CONTENTS
Monday 22 March 1993
Pre-budget consultations
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
*Chair / Président: Hansen, Ron (Lincoln ND)
*Acting Chair / Président suppléant: Wiseman, Jim (Durham West/-Ouest ND)
Vice-Chair / Vice-Président: Sutherland, Kimble (Oxford ND)
*Caplan, Elinor (Oriole L)
*Carr, Gary (Oakville South/-Sud PC)
Christopherson, David (Hamilton Centre ND)
*Jamison, Norm (Norfolk ND)
*Kwinter, Monte (Wilson Heights L)
Phillips, Gerry (Scarborough-Agincourt L)
Sterling, Norman W. (Carleton PC)
Ward, Brad (Brantford ND)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Dadamo, George (Windsor-Sandwich ND) for Mr Sutherland
Harrington, Margaret H. (Niagara Falls ND) for Mr Ward
MacKinnon, Ellen (Lambton ND) for Ms Ward
Marland, Margaret (Mississauga South/-Sud PC) for Mr Sterling
Perruzza, Anthony (Downsview ND) for Mr Christopherson
Clerk / Greffière: Grannum, Tonia
Staff / Personnel: Campbell, Elaine, research officer, Legislative Research Service
The committee met at 1013 in room 151.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Ron Hansen): This is the standing committee on finance and economic affairs, and before us this morning we have the draft report on pre-budget consultations. We have agreement from the three parties that we'll be recording by Hansard but we won't be going on TV.
I guess we can start out with Ms Campbell, if you can give some explanations. Maybe she can give us some ideas ahead of time on how she's written up this draft report on the direction we've given her. We're going to go section by section, so, Ms Campbell, can you give us some ideas before we get started on exactly what you've done.
Ms Elaine Campbell: I'll start with the introduction, and there may be some comments to be made after I've made a short statement. You'll notice that there were two paragraphs added to this section, as requested by the committee. The third paragraph is sort of a lead-in to what follows and the fourth paragraph thanks the groups and individuals who appeared before the committee.
The Chair: Any comments? Mr Carr.
Mr Gary Carr (Oakville South): Just down to the part where it says "The Current Situation," the first section there, from the introduction down, I think it's fine myself. Just down to page 2, that's fine. The introduction is fine with me.
The Chair: Mr Kwinter?
Mr Monte Kwinter (Wilson Heights): I have no comments.
The Chair: No comments. Mr Jamison?
Mr Norm Jamison (Norfolk): No.
The Chair: Okay. We'll go over to page 2 then.
Mr Jim Wiseman (Durham West): How far are we going?
The Chair: Okay, "The Current Situation." Is everybody in agreement?
Mr Wiseman: Down to the bottom of page 3?
The Chair: Halfway through page 3, on "The Current Situation." I think maybe if we don't go too far we can -- we wind up taking too many titles and then we wind up getting confused. We're all in agreement till the middle of page 3 on "The Current Situation."
Okay, "Debt and Deficits." We'll go just about to the end of page 4.
Mrs Elinor Caplan (Oriole): On page 3, at the bottom, where the last paragraph begins, "The conference board estimated that the existing debt was $600 billion, not including crown corporations," is there any place where there's been a documentation, particularly for Ontario, of the debt of crown corporations?
Ms Campbell: I could see if anyone who made a presentation to the committee referred to that specifically.
Mrs Caplan: We know what the debt is of Ontario Hydro, and I know that, because the province guarantees that debt and also because the policy of this government is to establish a number of crown corporations with the intent of moving debt to those crown corporations, it might be significant at this point to include that kind of reference.
The Chair: I think the Canadian Manufacturers' Association had made some comment on the cost of hydro and the debt. Mr Perruzza.
Mr Anthony Perruzza (Downsview): Mr Chairman, explain to me exactly what we're doing right now. We're reading this, and is now the appropriate time to make comments on what's here in front of us?
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The Chair: Actually, if there's something that should be added to make clarification or if there seems to be something that is not too clear, to clarify it. I wouldn't say there are incorrect facts in here; but all these facts have been brought forward and the researcher has taken a look at it to find out whether what was said by a particular group was a true figure.
Mr Perruzza: Here's what my concern is: In the recommendations, we're talking about efficiency; recommending efficiency and the rest of it, both within government and sort of our arm's-length, semi-private, public sector. By that, I mean schools, hospitals and everything else.
We're talking about how they have to be frugal and how we have to be frugal with transfers, but we're not underlining some of the things that have happened over the last 10 years in all of these sectors in terms of growth, both in numbers of people, with government -- I mean, what happened between 1980 and 1990, for example, in terms of how government has expanded and what kind of growth has also happened with respect to our transfers?
We're saying we have problems here, but we're not detailing the pattern of how those problems have arisen, right? I think we should make some mention of that, primarily in the introduction, especially when we get to the section on debt. You can't talk about debt without talking about what this government is committed to in terms of transfers and the supply of money to our transfer partners. When the economy fails out from under you, you're faced with a debt; there's no other way around it. I think you need to emphasize that and I don't see that in here.
The Chair: You're talking about a history lesson. Ms Caplan.
Mr Perruzza: No, I'm not. Absolutely not.
Mrs Caplan: I was going to say that if Mr Perruzza is looking at documentation, I think we might also add a section on the effect of the policies of this NDP government and the mistakes they made in the first two budgets, particularly the first one that has exacerbated the difficult situation we find ourselves in Ontario in today. I think it's the sort of thing that -- if you wanted to look at that in the historical context, we could spend quite a bit of time enunciating the mistakes that were made that have created this situation and made it worse than I believe it had to be.
Mr Jamison: I think what we have to make clear is the extent of the financial situation the provincial government is experiencing. If we make the figures understandable in the report rather than deviating and getting too far into background -- although I have to say that some forms of background can be helpful. Traditionally, because of the size of government, it's a hard ship to turn around when it's travelling on.
At the same time, I don't think we should delve into anything other than the financial reality. This finance and economic report certainly has a background, but different people will expound differently given the different opportunities that present themselves. But really we're looking at the finances of the province and in general terms we want people to understand what the finances are at this point.
The Chair: You're saying then pre-budget consultations in past years. Anybody can get those books out and see what went on there rather than a history lesson.
Mr Carr: My only feeling is as we get into -- basically the whole report, other than a couple of questions, I could agree to. We've already hashed out some of the things we couldn't have agreed to in the last week and we could include them in some of the things we would like to see.
The only thing I'd point out, if we get into taking a look at this government's performance or whatever, then we're going to be here all day, because we won't agree, and I think there's a bit of a consensus. That's the only thing I'd like to say. We could spend all day going back and forth on this, but at the end of the day we'll end up having no consensus, time will run out and we'll have no report.
I can live with this in terms of an assessment of where we're at and what we've heard. Later on, I'd like to expand on the things that I'd like to see us do that I know we can't get agreement on from the other side.
Having said that, I think that will make it go a little bit faster. Otherwise, just keep sight of the fact that we may run out today with no agreement even on any type of report, which I think would look very bad for this committee, because I think we should try to come to some type of agreement on some of the things. This is a pretty good step, taking a look at all the political backgrounds of all three parties to get some type of report.
The only thing I had a question on with Elaine was at the bottom, talking about the 20% of the federal and 40% of the provincial debt levels being held offshore. I just wanted to check because I wasn't too sure: Where did those statistics come from? Are they accurate? Was it a presenter who gave it to us, or did we look?
Ms Campbell: Those figures were provided in the presentation made by the conference board.
Mr Carr: I just wondered, because I had heard different figures and the Treasurer, when he was here, didn't present any figures of provincial being 40% at all, or did he?
Ms Campbell: That's why I prefaced that paragraph with the reference to the conference board, because the information was provided by that particular presenter.
Mr Carr: Okay. Those are the only comments I wanted to make, that if we are going to get any type of agreement, then anything we put in that isn't in here now, we're going to argue about all day, and at the end of the day we'll have absolutely no agreement.
The Chair: I agree with you, Mr Carr.
Mr Wiseman: I'd just like to echo what Mr Carr has said about how if we start trying to turn this into a political bashing document, it's not going anywhere. If that's the direction some people want to take, I'm prepared to sit here until hell freezes over to put everybody's mistakes on the record for the last 20 years. That won't do anybody any good. So I think we should be cognizant of that.
I would like to reiterate again what Mr Carr was saying. I had it circled, the 20% of federal and 40% of provincial. Those are not the numbers that I recollect having read in other places. It may well be that 40% of provincial means all of the provinces --
Mr Kwinter: It does mean all of the provinces.
Mr Wiseman: -- but I would prefer that this document reflect Ontario and say what our situation is in terms of foreign borrowing as opposed to borrowing either from the -- what percentage is made up of teachers' pension funds, what percentage is made up of borrowing from the Canada pension fund, what percentage is borrowed using Ontario bonds, how much of it is borrowed from the Province of Ontario Savings Office, how much is borrowed from other banking institutions in Ontario and how much is borrowed offshore.
In terms of making a recommendation around this kind of debt for the province of Ontario, I think how much is borrowed offshore has huge significance. What happens is that if we start to be moving towards offshore borrowing, then we'll be taxing the taxpayers of Ontario into the future and sucking the investment potential money out of the province of Ontario and giving it offshore. That has some tremendous ramifications for economic recovery and long-term growth.
I think a recommendation and an understanding of that in this area would have some implications for the recommendations to the Treasurer. For example, if we are beginning to borrow more and more offshore, I think that makes it even more important for changes to be made in the way we finance that and so on, and what we do about that. It's one thing to borrow within your own boundaries and have the money circulating in the economy; it's quite another thing for the money to be leaked.
The Chair: Mr Carr, do you agree with this, that the province of Ontario should --
Mr Carr: I agree with that. I just thought the federal was higher, and I would like to see Ontario's percentage in there. I'm sure we can get that.
The Chair: It doesn't tell us because it's all the provinces grouped together.
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Mrs Caplan: It might be helpful, and I'm sure the Ministry of Treasury and Economics has it or could produce fairly easily a graph that shows the level of foreign borrowing for Ontario, say, over the last decade, which I think would be very helpful in understanding what the situation is. It could show the total foreign debt compared to the domestically held debt, but I think in graph form if we're looking at something that will be easy for people to understand. Perhaps we could ask the ministry to produce a graph or two on the level of foreign-held debt and a graph over the 10-year historical period from 1982 to 1993.
The Chair: If I'm hearing right, leave this figure in for all the provinces but put a supplementary graph in to show Ontario alone.
Mrs Caplan: Break out Ontario.
Mr Perruzza: While we weren't going to get into sort of a partisan dogfight on this, all I meant to suggest earlier -- and I suspect that my Conservative colleagues, if they looked at this, would agree -- was that we add a paragraph, because I think it's important to detail and to go through a bit of the history on why we're in the mess we're in.
While I agree with my Liberal colleague, who says, "Let's put in a graph," you and I will both know exactly what that graph will show. It'll simply show a debt load for the last two years, because when you look at the taxation levels and when you look at expenditures, I guess for the period of the late 1980s, you'll find that the two sort of equated and what you'll see is that over the last two years there'll be a negative downslide in terms of where we've had to go off and borrow.
The Chair: We're talking percentages.
Mrs Caplan: Foreign-held debt; that's right. The percentage of the total debt that's foreign held; that was the question.
The Chair: I think it's very important for the public to know and for the Treasurer to know on these percentages. There are some other graphs that are in there that give a little bit of a history story of --
Mr Kwinter: Just for clarification, we're not talking specifically about the debt. Whatever the debt is, we just want to know how much of it is foreign held as opposed to what has happened historically over the last decade. I don't know what particular year, but this year percentagewise isn't much different than 1981 in the amount of foreign debt; not the quantity of the debt, the percentage of it.
Mr Perruzza: My concern is that won't give an accurate picture of what exactly has happened. Although it speaks to a very specific issue in terms of the debt, it doesn't speak to how government has been shaped over the last decade in relation to the debt. So what you get by doing that is a misleading picture of what's happened.
The Chair: I don't think it's misleading at all. I think the thing is that it depends on where the money is fluid at that particular time, whether it's fluid in Ontario, that there's money to borrow, or there isn't any money available, that you have to go beyond the borders of Ontario, and this is what people want to see.
Mr Perruzza: I agree with that but I think you also need to develop a similar graph that shows where government has gone over the last 10 years as well, in terms of expenditures and taxation.
The Chair: You're talking about a history lesson again.
Mr Perruzza: No, I'm not. I'm talking about a graph. I'm not talking about a history lesson. I'm talking about one paragraph which will detail how government has grown as well in relation to tax levels, and then you can do your debt side.
The Chair: I'll hear from other members of the committee. Mr Wiseman and then Mr Jamison.
Mr Wiseman: I think what we're really grappling with here is, how complex a document do we want to make this? I hear what my colleague is saying in terms of laying out how we got to this situation.
My major concern, though, is really twofold and that is that we need to make recommendations to the Treasurer and I am prepared -- I am prepared; I haven't discussed it with my colleagues -- to try and indicate to the minister that I view foreign borrowing as a very serious problem that should be avoided at all costs, literally at all costs in terms of making sure that we don't have to go offshore, because I see that as a major issue in the long-term growth of the province.
If we wanted to get into how deep we wanted to go, I think we could talk about what Comer was talking about, and that was the multiplier effect of the reserve ratios of the bank and who controls that and how that could be a useful mechanism for perhaps financing the province of Ontario through the Province of Ontario Savings Office. But I'm not sure how deep we want to go. If we start putting in too many recommendations, they start to get lost in the volume. The reason I raise this about the foreign debt is because I am absolutely --
The Chair: You raised that in your last statement also, so I'm going to go on to Mr Jamison.
Mr Jamison: I don't particularly have any problem with the request. As a matter of fact, if we're going to use graphs, and it seems to be something the committee has indicated would allow people to better understand the report, I believe that there are ways to draw the relationship to debt to other provinces across the country, and that's in the per capita sense. Graphs of that nature should be there.
Also, I think it's significant to have an understanding of the overwhelming effect of what has taken place. Possibly, two or three graphs would be important to quickly explain to people who may not have the ability or the time to read the report in full and take it in, and that is the percentage increase in budgetary deficits over the last year, province to province. I think that's symptomatic and would spell out basically what kind of situation many governments are in.
The Chair: We can talk about this graph for hours. I think everybody is in agreement to put the graph in. Just so I get a better indication as Chair, is anybody opposed to putting the graph in?
Mr Perruzza: I'll move that two graphs be added: one on how the debt is spread out and who controls the debt, essentially the Liberal request; and the second graph detailing government expenditures and government growth, both in direct government, Ontario government, and the semiprivate public sector over the last 10 years, period. It's really simple: two graphs.
The Chair: Does everybody agree with that?
Mr Carr: The second graph that Anthony is talking about would be taking, the way I understand it, the original $23 billion all the way up to where we are now and just throwing on a graph each year where the spending is, total, bottom line?
Mr Perruzza: Exactly. In 1980, it was $26 billion or $27 billion; in 1990, it was $44 billion. In terms of real people, that's important; you need to know where you've been, because those are the commitments.
The Chair: Do you want the population also, did you say?
Mr Perruzza: It would be good if the numbers of employees could be added on the other side in terms of the people dependent on government and working for government over the last 10 years.
Mr Jamison: It's important to understand it in relative terms. This is an experience that every province is having. The only way to really understand the debt load of the province is to really understand the per capita debt load of the province. The fair way of assessing the debt load on the people who pay the taxes out there, who make up the taxpayers -- to put it on a per capita basis is one way to look at it so that people can see in a definitive way in one glance what level the debt is per capita.
The other suggestion was the percentage increase in debt load, province to province, from their budgetary outlook, just to show the dilemma that all of us are in. Both can make a report much simpler to understand in the context of understanding the immensity of the problem.
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The Chair: I think we have those graphs already. Can we go back? I want to know exactly what everybody here wants now and see whether we agree on what you have heard from the committee. Can you go back to exactly what is requested on these graphs?
Ms Campbell: Yes, I'd like to confirm what the committee, in terms of a consensus, has requested. But first of all I'd like to preface my remarks by saying it's my understanding that the report has to go to the Treasurer by Thursday. That means I would have to have my work completed by at least Wednesday. That gives me a day and a half to pull all this information together. It might be rather difficult to pull together all the statistical information that the committee has requested. Is there one graph or table that is deemed more important than the others?
Mr Wiseman: Yes, the breakdown of foreign debt.
The Chair: I think that was the main one. If we could have that one chart, that would be very simple. Most likely, in 15 minutes you'd have all the information on the borrowing faxed from the Treasurer, because he'd have those facts and figures there for the last 10 years.
Mr Perruzza: There is already, and I've seen it, a graph which outlines government expenditures over the last 10 years in terms of growth and also revenue.
Mrs Caplan: It's in the budget.
Mr Perruzza: It's in the budget, but I think it's also important to use as part of our report.
The Chair: I think the Treasurer would know this already.
Mr Kwinter: We're looking for borrowings and we're looking for the percentage of foreign borrowings. That's really all, I assume, we're talking about. We're looking at the borrowings over the last 10 years, and in each year, what percentage of the borrowings of the province of Ontario were foreign -- that's all we really want to know -- and to see how that has changed.
Mr Perruzza: And you don't think that correlates with expenditures versus revenues?
Mr Kwinter: No.
Mrs Caplan: It's unrelated.
Mr Kwinter: Some years you have expenditures and revenues that almost balance and other years you don't.
Mr Perruzza: Exactly, but don't you think it's important to detail that?
The Chair: No, the Treasurer knows that already.
Mr Kwinter: We know that. I assume all we're asking for is that we want to know, because of what we think is the negative significance of having foreign borrowings, in the last 10 years, how that has changed or if it has changed or what the history of foreign borrowings is over the last 10 years.
The Chair: Mr Perruzza, there's one thing to understand. The comments that you've made today are in Hansard. Treasury will be reading Hansard, so your ideas on that won't be lost if they're not in the report.
Mr Wiseman: I want to go back to what this report is trying to do. For me, this report is trying to highlight what are significant recommendations to the minister. When I raised the issue about the percentage of foreign borrowing, it's because when we borrow offshore, we have to pay offshore. That money then becomes a leakage in terms of what is available. The larger the leakage, the more serious it becomes for the economy and the growth of the economy. My recommendation would be that we avoid offshore borrowing as much as possible.
The second part of this, that we didn't talk about, is that when the government borrows domestically, it forces corporations to borrow offshore and the whole debt crunch spiral becomes -- there are two of them going on at the same time: One's the private sector and one's the public sector. What both of them do is dry up the amount of available capital for borrowing. So what I'm trying to emphasize for the minister in this section is that we must be really cognizant of our offshore borrowing, that we must curtail it and try to prevent it as much as we can. To put all of the other things in here I think could perhaps diffuse or muddy the recommendation.
The Chair: Okay, I think we're all in agreement on that. Is everybody okay?
Ms Campbell: I'd just like to ask some further questions re what the committee would like done to this particular section, "Debt and Deficits." It's my understanding that there was consensus that there be a further reference to Ontario's actual debt and that of Ontario Hydro and that the committee wished further information on the amount of Ontario's debt held offshore and that will be portrayed in graph form. Does the committee wish to make a recommendation about offshore borrowing under this section?
Mrs Caplan: I think it's important, and I think the point Mr Wiseman has raised is an excellent one. If we're making recommendations to the Treasurer and to the government, I think an excellent recommendation might be that we ask the Premier to refrain from making derogatory statements about stability and the economic situation in Ontario, such as he did when he went to Hong Kong and when he went to Davos, when Ontario was portrayed in a very bad light. Since foreign borrowing is a concern, and we recognize that we are always vulnerable, I think a recommendation from this committee that says: "Senior government officials, the Treasurer and particularly the Premier should be aware, when they travel on behalf of Ontario and make statements about both the creditworthiness and the economic stability and the confidence that we have in Ontario, that the Treasurer and the Premier in particular not make negative statements which will adversely influence foreign investors."
Mr Jamison: I don't believe any document dealing with finance and economics should take to task anyone on any --
Mrs Caplan: I'm talking about for the future. I'm not saying you have to document and say because he did in Hong Kong and Davos; I think as a recommendation you could say that it wouldn't be a good idea to do that. Surely you think it's not a good idea to do that.
Mr Jamison: Elinor, if in opposition we had asked you the same question, I know what your answer would have been.
Mrs Caplan: My answer is that the Premier should not leave and go to Hong Kong and go to Davos, where our foreign investors are, and shake their confidence in the creditworthiness of Ontario. As long as we are vulnerable, it's very important that the Premier and the Treasurer understand how important it is on that international stage to be champions of Ontario and not to create any crisis of confidence in our creditworthiness.
Mr Jamison: If I might, Mr Chair, the Premier reiterated our long-standing disagreement with the type of trade agreements that have been prevalently produced over the last number of years in North America, indicating that those agreements did not serve us well, and if I recall rightly, Ms Caplan's party made it clear in its term, especially going into its second term, that its position was clear on the agreement whether to support it or not, subject to six defined issues.
Mrs Caplan: Mr Chairman, with respect, the former minister is sitting here, and he can assure you that no member of the previous Liberal government ever left this country and badmouthed Ontario on the international stage.
Mr Jamison: Their position was made well known, and news travels. So to ask us to do something differently than they would have done themselves and have done in the past, I certainly can't agree with.
The Chair: Mr Kwinter, any comments?
Mr Kwinter: Yes. I just want to say for the record that to suggest that we were opposing any of our trade pacts or treaties is just not true. We definitely felt that the free trade agreement that was negotiated could have been a better deal, but we were not opposed to the deal.
I also want to put in for the record that if you take a look at the last two years, the only reason the recession in Ontario and in Canada has not been worse than it was is because of our trade. The only bright spot in the economic sector has been the growth of trade, where we've had absolutely record trade figures, and that is as a result of being a trading province. We are absolutely dependent on trade, and for the Premier to go out and suggest that these trade deals are negative and are going to hurt the province is patently silly. I would agree that there have to be safeguards, there have to be conditions in there to make sure that the environment and labour and everyone else is protected, but certainly it is to Ontario's interest to have the broadest trading opportunities possible, because that's what gives us our vibrant economy.
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Mr Jamison: I couldn't agree with that last statement any more. The problem is that what we have is something that does not produce that. If we look at the sanctions that have been put upon us by our trading partner in various sectors time after time after time, the latest being in the very basic sector called steel, we don't disagree that there should be a good and healthy trading relationship, especially between the two countries, but it should be much fairer than it is now, the problem being that the elements to make that a fair trading atmosphere were not properly looked at in any agreement.
Mrs Caplan: The point I was making -- and Mr Jamison has missed the point -- is that's a very important debate, the debate about both the free trade agreement and NAFTA, the North American free trade agreement. That's an important debate for us to have here. But for our Premier to be a whiner on the international stage in a way which might affect adversely the ability of Ontario to attract investment and to have the confidence of foreign investors -- I think it is a proper recommendation from this committee that says, in the future, no member of the Ontario government, from the Premier to any member of this Legislature, should go on to the international stage and shake the confidence of foreign investors in Ontario's economy. That's the recommendation I'm suggesting. It's not a debate on the agreement; that we have here within our borders. Don't wash our dirty laundry on the international stage in such a way that it's going to affect investor confidence in Ontario. That's the point.
Mr Jamison: Elinor, we could not stifle our Premier and our opposition to the flawed agreements that are out there.
Mrs Caplan: Well, maybe somebody should go with him and tell him what's in Ontario's interest.
The Chair: Mrs Caplan, it's in the record here, so maybe we can get on with this report. As I said to Mr Perruzza, the treasury will be reading this Hansard anyhow and going over it, so it's on the record and I hope you agree we do have some different points of view here, but I think we have to carry on. Mr Kwinter.
Mr Kwinter: On another point, and I think it may be the time to discuss it, I'm looking at page 5, table 1. A couple of weeks ago, in our last week of hearings and our last week of discussing our report, I raised a concern, and I'd like to raise it again because I think it's fairly dramatic when you look at it.
I think one of the problems -- and again, I'm not saying this in a partisan way; I'm just saying that we should caution all treasurers and all ministries to the future -- is that in order to put the best light on their budget, the Ministry of Treasury and Economics is consistently overly optimistic to make their figures, as bad as they are, look as good as they can.
When you take a look, for example, at the projections for Ontario under "Employment," the Ministry of Treasury and Economics is 2.1%. That is almost double any other projection that you see. If you take a look at the TD Bank, it's 1; CIBC, 1.4; DRI/McGraw-Hill, 1.2; Conference Board of Canada, 1.3; Scotiabank, 0.8; Royal Bank of Canada, 1.6.
Take a look at "Real Growth." Other than Informetrica, the Ministry of Treasury and Economics is the highest.
What happens is that by using those what I consider to be overly optimistic projections, they generate what they anticipate in the future their revenues are going to be. They figure more people are going to be working, so more people are going to be paying taxes and there's going to be more growth. As a result, they project their deficits at a figure using those projections.
Then the reality sets in, and we've had that happen very dramatically where every month, it seems, the treasury people have to come up with a new projection because these figures just aren't met. What I said a couple of weeks ago and what I'm saying now is that I think there should be a recommendation to the treasury to be more conservative, small-c conservative, in their projections so that they are more realistic.
Politically, that may be very difficult, because the Treasurer -- and every Treasurer has the same problem when he's crafting his budget -- has to put the best face that he can. But it seems to me quite obvious and very, very dramatically set out, when you look at the employment projections, where he's not even close to what everybody else is saying, and I think that is something that we should talk about.
The Chair: Okay. I've got one thing. We are going to finish "Debt and Deficits," and that's into "The Future" now. I just wanted to make sure that we're clear on the other part. Ms Campbell, are you clear now on "Debts and Deficits"? Yes. So then we can go on to Mr Kwinter's comments.
Mr Carr: Sorry, Mr Chair. Did we agree on the percentage? What do we agree on again?
The Chair: Can you read it back just to make sure that we're all in agreement, because I know there were some other comments thrown in. We were taking a look at the province of Ontario in the chart.
Ms Campbell: The committee agreed that it wished further reference to be made to Ontario's debt and that of Ontario Hydro, and the committee would also like more information included on the Ontario provincial debt held offshore. That would include the presentation of a graph or a table.
The Chair: Okay, I think we're all in agreement.
Mr Carr: Now that Anthony isn't here, did his spending come out?
The Chair: What's that, Mr Carr?
Mr Carr: Now that Anthony isn't here, did his spending come out?
The Chair: On to "The Future" there. Mr Kwinter just made some comments. Any other comments on the chart here? Mr Wiseman.
Mr Wiseman: Just before we leave this one, in paragraph 2 on page 4 of "Debt and Deficits," it states, "As the Canadian dollar drops in value though, the costs of servicing that foreign debt increase." I think it would be helpful, if it's possible, and I don't want to put an impossible task on the researcher --
The Chair: You're not asking her to figure it out, because treasury would figure that out.
Mr Wiseman: I would like to see included there some kind of graph or table to show how the fluctuating dollar would put a demand on the amount of money the Treasurer would have to pay out in terms of servicing the debt.
The Chair: I think the thing is that the comment's already in here. I mean, the recommendation's already to the Treasurer. For the researcher to go through all that work -- which treasury normally does, because when it's taking a look at borrowing, it's taking a look at how much it costs for that dollar. So I think what we're going to do with the researcher is we're going to bog her down and she won't get the report done. Mr Jamison.
Mr Jamison: I think it's a fair comment that Mr Kwinter makes.
The Chair: But we're on "The Future" here.
Interjection: We're still back on page 4.
The Chair: He just went backwards there. So can we agree?
Interjection: All right.
The Chair: We'll carry on to "The Future" then. You know, treasury can figure those figures out, and I think it will take a look at it. It's just like when you go down to borrow money at the credit union or the bank on how much it's going to cost you on the loan for your new car. You figure out the differences between the two of them there; you don't get a consultant.
Mr Wiseman: I think you're missing my point, Mr Chair. My point is this --
The Chair: But it's already written in here.
Mr Wiseman: But the way it is written does not draw attention to the degree of importance that I place on having to pay offshore lending institutions money from the province.
The Chair: Okay, it's in Hansard. Agreeable? Okay, we'll carry on. We agree with "Debt and Deficits." We go on to Mr Jamison on "The Future."
Mr Jamison: After listening to Mr Kwinter, I think it's important to note that the forecasters in general, including the Ministry of Treasury and Economics, have had, to say the least, a very difficult time in assessing the situation on an ongoing basis. Especially now that most people feel that we're into some sort of recovery, it's very important to try and peg the rate of growth and change and its upward value to a consensual kind of level. Therefore, I would agree that we shouldn't become overly optimistic by projecting figures that are possibly higher or at the higher end, but that the treasury should be assessing that, especially in light of a recovery, more often and with a little more vigour.
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The Chair: Taking a look at the graphs here, it's hard to figure the employment percentage change and unemployment. Mr Kwinter, if you take a look there, in 1993, it's a 2.1% change, and we have 10.6%. This is for the Ministry of Treasury and Economics. The 1993 unemployed is 10.6%, yet you go down to the bottom here, to the Royal Bank of Canada, and they show an employment change of 1.6% and an unemployment figure of 10.6%. Can anybody explain that one to me?
Mr Wiseman: Yes. I'm glad you did what you just did, because it points out what I think is a game of smoke and mirrors with what we do with unemployment numbers. What we do with unemployment numbers is that we exclude people from the unemployment percentage if they are no longer looking for a job, which does not reflect the number of people who are truly out of work. It doesn't reflect the absolute number of people who are employed and whether it goes up or down.
Because of the way we classify and calculate that unemployment percentage, we really hide the true numbers from the population as a whole. When you talk about employment changes, those are based on the number of people who are actually working over the number of people who had jobs previously. When you look at unemployment, you're looking at a number that is going to stay high as more people come into the workforce looking for jobs that were not there previously.
I think a better number in terms of not having an unemployment percentage would be a projection of the number of people who are actually working in the province.
The Chair: As I said before, this is the crystal ball we were talking about the other day. If you take a look at real growth at the Ministry of Treasury and Economics, its figures are actually low to the Toronto Dominion Bank, yet if you've got real growth which is higher, there should be less unemployment. So it's hard to even relate. Mr Kwinter, do you have a comment on that? I thought you were done there.
Mr Wiseman: No, I'm not quite done. The reason I think it's more important for us to make projections on the absolute number of people who will be working is because then you can take that number and have a better idea of what your personal income tax is going to be and maybe even some kind of projection around possible tax revenues, employer health revenues and so on.
The way these numbers are presented here really doesn't do the Treasurer enough service in terms of being accurate. If you look at real growth percentage change in the year 1993, Mr Kwinter is right, the Ministry of Treasury and Economics is high. If you look at projections for 1994, Nomura is even higher at 4.8%; 4.2% for the Treasurer; 4.3% for the Toronto Dominion Bank; Informetrica at 4%; McGraw-Hill at 4.3%; and the Royal Bank at 4.1%. I think if we went back and looked at what they were projecting in 1990 -- I happen to have reflected on this last week -- those numbers were way off as well.
I wouldn't have any difficulty in trying to establish a different projection or a different mechanism for projecting income revenue and what the situation is going to be, perhaps based on true employment numbers, the number of people coming into the workforce, the number of jobs being created in certain income levels as opposed to these unemployment numbers. I just have a great deal of difficulty with them.
Mr Kwinter: Could I just comment on some of Mr Wiseman's remarks? I agree there are a couple of problems that present themselves. First of all, the unemployment figures do not reflect those people who have left the workforce. The other thing that it doesn't reflect is the real numbers. The employment pool grows every year for a variety of reasons. We have the baby-boomers who are coming into the workforce and we have immigration. What happens in real numbers is that we have less people working compared to the total amount who can work, and that is not reflected in this.
To get back to my original point, it seems to me that government should be in a position where, if it takes the middle road and says, "This is the highest and this is the lowest projection and we're going to be somewhere in the middle", they have the advantage of having possibly additional income at the end of the year they can then allocate to debt reduction or some other point. Whereas if they're consistently high, which seems to be the case, that is impossible and, if anything, their deficits keep going up as the year progresses.
I think the major problem is that it makes the average taxpayer very cynical, saying: "We've got all these guys who are supposed to be experts. Why can't they figure this out? Why can't they know where we should be? How difficult can it be?" Obviously it is difficult and, given the fact that there is this problem, you would think they would take a middle road so they could be fairly close. In a worst-case scenario, if they're overestimating, it won't be that much and if they're underestimating, they get a benefit out of it.
The Chair: So you want the high and low rates, like the 1.5% to 2%.
Mr Kwinter: I'm just saying I have noticed over the last few years -- and I'm not just saying this particular government -- it's done for political reasons with the best face on the budget. It would be, in my mind, doing a better service to the people of Ontario if the Treasurer, as a matter of policy, tried to take the middle road with his projections so there's a better chance they will be fairly close to the mark.
The Chair: Would you say that some of the statistics come from Statistics Canada, so their figures on unemployment they sort of pick up and work with them and this information is there?
Mr Kwinter: I'm saying to you, and I don't want to be cynical, that the budget is constructed backwards. They take a look at what is happening and they say, "How can we get these figures so that they're more acceptable?" They look at it and they say: "Let's show a greater growth which will show greater income. Let's show greater employment which will show greater income and then we can get the figures -- as bad as they are, they won't be quite as bad as they could be."
Unfortunately, the Treasurer came into the House on several occasions and said his projections were spot on, and they're never spot on. He always has to adjust. The reason he has to adjust is because --
Mr Jamison: Depends on the size of the spot.
Mr Kwinter: Yes, because they work backwards, whereas if they would take a look at it and say, "Okay, here's our best-case scenario, let's discount that by a factor so we have a better chance of achieving it." That's all I'm saying.
Mr Carr: Yes, I would support putting that in. I don't suspect the government would, but I think it's right and it's a lesson for other governments to learn as well, when you see the wide discrepancy there.
The question I had was more of a question on this to Elaine, because I know some of them didn't put in figures and I thought some of them had figures in there. I thought Informetrica put in an unemployment rate and I don't see it. I take it that it's not there because it wasn't in their presentation. If you look across --
The Chair: You are talking about unemployment changes?
Mr Carr: Unemployment rate. Informetrica, for example, doesn't have an unemployment rate. Didn't they make projections?
Ms Campbell: The table is headed "Economic Projections for Ontario," and if there is a number not included under a particular organization, it was because they did not provide a number to Ontario.
Mr Carr: So the numbers were related to federal.
Ms Campbell: I think, in the case of Informetrica, their focus was at the federal level.
Mr Carr: That was the only point I wanted to make. If the government will agree, I'd agree with what Mr Kwinter wanted to do.
The Chair: Does everybody agree with "The Future"? I know there were comments on the chart. Ms Campbell.
Ms Campbell: Under the heading, "The Future," would the committee like a line added to the first paragraph saying that the committee realizes these projections are subject to the volatility of the economy and are based on any number of different variables being held constant and often do not reflect real numbers?
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Mr Carr: I would just include that some of the presenters didn't do it specifically for Ontario only, as you just explained to me. Personally, I don't think you need to get into defending economists when they're wrong, other than the fact that there'd be the simple question -- you used the example of, why didn't Informetrica put in an unemployment rate? Well, they did; they just didn't do Ontario, because of whatever reason. That's the only thing I would do. I don't think we should get into trying to defend economists, saying that these numbers can change. They can do a good job of defending themselves later.
Mr Wiseman: I think I would be supportive of some line that says that, given the difficulty with accuracy on projecting real growth over the last few years, these numbers be considered extremely variable and that the Treasurer should take that into account.
The Chair: Mr Carr, do you agree with his statement?
Mr Carr: I was going to say that we should add that especially your own numbers are the most variable.
Mr Wiseman: But you don't want to do that.
Mr Carr: No. That just sort of came to mind. No, I would have no problem, if it was just something explaining to somebody who maybe doesn't know that economic projections are such. The only problem I'd have is the one line you said about how economic growth rates have been tough to predict. I think the government has been wrong on the projections, but I don't think some of the other people had been, if we look back.
Mr Wiseman: Yes, they have. I've got the numbers at home and I looked at them on the weekend. I will tell you, for the numbers over the last three years on these projections, nobody, but nobody, got it even close to being right.
Mr Carr: With the government being the worst, right?
Mr Wiseman: No, with the government being somewhere in the middle on all of them in terms of the numbers. When we did the pre-budget consultations in 1990, we heard numbers from all of these groups, including Nomura, that the maximum unemployment rate in Ontario would be about 6.7%, and we all know where that number went. It's not just the ministry that has difficulty with these numbers; it's all of them. If the ministry is making overly optimistic projections in some scenarios, in the next year out you can see that everybody is making overly optimistic numbers.
If you want to take a look at what's happening in the debate in the economists' community, there's a raging debate about this -- what is it called? -- the Kondratieff curve or cycle. The debate right now is whether this recovery we have is really the bottom of the cycle or whether it's just a little upward blip that is then going to turn down and we'll sink even further towards even a greater collapse of the economy. I think everybody's having difficulty being able to project what's going on out there in terms of the economy.
Mr Carr: I'd have no problems if we do it like that, just saying that because of the problems in the past -- I just didn't want to say specifically growth versus unemployment. If we could just say it a little more broadly, however Jim worded it, that due to some of the problems in the past with economic forecasts, the Treasurer should be leery or whatever --
Mr Wiseman: Cautious.
The Chair: Comments, Mr Kwinter.
Mr Carr: As long as we don't get specific on saying either unemployment or growth.
Mr Kwinter: Without belabouring the point, the concern I've had is that all of these other forecasting agencies, whether it be the banks or the securities companies or the think tanks, when they make their projections, are almost anecdotal: They take a look at what they think are all the factors that will influence what's going to happen and say, "We think there's going to be growth of X," and if it isn't, the next year they say, "Well, we were wrong, and we think it's going to be Y this year," which is fine. There's no problem with that. It gives their customers or their clients an indication of whether it's going to be a good year or a bad year.
But with the government it's different, because its projections have a direct relationship to decisions that are being made. Their projections determine what the deficit is going to be. As a result, it's going to determine what policy decisions are going to be made, to curtail expenditures or to increase revenues and to do all of these things.
That is where my concern is, that when you go to the extremes in optimism you make decisions that have really a domino effect when you don't meet those projections, and then you have to scramble and you have to do some very drastic things. It would seem to me that we should get a recommendation to the Treasurer that if they could get to this middle road, those sorts of fluctuations would not be as extreme. That is really the point I'm making.
Mr Wiseman: I think what I was saying was that I agree with you: We would recommend that the minister be cautious in terms of projected growth, for reasons broader than that: If we put in a recommendation here that was really negative, we as a group could have an impact on the way people view the world and we could become part of a self-fulfilling prophecy in terms of negativity, in terms of causing some things to happen that we wouldn't want to see happen, if you understand what I mean. That's why I prefer the word "cautious."
The Chair: Could we just find out where we're at right now, Ms Caplan? I'll come to you. It's gone back and forth: Everybody's added about two words to this sentence, and I can't find out where the period is. Ms Campbell, let's find out what the committee is saying and what you interpret.
Ms Campbell: My understanding is that the committee is still discussing the issue of projections and would like to add something making reference to the difficulties associated with projecting with any degree of accuracy; and also the inclusion of a sentence that refers to the table on page 5, and state that some of the areas were left blank because projections were not made for the province of Ontario specifically or just were not made for the years that are left blank on the table.
The Chair: Ms Caplan, comments.
Mrs Caplan: I think the comments that have been made by Mr Kwinter are very relevant. I think Mr Wiseman rightly explained it when he talked about the self-fulfilling prophecy. The flip side of that is that if the projections, as they come from the Ministry of Treasury and Economics, are consistently optimistic, especially if they're way off from the others who are doing forecasting, then it's not a question of self-fulfilling prophecy but one of confidence in the ability of the province to plan and to bring forward a budget and an economic plan which will instil confidence. So I would see a recommendation from this committee that says to the Treasurer and to the ministry that it is very important that their projections are as close to, if you can, those which are being projected by the other economic institutions in the province, that greater collaboration between them take place so that we can have a more realistic budget plan; recognizing that the world is constantly changing and that nothing is ever spot on, as Mr Kwinter says.
For the question of how the ministry officials relate to those other institutions doing forecasting, I think Mr Kwinter makes a point that should be heeded. I think the ministry and the Treasurer should set aside the political imperatives and attempt to come in with as realistic a picture as possible, because then I think you'd have a greater sense of confidence, if the numbers were presented in that way.
Mr Jamison: I don't have any real difficulty with that particular approach. But I think it should be pointed out that our experience with economic forecasts by recognized groups -- especially since the recession we are supposedly coming out of at this point -- is that they generally have not been able to develop a really close feel for the type of change that's taking place within the province as far as the structural change is concerned, and that impacts on forecasts. Generally, I think we can agree with that particular thrust. In these times, it seems that no one I know of over the last few years has been correct in their assessments and that we should be cautious about our projections.
The Acting Chair (Mr Jim Wiseman): Do I hear an agreement, then? Can we move to the next section? The next section is "Economic and Fiscal Policies."
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Ms Campbell: I have one comment to make about this particular section. The committee will notice that there has been a change from the draft that was proposed a few weeks ago. The draft had proposed that taxation be its own section, but when it came to actually writing it, it made much more sense to include taxation under the heading "Economic and Fiscal Policies."
The Acting Chair: Comments on this section?
Mr Jamison: We're just talking about the two paragraphs under "Economic and Fiscal Policies" at this point?
The Acting Chair: Yes.
Mr Jamison: Fine.
The Acting Chair: No discussion?
Mr Carr: The only thing I wanted to add at the bottom, where it said, "There seemed to be some agreement that the separation of spending into current/operating and capital accounts was a good practice," is that --
The Acting Chair: We're not into that. We're just doing those two paragraphs, Mr Carr.
Mr Carr: Oh, just the two. Okay, I'll wait.
The Acting Chair: Okay? Can we move on to "Budgetary Procedures" then? We all agree on that?
Mr Kwinter: Mr Chair, a point of clarification: Are we doing both the budgetary and "Taxation" together?
Mr Wiseman: We're doing "Budgetary Procedures."
The Chair: Is there some reason you'd like to do both at once?
Mr Kwinter: No, I just want to know whether you're up to "Taxation." I had a had a comment on the taxation part. I'll wait.
Mr Carr: I just had a question on what I was going to start there a minute ago. "There seemed to be some agreement that separation of spending into current/operating and capital accounts was a good practice." Since Gerry isn't here, I know that's one of his big concerns, as it is mine, and probably Norm's too, and I wonder how we could word it so we get an accurate reflection. As you know, as Gerry and Norm have both pointed out in this committee, we believe what the government is intending to do is to move that capital, and then all of a sudden the deficit appears lower when you add the two numbers up.
I couldn't agree with it the way it's written there unless, when there's any other controversy, you want to leave that in and then put a line saying, "Although some disagreed." I think most people agreed there should be some way to total that simply so people will know what the total amount is without having to get into too much detail.
The Chair: Have you got some idea on how to word that, some different business accounting procedures?
Mr Carr: No, just put a line saying there was also some concern afterwards about the government doing that.
The Chair: Mr Kwinter, any comments on that?
Mr Kwinter: No. I would agree, though, if we could clarify that there was no problem in separating the capital from the day-to-day revenue, as long as it was understood that it wasn't a device to get stuff off the balance sheet, which is really the major concern.
Mr Jamison: I don't have any difficulty with that.
Mr Wiseman: I would agree. I think what we need to do at all costs is to avoid an Ontario Hydro situation developing in the future where revenues are spent and accountability is not there. I have no difficulty in agreeing with that, that there need to be checks and balances and close scrutiny of the activities.
The Chair: Ms Campbell, have you got some wording there you could read back to the committee?
Ms Campbell: Would the committee like a line added to that second paragraph under "Budgetary Procedures" that would state, in effect, that other presenters expressed concern that the separation of spending into operating and capital accounts not be done in an attempt to get information off the balance sheet? I may not be interpreting the comments properly at this point.
Mr Jamison: Yes, basically that capital and operating be totalled at the end. But the other point should be that this is not a new practice. It is new for Ontario, but other provincial governments have been doing this for a long period of time.
Mrs Caplan: Perhaps it would be helpful if the recommendation suggested that there's no objection to the reporting of operating and capital separately as long as, in the reporting of the net cash requirement or the deficit number, the report also included the cumulative of the two, because that is the actual amount that has to be borrowed.
Similarly, as well as the separation between capital and operating, I believe it's very important that we continue to report the debt or the deficit accumulated by those crown corporations that have been established, so that we don't just move it out of one place into another and so that we ensure that the total deficit annually, as well as the total debt load of the province, be properly reflected in all treasury documents.
Mr Wiseman: I would even go one step further and suggest that it might be useful, within the annual reports of those crown corporations, to give a detailed account of which projects would be retiring the debt in terms of, if you borrowed $20 million to build building A and you've amortized it over a 20-year period, how many more years you have to pay it off, at what rate that is happening and where are the funds coming to do that, so people can take a look at that and say, "Okay, we have $400 million borrowed here, but we have revenue coming in and we have these debts being retired at these dates." I think that would be useful as well.
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The Chair: Ms Campbell, can you come back with what you've heard from the committee so we are in agreement?
Ms Campbell: It's my feeling that the committee has, at this stage, jumped to the recommendation. Has the committee finished its perusal of the section on budgetary procedures?
The Chair: Everybody in agreement? No comments?
Ms Campbell: Just to go back over then, the committee would like some additional statement made to the separation of spending into operating and capital accounts. Would you like that placed in the second paragraph under "Budgetary Procedures" or would you like the recommendation that appears at the top of page 9 expanded to include a reference?
Mr Kwinter: I suggest we do it both ways. I think if you just include it in the recommendation, where did that recommendation come from? If you at least have a statement in there, then you would include it in the recommendation. Do you know what I'm saying? If you just put it in the recommendation, there's no groundwork for where it came from.
Mr Wiseman: Explain it so we're all in agreement.
Mr Jamison: I think the recommendation at the top of page 9 already indicates that it's a clear statement to be made. I have no problem adding it in the line or a couple of sentences in the body on page 8.
The Chair: Can we agree on "Budgetary Procedures"? Can we go on? Mr Kwinter has comments on "Taxation."
Mr Kwinter: In the second paragraph, I think the first sentence is a little misleading. It says, "The government was cautioned against major tax reforms."
I don't think anybody would be opposed to tax reforms. They'd only be opposed to tax reforms they consider to be negative. If they were positive, everybody would be quite happy with taxes.
Mr Wiseman: Yes, but somebody's ox is getting gored when you do tax reform.
Mr Kwinter: No, I'm saying that a caution against any major tax reforms -- I just don't think that's an accurate statement. If the government came up with some tax reform that everybody thought was just fabulous, everybody would support it and I think that the --
Mr Wiseman: We know they won't, though.
Mr Kwinter: I'm saying I think the language can be a little different so that the implication is a tax reform that is going to have a negative impact on growth on a sort of competitiveness, on attracting business and all of those things would be objected to, but a tax reform that encouraged that would be quite accepted. I just feel that statement should reflect that.
Mrs Caplan: I suggest it be in two sentences, because there were the cautions about tax reform that have a negative impact on the economy. I think that's the point Mr Kwinter was making. Secondly, I think it was quite strong that the government was cautioned against any tax increases at this time.
Mr Jamison: I believe we can't confuse the issue, that we're cautioned against any tax increases. I think the committee has agreed to say that the Treasurer should measure any tax increases subject to the economic impact.
Mrs Caplan: As I read the presentations and what I heard and recognized in presentation after presentation before this committee, the tax burden should not increase at this time if the concern Mr Kwinter raised about the removal of additional revenue from the economy through higher taxes -- we were told in this committee -- would have a negative effect at the time the province was hopefully coming out of this recession, and that any tax moves -- the Treasurer was cautioned that tax increases at this point in time would have a negative impact on the economy.
The Chair: It sort of said that any tax increase should be taking a look at an economic impact.
Mrs Caplan: I agree with the last line, where it said that "If any changes are to be made, they should be incremental," and revenue-neutral. The point was that the total burden should not increase, that they should be revenue-neutral. That was also the concept that says don't take additional revenues out of the economy at this point in time, because it would have an adverse effect on economic recovery, the more you take out in the form of taxes.
Mr Jamison: It says "as possible."
Mrs Caplan: But that was not what the committee was told. What the committee was actually told was that tax moves should be revenue-neutral and that tax increases at this time would have a detrimental effect on the province's economic recovery.
Mr Wiseman: I thought we had a discussion around this issue of taxation that also indicated that we would like the Treasurer to take a look at perhaps the areas of taxation where a reduction in taxes could lead to an increase in revenue, based on a premise that if the Laffer curve actually applies, you cannot raise taxes to increase revenue any more because they will start to decrease it, but if you were to lower your taxes on certain items and certain products, you could in fact move the demand curve and therefore increase the amount of taxes you're collecting.
Mrs Caplan: That was exactly the suggestion that Mr Kwinter just made, which was that if you had a reform, a tax reform means that you are making tax changes. Unfortunately, tax reform, I think, has been given quite a bad name by your tax commission because tax reform to them is new taxes such as wealth tax and spec tax and corporate tax, that sort of thing.
Mr Wiseman: That's by people who haven't read all of the documents. And MVA didn't help either.
Mrs Caplan: But that's one of the concerns that we heard at the committee, that tax reform means lower it here -- you know, adjust it so that it has a positive impact on your economy. That should be reflected, I think, in the report, because that's what we were told. We were also told, "Don't take additional revenues out of the economy, because that will stall recovery," which means no increase overall in the tax burden.
Mr Wiseman: Of course, we also received some mixed messages. One group of people say, "Lower our taxes but raise those so that they make those people more competitive with us."
So we heard some mixed messages.
Mrs Caplan: That's why, in attempting to be general, I think Mr Kwinter made a very good point that talked about the overall impact on the economy, because that was the one consistent message that this committee received.
The Chair: Okay. The researcher here has been listening to all sides of this discussion. Could you come up with a statement, what you're hearing the committee saying here?
Ms Campbell: I just felt that there was some problem with the first line in the second paragraph and that it was suggested that it be reworded to state: "The government was cautioned against major tax reforms which would have a negative impact on growth and competitiveness. It was also cautioned against tax increases at this point in time."
The Chair: Mr Carr? Agreeable? Mr Wiseman? I'm looking at the first person every time on that side. Okay. We all agree.
Any other comments that were made later on? I don't think so. I think that was the main part. Any other comments on that remaining paragraph?
If not, are we all in agreement on the "Taxation" section? Anybody opposed?
Mrs Caplan: How about me?
The Chair: Okay, Mrs Caplan.
Mrs Caplan: This section makes reference to some very specific tax moves. As I recall -- correct me if I'm wrong -- there were also presenters who said very clearly that any discussion of wealth tax or inheritance tax should not be contemplated and that the Treasurer should be very clear in his response to the recommendations of the tax commission. That was a recommendation to this committee, that the province not contemplate wealth tax or inheritance tax. The reason for that was that by leaving that uncertainty and not having the government very clearly state, "We're not going to bring in a wealth tax; we're not going to bring in an inheritance tax," what has happened is that capital is fleeing the province, as you have that insecurity today because the province is saying: "We're thinking about it. We're contemplating. We haven't made a final decision." It's very important that the Treasurer be definitive so that those people who would be affected by those two initiatives have confidence in Ontario in the immediate future and not remove their capital and investment from Ontario. I believe that is the situation.
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Ms Campbell: You make reference to the specific taxes that are referred to in that paragraph on page 9. Those taxes were referred to at the request of the committee.
Mrs Caplan: I guess what I'm requesting is that you expand on that, particularly in light of the tax commission's report and recommendations on wealth and inheritance tax. The committee had representation that said those would be very damaging to the province at this time.
Ms Campbell: Could you perhaps tell me which presenters made those statements?
Mrs Caplan: I don't remember.
The Chair: I remember also. I just don't remember who it was.
Mr Wiseman: I would be prepared to support some kind of a recommendation that would say that until the final draft of the Fair Tax Commission has been established and discussed in the public, caution be exercised in the introduction of new taxes that would cause uncertainty and flight of financial --
Mrs Caplan: I guess the concern I have is that we've been very specific here about references to the commercial concentration tax and to the GST. I think it's appropriate to add a specific reference to a wealth tax and an inheritance tax. We heard, before the committee, that those were two concerns from presenters around specific taxes. If, in this section on page 9, you're going to name specific taxes, it seems to me prudent and wise that those two in particular -- there are others we could name as well, but those are two that I think the committee should be adding because of the timeliness of the tax commission's report.
Mr Wiseman: If the wording was, "Some presenters drew the committee's attention to their concerns about these taxes," I think I could support that.
Mrs Caplan: Yes, where it says, "The possible introduction of a minimum corporate tax was not viewed positively," you could just add to that --
Mr Wiseman: "Nor was the addition of a wealth tax."
The Chair: Yes, without a reference. It's in there; we've heard it.
Mrs Caplan: That's right. "Wealth tax and --
Mr Wiseman: "Succession duties."
Mrs Caplan: "Succession tax," yes.
The Chair: You just said it would dry up the fluid capital out there.
Mrs Caplan: Fluid capital, for capital investment, yes.
The Chair: Mr Kwinter, you've got your hand up? No? Okay. So we're all in agreement now with the taxation section? Okay, it looks like we are.
We can get on to the "Sectoral Issues," and there's an opening statement. I guess we should have the opening statement first and then get into agriculture and the other areas. Yes, Ms Campbell.
Ms Campbell: The committee will notice there are only five sectors that are summarized here. There were certain time constraints in operation when it came to preparing the report. If the committee would like additional sectors added to this particular section, that request could be accommodated.
Mr Kwinter: The only concern I have by not -- I can't remember exactly which sectors were here in total, but I think it would be prudent on our part to list every sector that was here, because I think it would be very difficult to explain when someone says, "I came and presented something to you on behalf of our particular sector and you don't even mention it." I think that would lead them to believe, what's the use of coming here?
Mr Wiseman: That's right. "You weren't listening."
Mr Kwinter: "You weren't listening." As I said, I can't be more helpful. I can't say to you that the day care people or health people or whatever groups came in; I think we should at least acknowledge that they were here and say something about some of their concerns.
Ms Campbell: I put together an additional list of eight possible headings that could be included. They included construction: We heard from the Council of Ontario Construction Associations. We also heard from the Ontario Road Builders' Association and the Ontario Good Roads Association.
Another would be culture: The only organization that appeared under that heading would be the Ontario Arts Council.
Food service: We heard from the Ontario Restaurant Association. Forestry: the Ontario Forest Industries Association.
Housing: We heard from the Ontario Home Builders' Association. Rail transport: We heard from CP Rail. Small business: I was thinking of the Ontario Convenience Stores Association, which appeared before the committee. And finally, utilities: We heard from the Municipal Electric Association. We also heard from Energy Probe, the Ontario Natural Gas Association and the Propane Gas Association of Canada.
The Chair: Mr Carr, any comments on Mr Kwinter's recommendation?
Mr Carr: I agree. I had thought there were only a few, but when you list them now, I remember them, and saying you can't put forestry when we only put mining in -- you've got to put forestry in too.
The Chair: I think there were a lot of valid points that each group brought forward.
Mr Wiseman: I would agree that we should say that we've heard from a "cross-section of all of the sectors of the economy of Ontario, including," and list them all and then perhaps say that there is a commonality to the concerns they were raising, with respect to both the deficit and taxation, and that we have chosen to highlight some of the comments from these areas which seem to reflect a more broadly based concern throughout the economy.
The Chair: Ms Campbell, it's a quarter to 12. This may be a big request, but over lunch hour, until we resume at 2 o'clock, is there a possibility that you've got some notes on these different sections that Mr Kwinter -- or you have mentioned what Mr Kwinter, Mr Carr and Mr Wiseman have brought up -- that you would have a couple of lines on what these particular groups had said? I was watching you during the hearings. I think you made some rough notes. Maybe you could wind up presenting those rough notes, even if they're just verbal, to the members here. I think it's very important, because everybody said maybe one important thing, about how the budget could influence their sector. Leaving them out -- as Mr Kwinter said, I think they would say they came here, we listened, but didn't listen enough.
Mr Kwinter: We heard but didn't listen.
The Chair: Yes, we heard but we didn't listen.
Ms Campbell: I'll try to pull together some rough notes that I could read into Hansard.
The Chair: I know that we have it all in Hansard, but still, I think the Treasurer should be able to read this condensed form.
Mrs Caplan: This might be a good point, since we've just completed this section, I believe, to recess and come back.
The Chair: Can we go for 10 more minutes and maybe get agriculture, beverage, manufacturing, and we can add the other ones on when we come back after lunch? So if we can get up to "Social Issues" -- let's see if we can get that far, I think, in 10 minutes. I think it's straightforward, each section, and then we'll recess when we get to "Social Issues" or 12 o'clock, whichever comes first.
Mr Kwinter: The only thing is, that's going to be expanded anyway.
Mrs Caplan: That's right.
The Chair: Yes, but you're just going to have different headings.
Mr Kwinter: No. Each heading is going to have a statement, something.
The Chair: Yes, but we can go through agriculture.
Mrs Caplan: The "Sectoral Issues" section is quite significant, Mr Chairman. I don't think it can be done within 10 minutes.
The Chair: No, but I'm just saying the ones that we have here so far. We'll go as far as we can until 12, and Ms Campbell will be bringing the other sectors in at 2 o'clock.
Mrs Caplan: If we gave her a few more minutes now, we could then do the whole thing together at 2 o'clock.
The Chair: Okay, 10 minutes, I guess, isn't going to make that much difference.
Mr Wiseman: As long as we're all back at 2 o'clock.
The Chair: Okay, at 2 o'clock sharp. This committee is recessed until 2 o'clock.
The committee recessed at 1149.
AFTERNOON SITTING
The committee resumed at 1408.
The Chair: Okay, we'll resume working on the draft report of the committee, pre-budget consultations for 1993 for the standing committee of finance and economic affairs. I'm going to hand it over to Ms Campbell to see what she was able to come up with over lunch for the committee members here on the other sectoral areas before we get going.
Ms Campbell: Before I talk about the sectoral issues, I'd like to let the committee know that I phoned the office of the Minister of Finance during the noonhour to see if it might be possible to get some information on the amount of foreign debt over an extended period of time. I was told that the person I should speak to was unavailable at the time and that I should call back later this afternoon. I would like to warn the committee that it may not be possible to have that information ready for inclusion in the report by Wednesday and I would like the committee to be aware of that.
Moving on to the sectoral issues, I'm afraid that I wasn't able to accomplish a great deal during the noonhour. I did manage to get through a few of the eight I had listed prior to our leaving at noon. One of the suggestions that was made before we recessed at noon was that perhaps mention could be made in the introductory paragraph to all of the sectors that made presentations to the committee and then pull out some common themes or threads that appeared in all of these presentations. I think that a few that could be focused on would be the reduction of taxes, the creation of an environment that enhanced confidence, stimulated investment and encouraged competitiveness. Those seemed to be some common themes.
I was able to get through the construction sector, foodservice, housing, forestry and small business, and while there were specific concerns in each of those sectors, I think they were all concerned about taxes and an environment that stimulated investment and competitiveness.
The Chair: I was wondering if you could get photocopies of your notes so all members of the committee could read along with you.
Ms Campbell: They're very rough point-form notes. I don't know whether they would be of any use to the committee.
The Chair: It looks like my handwriting. So I would be able to understand it.
Ms Campbell: I guess my question is, does the committee want each of the sectors summarized or, as was earlier suggested, to make reference to each of them in the introductory paragraph and then choose four or five or six, however many, to focus on and be viewed as representative of the presentations that we heard during the hearings?
The Chair: I'm going to go to Mr Kwinter. I know we have agriculture, we've got two paragraphs, if we just mention them; maybe that's not exactly what the other committee members want to see.
Mr Kwinter: Before I ask the question, is there going to be an appendix to this report listing everybody who appeared?
The Chair: There should be, yes.
Mr Kwinter: Before we broke for lunch, I felt that we should take some more sectors and, even if there are one or two sentences on each one, that it should be laid out just so that we acknowledge their presentation. The only ones that I would exclude are if there were individual groups that weren't connected to a major sector of the economy. But if you're talking about forestry or if you're talking about agriculture, if you're talking about some of the other groups that are not included, I'd like to see them included. It doesn't have to be a long thing, just a brief summary of what they had to say.
Ms Campbell: By "what they had to say," do you mean what the current state of their particular sector is as well as their recommendations to the Treasurer?
Mr Kwinter: Primarily what their recommendations were to the Treasurer.
The Chair: I'm going to throw one out. We've got trucking. Should it be a title, just "Transportation," which would cover rail and trucking and other areas rather than breaking it down just into trucking? This is a question I think the committee should take a look at: How far do we break it down? Because we've got agriculture; that's a wide range. But when you talk about trucking, you're talking about one area.
Mr Kwinter: I think we're only talking about another six to eight groupings. Is that correct?
Ms Campbell: Probably closer to 12, considering the fact that there were five already completed.
Mr Kwinter: Five including the 12, or 12 in addition?
Ms Campbell: The list that I read out this morning had eight in it plus the five that are included in the draft report.
Mr Kwinter: So I'm saying there are eight additional. Eight additional might be two pages, double-sided, which is a couple of comments.
The Chair: Maybe you could read out the comments of each sector, of the ones you have written down over the lunch-hour, and whether we agree with the sentence for each one of the sectors. You can read your own writing, can't you?
Ms Campbell: Under "Construction," I looked specifically at the brief prepared by the Council of Ontario Construction Associations. In their brief they discussed a number of statistics and figures related to developments in the industry over the last few years in terms of jobs lost, bankruptcies, closures. They also spent a great deal of time discussing the issue of capital spending.
They were quite enthusiastic in their support of the government's establishment of the three new crown corporations. They also highly recommended private sector involvement in the operation of those capital corporations. They also discussed reducing taxes and creating an environment that enhances confidence and stimulates investment.
The foodservice sector --
The Chair: Can we just get agreement on each one? Do you agree, Mr Kwinter, with that statement?
Mr Kwinter: Yes. Maybe we could short-circuit this. From what I understand from Ms Campbell, all she's going to do is sort of condense what their recommendations and comments were. It isn't a matter of whether or not we agree with it; it's what they've said. It isn't a matter of our interpretation; it's what they said. All I really want to do is see them included.
I don't think we really have to even hear what it is to agree, "Is that what they said?" I can't remember what they said, but I assume she has the notes; that's what they said. All I really want to do is see them included. I don't really care what they said, just as long as what they said is included.
Mr Carr: I would like to see them all included, because I don't think the length should be a problem. The only thing I'd like to be careful of -- and I think Elaine has been able to word it such that if there's any conflict, she does present both sides. If there haven't been two sides to an issue presented, it might appear that this report is supporting, notwithstanding the fact that it will say, "This group said." It still could be perceived as this report presenting that.
The only thing I'd like to caution is, because there were a number of controversial items where this committee may not have agreed with it, that we don't present it like a recommendation. I would like to see us include it. Whether you made them broadly based, saying "Transportation," or whether you made it "Trucking" and "Rail" and so on, the length would still be the same. When we come to the recommendations at the end, I think that's where the committee will have its imprint on what it has suggested.
I would support Monte and say we should include the number of groups that have come through, but just keep them fairly short. Even if they were as long as these that have been listed, I don't see that as being a big problem, because it is a diverse province with a lot of interests and I think we should carry them forward and then at the end make our recommendations. I support what Monte said rather than trying to group them together. I think it may even take more time if you had to group them together.
The Chair: Mr Jamison?
Mr Jamison: I'll pass to someone else at this point.
Mr Wiseman: In terms of being inclusionary in the budget in this document, we did hear from so many and I guess the question is, where should they be included? Should they be listed? Should we have every one of them in this section? Just thinking about it, while we don't want to exclude anybody, I'm trying to think in terms of the impact of the document on the minister.
I would say we should include them in this section where they have made direct issues and points about what impact it will have on them if there are changes in certain areas, increased taxes or decreased, transfer payments and so on, so that the minister and his staff know that when they go through this document, they're reminded of the impact of their decisions; so that this document not only gives them advice but serves as a reminder to them that they have to think in holistic terms, that they can no longer just make a decision in one area without being cognizant that it's going to have effect in others. I think that's what I would rather see than to see everybody there.
Perhaps we could make an addendum in the appendix to this, thanking all of the groups for the points they raised, and perhaps list the recommendations they gave, saying that these will be passed on to the minister.
The Chair: We already did that in the introduction.
Mr Wiseman: In that way?
The Chair: Yes.
Mr Kwinter: There's a defined number -- I think it's eight -- and they're very specific groups: the home builders, for example. I would agree that we should not list an individual who came here or a very small group, but we're talking about sectors. Home building is a major sector in Ontario. I think it's a mistake to have them appear before this committee and not even acknowledge what their concerns and recommendations were.
We heard from Ms Campbell before lunch what the eight are. I don't think eight is an onerous number. As I say, it doesn't even have to be judgemental. Whatever their recommendation is, it isn't our recommendation.
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The opening paragraph in the "Sectoral Issues" section says: "Ontario's economic diversity was much in evidence during the pre-budget consultations. The committee heard representatives from a number of sectors describe in great detail how they met the challenges of the recent recession and how they hope to cope with recovery. The major points of some of those presentations as summarized below." We're not condoning, approving or rejecting what they're saying; we're just saying, "Here are the major points of what they have presented."
All I'm saying is that I think that five representative groups aren't enough, considering that there are fairly significant groupings that have not been included. So all I'm suggesting is that we include them. I don't think we have to listen to what we're saying about them, because this is what they're saying; we're not going to change that. Just have it there so that people at treasury will have heard from the various groups as to what their concerns are and what they would like to see. That's really all I'm asking for.
Mr Wiseman: In the interest of moving along, I would agree with you.
The Chair: Okay, thank you. Mr Carr, do you agree with Mr Kwinter?
Mr Carr: Yes, I do.
Ms Campbell: Just as a point of clarification, the committee would like a one- or two-paragraph summary of what each of the sectors said in their presentations to the committee. Would you like the introduction expanded a bit to sort of make reference to the common themes that appeared in those presentations?
The Chair: That would be "Recommendations from the Committee" later on, wouldn't you agree, Mr Kwinter? Just what they said.
Mr Kwinter: Just list them.
Mr Jamison: Not to get ahead of ourselves --
The Chair: We are ahead of ourselves. We're on "Social Issues" now.
Mr Jamison: Okay, that's fine. While we're heading into "Social Issues," the same can be said for the social services group and the other particular sectors that presented to us, not just the manufacturing/business-related sector, because I think we'll find diverse views when we look at it in that light or that context.
The Chair: Okay, we're on "Social Issues" on page 13.
Mr Wiseman: We were suitably boring. Our one spectator left.
The Chair: That was while you were talking, Jim.
Mr Wiseman: Not me. I saw him get up and leave when Monte was talking. Don't try and put it on to me.
Mr Kwinter: Mr Chair, I have no objection, as long as all of the major presenters are acknowledged now. It seems to me they are.
The Chair: Okay. Mrs Marland, we haven't heard from you today. This is your field.
Mrs Margaret Marland (Mississauga South): Which field?
The Chair: On page 13.
The Chair: Mr Carr, I guess you --
Mr Carr: Yes, I'll follow through because I've been following the committee right from the beginning.
The Chair: I can't hear you very well.
Mr Carr: Okay, I'll speak up.
No, I have no problem with this section as well the way it's written there.
Mr Jamison: The second paragraph, starting three quarters of the way through the third line, "Over time, social assistance benefits have been reduced": I don't think that's an accurate statement and I'm concerned about that statement in that paragraph.
Ms Campbell: I think that's a representation of what was said in the presentation. The comments would be attributed to the Daily Bread Food Bank, or would you prefer that they be changed?
Mr Jamison: I don't know. On this particular issue we seem to be getting told by some people that the increases have been too much and now we're being told by other people that we've reduced payments, and that's simply not true.
Ms Campbell: Would you prefer something like, "According to the presenters, over time, social assistance benefits have been reduced"?
Mr Jamison: I don't think that's a factual statement. In their opinion, possibly -- that's the context it's in -- but I don't think I would feel well about giving that credence. I don't think there's anyone in this room who would say that we've reduced social assistance benefits.
Ms Campbell: Would you prefer the sentence be rewritten to state, "Over time, more food bank patrons are getting by with less," taking out any reference to social assistance benefits?
Mr Jamison: I understand that there's more pressure on the food banks; there are more people using them. But I don't agree with the statement about the levels of benefits being reduced. That's certainly not the case.
The Chair: Mr Kwinter, any comments on that particular sentence?
Mr Kwinter: I would have no problem if they want to take out "Social assistance benefits have been reduced," and just have "Over time, more food bank patrons are getting by with less." That was certainly Mr Kennedy's position when he made the presentation.
The Chair: Because the dollar figure hasn't been reduced, what benefits are being paid out. Okay? Do you want to read it back to us, Ms Campbell?
Ms Campbell: I'll read the sentence. In the second paragraph under "Social Issues," the third sentence will be reworded to state, "Over time, more food bank patrons are getting by with less."
Going back to Mr Kwinter's wish to include everyone who made a presentation, in the third paragraph I make a very generic reference to "private child care centres, children's aid societies" etc. I'm not specifically naming the groups who appeared. Are those references --
Mr Kwinter: When you finished, I was going to clarify to say I did not necessarily want everybody who made a presentation, but every sector that made a presentation.
Mrs Marland: On the second paragraph on page 14, in the same section, you're talking about the non-profit housing generating comments from a range of private sector groups. "Some suggested that rent controls be eliminated and that shelter allowances or rent subsidies be given to those in genuine need." When they talked about that, did they define "genuine need" as eligible need or eligible criteria? When I talk about direct subsidies or shelter allowances as an alternative to government-owned and -operated bricks and mortar, I talk, on behalf of our party, about people who are eligible. Maybe, Elaine, your words "genuine need" mean the same as people who are totally eligible with defined criteria. It's very specific, and although I wasn't fortunate enough to hear these groups that came before this committee, I have heard them making the same presentations elsewhere, and they're talking about this alternative to government housing being given to those people who are eligible under very strict criteria. That was one question I had.
The other is, "Uninitiated projects should be cancelled and no further approvals should be granted," and then, "Others called for a complete program review." Of course, the auditor is calling for a complete program review as well, so I agree with that statement, but what is meant here by "Uninitiated projects should be cancelled"?
Ms Campbell: I interpreted that as meaning perhaps projects that are in the discussion stage but that haven't actually been fully approved.
The Chair: On the drawing table.
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Mrs Marland: So were these groups saying -- I don't know what they mean by "initiated" and "uninitiated." I know what those two words mean, but I don't know what they mean in this context. If they're saying no further approvals should be granted, the thing is, unless -- if that sentence goes with the first sentence in that paragraph, then I guess it's all right to leave it as it is, but it doesn't stand on its own.
I'm very sensitive to this housing issue and I just want to make sure this committee heard these housing coalition people and the private sector people very clearly, because it's a very important statement. We're talking about multimillions of dollars in this program and I think "uninitiated projects should be cancelled and no further approvals should be granted" has to follow if the other programs take their place; for example, direct shelter subsidies or shelter allowances. That's what these people are asking for. They're not saying, "No, no, no"; they're saying, "This is what we would like as an alternative to what's being done," because they know that if you subsidize a residential unit $2,000 a month for one family, in fact, you can be looking after four families for the same dollars. So what these private sector groups are saying for the most part is not to cancel the dollars; just to look after more people for the same investment. But what I'm trying to confirm is: Is that what this paragraph is referring to?
Mr Wiseman, you're shaking your head. Were you here the day they were there?
Mr Wiseman: I heard some of them, yes.
Mr Kwinter: My understanding of what was meant was that pending a complete program review, no programs be approved and no programs be initiated. In other words, stop all of these non-profit housing programs until a complete program review. The only ones that would go forward are ones in progress, but those that had not started were not to start and there were to be no approvals given, pending a program review.
The Chair: Okay, Ms Campbell, I think you most likely have the paragraph that -- how the statement was given by that group.
Ms Campbell: I'd just like to point out that the introductory line to that paragraph states, "Non-profit housing generated comments from a range of private sector groups." These comments were made by a collection of groups. It's rather hard to meld them into one recommendation that very easily flows from one sentence to another. The Ontario Home Builders' Association stated that no further approvals should be granted for the construction of non-profit housing projects, and the Board of Trade of Metropolitan Toronto stated the government should cancel all its uninitiated non-profit housing projects and complete only those currently under way.
The Chair: So you've got two groups that have said --
Mr Jamison: It might be wise to specify which group said that, then, because obviously more groups than that presented.
The Chair: Mr Jamieson, but it does cover a range of private sector groups; it's a general term. Then you have your -- this'll be in the report also of what different groups actually said, so we could make a really detailed report. It's got to be simple. This is what sectors said rather than just naming the sectors. Comments by Mr Kwinter on this particular -- Mrs Marland?
Mrs Marland: Maybe we could say -- after "genuine need" you could put comma. "Some suggested that rent controls...shelter allowances," da, da, comma, and then, "Some also suggested uninitiated projects should be" da, da, da, "while others called for a complete program review." I think maybe you could make it flow that way.
Ms Campbell: If you question the use of "genuine need" in the second line, would you be happier with something like, "Some suggested that rent controls be eliminated and that shelter allowances or rent subsidies be given to those who met eligibility criteria"?
Mrs Marland: Yes, that's very good. Thank you. That's great.
The Chair: Everyone has a genuine need. Any other comments on "Social Issues"? Seeing none, we'll go on to "Transfer Recipients" at the bottom of page 14.
Mrs Marland: Are you dealing with the recommendation on page 14, Mr Chairman?
The Chair: No, I just took it that we're --
Mrs Marland: Okay. I just want to ask --
The Chair: Are you going to back up?
Mrs Marland: Where it says, "Social services should be delivered in a more efficient, effective, productive and coordinated manner," there is nothing there that says "fiscally responsible"; there's nothing there referring to finance.
Mr Jamison: "Efficient" could tend to --
Mrs Marland: Efficiency may be time management. Social services is the largest budget of the government, because it's now larger than health, isn't it?
The Chair: No, Health is still the largest.
Mr Wiseman: Health is $16 billion.
Mrs Marland: Well, second-largest then, not far behind.
Interjection: Well, $4 billion is far behind.
Interjection: About $17 billion.
Mrs Marland: And is social services still $12 billion in the recession?
Interjection: Eight.
Mrs Marland: I just think it's important that when you're talking about social services, we've got to maximize the dollars that are invested in social services. Sometimes they might be efficient but not always fiscally responsible. They could be effective and not fiscally responsible, "and productive and coordinated manner."
This is the finance and economics committee, isn't it? I think it would be important for those of you who are financiers, which I'm not -- the standing committee on finance and economic affairs: I think you should get something in there that addresses fiscal responsibility but it's only a humble suggestion.
Mr Wiseman: There was an added phrase to that, and I thought we all agreed on it, that social services should be delivered in an efficient, effective, productive and coordinated manner based on client needs. That this would go a long way to what Mrs Marland was saying in terms of making sure that it's done in a way that makes sense. If it's on a client-based needs system, then I think we're moving in the right direction, if we start asking the right questions about delivery mechanisms and about how the money is being spent.
If there isn't any objection, I would like to see added there some phrase that the delivery of the system should be done on the basis of client needs, and that what would follow from that would be a reassessment of the administrative structure and how it would be delivered.
The Chair: Mr Kwinter, any comments on Mr Wiseman's or Ms Marland's comments?
Mr Kwinter: In the interests of being helpful, maybe the recommendation, and the last recommendation as well, could have the word "cost-efficient" as opposed to "efficient." That might resolve Ms Marland's concerns. I know we're jumping ahead, but in the last recommendation, "A determination should be made of the most efficient mechanisms available for the delivery of services," we can use the words, "the most cost-efficient mechanisms." Would that solve your problem, Ms Marland?
Mrs Marland: Yes, thank you. No wonder you were a cabinet minister. That's the training I have yet to have, Monte.
Ms Campbell: Be nice to him. It's his birthday.
Mrs Marland: But that well addresses --
Mr Wiseman: Thirty-five, Monty?
Mr Kwinter: Thirty-nine, and holding.
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Mrs Marland: Those are excellent suggestions of Mr Kwinter and I appreciate his suggestions. That resolves my concerns. Thank you.
Mr Jamison: I just want to let Margaret know that I was just about to think of that.
Mr Carr: One step behind again, eh, Norm?
The Chair: Ms Campbell, just read back to the members what you are going to change here.
Ms Campbell: I'll reread the recommendation. It will be rewritten to say, "Social services should be delivered in a more cost-efficient, effective, productive and coordinated manner based on client needs."
Mr Wiseman: I go for that.
The Chair: We've got everybody incorporated in that one now. Transfer partners, at the bottom of page 14, "Transfer Recipients": Mr Wiseman, any opening statement?
Mr Wiseman: At the risk of being repetitive again -- repetitive again; that's redundant -- on page 18, my major concern here with the transfer payments has to do with outcomes, and client outcomes in particular. A lot of money is being transferred to agencies in this sector which provide a duplication of services. They may not be exactly the same services, but broadly speaking, they come under the same headings. Each of these agencies has its own organization. Each of these organizations has its own administration and bureaucracy.
I would like to see where it says on page 18, "This process could involve comprehensive audits," based on client-defined needs, for example in the education sector, somewhere where I come from.
I circulated the article. We've seen huge increases in the administration of boards and I asked the question, how has that helped and assisted the classroom teacher in providing better education to the students? A comprehensive audit that asks that question and would trace the spending backwards to the boards through the whole system to find out if the money is in fact being spent to achieve that goal: I have my own belief on this, that a lot of money is being spent to support the administrative structure and not necessarily to meet the client needs. I think I would be arguing on page 18 that client needs be part of the comprehensive audit and would form the basis upon which comprehensive audits would be done.
The Chair: Comments?
Mr Kwinter: I'd like to comment on Mr Wiseman's comment, but first I just want to repeat what I said earlier, that the first line of the recommendation should say "the most cost-efficient,"just to make sure that's in.
The problem I have with Mr Wiseman's suggestion -- and I shouldn't say it's a problem; I think there has to be a clarification. If you're doing an efficiency audit or a value-for-money audit, then you have to take a look at the client base. I just don't know whether that is what is intended by this recommendation, or that the recommendation is to make sure that the funds are properly accounted for. Regardless of how they're spent, it's just a comprehensive audit to make sure that the moneys are being used, that there is no wastage, things of that kind, as opposed to saying, "The money was spent here and we think it should have been spent somewhere else."
That isn't normally the function of an auditor. He doesn't make those value judgements. That's a policy decision, and that's what happens with the auditor who does the budget. The government makes a decision how it wants to spend the money and it's not the auditor's business. The auditor's business is to make sure that if that's what they said they wanted to spend money for, that's what it was spent for, but as I say, without making a value judgement as to whether or not that's where it should have been spent.
I have no problem with what you're saying; I just don't know whether that was the intent of that line. I'd like some clarification on that.
Mr Wiseman: I'm more than willing to entertain any wording or any kind of changes to this that would do what I suggested, and that is, define what it is you want to deliver and then find out if in fact the money you're spending is delivering what it is you intend to deliver, whether it be education or health care or good municipal government. I think we're way past the time when we should be asking whether or not the money we're spending is being spent efficiently, not just according to whether or not the $100 was spent on buying books, but whether or not we've in fact bought the right books, whether we're doing the right thing for the students or whatever.
Just to give you an example, when I was in the system, when we changed to OACs, all the textbooks were changed. The unfortunate thing was that the money was granted the year before the textbooks were written and there was no way to roll the money over into the next year, so millions of dollars across the province were spent that needn't have been spent in that year, buying books that were used for only one year and didn't apply to the course the next year because it changed.
That's what I'm trying to get at in terms of whether or not we should have multi-year budgeting and how we should define the money spent on the clients.
The Chair: I think if you were listening to Mr Kwinter's point, what he was saying was that the auditor comes in and says, "Yes, you've got all your beans in there that you spent," but the policy it has to be reworded to the point of how you wind up saying that it is efficient, that it is being spent properly. The Provincial Auditor is going to say, "Yes, the books are correct; this is what you did spend," but not whether you're spending the right way.
Mr Kwinter: You have to decide whether you're calling on the auditor to set your policy, but you're not. The point I'm making is that the auditor's function is not to decide what your policy is; the auditor's function is to decide whether or not the funding that has been provided has carried out your policy directive and it's been done in a proper way. How you do that, I have no problem. The only problem I have is when you link it to the audit.
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Mr Wiseman: I'm not married to the way the audit is done. I just want it recommended to the minister that it be done, that we do start to evaluate the delivery systems on the basis of whether or not the client we're trying to deliver to is receiving the maximum amount of funds or the maximum benefit for the money we're spending. From what I have been able to see over the last two years, this is not necessarily the case; that we have huge administration structures developing that are funnelling off money at this level before it gets to the client we want to serve.
The Chair: I think Mr Carr has some words.
Mr Carr: I was just going to add, first of all, the one point Monte made: "A determination should be made of the most cost-efficient...." I think we're getting hung up a little on, "The process can involve comprehensive audits." Those audits don't necessarily need to be by the auditor; they can be audits done by, for example, the Minister of Health over hospitals. My suggestion would be to include, "This process can involve comprehensive audits that look at cost-effectiveness and client needs," or whatever. I think that line can just be expanded to include them, because I don't think that last line necessarily meant the auditor looking at it.
The Chair: Could it be "cost-effective program review"?
Mr Carr: No. "This process can involve comprehensive audits that look at clients' service needs and cost-effectiveness."
Mr Wiseman: Delivery.
Mr Carr: Whatever.
Mrs Caplan: I realize that both Mr Carr and Mr Wiseman were elected in 1990 for the first time, and I'm just trying to be helpful, as opposed to gratuitous, in my comments. The government today has the ability to do what both Mr Wiseman and Mr Carr are suggesting, and there are two ways it can do it. First, through the ministry's audit branch, they have full authority to hold any of those receiving government funds accountable for those funds and to do an audit of the funds received directly from within the ministry. There are also powers under numerous acts to allow that. I can cite the acts for you from the Ministry of Health if you wish, but they are also available through the Ministry of Community and Social Services.
If you don't like any of those approaches, of doing it directly through the ministries, then the second approach is that you, as the government, can call in the Provincial Auditor at any time and ask the Provincial Auditor to audit any one of the people you give dollars to for funding. The auditor has the authority under the provincial Audit Act to pick and choose the ones he would like to audit, and he does that independently, free of any influence from government.
But I can personally think of occasions, when I had the privilege of serving in government, when we initiated an audit by the Provincial Auditor because of our desire to have an audit done and ensure accountability and fiscal responsibility. So the tools are there, and I just wanted to suggest to both Mr Wiseman and to Mr Carr that there is that ability right now to do that if the government has the will to do it.
Mr Kwinter: I think one of the confusions is the word "audit." Maybe we could solve it by saying, "This process could involve comprehensive evaluations of the delivery of service."
Mrs Caplan: Yes, evaluations.
The Chair: There you go again, Monte, coming up with the right word.
Mr Wiseman: I just want to be clear that I know the government can do all of those things and is in fact doing them, because we've certainly gone through a lot of program reviews. Where this really stems from for me is that my board of education is building a $26-million administration building without having gone through the process of determining, on the basis of client delivery systems, whether or not it's needed. I think the government should do that before it starts.
Mr Perruzza: Shame on you, Jimmy. Where are they, in a warehouse now?
Mr Wiseman: Well, they've got a building, but it's grown over the last 17 years. So that's what my focus here is, to deliver the system in the most efficient way. But thanks, Monte, for your comments.
The Chair: Ms Campbell, are you just about ready?
Ms Campbell: Yes. The reworded recommendation would be: "A determination should be made of the most cost-efficient mechanisms available for the delivery of services provided by the province's major transfer recipients. This process could also involve comprehensive evaluations" -- is this where we want to get "client-defined needs" in there, or do we want to make any reference to that? "This process could also involve comprehensive evaluations" strikes me as perhaps leading to something else.
Mr Kwinter: I had suggested "evaluations of the delivery of service."
Mrs Caplan: You could even say, if you wanted, "evaluation of the outcome" or "the results of service delivery," because in fact I believe it's going to be very important to start to focus on the quality of the results. I spoke about this for three years, and outcome/results-focused evaluations are the key to quality management. I think it's a positive way of effecting the kind of changes that will be necessary in the future.
Mr Wiseman: You can't accomplish that with hierarchical structures. They have to be horizontal.
Mrs Caplan: Well, that was one of the reasons we had moved to a different kind of management system at the ministry when I was there, to accomplish that.
Mr Wiseman: We need to do that in education in particular; it's just horrendous.
The Chair: That's "the committee recommends." We skipped over "Community Colleges," "Schools," "Universities," "Municipalities" and the introduction --
Mr Perruzza: I move approval. Let's go.
The Chair: You just got here. I'll give a few minutes to read over the other sections, if there are any changes to be made.
Mr Perruzza: Mr Chairman, may I move that we cut to the chase?
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The Chair: I know you read it in about three seconds, speed reading, but some of the others can't read as fast. I'm still on the first sentence.
Mr Perruzza: I read it this morning, Mr Chairman, but you didn't want to listen to me.
Mrs Marland: Is "cut to the chase" a jockey term?
Mr Jamison: No, it's a movie term. They say, "Okay, cut to the chase." That means, "Wind it up."
The Chair: Any comments? Mr Carr?
Mr Carr: No, I agree with the way it's written.
The Chair: Mr Kwinter?
Mr Kwinter: No.
The Chair: Mr Jamison?
Mr Jamison: That's fine.
The Chair: So we're right down to the last page on recommendations.
Mr Perruzza: Can I move approval, Mr Chairman?
The Chair: We haven't had any comments from the opposition parties yet.
Mr Kwinter: I would move these recommendations as amended, which we've amended as we've gone along, some of them. And we as a caucus will be presenting an additional report to be included with this one.
Mrs Caplan: There are a number of areas in which this report just doesn't go far enough and a number of issues that were rejected by the government through the discussions.
Mr Perruzza: How come you didn't bring it here so we could review it?
Mr Wiseman: Any specific areas? I think we've got pretty far in terms of agreeing. You might be surprised where you could get agreement.
Mr Kwinter: We agree on everything that's in here. We have no problem with that. We just agree with things that aren't in here that we don't think we could get in there.
Mr Wiseman: Such as?
Mr Kwinter: A range of issues that --
Mrs Marland: A change of government.
Mr Wiseman: Well, we'll wait for a couple of years on that.
Interjection: And here I thought we had a consensus. I'm disappointed.
Mr Perruzza: Mr Chairman, I'd be interested in coming to a committee to review their report, for sure, prior to its being submitted.
The Chair: We have only two hours left in our mandate to finish this pre-budget consultation to be handed to the Treasurer.
Mr Perruzza: We could read through a Liberal report in two hours, no problem.
Mr Wiseman: I'm still very much interested in hearing what other recommendations you would put.
Mrs Caplan: You won't have to wait long.
Mr Kwinter: If we had our report here, we would table it. I don't have the report.
Interjections.
The Chair: What's that? The Blueprint for Recovery? What's it called?
Mr Carr: No, this is an updated version.
Mrs Marland: We could send you a copy of our two blueprints.
The Chair: Okay, Ms Campbell is going to go through the changes we've just had, for clarification. She has everything that the committee said to her.
Ms Campbell: I'll just go back to the first section of the paper, "Economic Summaries and Forecasts," under the heading, "Debt and Deficits." The committee has asked that there be specific reference made to the province of Ontario's debt and that of Ontario Hydro. There will be reference made to that under "Debt and Deficits."
The committee has also asked that there be a graph or table inserted showing the amount or percentage of foreign debt over time owed by the province of Ontario. As I stated earlier, I have attempted to try to track down that information and will try to have it ready for Wednesday when the report will be due.
Under the section "The Future," it's my understanding that the committee would like to add a statement that in brief states that the committee fully recognizes that there are difficulties associated with projecting the future with any degree of accuracy, when we're referring under the first paragraph to the table and the projections contained within that.
I'd also make reference to the fact that there are a number of blank spaces on table 1 and will state that those are due to the fact that some forecasters did not make specific projections for the province of Ontario or did not make multi-year projections. Some of them went only as far as 1993 and didn't go any further than that.
Under the section "Economic and Fiscal Policies," under the heading, "Budgetary Procedures," there was concern under the second paragraph, which begins, "There seemed to be some agreement that the separation of spending into current/operating and capital accounts was a good practice." I'm still not clear on just what it is the committee wanted added at the end of that paragraph. I gather there was some desire to state that there were other witnesses who expressed concern about the separation of spending into current/operating and capital accounts. I'm just not clear on what those concerns were.
Mr Jamison: The concern, from what I understand, was to ensure that all government expenditures are accounted for in the final statement. To separate operating from capital is something that some people are uncertain about, in terms of confusing figures, but separating operating from capital is something other provinces have done for many years. The concern might be that someone may not report the actual overall deficit at that point.
Ms Campbell: Further to that particular section under "Budgetary Procedures," the recommendation at the end of that section is, "The committee recommends: The Minister of Finance should prepare a simple yet complete economic statement that provides detailed information on all government and crown corporation assets and liabilities."
There was also some discussion about making reference to the accumulated deficits being properly reflected in the statements. Does the committee wish to include that in the recommendation or leave it as I've just read it?
Mr Carr: I'd like to see it included if there's no objection.
Ms Campbell: Include a reference to the accumulated deficit in the recommendation?
Mr Carr: I think we talked about that last week.
Ms Campbell: Under the heading "Taxation," the committee asked that the first sentence of paragraph 2 be reworked into two separate sentences: "The government was cautioned against major tax reforms that would have a negative impact on growth and competitiveness. It was also cautioned against tax increases at this point in time."
In paragraph 3, under the heading "Taxation," it was asked that there be references added to wealth and inheritance taxes, to place them in a context similar to that of the reference to the corporate minimum tax and also make reference to some concerns that capital might leave the province with the introduction of those taxes.
Is the committee happy with the recommendation under "Taxation" that appears at the top of page 10? Okay.
Under "Sectoral Issues," I think there was agreement that references would be added to the other major sectors that appeared before the committee.
The Chair: That was eight sectors?
Ms Campbell: Yes. I would gather that the committee is happy with the recommendation that appears at the top of page 13.
Under "Social Issues," in the second paragraph, the third line will be rephrased to state, "Over time, more food bank patrons are getting by with less."
The second paragraph on page 14 under "Social Issues" will also be reworded in the second line: "Some suggested that rent controls be eliminated and that shelter allowances or rent subsidies be given to those who meet eligibility criteria. Others told the committee that uninitiated projects should be cancelled and no further approvals should be granted, while still others called for a complete program review."
The recommendation under "Social Issues" will be rephrased to read, "Social services should be delivered in a more cost-efficient, effective, productive and coordinated manner based on client needs."
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Under "Transfer Recipients," the recommendation on the bottom of page 18 will be rephrased to read: "A determination should be made of the most cost-efficient mechanisms available for the delivery of services provided by the province's major transfer recipients. This process could also involve comprehensive evaluations of the outcomes and results of service delivery."
The Chair: You've done a good job, Ms Campbell. Any dissenting opinions, if any, should be delivered to the clerk's office by Thursday, March 25, at 1 pm.
Mrs Caplan: There is one thing I think we might add. I think it's a reasonable proposal. That is, in the programs the Treasurer is funding, it seems to me that it's a waste of taxpayers' money to advertise programs that are failing, so perhaps one of the things that we could look at -- I was just reading an article that appeared on Sunday that said that the Jobs Ontario Training program has created less than 50% of the jobs it promised and that the response from the government has been to announce a $1.5-million ad campaign touting the program and how good it's been. So it seems to me --
Mr Wiseman: I believe I read another article on the weekend that said --
The Chair: Mr Wiseman, you'll have your opportunity.
Mrs Caplan: It seems to me that perhaps it would be a good idea to suggest that they review the advertising budgets to make sure they're not doing false advertising.
The Chair: But I bet Mr Kwinter advertises his hot dogs more when sales go down, to increase sales. I'll go to Mr Wiseman.
Mr Wiseman: I read an article on the weekend as well, Ms Caplan, that said the whole program is gaining momentum and steam as more and more business people become aware of it, and that the difficulty with the program is that not enough people are aware of it. In my own riding I've had people who, when I've told them about this program, decided they would like to become involved in it and now have hired people. So it's a matter of getting people to know what's going on.
Mrs Caplan: That's a year late. You made a commitment to a program that was supposed to create jobs and now, a year later --
Mr Wiseman: Well, if you want to go on like this, Elinor --
Mrs Caplan: I'm being gratuitous, Mr Chairman, but it is very frustrating to sit here in the finance and economics committee discussing advice to the government for budgetary matters when you see programs that were announced over a year ago which are clearly failing, and we just had a whole discussion about program evaluation and checking results and outcomes and making sure we're getting value for money on behalf of the taxpayers. When the suggestion is made that at least you not do false advertising or that you look at how you can make programs successful in the first place --
The Chair: I thought it started in August.
Mrs Caplan: -- they just get upset and annoyed. I was trying to be helpful and express my frustration, Mr Chairman. Forget it.
Mr Perruzza: Mr Chairman, a point of order. Actually, it's not so much a point of order; it's simply an observation which I'd like to put before this committee and on the record, and I'll end by asking the member a question. I watched her television show for the past month --
The Chair: Through the Chair.
Mr Perruzza: Through the Chair, Mr Chairman, of course. I wouldn't dream of doing it any other way.
I just happened to be in the whip's office, and in the process of having to kill 15 or 20 minutes while I was waiting for an appointment, I happened to turn on the television and I noted that the member for Oriole had her program on. I can tell you that in that 15 minutes she did not once mention the Jobs Ontario Training program, not once. She mentioned Horizons, and I remember she was interviewing two of her staff members.
It's called information sharing, Mr Chairman, and I thought she was doing a great disservice to the unemployed people in her community and people on social assistance by not providing the number and the information for the program. Obviously, people in her own riding would have been able to call the numbers and access the information, both employers and the unemployed alike, but not once did that happen, and it boggled my mind. I'd like to ask the member very directly in this committee, what have you done to sell the program and to talk about it with your constituents and with your employers so they could participate in it and make it successful?
The Chair: You've both had your shots, okay?
Mr Jamison: Up until now it's been going quite well.
The Chair: Unload the gun, Mr Jamison. Just put it back in your holster, okay?
Mr Perruzza: Mr Chairman, I asked a question.
The Chair: You don't need an answer on that. You know what the answer will be.
Interjections.
The Chair: Look. Let's adjourn, and then everybody can shout back and forth, okay?
The other thing is, do we want to have a subcommittee meeting on Wednesday afternoon to look over the report?
Mr Carr: I just wanted to see the timing of this. I know there was some debate. Norm may know this. I'm thinking now of two things: one for Elaine, and the other one is for any minority reports. When we originally discussed this, I think we thought we'd be coming back on the regular calendar. I'd like to see a little more time for Elaine to get all this together. I know she's working through lunches. What time frame are we looking at, Norm, in getting this into the hands of the Treasurer? I'm thinking that the budget now probably won't come down until May.
Mr Jamison: From my understanding, we've basically pushed the limit at this point. We're very, very short on time.
The Chair: It was supposed to be handed to the Treasurer today, I believe.
Mr Kwinter: My understanding is that it was supposed to go to the Treasurer on Thursday.
The Chair: Well, it was supposed to go today, but we had to have one more day.
Mr Jamison: Again, it depends on how much value you place on the report in the Treasurer's hands. I mean, the Treasurer should have this report to look at, to assess in his major decision-making capacity as far as the upcoming budget is concerned. He has to have that in his hands in enough time to affect all areas. I think some areas are on the verge of having decisions made at this point.
Mr Carr: We're not going to have the budget until, at the very earliest, early May now.
The Chair: It has to be tabled on April 14, the second sitting day.
Mr Carr: When the House comes back?
Interjection: This report does, yes.
The Chair: This report is going to the Treasurer ahead of time, and it has to be in English and French and printed, so there isn't very much time left.
Mr Jamison: Not a lot of time, folks.
The Chair: Your report's very short, isn't it, Mr Carr?
Does the subcommittee want to have a meeting Wednesday to look over the final we've prepared today?
Mr Kwinter: Sure.
The Chair: Mr Carr?
Mr Carr: What time?
The Chair: What time would you want?
Interjections.
The Chair: Let's talk about that after the exact time, okay?
Mr Carr moves that the Chair be authorized to present the report to the House. All in favour of the motion? I should say first, any discussion? I don't think there's any discussion; we discussed it all day. Passed.
Mr Perruzza: Mr Chairman, just a thank you to the staff for their indulgence and their patience, and to Elaine for an excellent job.
Mrs Marland: Oh, they love their job.
The Chair: I thank you for your attendance here today, Mr Perruzza. I'd like to thank all the committee. I think this is the last day I'm sitting as committee Chair. It's been well working with -- I guess one person left us. No, a couple left, Mr Kwinter and Mr Jamison, from when we started out three years ago.
Mr Wiseman: Now I'm here.
The Chair: Yes, you're back again.
The committee adjourned at 1518.