Thursday 3 February 1994

Draft report, pre-budget consultations


*Chair / Président: Johnson, Paul R. (Prince Edward-Lennox-South Hastings/

Prince Edward-Lennox-Hastings-Sud ND)

*Vice-Chair / Vice-Président: Wiseman, Jim (Durham West/-Ouest ND)

Caplan, Elinor (Oriole L)

*Carr, Gary (Oakville South/-Sud PC)

*Cousens, W. Donald (Markham PC)

Haslam, Karen (Perth ND)

*Jamison, Norm (Norfolk ND)

Kwinter, Monte (Wilson Heights L)

*Lessard, Wayne (Windsor-Walkerville ND)

*Mathyssen, Irene (Middlesex ND)

*Phillips, Gerry (Scarborough-Agincourt L)

*Sutherland, Kimble (Oxford ND)

*In attendance / présents

Substitutions present/ Membres remplaçants présents:

Crozier, Bruce (Essex South/-Sud L) for Mrs Caplan

Haeck, Christel (St Catharines-Brock ND) for Mrs Haslam

Ramsay, David (Timiskaming L) for Mr Kwinter

Clerk pro tem / Greffière par intérim: Bryce, Donna

Staff / Personnel: Campbell, Elaine, research officer, Legislative Research Service



The committee met at 1008 in the St Clair/Thames/Erie Rooms, Macdonald Block, Toronto.


The Chair (Mr Paul R. Johnson): The standing committee on finance and economic affairs will come to order. We continue this morning with our rewriting or writing, correcting or not correcting -- I wouldn't say that was probably the proper word either, but we're certainly going to examine the draft of the pre-budget report. I realize that this morning members have had considerably more time than they had yesterday, so I'm sure they have many important comments to make with regard to probably an already nearly perfect draft pre-budget report.

At this point in time, how would the committee members like to proceed?

Mr Gerry Phillips (Scarborough-Agincourt): Quickly.

The Chair: I see there's a consensus with regard to that.

Mr Kimble Sutherland (Oxford): I made lots of suggestions yesterday and I think we're waiting for how the opposition members thought we should proceed with the report.

Mr Phillips: On the economic side, I think the theme should be that there's general agreement that it looks like the economy is going to show some real growth in 1994, that the government's estimates of GDP, employment growth and the unemployment rate etc are in line with what we heard from private forecasters. On the economy, I think that should be one theme.

On the overview on the fiscal side, I think that with the economy moving ahead solidly, we should be able to make some significant progress on the deficit. Last year's deficit estimate for this year I think was $6.8 billion, and I think we should be saying that should continue to be essentially the target and I don't think there's anything I heard that says that isn't generally attainable.

On the expenditure side, I think they said we're pretty much on track on the expenditures. On the revenue side they were saying right now it looks a little weak, but I gather from what they were saying that they're going to sell some more assets that weren't included in the document. I think that's the second theme, that this is the year to make some significant progress on the deficit and that it looks attainable.

I think the third thing that we heard is that the budget should contain no new tax or near-tax increases. That was a theme from pretty well everybody.

On the transfer payments, I haven't really reread everything that was presented, but there seemed to be a view that what they want is some certainty in fiscal planning, the transfer payments, and that if the government delivers on what it promised last year, it sounded to me like not all but many could live with that. I think we should be careful of saying "all," because I think there were three or four who didn't agree with that, but that was the general theme.

The Fair Tax Commission recommendations: It seems to me that we had such a variety of conflicting views on them. I think everybody said, "Yes, remove a large part of education costs off property tax," but then a lot of people tended to part company with how to actually do that. I'm not sure how helpful we're going to be on the Fair Tax Commission in our report, only because it almost requires a whole separate study by this committee, it seems to me, rather than just a, "By the way, give us your comments on the Fair Tax Commission." I think our report will be probably more general on the Fair Tax Commission than specific.

Then I think there's probably a section on specific recommendations we heard that were useful. That's where I'm at.

I would order the report so that part 1 is "Economic Summaries and Forecasts." Then "Economic and Fiscal Policies": I think this is the year when we should see a substantial reduction in the deficit. As I said -- I repeat myself -- I didn't hear anything that says we should be much offtrack of what was promised last year.

The other point that I feel very strongly about is just the way the books are kept. I was personally very disappointed to hear that it's going to be September 1995 before we actually see the books in the way the auditor wants them kept. That disturbs me a lot.

Mr Sutherland: September 1995? I thought they said September 1994.

Mr Phillips: No. They said the 1994-95 budget will be reported in September 1995, the way the auditor wants it.

Ms Elaine Campbell: I seem to recall them saying that the public accounts would be in that format.

Mr Sutherland: My sense is that the budget will be presented in the traditional format, but the 1993-94 public accounts will be presented as the auditor has requested.

Mr Phillips: You didn't listen to what I said. I'm talking about the 1994-95 budget. It will be reported in September 1995 the way the auditor wants it.

Mr Sutherland: Okay, I hear what you're saying.

Mr Phillips: That's totally unacceptable for me. I understand why they're doing it, but it's totally unacceptable for me.

Mr Gary Carr (Oakville South): I agree with a lot of what Gerry was saying. My suggestion would be that in the beginning part what we do is put the charts which Elaine has put together outlining -- because charts are very easy to read in terms of what they project -- the handout that we got this morning just listing all the forecasters. I think we can maybe get Nomura to be included in that since they've sent one in today as well. That could start us off in terms of the forecasting.

Then I would suggest we take a look at the taxation issue. Again, I'll be repeating myself from yesterday and what we talked about: Not only do we need to send a strong message on the tax increases but also on the fees and the non-tax revenue. Since we didn't get those recommendations in the underground economy report, I don't think one night's rest is going to allow us to put that in there. But as a minimum, we can include what we did in the underground economy.

I'd like a strong signal, and we can even word it in a non-partisan way, that the books need to be kept properly. I would even go so far as to blame all governments in the past for the way it's been done, if you'd like. But we need to send a clear signal that in a non-partisan way the old way of doing things is off and trying to con people with the way the books are held is not acceptable in this day and age. I think this committee could and should send a strong signal. I don't know how we would word that, but I agree with Gerry: I think people are expecting that, and if we come out with nothing else, I think that would be a good recommendation, in a non-partisan way.

On job creation, I'd like to go a little further than maybe the committee would in looking at some of the problems. For example, we heard a lot about WCB. I'd like to have something included on that. But my recommendations, which we've outlined, I don't think the government will agree to because we've outlined about a six-point plan to deal with WCB including freezing entitlements, cutting back benefits to 80%, freezing the rates and so on. But I doubt if that will be incorporated. So I'd like to see us take a good hard look at some of the issues in job creation.

I suspect, again, because the government probably will not agree to no increases in taxes or fees or non-tax revenue or whatever, we probably will have to incorporate a minority report to send that strong message as well. Also, because in some of these other areas I think there will be disagreement on things like WCB and Ontario Hydro and employment equity and things like that, in terms of the job creation section.

My suggestion is, let's go through it like we did in the underground economy, see what areas we can agree on and then each of us will put together our own minority report on some of these issues which -- again, I don't want to pre-empt anybody and say that we can't get agreement, but I doubt whether you're going to be able to agree to some of the things that I've already talked about.

So let's go through it, see where we can agree and the language we can get, and then together, each of the parties can then put their own minority reports together.

Mr Sutherland: I guess I would have to disagree with the assessment that Mr Phillips made in terms that we didn't hear any reasons as to why we couldn't hit the same deficit target that had been projected in last year's budget.

I would say there are a couple of factors. Certainly some of the forecasters came in and said, "You need to do deficit reduction but you need to do that in a gradual way." The other factor is certainly when the Minister of Finance was here and said that revenues are projected to be $1.6 billion lower than had originally been anticipated. So I think if you add a combination of that $1.6 billion, some of what the forecasters said, and I've heard from both sides now, that also they don't want anything done on the taxes or non-tax revenue, I guess that would leave the question then to come back for both opposition parties to say, "Okay, so where are you going to do the expenditure reductions?" and for that to come out.


If you add up all the things that're there, I'd think you'd be talking significant expenditure reductions. That's fair enough. I just think that you need to be forthright with folks as to where you suggest that should come about. I just don't think it's as easy as being projected to hit that $6.8 billion, given we're supposed to be $1.6 billion below in our revenue to begin with.

You mentioned about the other transfer payments. We're not sure what the federal government is going to do with transfer payments to us and the further impact that may have. So I would say it's not quite as easy as has been presented to reach that target.

Mr Carr: I don't think we'll get agreement on that, but what we will be doing is putting in things like that. If we can get agreement on it, some of the things we talked about -- immediate freeze in non-profit housing. The subsidy on that is well over $1 billion a year coming up. That should end. There should be no more non-profit housing.

Welfare reform: If anybody saw the last few nights and what's being done -- and I say this in a non-partisan way. New Brunswick is making tremendous inroads in that way. You heard the deputy minister saying that welfare's going to go to $6.5 billion. They are actually doing that. Alberta is scaling back. So we've got a Liberal government in New Brunswick doing it; a Conservative in Alberta that's reducing the number of people on welfare; BC is doing it, a socialist government. We can get into some of the things that need to be done in that area including cutting 16- and 17-year-olds off, more home visits, tighter controls as per the auditor. So if you'd like to get into those things and can agree to them, we are going to be specific in there.

We will also be including things like not driving the private sector out of day care and nursing homes, which is putting tremendous pressure on the public sector. We believe the private sector needs more involvement in the areas, because there will never, ever be enough money to provide for all the services that we need in this province if the private sector isn't involved. So we're going to be very specific. Obviously you're not going to agree to that because the government policy on driving, for example, the private sector out of day care is very clear. I mean, you're doing it now. So you can't see agreement.

It's similar to our last minority report. I don't know how many members of this committee read it, but if anybody read it, it was about 30 pages that I personally put a lot of work into where we were very specific: the elimination of Bill 40, secret ballot provisions for certification, ratification strike votes. We're going to call for employment equity to be thrown out, all the things --

Mr Sutherland: I'm not sure what they're going to do about the deficit.

Mr Carr: Just in terms of everything that we're sending out there in terms of job creation signals, because the problem isn't just looking at our expenses while we downscale the public sector; we have to bring confidence to the private sector to be able to invest. We're looking at both sides of it, so we will be very specific. The numbers are there. All you need to do is take a look at what we spent last year, as an example, in non-profit housing. Had that been frozen and not been done --


Mr Carr: Well, you guys can disagree; you asked me where I was going to cut. We're going to lay them out. Don't ask for it if you're going to sit there and yip about it then. That's fine. We're going to be very specific.

Mrs Irene Mathyssen (Middlesex): Actually, this is very useful. Keep talking.

Mr Carr: Read the report. If you read last year's you could have read it. If you read last year's report, we had about 35 recommendations, but we're going to do it anyway. So we're going to be very specific. Obviously we're not going to agree, so let's get on to the report and write what we can. We're going to put it together like we did two years ago.

Our first New Directions paper talked about what needed to be done in terms of controlling spending. Quite frankly, had you listened then, we wouldn't have needed the social contract. But I'm not going to get into I told you so's. The date on that was November 1990, where we told you you can't continue to spend your way out of it. You didn't listen. We can say, "We told you so," now; that doesn't do much good.

We are going to be very specific in terms of what we want to do in terms of controlling spending. I just wanted to put that on the record. It's going to be there like our minority report was last year. This afternoon I'll bring you copies of it, for those who weren't on the committee, because we did 30 pages, very specific about what we would do. I want to be clear. We are not sitting here saying, "Don't increase taxes," and, "You can't cut savings." We're very specific about where we have been and we have been from day one. So you can criticize all you want and say, "We disagree with non-profit or whatever," but the fact of the matter is that from day one we've laid out the areas where the savings could and should come from.

The Chair: If I could put some information on the record, I mentioned yesterday to the fact that the government has taken very seriously the concerns of everyone with regard to how the books are kept and how they're reported. I indicated yesterday that there was a committee that was examining this. This committee was in place last year. It included a Deputy Minister of Finance, Erik Peters was actually part of the committee, I was the only member on the committee who was from any of the elected members of the Legislature, and there were a number of private business people there, accountants.

Understand that the way the books have been kept in the province of Ontario for a long time has been very similar and now we're asking for some changes. As all these knowledgeable people got together to examine the format, it became clear that changes were necessary but weren't going to happen entirely easily. There was some agreement on some points and some disagreement on others but I just wanted to make it clear that the government recognizes that there needs to be a different format for reporting, a format that is more straightforward, easier to understand and probably represents in a more meaningful way exactly what is happening with regard to revenues and expenditures in the province of Ontario.

I just wanted to make it clear that this is not something the government has chosen not to do but is doing it, although maybe not as expeditiously as some would like, is examining it and has indicated, as Mr Phillips has told us, although not as quickly as he would like, there are going to be some changes and things will be reported differently in the future.

Mr Sutherland: I think it's also important, in this discussion about the books, to remember a couple of things. One, it's important to understand why we had a cash-basis accounting versus an accrual accounting basis. My understanding is that the previous auditor wanted the books done in a cash-basis accounting format and that's why they had been done on that. The new auditor has a different view, given a growing sense of accountability, I think, in the public. He seems to have a stronger support for -- I forget the group -- one of the accounting groups that has set the standards as to how government books should be kept. I think that's fair enough.

I think we also need to recognize the fact that when you're talking about a corporation, the province of Ontario, that spends over $50 billion, has over 20 different ministries, you're not just going to change that accounting system overnight. It requires a lot of work, it requires a lot of effort, a lot of planning in each ministry so everyone has a clear handle on what the expectation is, and then just within the Ministry of Finance and how it's putting everything together in the public accounts. You can't just do that.

I think there is a firm commitment made by the Minister of Finance, with the auditor, and agreeable, to have some form of not only going to the accrual basis of accounting and how the public accounts should look -- the auditor has some views, the Minister of Finance and the ministry have some views, and there have been some discussions and negotiations going on about what is acceptable and what isn't. That process takes some time too to work through. I know the auditor wishes that those discussions had been concluded and fully put to bed far quicker than they have.

I just think that point needs to be made. It's not an overnight process to change the accounting system for a corporation this size.


Mr Phillips: I guess to beat a -- I was going to say not to beat a dead horse but I'll beat the dead horse. Only time will tell and I will just say to you that if you want to spend a lot of time I could convince you that the government has taken the creative bookkeeping to an absolutely fine art for understandable reasons.

I will say to you if this were a company and it reported its earnings on the basis on which the government's reporting its earnings and people bought shares in it and then found that the company was misrepresented, you would be demanding the courts to take action, and I could go through 10 areas.

It's being done because it's desperate to show a lower number on the books, but if any company ever tried to take cash out of a pension fund that has an unfunded liability of $7 billion -- Conrad Black tried to do it when there was an actuarial surplus -- but you've actually gone in and the only way you could do that was to pass legislation. You're going to sell these government buildings and then lease them back. You've transferred all the capital debt for school boards on to school boards' books. If any insurance company or any company that sold five-year policies tried to show all the revenue for five years in the year it got it, no accountant would ever sign the books, you'd never get the stock listed in the stock exchange and the shareholders would sue for misrepresenting the profitability of the company. I could go through a whole list of them for understandable reasons. I'm not going to convince you right now but I will say that somewhere down the road, when it's all laid out, you'll say, "I didn't even know all of that was going on."

I will tell when I read the answers I got back I thought good, if you read the answers we are moving to an accrual basis on those things. I thought, "That's great." Then I found out that it's only in the public accounts and next year's budget; 1994-95 is when most of the games really come into play but we won't get those numbers reported properly until -- surprise, surprise -- September 1995.

I won't convince you. You're committed to the government plan. It will only be over time, when it's all peeled back and you say, "God, I didn't realize all of that was going on," but every creative scheme that one could think of that the financial community understands -- as I say, I'm convinced the GO train sales will occur in the next couple of weeks. You understand that GO train loses $137 million a year -- that's what the province subsidizes it -- and they will sell their $425 million worth of GO trains -- they're not even paid off yet -- the province will take that money and then there'll be a new lease cost against it.

It's not in the books yet but I'm pretty sure you'll see the computers. I think that's why you spent $4 million to count them, not because you want to count them but because you will sell them and then "lease them back."

That's all I'm saying, every imaginable creative scheme, and the problem is that legally you can do that in the government books. If you were a private sector company you couldn't report the finances, and as Gary said, I'm not saying that previous governments didn't do similar things. I'm just saying it is taken to an absolute fine art and therefore, for me at least, the books are now getting close to irrelevant. You've got to have another set of books which you'll call the public accounts which we'll see in September 1995 to understand the true finances of the province.

You can accept that or reject it and I think we know you've rejected it, but that's how I feel and that's why I think once again it's important to state the need to move as quickly as we can on it.

The Chair: We have dealt with some things that are related but probably extraneous to the actual reporting of the report that we have before us. At this point in time we've heard from all three caucuses with regard to how they would like to see changes made to the report. Does the research officer have any questions at this time?

Mr Phillips: Have you had enough direction?

Ms Campbell: Perhaps I could ask some midterm questions. In terms of the table of contents that appears at the beginning of the document, it's my understanding that the committee is agreeable to having a section on economic summaries and forecasts. I think Mr Phillips had made reference to the point that there doesn't seem to be the divergence in the forecasts there might have been in past years and expressed an interest in making that point in that particular section of the report. The table that was received this morning will be included.

One of the members made reference to the inclusion of Nomura Canada's forecast in the table. My cursory look at the presentation by Nomura did not find a forecast for Ontario in there. There were a couple of tables on Canada, but I don't think there was anything specifically related to Ontario.

The next section is economic and fiscal policies.

Mr Phillips: I'm sorry, Elaine. What I said was something a little bit different. I think in previous years the economic forecasters have been fairly consistent. My own feeling is that they each read each other's reports and the government picks one in between because it phones them all. So rather than saying this is different than in previous years, my recollection -- and Don, maybe you've got a better recollection than I -- is that it seemed to me that even in previous years we were kind of bracketed. Now, it happened they were all wrong, but we were --

Mr Jim Wiseman (Durham West): They've been wrong for about three and a half years.

Mr Phillips: Yes, they were all equally wrong, I thought.

Mr Wiseman: The way they were wrong in 1991.

Mr W. Donald Cousens (Markham): They're just optimistic this year.

Mr Wiseman: You should have seen how optimistic they were in 1991. Everything was going to be fine by April 1991.

Mr Phillips: That's a detail. I would say that I think the government's forecasts look like they're consistent with the private sector forecasters.

Mr Wiseman: They didn't calculate the devastation because of your dollar policy.

Mr Carr: Well, that's changing.

The Chair: Order.

Mr Phillips: Don't bait the bears.

Mr Wiseman: Not according to Nomura.


The Chair: If the committee members would make comments relevant to the report, I would appreciate it.

Mr Norm Jamison (Norfolk): Actually, we'd like to mud-wrestle here.

Mr Cousens: Get hammered another way?

Ms Campbell: The next subject heading was economic and fiscal policies. Is it my understanding that the committee is fairly happy with the items listed here as possible points of emphasis? I think there was reference made to the job creation issue that was raised by a number of people.

The issue of the provincial accounting methodology was an issue in last year's report. There were people who recommended that the province move from a cash-based accounting method to one that was accrual-based. Would the committee like some reference made to developments that have occurred since last year's report in that area? I'm thinking specifically of the auditor's recommendation last year and what the ministry officials told us this year.

Mr Sutherland: I think that's fair. It was more or less brought up during the committee hearing, so some summary of the comments made would be fine.

Mr Phillips: I would like in the report, and we won't get it so then we have to put it in -- I would like to say that this year's budget should be prepared on the basis of what the auditor recommended.

Mr Cousens: You're not smoking pot yet, Gerry.

Mr Phillips: Well, it is cold, and hell may start to freeze over.


Ms Campbell: The next section is sectoral issues. On page 6 of the report, there is a question. Representatives of a number of economic sectors appeared before the committee. Do members want separate sections for each, or would they prefer to focus on a few?

Mr Phillips: Oh, these are the sectoral ones, aren't they, as opposed to the transfer recipients. Sorry.

Mr Sutherland: Maybe we could reduce the number of areas. For example, if we took resource-based industries as maybe one heading, that would combine a few. Hospitality and tourism may combine the foodservice, beverage alcohol and maybe culture in there, although I'm sure some of the cultural people wouldn't like to be totally included in that category, but somewhere either under that or just under service industries. We'd have manufacturing, retail and trucking. Trucking and manufacturing are significantly interlinked, I would say, and then whether we wanted to just do separate retail or not. Just to reduce the number of headings, whatever you can come up would be fine.

I just want to go back to the economic and fiscal policies. Under that are we going to have in the body of the report some discussion on the comments we heard about the deficit and what the approaches should be to the deficit?

Ms Campbell: Yes, I have those sorts of comments you made yesterday. You were interested in what the forecasters had said pertaining to the deficit. You also mentioned the comments the forecasters made with respect to job creation.

Mr Sutherland: Okay. Great.

Ms Campbell: The next section of the paper is social issues. There were a number of presentations from a variety of groups. It was rather difficult to categorize these comments. They represented a variety of areas.

On page 8 of the outline, there's an italicized statement, "This section will be an overview of all of the appropriate comments/recommendations made to the committee." Is the committee agreeable to that?

Mr Cousens: I think you have to, but I think the problem you have is that there were so many cross-sections of ideas. Don't go for length, because they didn't even cover all the issues. If we come out of this thing trying to think we've covered all the issues that are going to be part and parcel of the budget and the budget process, we're fooling ourselves. I think we can indicate we heard from a number of them and they had certain important things to say, they've been considered, and very succinctly bring it down. I haven't heard the other members say this, but I think, don't go for length on this one, because I think we're just building up false expectations and hopes. If we can come up with several meaningful recommendations to the Treasurer that this group in this room agree on, we've done well, and then let's get rid of all the lard and the crud in the report.

Ms Campbell: The next section is transfer recipients. That section has been divided into the headings for each part of the so-called MUSH sector. Is the committee agreeable to using those particular subject headings?

Mr Cousens: I am.

Mr Sutherland: Yes. I know we said on some of the other issues we got quite a difference. I would agree with Mr Phillips's comments that on the transfer payments there seemed to be a general consensus on what the issues and concerns were and what their expectations were. If that can be summarized into one, that's fine; if you want to have it separate, whatever, or a combination of both.

Ms Campbell: Perhaps the introductory paragraph could be a summary of the general comments that were made.

Mr Sutherland: Sure. That would be good.

Ms Campbell: The last section is the Fair Tax Commission report. Is it my understanding that the committee would like a general statement made about the presentations the committee heard rather than going into a tremendous amount of detail about what was said on each particular issue that was raised in the tax commission's report?

Mr Sutherland: I would think that there should be at least three topics covered, or a little more detail on three specific subjects, anyway: The question of the property tax base for education versus, if you take it off there, what other bases should you use; a bit of discussion -- sorry, I guess I'm going to add four.

First of all, begin with some general reflection of the comments that people made on what they thought progressive taxation was or fair taxation was to them. Then some question on the property tax base, taking education off of there. Then I would think we should have a bit of a summary on some of the comments made regarding issues that could be generally described as corporate taxation; I guess some discussion about payroll taxes should be referenced there. And then, I would think, a summary of some of the comments we heard about environmental taxes, which to me would also include the carbon, the water and sewer. The rest could be just summarized, as we heard some general comments, some other recommendations, or, as said earlier, just put an appendix outlining what the other recommendations were for the other ones.

Ms Campbell: I think I mentioned to the committee yesterday that the information that was presented in the outline in terms of the recommendations made under the Fair Tax Commission report is not at all inclusive. There were many more comments made, but there wasn't time to include them all in here. This would be a rather limited representation of what was said to the committee, if it's the committee's desire to put a document such as this within the final report.

Mr Sutherland: I think as long as you make that very clear at the beginning of the section, that this should not be considered comprehensive, that it is just covering some of the major issues.

Mr Cousens: We might come to an earlier consensus on the Fair Tax Commission just within this committee, because my feeling is that we don't have any consensus on FTC. The recommendations and the comments cross the whole board, it's so vast an array of opinion and thought processes.

I'd be interested if Gerry would comment on this as well. Though the Minister of Finance invited this committee to review the FTC and come back with some recommendations, I have a feeling that we're not going to find a consensus out of the committee for what we should be doing on it unless we all agree that we should table the whole thing, and that's not fair or true either. But there's just so much to it that to be able to say in this committee in the short time that we have had to look at it -- if you look at how much time they spent preparing it, how many pages they've dealt with and how the different groups that made presentations to us had their own biases and they were able to select certain things, for our own research to be able to go back and then compare and check it through is a far bigger thing than we're equipped to do in the time that we've had.

I'm inclined to again suggest that we give it more of a cursory review rather than the detailed, extensive look that we might be inclined to want to do. I'd be interested in some feedback on that because that can give you some direction, Ms Campbell, on limiting the amount. We might well say, "Here is a range of some of the opinions that were presented that take us through this and that," but it exposes the difficulty of trying to come to a consensus on it.


Mr Phillips: I agree with much of what Don said. I'm trying to be candid with ourselves. Firstly, it's an extremely complicated thing. The first part's pretty easy. I agree that we should be reducing property taxes.

Firstly, the committee's set up to do pre-budget, and the Fair Tax Commission is a job in itself. The comments we got back, at least half were on the pre-budget and maybe half on the Fair Tax Commission.

Frankly, I think often as we asked a question, it was clear that, for example, in order to agree we should move to this unit value assessment thing -- and I think there are an awful lot of questions there -- and say, "Listen. We all agree we should move off property tax," we might all agree, but I think we have a mild responsibility to assure ourselves that the pool we're jumping into has enough water to hold it.

Everybody says, "Take $3.5 billion off residential tax," but when you start to look at where $3.5 billion is going to come from, I can't remember hardly anybody who has looked at the true implications of that, other than some people who have really figured it out. I think the city of Toronto figured out its constituency.

I don't think we're shirking our duties to say that we began the discussion on the Fair Tax Commission. It's clear that it's an issue that requires a lot more detail time than we would have, and that while many people came supporting tax reductions in property tax, there are questions being raised about the sources of income. I think I said that in my opening comments this morning on the Fair Tax Commission, that we should acknowledge the complexity of it.

Mr Sutherland: I don't disagree with what they're saying. I just think that in the body of the report, anyway, we should have some reflection of some of the various options that were put forward by the presenters. I think the presenters would at least expect that, and I think anyone reading the report would like to have some sense of what people's different reactions are in the body.

I would probably agree with the comments of both Mr Phillips and Mr Cousens that we can't go jumping into this without doing some more analysis of what the full implications are of those things, but we were given some advice by the presenters, and some of that should be reflected in the body of the report.

Ms Campbell: Is it the committee's wish that there be a paragraph or two summarizing some of the major issues raised and the comments, such as the issue dealing with property taxes and education, corporate taxation, the payroll tax and some reference to environmental taxes, but that also included in those few paragraphs would be a statement to the effect that the committee has only been able to take a cursory look at the issue of the Fair Tax Commission's report, that there was quite a bit of divergence on the various recommendations put forward by the Fair Tax Commission and that the whole issue requires much more in the way of detailed consideration?

Mr Sutherland: Sure.

Mr Cousens: If you do it that well when you're writing the report, we'll be okay. But you have to sort of run away fast and do it.

The Chair: Fortunately, you'll have Hansard to refer to.

Ms Campbell: I have one last question, and that is concerning recommendations. Is the committee interested in making some recommendations for this report or will it be a mere overview of what we heard?

Mr Cousens: The Minister of Finance is not going to resign and the government's not going to call an election, which we could find very helpful at this time.


The Chair: Is there any further direction that the committee members would like to give to Ms Campbell with regard to the draft report? Any further recommendations?

Mr Phillips: The recommendations I would put in --

The Chair: Recommendations that all committee members would agree to.

Mr Phillips: Yes. They are the overview recommendations, and that is that the economy is hopefully beginning to turn and we need to continue to foster that, that the deficit numbers announced last year should continue to be our target. Then I would use the same tax thing we had yesterday and I would be urging them to move faster on the way the books are kept.

The Chair: Are members in agreement with that?

Mr Carr: Yes. Then, also, the ones which I don't think they will be are the ones I outlined at the beginning about the tax increases and no fees and non-tax revenue. Obviously, I don't think that's going to be agreed to, and some of the other points I made I don't think will either, but I think I can agree with Gerry's. Could we have some indication from the other side what they feel about some of these things?

Mr Sutherland: On the question that the books should be presented in a straightforward way as quickly as possible, a recommendation to that effect, we have no problem supporting that type of recommendation. If we're going to get into specifically when that should be done, then obviously that will pose problems, but I think we all agree with a general recommendation that the books need to be presented in as straightforward a way as soon as possible and in conjunction with the auditor's recommendations on that.

I must say, I still have a dilemma here regarding Mr Phillips saying that it shouldn't be too much of a problem still hitting the same deficit target. The third party has certainly indicated, "We'll outline where all the expenditure cuts come from." That's fair game. I think that's the dilemma. We're $1.6 billion less in our revenues. We don't know where federal transfer payments are going to be as of yet. I'd say they're two significant question marks that would have a significant impact.

I would certainly agree that the goal needs to be reducing the deficit, continuing a multi-year plan to reduce the deficit, and particularly to get the operating deficit to zero, but I'm just not sure, given also the advice that we received from some of the forecasters who said, "You should be careful how quick you do this because you could still have an impact on the economic recovery if you do it too quickly." I think we heard that from at least two that come to mind, but I think maybe a couple more said, "You need to reduce the deficit but need to be wary of how quickly you do it or you may have a negative impact on economic recovery." I think that needs to be a priority.

I think also we need to say, in a recommendation -- again, we may not agree on how to do this -- that job creation does need to continue to be a priority and that 10% unemployment is not acceptable and efforts need to be made to try and reduce that.


Mr Carr: The other point I was just mentioning when Kimble talked about the transfers. I heard this morning that the Premier has sent to all the federal Liberal MPs a letter encouraging them to give him more money in transfers. He mentioned a booklet that was sent.

Mr Wiseman: Removal of the cap on CAP.

Mr Carr: Getting more money for transfers from the federal government is what it is, whatever you want to call it --

Mr Wiseman: Restoring the fairness that the Tories took away.

Mr Carr: -- in addition to what he has done.

I think what he's doing, of course, is the same thing he did with the previous government: Socialists all blame somebody else for all the problems. But not to be political, he did mention that there was a book sent out which outlined that. I was wondering if, through the researcher, Elaine, or even the government, we could get a copy of it. What it was is a booklet outlining what's happened to the transfers over the last little while. I think it would be helpful to get it if we could, and maybe even a copy of the letter that was sent, since it was sent to 97 MPs -- 96; I guess one didn't quite get it.

Interjection: Jag didn't get it?

Mr Carr: And the Reform person didn't get it. Just as we're on that, maybe that would be helpful to have. I just thought of it with the mention of the transfers. Because I think what we're seeing very clearly is a continuation of what this government's done since 1990, which is continue to blame the federal government. I think he's already setting them up for the next budget, to say: "Here we are. That's why we have the deficit again. It was Mulroney's fault; now it's Chrétien's and Martin's fault."

That's why, quite frankly, I don't want to give him any more money, because I know what he'll do: He'll spend it, and then some, anyway. I've been very clear about that. Norm Sterling's gone into much detail about how Ontario pays more per taxpayer into the federal government than it takes out, so if in fact more transfers come, all it will mean, the bottom line, is that Ontario taxpayers will pay more.

Notwithstanding that, I think politically the Premier's been very good and been very successful, particularly with the previous Conservative government, which was unpopular, in blaming them for all the problems. I think he's attempting to do it and I think we're seeing the spin already start. I would just like, as a member of this committee, to have a copy of what he is doing. If Elaine or somebody could get that, I think that would be helpful.

Mr Jamison: In fairness, I think that just to comment on the last comment, it's clear that what the Premier is saying is that for mandatory programs, cost-shared programs, the proportion of that share has shrunk dramatically for Ontario while provinces next door, such as Quebec and Manitoba, still receive 50-cent dollars from the feds. We receive 29-cent dollars. That brings up the whole question of fairness, and I believe that is the issue, in clearer terms, that's being put forward: fair treatment by another level of government. Of course, all governments are indicating that there is a need for fairness, and that's the province's point of view, one that's backed up with documentation.

Mr Sutherland: That information has all been sent out publicly. It needs to be there. Without trying to get into too lengthy a debate, I would like to support Mr Jamison's comments. What we're clearly asking for is that the cap on CAP -- Canada assistance plan programs were started, established, as 50-50 cost-sharing between the federal government and the provinces. The previous government decided that no, that wouldn't be the case, that it would put a cap of 5% limit on the three "have" provinces: BC, Alberta and Ontario.

The impact in BC and Alberta has been there, but not as dramatic, because they have not suffered as much in this recession as Ontario has. As we know, the adjustments to free trade, higher interest rates, a combination of all those factors at once led to a much more significant recession, particularly in manufacturing, in Ontario. As a result of that, the impact of that initiative by the previous government -- it was for three years and they were able to complete two years, and now we have the third year coming up -- has had a far more dramatic impact on Ontario and as a result has, in effect, been discriminating against the province of Ontario, where the federal government entered into a 50% agreement -- 50-50 cost-sharing -- and has arbitrarily changed that. Now it is only picking up 29 cents on welfare costs and on other costs. The real question here is, how is the federal government going to treat Ontario? What should be Ontario's fair share of a program that is designed to be a 50-50 split between the federal government and the provincial government? That's really what the issue is.

To say that we're asking the federal government to spend more money, no; we're asking them to treat Ontario, as the original program was established, as they would treat any other province with 50%-50% cost-sharing and not to make changes to that in an arbitrary fashion. That was carried out by the previous government and now the current government has an opportunity to change that if they so desire. If not, then our sense is that they will continue on with the same policies as the previous government and they will be taking ownership of that policy.

Mr Carr: I don't want to debate it here because we could debate all day, but I will say this: What the federal government has done to municipalities, universities, school boards and hospitals -- I will remind you of when the Premier went on TV and said, "We're going to let you go into the next three years with a 1, 2 and 2." The changes he made and the transfers he cut are more than what the federal government -- you talk about a 5% cap he originally promised, then broke that promise and then went to reductions.

So when you're talking about what happened to transfers, what he did to municipalities, universities, school boards and hospitals, his transfer partners, was worse -- and I underline "worse" -- in relative terms, in dollars than what the federal government did to him. So for this government to continue to blame the federal government when what they did to their transfer partners was absolutely worse -- not only that, he went on TV and said: "Don't worry, you're going to have a three-year time frame to plan. You're going to have a 1, 2 and 2 over the next three years," and then he cut the legs out from under them.

They had already made plans. I tell you this: The bottom line is, what happened to the provincial government from the federal government was nothing compared to what this government did to its transfer partners in the MUSH sector. The municipalities and the school boards and the hospitals got worse transfers from this government than what the federal government did to this province.

We can argue this all day. The numbers are there for you to look at. I suspect those numbers will not be in the Premier's brochure. I guess that's where we're a little bit concerned about it. Not only do you blame other levels of government for all your problems; you in fact have lopped all your problems on to the other sector as well. On the one hand I could see you complaining if in fact you'd held your transfers and held your end of it up. You did not.

When you get into things about making welfare easier, where 20% of the cost of that is borne by the municipalities and they have absolutely no say in what happens, I will remind you, the bottom line at the end of the day is that what you did to your transfer partners was worse than what the federal government did to you.

I won't continue on because I know we could debate this for about four hours all day and we won't get the report done, but I would just remind you, that is the reality.

The Chair: I thank you for the last comment, Mr Carr, because indeed this isn't relevant to the report we're trying to complete here. However, Mr Sutherland.

Mr Sutherland: You did say it was the last comment, but all I want to respond is that the Canada assistance plan agreement was an agreement entered into between the provinces and the federal government. You're quite right that transfer payments to municipalities have been reduced as a result of government revenues being down, but I would indicate to you that the type of formal relationship --


The Chair: Order.

Mr Sutherland: I would indicate to you that the formal relationship of the agreement of the Canada assistance plan is not a similar type of agreement with which transfer payments are awarded to municipalities. My sense is that there has never been a specific set amount as to what transfer payments are. They have been determined by the government on a yearly basis.


The Chair: Order, please. I believe then at this point in time we have come close to concluding what we need to deal with. However, Ms Campbell would like to ask a couple more questions for clarification.

Mr Carr: I don't think we have agreement, Mr Chairman. Do you?



The Chair: Order, please. I believe we have a draft report here that is nearly completed and for the most part, if not entirely, is agreed upon by all the members of the committee. Again, I just want to make sure that everyone understands. If there are dissenting reports, that is, information that caucuses would like to direct to the Minister of Finance that are outside of the comments of the report that we will be making, then they must submit the dissenting reports to the clerk by February 17.

Certainly what we're trying to do right now is draw up a report that we can all agree on, and there will be some other comments and dissenting opinions that will be outside of the report we're about to make. I think if we all understand that, then we should be able to come to some conclusion here with regard to this report.

Ms Campbell: I'd just like the committee's further direction with respect to recommendations. It's my sense that there may be the two that could be put in the final report, the first being, "The provincial economy appears to be entering a period of growth; however, controlling the deficit and job creation should continue to be goals or priorities of the government."

Secondly, "The provincial account should be prepared and presented in as straightforward a manner and as quickly as possible."


Mr Sutherland: I guess maybe with that one, we should go a little more detailed than "straightforward manner."

Mr Phillips: "Honest"?

Mr Wiseman: I think the auditor would have loved that comment.

Ms Campbell: If I may, the committee last year made a recommendation in the same general area:

"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. Accumulated deficits must be accurately reflected in both current and capital accounts." Would the committee like to repeat that recommendation in this year's report?

Mr Cousens: It's still valid.

Mr Phillips: I think the problem is, as you read those two recommendations, they're kind of sufficiently vague that we all can salute it and then say what we really mean in our own minority reports, unfortunately. In fairness to all of us and to the legislative research people, we haven't really seen the reports yet. So I like characterizing this as we're down to crossing the i's and whatever they do, dotting the t's, but the fact is that we've barely begun to debate the content of the report.

I guess what's going to have to happen, because of our timing, is that legislative research will send the report out as much in advance of the 17th as we can. I think each of us has to anticipate what's going to be in there and then do our own thing, and there we are.

Ms Campbell: So is it the committee's direction that there be no recommendations put in the draft that is sent to committee members prior to February 17, that there will be some discussion?

Mr Phillips: I think you said you're going to put those two recommendations in, which sound vague enough that I don't disagree with them, but we would go further than that.

Mr Sutherland: On the one regarding the accounts, if you want to make some reference to "present the accounts in a way that is agreeable to the Provincial Auditor" or something a little stronger than that, that's probably a little better and gives it a little clearer direction. In the long run, no matter what any of us here personally thinks the books should exactly look like, the person to whom ultimately they have to be satisfactory is the auditor. If we're making recommendations, the auditor is probably the best recommendation you can make.

Mr Phillips: But I would be saying that this year's budget should be presented in accordance with the auditor's recommendations.

Mr Sutherland: I think you'll have to make that as a separate --

Mr Phillips: I realize that. That's why I'm just saying that the rest is like, "Well, after the next election, we'd like them to report the way they should be." That's essentially what they told us they're going to do.

Mr Sutherland: The 1993-94 public accounts will be presented according to how the auditor has requested, so I'm sure that'll give a strong indication of where things are at.

Mr Phillips: Everything clicks in in 1994-95, all the big crown agencies, the 4,000 people moving over there, blah, blah, blah.

Ms Christel Haeck (St Catharines-Brock): As a point of information, I was one of those people who sat on the committee that hired the auditor, and discussion was raised about working with the different auditing departments within the ministries, and definitely Mr Peters committed to work very closely with those different departments, and it was very clear from comments that had been made previously that this was an area that the previous auditor and definitely the acting auditor at that point realized where there were some gaps.

So really for Mr Peters and his, shall we say, relatively small staff to try to make clear to all of the different ministries and the secretariats the range of requirements and for them to bring their records in order and even how they collect information is going to take a bit of time and I think we all have to be realistic. The idea of changing something this large overnight is rather large. The tradition of doing things for who knows how many years does have to be changed intellectually, emotionally and in the very practical terms of getting it down on paper.

I think all of us are very much on side in making sure that what's been committed to is in fact going to happen, but within those ministries there's got to be a real turnaround.

The Chair: Ms Campbell, you've concluded your request for further information? Mr Sutherland.

Mr Sutherland: So the subcommittee is going to meet on February 17, right, to finalize it?

The Chair: That's right.

Mr Sutherland: I know Ms Campbell won't like this question. Do we have some idea as to when members of the subcommittee may have a copy of the draft report?

Ms Campbell: I think there was some agreement to Friday, February 11. If it was not possible to get it to the subcommittee members on February 11, would Monday, February 14 --

Mr Sutherland: Yes, that would be fine by me. I don't know about the other members.

The Chair: It appears there's no one overly concerned about that. So February 11 if you can and, failing that, then February 14.

Mr Sutherland: I would then move that upon final adoption of the pre-budget report by the subcommittee on committee business the Chair be authorized to present the final report to the House and that the report be forwarded to the Minister of Finance prior to its presentation to the House.

The Chair: Did everybody hear the motion?

Mr Cousens: I don't think I've got anything against it, but could you read it again just so that I can really get both ears working?

Mr Sutherland: I move that upon final adoption of the pre-budget report by the subcommittee on committee business the Chair be authorized to present the final report to the House and that the report be forwarded to the Minister of Finance prior to its presentation to the House.

Mr Phillips: He'll need it for his budget.

The Chair: Any further debate? Seeing none, shall the motion carry? Carried.

Is there any further committee business at this time that committee members would like to raise?

Mr Cousens: Just on an aside, has the Finance minister indicated when he's going to make his budget? The federal budget's going to come down in February, I understand, isn't it?

Mr Wiseman: February 22.

Mr Sutherland: I think it's far too early to indicate. The federal minister, while indicating it is in February, has not set a specific date as to when he'll bring his budget down.

Mr Phillips: I hear February 22, but is that just sort of people speculating?

Mr Sutherland: That's people speculating. I don't believe there's been any formal announcement made by the federal Minister of Finance on the date. It's my sense it would be roughly the same time line as last year.

Mr Cousens: When was it last year?

Mr Sutherland: I believe it was the second week of May last year.

Mr Phillips: I think the thing bumps around. One was April 29 and the rest were early May, normally.

Mr Sutherland: Yes. So late April, early May is what you're usually looking at, okay?

The Chair: Any further business? Seeing none, this committee is adjourned until the call of the Chair.

The committee adjourned at 1120.