PRE-BUDGET CONSULTATIONS

ONTARIO ASSOCIATION OF CHILDREN'S AID SOCIETIES

ONTARIO HOME BUILDERS' ASSOCIATION

ONTARIO FEDERATION OF AGRICULTURE

ONTARIO FOREST INDUSTRIES ASSOCIATION

ONTARIO MEDICAL ASSOCIATION

ONTARIO MINING ASSOCIATION

ONTARIO RESTAURANT ASSOCIATION

CANADIAN BANKERS ASSOCIATION

INCOME MAINTENANCE GROUP

ONTARIO ASSOCIATION FOR COMMUNITY LIVING

CONTENTS

Monday 13 February 1995

Pre-budget consultations

Ontario Association of Children's Aid Societies

Barbara Brownell, president

Mary McConville, executive director

Ontario Home Builders' Association

Ward Campbell, president

Laverne Brubacher, first vice-president

Ontario Federation of Agriculture

Roger George, president

Cecil Bradley, senior manager, policy and research and chief economist

Ontario Forest Industries Association

Marie Rauter, president

Martin Kaiser, policy manager

Ontario Medical Association

Dr Michael Wyman, president

David Pattenden, chief executive officer

Ontario Mining Association

Patrick Reid, president

Peter McBride, manager, communications

Ontario Restaurant Association

Paul Oliver, president

Rachelle Wood, manager, government affairs

Canadian Bankers Association

Michael Green, regional director, Ontario

Judith Bussey, chair, taxation committee

Barbara Amsden, director, financial affairs

Harri Jansson, chair, Ontario committee

Income Maintenance Group

Scott Seiler, coordinator

Harry Beatty, legal counsel

Ontario Association for Community Living

Cheryl Easton, president

Barbara Thornber, executive director

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

*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)

Abel, Donald (Wentworth North/-Nord ND)

*Caplan, Elinor (Oriole L)

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

*Haslam, Karen (Perth ND)

*Jamison, Norm (Norfolk ND)

*Johnson, David (Don Mills PC)

*Kwinter, Monte (Wilson Heights L)

*Lessard, Wayne (Windsor-Walkerville ND)

*Phillips, Gerry (Scarborough-Agincourt L)

Sutherland, Kimble (Oxford ND)

*In attendance / présents

Substitutions present/ Membres remplaçants présents:

Hope, Randy R. (Chatham-Kent ND) for Mr Abel

Klopp, Paul (Huron) for Mr Sutherland

Clerk / Greffière: Mellor, Lynn

Clerk pro tem / Greffière par intérim: Grannum, Tonia

Staff / Personnel:

Campbell, Elaine, research officer, Legislative Research Service

McLellan, Ray, research officer, Legislative Research Service

The committee met at 1003 in room 151.

PRE-BUDGET CONSULTATIONS

ONTARIO ASSOCIATION OF CHILDREN'S AID SOCIETIES

The Chair (Mr Paul R. Johnson): The first presentation this morning is by the Ontario Association of Children's Aid Societies. If the representatives of the association would please come forward, make themselves comfortable and identify themselves for the purposes of the committee members and Hansard, it would be appreciated. I'll remind you that you have 30 minutes within which to make your presentation and field questions from the committee members. I'll also let you know that I expect to see the Progressive Conservatives and other representatives of the Liberal Party and the New Democrat Party here very shortly. So we'll get things rolling and they'll drop in very soon, I'm sure. Whenever you're ready, please proceed.

Ms Barbara Brownell: Good morning. My name is Barbara Brownell. I'm the president of the Ontario Association of Children's Aid Societies. On my immediate right is Mary McConville, the executive director of the Ontario Association of Children's Aid Societies. Next to Mary is Kim Way. Kim is a youth program worker, Youth in Care Connections Across Ontario. Kim is a former ward of the children's aid society and is the lead for the Youth in Care network in Ontario.

The Ontario Association of Children's Aid Societies welcomes this opportunity to appear before the standing committee on finance and economic affairs. I would like to put this presentation into the context of our children being our most valuable resource. What we invest in our children now will dictate future values, attitudes and quality of life. Our children are our crystal ball.

We have appeared before this committee annually since 1991, and during that time we have described an ineffective and irrational funding formula for children's aid societies. Over the years, nothing has changed. In fact, the recession, the social contract and decreasing annual adjustments to base budgets have complicated the funding situation further and eroded the service. Despite efforts by CASs to decrease budgets to respond to government cuts, the demand for services to families and children in Ontario continues to increase.

I would like to highlight the following points:

-- The 1992 expenditures for 51 CASs amounted to $396.2 million.

-- The 1992 ministry-approved base budget for 51 CASs was $378.8 million.

-- Social contract and expenditure control cuts were reduced from the 1992 base budgets.

-- CASs faced a 0.75% social contract reduction in 1993.

-- In 1994, children's aid societies had a 0.5% expenditure control plan reduction.

-- In 1995, children's aid societies face a further 1% cut to budgets.

-- Since 1992, CAS budgets have been reduced by 2.25%.

Quite clearly, gone are the days of economic adjustments designed to assist CASs to keep up with inflation and the cost of delivering children's services. Children's aid societies have always had difficulty in planning for upcoming years because MCSS transfer payment announcements have been historically announced after the fact and well past the start of the January 1 budget year.

Mr Silipo was able to make his announcement for the 1995 budget in late 1994. This was helpful. However, the announcement has a further negative impact on budgets and requires further cuts to programming. This most recent reduction is the result of the minister passing on the ECP constraint from last year, which was reduced by half, following an impact assessment on the effect on these services.

All children's serving organizations face budget cuts, and as others reduce their services, more and more families turn to CASs for assistance. Children's aid societies continue to cut valuable programs that serve vulnerable children, have required their staff to take unpaid leave days, and continue to face potential layoffs.

In 1993, the Ontario Association of Children's Aid Societies participated with its community service partners to negotiate a social contract reduction of 0.75%. This reduction, which amounted to $10 million, recognized an already underfunded sector, poorly paid employees and high demands for service. In the context of ongoing constraint, restructuring efforts are in short supply in the broad MCSS transfer payment sector and are hampered by ministry policy gaps, unclear policy or immature or non-existent local planning bodies to support these efforts.

As constraint continues, restructuring is essential. More intensive efforts must be directed to the creation of prevention services, integrated approaches to service delivery, treatment and care, and interministerial coordination.

Public tax dollars support the primary needs of children through the ministry structures of Education, Health, Housing, and Social Services. We see no substantial effort at integrating ministerial policy with respect to children so that community planning and service delivery can be more integrated. The Royal Commission on Learning report with respect to early childhood education is a perfect example of the structural barriers to integrated policy and programming for children. The fragmentation of children's services and cutting our children into convenient sections for budgetary purposes is not acceptable. We need a holistic view. A strong political commitment is required to effect bureaucratic change that will ensure interministerial cooperation and joint planning.

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Specialized services for children and the mandatory services of child protection and young offenders' services cannot withstand further across-the-board cuts without the erosion of services. The ministry must ensure that there is a systemic approach to achieving efficiencies. A service system that responds in a piecemeal fashion and too late inevitably leads to more expensive intensive treatment interventions and substitute care.

The reform of the delivery of children's services in Ontario needs to move forward. The MCSS children's policy framework was begun in the early 1990s to guide the integration of the specialized children's services -- those that are funded through the Child and Family Services Act. As we move to implementation of the policy directions, we find government relying on a community planning capacity to effect change. In some instances these processes must be created. They need time to mature before they are able to take on the monumental task of rationalizing a cumbersome service delivery system.

In some communities, the community planning process is utterly new. In others, the community planning process is still non-existent. Even in those communities where community planning processes have been in existence for some time, it is unrealistic to expect them to make budgetary decisions which force them to pit one agency against the other. The planning functions of health, education, social services, child care and children's services must be integrated if we are to be serious about reforming our public sector structures.

Ontario's child welfare system has historically been considered one of the more progressive in Canada and the United States. It has been praised for innovative approaches and responsive legislation. However, child welfare in Ontario today is in trouble: Budgets have been slashed; staff resources have been reduced; programs have been cut; some families get help too late; some teens get no service; some teens flee to the streets or welfare at age 16.

Children's aid societies in Ontario are increasingly worried about their ability to comply with the regulations of the Child and Family Services Act. Good intentions simply are not enough.

Ms Mary McConville: In 1991, the minister of the day, Zanana Akande, who was Minister of Community and Social Services, announced a joint OACAS-MCSS funding committee to address the irrational and ineffective funding mechanisms for CASs in Ontario. Indeed, I'm aware that the subject of the irrational funding methodology has come up in the House on numerous occasions over the last four years. Four years later, we're still working on that joint funding approach and I have to tell you that we're making very little progress. No new approaches to funding have been suggested.

We have persistent problems with our funding mechanism for child welfare in the province of Ontario, and I will remind you of the difficulties as follows:

-- The funding of children's aid societies is not related to the community needs documented in the society's required annual service plan.

-- The child welfare review process, which is established through legislation in this province to respond to the base budget requirements of your children's aid societies, has been abandoned by the ministry.

-- The exceptional circumstance review process, which is intended to respond to unexpected and unusual expenditures, such as an increase in the number of children in care that cannot be planned for, has now been converted to a contingency fund that has been capped by treasury and some of these funds are now directed at our other mandatory children's service -- the young offenders' services of the province.

-- Despite the minister's transfer payment announcement on December 5, there is no commitment to annualizing any of the contingency funds, despite demonstrated need.

-- Ministry policy, further, which supports the divestment of child welfare services to our native peoples -- and we're not, by the way, criticizing the policy direction there -- is also placing further strain on children's aid society budgets.

In a recent analysis of our spending, which was done to support the joint funding committee with the ministry, we discovered that there's been a 7% loss in staffing resources in our children's aid societies from 1991 to 1994. Post-social contract, we anticipate further job losses as some societies are still relying on unpaid leave days to get through.

Recently, again as part of that analysis of cost expenditures, we looked at where we were spending our money, and you might find some of that interesting: 33% of our expenditures were directed at intake or investigation of cases and protection services; 32% of expenditures were directed at foster care support; 33% of expenditures were directed at group care support for children in care; only 2% of our expenditures were directed at early intervention and prevention programming.

We need to ask ourselves some tough questions. We need to redesign our funding policy so that it's more flexible. Are there new ways of redirecting money in group care to family support and prevention, or from foster care to in-home resources? Can we further reduce the number of children coming into care? Can we reduce the length of stay of those children who must come into care temporarily? Can more moneys be directed to prevention and family support and, in turn, reduce the need for out-of-home care in the first instance? How can we support our youth who are wards of the province so that they can lead productive lives on their exit from child welfare?

We need a consistent policy focus to improve the outcomes of children's aid societies in the province.

In the interests of time, Mr Chairman, I'm going to skip to our recommendations for funding policy that supports both the child welfare system in the province in particular and also the broader government responsibilities for public services to children and their families, which are listed on page 10, some of which you've heard before.

Firstly, the government must recognize the mandatory nature of child welfare services and provide adequate resources and funding to CASs to carry out the requirements and the intent of the legislation and the regulations.

The government must commit to annualization of contingency funds when the need has clearly been demonstrated. The government must reinstate and respond to the child welfare review mechanism which was established by legislation to deal with the adequacy of children's aid society budgets.

The government must develop public funding policy to support a spectrum of child welfare services that includes services directed at the prevention and remediation of circumstances leading to child maltreatment.

We recommend that a provincial fund be created to finance new strategies that promote the health and wellbeing of children and support primary prevention and early intervention programs directed at children at risk.

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We ask that the government ensure that all ministries that support children and families in the province share the responsibility and are accountable for the health, wellbeing and transition to adulthood of those children who are entrusted to the province's care.

That government transfer the jurisdiction and funding for young offender services to children between the ages of 16 and 18 to the Ministry of Community and Social Services.

We recommend:

-- That the full spectrum of services available to children at risk and funded by all ministries be formally reviewed to identify service gaps and barriers to the integration of services.

-- That restructuring be driven by service principles and effective government and community planning processes that cut across all related ministries.

-- That government clarify and assign appropriate roles and responsibilities for government, community boards and community planning bodies.

-- That government commit resources to data collection, evaluation and a research capacity to support service delivery systems.

If I could summarize our message to you this morning, and then we'll be glad to take some questions, I think I'd like to crystallize around three points:

Number one, as Barbara mentioned earlier, our ministries are fragmenting children. Government policy with respect to education, health and social services as it pertains to children and families has to be integrated.

Secondly, we need to modernize our service delivery systems in this province across all public services. Certainly, with respect to children's services and specialized children's services, we feel that early intervention programs should be organized around your children's aid societies for two reasons: number one, to ensure that we can, to the greatest extent possible, prevent unnecessary admissions to care, and secondly, to support more administrative efficiency.

Lastly, we are asking that there be an adequate response to the mandatory service requirements of your child welfare services in the province.

I'll be glad to take questions, as well as Barbara, and Kim Way will be glad to speak to any questions you have from a youth perspective.

Mr Gerry Phillips (Scarborough-Agincourt): I appreciate the brief and the recognition that we're all facing some challenging fiscal times.

One of your themes was much better coordination between ministries. There's a feeling that there's a lot of fragmentation that goes on and that must be costly. If we're to do one thing to kind of coordinate it better, what would your one recommendation be for us?

Ms McConville: I think there has to be a cabinet-level commitment to coordination. Short of the integration of ministries, which presents one with all sorts of problems, it would help if there was a single senior cabinet minister who was responsible for the integrated policy development and community planning issues across ministries, and that this minister be in a position to create some kind of cross-ministerial structure or group, again at the deputy level, I would think, at the very least, and involving ministers to ensure that some coordination happens at the ministry in the first instance.

You can't have coordination on the ground between boards of education, between specialized children's services, between family violence programs and child care, if there's no coordinated policy effort in the ministries themselves. It simply won't happen.

Mr Phillips: I appreciate that. That's an enormous challenge, but I think an enormous benefit if we can find a way, to use the current language, to eliminate the silos effect where we organize but we don't coordinate. I appreciate your recommendation and maybe that's something that has some --

Ms McConville: I should tell you that there was an attempt about three years ago to create a child and family secretariat across several ministries. It received some staffing support. It was to be supported by deputy ministers and a lead minister -- it was Marion Boyd at the time -- and when the government began to look at constraint, it was one of the first new initiatives to go. So the only attempt I've seen in the last five years to provide a cross-ministerial focus around children and families lasted about six months.

Mr Phillips: The challenge is, if it's seen to be adding bureaucracy, then that's not what anybody wants to do; if there's a way it replaces and simplifies things, then people can support it.

The second question would be, if we were looking at one area of what you call prevention, one area where we could really see a return on investment in prevention, is there any recommendation that children's aid societies would have there, where there's one most important area?

Ms McConville: I would make two recommendations. By the way, included in your package there is a presentation we made to the standing committee on children at risk. There are a number of recommendations in there that respond to your question. But quickly, there's no question that prevention programs that are targeted at the prenatal stage and through the early first three years of life are absolutely critical in order to prevent low-birth-weight babies, for example, as one particular program focus that you could zero in on. The creation of programs that would focus on prenatal through one, two and three years of early childhood will have very effective outcomes, and that's been demonstrated again and again.

With respect to moving along that spectrum with respect to your specialized services, what would be helpful is if the early intervention programming -- there is a significant amount of it but not enough -- that does exist in the community that targets your high-risk families, the families that are already moving into the safety net, could be organized around your mandatory functions more effectively, I think we would do a better job of reducing the number of children in care and providing in-home supports to families rather than more expensive residential services, recognizing that some kids will still have to come into care, that they don't have a family that can care for them.

Mr David Johnson (Don Mills): I'd like to thank you for your deputation today and thank your agencies for the service that you give to those who need it across the province of Ontario under most trying circumstances. You mentioned the 7% reduction in staffing levels, certainly a difficult situation. To me it points out the impact that the deficit and the interest that's consuming so much of the provincial budget are having on the services of people in Ontario, because there's no question that one of the prime impetuses for cutting is to deal with the deficit and with the interest in the budget.

I was pleased to hear you talk about modernization, about efficiencies, about coordination between ministries. Perhaps just a question: In one of your recommendations towards the end, I wonder if you would explain the impact of transferring the jurisdiction and funding for the young offender services, which is one that you mention specifically, for children between the ages of 16 and 18 to the Ministry of Community and Social Services.

Ms McConville: I think one of the difficulties with the transfer to date has been the recognition that some new facilities would be required to house some of those youth who are presently in adult facilities, but in our view, housing youth between 16 and 18 in adult facilities is unconscionable, and that's a situation that has to change in Ontario. There are some financial implications for the province in doing that, which have more to do with the gap in capital in actual facilities for housing that population than the actual service to them.

Mr David Johnson: Shifting back, earlier in your presentation you talked about the timing of your funding, and coming from a municipality for many years, I know the problems of receiving one's funding about, I don't know, a third or perhaps more in come cases -- I know library boards in some cases didn't get funding until about the middle of the year, and it's very difficult to plan the year in that regard. What has been the experience of the children's aid society historically in that regard and what recommendations would you make?

Ms McConville: Children's aids frequently are a half a year or a full year into their spending before they get their budget approved, which is insane. You cannot plan on that basis. For their contingency fund requirements, in other words, if you have an extraordinary case, as we've had in the province on many an occasion, that involves a substantial increase in investigations or there is an unexpected and dramatic increase in the number of children in care, the contingency fund approvals are after the fact and money may not flow for a full year after you've begun to spend the money.

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One of the cures for this, but again it has substantial financial implications and that's why it's been resisted, is 100% government funding. All your other children's services are funded 100%, that is, the specialized ones, by the ministry. Child welfare gets 20% of its share from the municipality. The different fiscal years of the ministry and the municipality just makes for an impossible situation for the societies in terms of planning, and I know it's very difficult for the municipalities as well. So we've made that recommendation for years, that the funding be 100% provincial, as is the case with children's mental health. But it would require the ministry absorbing the municipal share, which is substantial.

Mr Norm Jamison (Norfolk): Thank you very much for your presentation today. As you're aware, we're here to consider the direction of this year's budget, and of course I needn't tell you that most of the presentations that we've had to date really recognize the need to deal with the overall problem of debt and deficits and so on, but it's interesting along the way that almost everyone is asking for some kind of recognition on their own part that's needed and that you really start to accrue all these things. We're talking about millions and millions and millions and possibly billions of dollars.

I'd like to say to you that the area in which you work is a very important, very crucial area. We're really talking about the next generation of people that will be really paying for things in this province and leading this province and so on, and that's very important.

I would like to ask you, we're talking about funding, of course, funding difficulties, and those are real. I believe they are. When we talk about the welfare system, you've described in this document very clearly about the transfer payment kind of situation where the province, in your terms, in your assessment, is now picking up 48% of the responsibility, as the cap on CAP has really affected things. Realizing that when we talk about welfare, 50% of the people receiving benefits from welfare are children, that's something I believe is very important.

There is a party out there that's talking about cutting welfare payments to people in this province up to 20%. In my mind, that's a 20% cut in supporting those children. I want to know what you see happening indirectly to your association if that were to happen.

The other question, as the Treasurer has asked, is that we have a federal budget coming up, and that budget could deal with more types of situations like the cap on CAP, which has placed our province in a situation of making up. So those are the things I'd like an answer to.

The Chair: If we could have a brief answer to your questions, it would be appreciated.

Ms McConville: Two brief answers: If welfare reform translated into just slashing welfare payments and nothing more, then I think you could easily predict that one of the outcomes would be increased CAS caseloads. Secondly, with respect to the rather real threat that federal transfer payments may be cut even further, and possible implications for services like ours, I have tried to alert government and the other parties in the House, through this presentation and other presentations, that you have to turn in that instance to rethinking how we're delivering our services and you have to take another run at your priorities.

We are moving too slowly, especially in the social services area, with respect to restructuring. I have a real fear that circumstances are outpacing the plans we have in place to address constraint. I think the entire restructuring agenda has to speed up, has to have more priority and has to be given very serious attention by the government very soon or we are simply going to erode away the service capacity we have and retain the infrastructure that we have.

The Chair: I'd like to thank the Ontario Association of Children's Aid Societies for making its presentation before the committee this morning.

ONTARIO HOME BUILDERS' ASSOCIATION

The Chair: The next presentation is by the Ontario Home Builders' Association, if you would please come forward and make yourselves comfortable. I remind you that you have 30 minutes within which to make your presentation and field questions from the committee members.

Mr Ward Campbell: Good morning. My name is Ward Campbell. I am president of the Ontario Home Builders' Association and I'm a builder and developer in the Hamilton area. With me today is Laverne Brubacher. Laverne is OHBA's first vice-president and a renovation contractor in the Kitchener area. Our remarks today should take about 15 minutes, so that will leave time for your questions. Laverne will start with an overview of the industry and then I will pick up with recommendations for the budget.

Mr Laverne Brubacher: As I'm sure all of you know, the housing market peaked during the late 1980s. For three years, from 1987 to 1989, we were building between 90,000 and 105,000 units a year. When the market fell to half that level, a lot of people thought it was just a matter of time before things turned around. Well, we expect 47,000 starts this year, and if that happens, it will mark the fifth year that starts have been between 45,000 and 55,000 units.

It's now clear to everyone that the late 1980s were an aberration. Part of the reason for the activity we saw back then was the baby boom. But there was more to it than just more families buying homes. Those families were a lot more affluent than the ones before or, more importantly, the ones now.

Over the past few years, most families have had their incomes frozen or reduced. On top of that, tax hikes have cut into their buying power. Finally, most families have had a spouse or a friend or a friend of a friend lose a job, so job security is not something they take for granted.

Two other things affect these families: First, they have a mountain of debt that they're trying to pay down, especially now that interest rates have gone up. Second, they don't believe the government will be able to look after them when they retire, so they're putting more money away into RRSPs and other savings. This means that families are less affluent and are trying to make their dollars stretch further, and this explains why the dramatic recovery in export-based industries has not and will not -- I repeat, will not -- spread into housing.

We believe the housing market has more or less stabilized in a range of 45,000 to 55,000 starts and we believe it will stay in this range for the foreseeable future, but as last year showed, demand for housing can fluctuate very quickly within this range. At this time last year, we predicted 50,000 starts for Ontario in 1994 and for a while it looked as if we may have underestimated the strength of the market, but then interest rates started going up in the spring and all of a sudden sales stopped. They didn't slow down -- they stopped. Some large builders who depend on 30 or 40 sales a week during the spring and summer reported going weekends without a sale. And the same thing happened a second time in the fall when rates went up again. It was like someone was turning a tap.

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The Royal Bank recently released a study that shows the increase in interest rates last spring increased the average cost of owning a home in Toronto from 34% to 39% of household income. For a lot of people, this makes the difference between owning and renting. Buyers today are right on the threshold of affordability. They are very price-sensitive and, unlike the 1980s, it does not take much to push them out of the market.

Before I turn things back to Ward, I'd like to say a little bit about the renovation side of the industry. In terms of total dollar volume, home renovations in Ontario have overtaken new home construction. The numbers last year were just over $8 billion for renovations and about $6 billion for new construction.

The renovation sector has been benefiting from the tendency of most people to do some remodelling four or five years after they move into a house. But two other factors are having a negative impact on this side of the industry: One is taxes, and the other is interest rates.

I routinely bid on renovation jobs in which I am undercut by as much as 20% and sometimes 30% and 40%. Black market renovators can do this because they pay their workers cash so wages can be lower; labour costs are lower still because they don't have things like WCB or payroll taxes, and materials costs are lower because they barter or pay cash so they can evade sales taxes. When renovation customers evade taxes by hiring in the black market, the projects still get done, but the losers are government and legitimate companies.

But high interest rates may hurt the industry for everyone. A lot of large renovation projects are tied in with refinancing mortgages when they come up for renewal. But with higher rates reducing affordability, fewer home owners will be able to refinance when it comes time to renew their mortgage.

If there's a single message in all of this, it's not to take anything about the housing market for granted. As we saw in 1994, it does not take much to turn a promising year into a disappointment.

Now I'll turn things back to Ward to talk about the implications of all of this for the budget.

Mr Campbell: If I can summarize in a few words what Laverne has just said, it is that the housing industry is very fragile. For a lot of reasons, the export-led recovery has had a difficult time spreading into domestic consumption. This has hit housing especially hard.

This condition has two clear implications for budget-making.

First, the estimates of the strength of the housing industry should be very cautious. If the government overestimates the number of houses to be built, it overestimates the amount of taxes it will collect and underestimates the social assistance it will have to pay out. Each house generates $15,000 to $20,000 in tax revenue for the province and creates a year's employment for two and one half people. Right now there is a gap of 6,000 starts between our forecast for 1995 and the government's. If we are right and the government is wrong, the government will be collecting $100 million less in taxes than it expects.

The second implication is that the government should look for ways to increase the purchasing power of consumers. Personal income taxes were raised in 1991, 1992 and 1993. In 1992 and 1993, when people were struggling out of the depression and not sure if they could hold on to a job, the tax hikes were retroactive. This attitude that the taxpayer has a bottomless pocket has got to stop. We meet those taxpayers every day, and, believe me, they cannot afford the taxes that are being piled on them. Every tax hike drives people out of the housing market and into the underground.

Now I want to shift from talking about people to talking about corporations. Two years ago, the government introduced its corporate minimum tax. I want to suggest that this year the government introduce minimum corporate tax. The lower dollar is already attracting export-based companies, but there is no reason for not sweetening the pot. Lowering corporate taxes would send an important signal to the international business community that Ontario is open for business. And let's face it, you get the money eventually anyway through capital gains or income taxes. The other tax on corporations I want to talk about affects the housing industry, but first I want to make one thing absolutely clear: All through the depression, the housing industry has not asked once for a break or a program to stimulate its market, and we are not asking for one now. All we want is a level playing field.

There is a provision in the land transfer tax that raises the rate to 20% of the purchase price if the non-residential land is bought by a foreign interest. Developers buy raw land before it is zoned residential, so this provision affects foreign-owned corporations and partnerships where the majority interest is foreign.

Next month, changes to the planning and approvals system will go into effect that will raise costs, shift them to the front end of the development process, and increase risk. Raising enough equity to develop land is already difficult and it will become even more difficult. The last thing we need is a punitive tax that will discourage investment in our industry.

That covers the main points we wanted to raise today. Just to summarize:

First, the housing market was hit hard by rising interest rates and will probably stay depressed this year. We estimate starts at 47,000, quite a bit lower than the government's estimate.

Second, the consumer cannot afford any more tax increases and is in open revolt. Over 40% of the renovation industry is underground, something that hurts our industry and the government.

Third, you put the first two points together and you get a clear direction for government budgets: Deficits must be reduced and taxes cannot go up. I hope you have made this point very clear to the federal government and I hope we see it reflected in Ontario's next budget.

Mr David Johnson: I agree with you 100% -- excellent presentation; your industry is of key importance in the province of Ontario. "Deficits must be reduced and taxes cannot go up." As a matter of fact, your comments about the personal income tax in the province of Ontario hit home to us. Canada has the highest personal income tax of all the G-7 countries and Ontario is right at the high end in Canada, so there you see it: The people of Ontario, on the personal income tax range, are about the highest, bar none, of the major industrial countries.

The wrong message was sent out on a corporate minimum tax; no question about that. The corporate filing fee is another one you might have mentioned, that $50 fee; again the wrong message to people who are trying to build our province and contribute to the economic wellbeing. Bill 163: I think that's the one you're referring to, is it?

Mr Campbell: Yes.

Mr David Johnson: About "the front end of the development process, and increase risk." I assume you're alluding to the fact, by "at the front end," that the application requires all the details up front. Perhaps you could explain that a little more fully.

Mr Campbell: We're most concerned about this bill being implemented in March, as you know. We have done a lot of work on this with the government. We sat on the task force for implementation guidelines, but we didn't even get the final package and everything put together until very late in December; nobody's had a chance to sit back and analyse whether all the things are going to go together.

You're most correct. We feel that the cost of developing land, at least in the short term, will increase, and the process will be slower due to confusion in the policies, conflicting policies, and also the fact that all of your work has to be done up front. As you mentioned, one of the big costs of land development is getting into the application system. They now say you have to have a complete application before you can submit it. We haven't got final details about what that's going to entail, but all indications are that it's going to be much more onerous than it is now to start the land development process, and therefore you're going to have longer waiting periods up front before you actually get into the application process. They have put in there time frames once you have your application in, but they can slow things down easily just by saying, "You're not complete," and not accepting your application. We're most concerned as an industry.

Mr David Johnson: The same bill that brought in those upfront application fees brought in -- essentially, the six policy statements came hand in glove with that, which means that right across the whole province of Ontario exactly the same rules are going to have to be applied: in rural areas, in urban areas etc. I think it's going to be a problem for your industry.

Bill 120 is another bill which essentially duplexed every house in the province of Ontario. I think that's probably had a negative impact on your industry.

Your industry has had a lot to cope with over the past few years.

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Mr Campbell: Yes, we have, but we have not asked for any handouts. We just want a level playing field, we want a smooth legislative policy, we want consistent guidelines, consistent rulings. We're not getting them. This "be consistent with" framework is most difficult for us to work in, especially when you take the variations across the province. You've put in, instead, guidelines and a set of rules that may work well in an urban area but may not work in Wawa or somewhere else. You don't know.

Mr David Johnson: The property taxes in Canada -- this is from the Canadian Tax Foundation -- are the highest of all the OECD countries; that's about 24 different countries. We have the highest, as a proportion of gross domestic product, property taxes right here in Canada, and I'm sure Ontario is right at the high end of that. So that shows you something else you're up against.

I just wanted to shift to building code standards. I'm not so sure you mentioned that in your brief, but building code standards over the past few years have been increased: I think insulating basements, the height of the ceiling, and in terms of the water flowing away, drainage -- all of those kinds of things. I suspect it was in preparation for Bill 120. That's added considerably to the cost of a house in the province of Ontario, has it not? I think we have to call a halt to that until we can get housing into an affordable range and stop piling more and more costs on to homeowners.

Mr Campbell: The last two changes in the building code that were enacted added about $8,000 to the cost of an average house in Ontario, at a time when the consumer could not afford any more price increases in their housing. A lot of it, we felt, was unnecessary.

The government has put a moratorium on and it's not going do any changes to the building code this year. We thank them for that, but it's not enough. We think the government needs to go back and the Ministry of Housing needs to go back, look at the entire building code, make sure it's cost-effective, reanalyse the different areas of it. I would suggest they should look at bringing in a code that reduces the cost of housing, rather than just increase the cost of housing every time. It can be done: I know I could sit back and build a perfectly safe house for less money than I have to right now.

Mr David Johnson: They need to tackle the deficit in the province of Ontario, and you've highlighted that here. This is really crucial, because deficits are essentially future taxes. They're piling on to the debt of the province of Ontario, which means that the interest on the debt today consumes $8 billion out of the provincial budget, which is a huge proportion of the revenues, and then guess what happens? It happens here in Ontario and it's happening at the federal level: Up go the interest rates, because those who lend money to Ontario and to Canada expect a higher interest rate because of that higher risk. And those higher interest rates are disaster for your industry.

Mr Campbell: No question. As Laverne mentioned in our remarks, when the interest rates went up this spring, the housing market stopped; the tap was turned off. We want the governments to attack their deficits, to stabilize the Canadian dollar, all levels of government, in order that we can get the interest rates back down in Canada.

You know, we're running a very low inflation rate here. It's very hard for the consumer to justify spending 10% interest rates when inflation's running at 1% and 2%. It makes big-ticket investments very difficult for the consumer of Ontario and of Canada. We definitely want the governments to get their debt under control, allow the interest rates to come back down and allow us to get back to work.

Mr Jim Wiseman (Durham West): I just want to correct the last comment, or throw it out for discussion. The interest rate increases over the last year or so have not been driven by the debt, the debt interest or any of those things, because none of those things has changed in the last year. What has changed in the last year is the Federal Reserve in the United States saying: "There are too many people employed in the United States. This is inflationary. Therefore we're going to raise the interest rates to put people out of work." That is the deliberate policy. It's called the non-accelerating inflation rate of unemployment. If your industry is being harmed, it's being harmed because of the monetarist policies by the central bank of the federal government in the United States and the fact that our government, the Liberal government and the previous Tory government, will not separate and have an independent banking policy for this country.

You're right. We don't have inflation in this country. We have huge capacity remaining in our manufacturing and in your sector, where we can grow without it being inflationary. Yet the interest rates continue to go up, and they go up, we have been told by the various groups, because of the Federal Reserve in the United States. If we look, everything is indicated there that they are raising interest rates to put people out of work. It's a deliberate policy on the part of governments, the federal government in particular, because it controls the Bank Act and the Bank of Canada Act, to raise these interest rates. From your brief to the Minister of Finance, you clearly indicate that interest rates are the number one factor in terms of turning off or turning on a consumer. I just wanted to clarify that.

I guess if there's a question in all of this it's, how do we make the presentation to these banks and the central bank in particular to start acting the way they did prior to 1975 when most of the changes that are allowing them to do these things to us came into effect?

Mr Campbell: You are correct in saying that the US Fed did push the interest rates up. That was to slow down the economy there, there's no question about it, but it's our deficits -- and the deficits have accumulated over the years -- that require us to have the spread in rates in order to bring money into this country, to keep our dollar in the 70-cent range rather than letting it go to 50 cents. We're still running a few percentage points higher than the United States even though we have lower inflation, and the reason for that is because of the foreign investors concerned about our total debt.

Mr Wiseman: I think that's interesting, because this current round of interest rate speculation was stimulated by the Wall Street Journal. The people who wrote that article are international speculators in currency. The people who benefited from the fact that they created the instability in the international markets and cast aspersions on whether we were able to hold our debt, whether we were going to meet our targets and bring the deficits down, were the very people who are making the money.

Don't take that from me if you mistrust what I'm saying. David Crane, who is an editor of the Toronto Star, wrote about that on the weekend, and others have pointed out that the so-called experts whom everybody believes are the very people who go into the market and make the money by jerking our interest rates around and by jerking around the value of the Canadian dollar. They'll sell through their electronic selling devices, they'll sell it on the international market, they'll cause a run on the Canadian dollar, and then bang, they make their money and they buy back in.

If you want to point to deficits and the creation of deficits, take a look at what the bank policies have been in this country for the last 15 or 20 years -- 20 years, in fact. Our deficits are real, but they're no different from what they were a year ago. What is different is the speculators playing the game and the Federal Reserve in the United States. If they were to keep their interest rates lower and allow people to get jobs in this country, then the deficits would go down, but the non-accelerating inflation rate of unemployment in this country is 9% unemployment rate. They're putting you and your people out of work deliberately to keep that unemployment rate high. That's the biggest threat we have both to employment and to Canadian unity at this time.

Mr Campbell: I still go back to say that if we did not have the deficits that are in place, if we were not running the big deficits at the provincial and the federal levels, we would be able to have a made-in-Canada interest rate policy and do what we wanted. Because of the deficits, we are unable to do that, and we have to go along with what the international monetary people tell us. You may be right, there may be some speculators trying to manipulate a little bit --

Mr Wiseman: May be?

Mr Campbell: -- but the reality is that the deficits are what is causing interest rates to stay up. If there were no deficits, we would be able to lower our interest rates in Canada and still attract foreign investment. With the deficits, people are concerned about their foreign investment and are demanding a premium to invest in Canada, forcing our rates even higher than they need to be.

Mr Phillips: I agree with you. I think there is no doubt that our very high deficits and debts cause high interest rates, because people want what's called a risk premium to lend money here because they're worried about the stability of the dollar.

So I agree with both points you make. The other is that taxes are a significant problem. There is no doubt that the population is taxed out and that we have to deal with the deficit by restraint. There just is no more manoeuvring room for revenue, no doubt of that.

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Having said that, has the council got any advice for us on the restraint area, anything you see where clearly we could be doing things more efficiently, spending less money, reducing the deficit through that area? Any recommendations for us at all?

Mr Campbell: Certainly in our industry the one that comes to mind right away is non-profit housing. We feel that the program is ineffective, doesn't target those in need, and it costs a lot more money than it should. I can give you an example. A non-profit was built in Stoney Creek, the price on it was $124,900, and right around the corner they were selling condominiums on the open market, and presumably making a profit, for $99,900. That doesn't make sense. Obviously, there's a huge waste of money there. It's an ineffective program and does not in any way help those who need help -- I take that back. Sometimes there are a few who get helped, but it does not help anywhere near the numbers it could with the amount of money that's being spent on that program. The auditor has report after report on inappropriate spending in those non-profits. That's certainly one right off the top.

The other thing that needs to be done, definitely, is that we need to look at the rent control legislation in this province. It's discouraging private investment in rental accommodation in this province. I'm not saying necessarily to abolish it, but it certainly needs to be looked at and reworked. When you take the situation in BC, where they decontrolled in 1984, and between 1984 and 1994 the rents went up less in BC than they did in Ontario, something's wrong with our system. I think somebody told me it costs $26 million to administer. There are all sorts of examples like that out there. We need to look at each program, each ministry, and cut them back.

Mr Monte Kwinter (Wilson Heights): I actually wanted to ask you about the non-profit housing, which wasn't in your brief, but now that you've answered it, I'd like to ask you another question.

Your concern about the 20% surcharge on foreign investors in land development: What would you suggest as a way of making sure of the intent, which is that farm land and things of that kind do not fall into foreign hands without that surcharge? Even though the residential is excluded, is there some formula you would have that would allow foreigners to invest and once they do get the zoning into residential they could get their money back?

Mr Campbell: Something like that would possibly work. Right now they do have a system in place where you have five years to get it approved. But we're very concerned that, with the new approvals process, that's not going to be long enough. Right now it takes approximately six years to get a piece of property through the planning approvals process from the time you purchase it. Add another year to that, another year and a half, and you have problems.

I understand that right now the foreign companies can come in and invest and, as long as they're going through the planning approvals process, they can post a letter of credit or suitable credit to the government and not pay the tax or they can defer it for up to five years, but that lapses after five years. Previous practice has been that they could just go in and ask and get an extension to that. Recently it's come to our attention that they're not allowing that; it has to go to cabinet now. They're trying to make it tougher in a time when they should be making it easier.

With the new planning system, it's going to be harder to get greenfields development done, and it's going to take longer. You could be five years before they even accept your application in the system. Before, it was easy to prove you were working on an application. You went in and you said: "I've applied for it. This is what I'm trying to do with the piece of property." Now it's not necessarily going to be like that, because they won't accept your application. You can say, "I'm doing studies," but until you've applied --

So we're concerned about the way it works. We don't think it adds significant amounts to the treasury, and we don't think it creates a level playing field. With the more complicated system, it's going to require more upfront money. There are going to be more partnerships. I know one company, and it's an international company that's done a lot of investment in Ontario, that says they've pulled back and have not made any new investments: They're in Florida, they're in Texas; they're there because they don't have the same problems they have here. And they have over the past made lots of investments in Ontario.

The Chair: I thank the Ontario Home Builders' Association for its presentation this morning.

ONTARIO FEDERATION OF AGRICULTURE

The Chair: The next presentation is by the Ontario Federation of Agriculture, if the representatives would come forward. I know you're not strangers to anyone on this committee, but if you would identify yourselves for the purposes of Hansard, it would be appreciated. I remind you that you have 30 minutes within which to make your presentation and field questions from the committee members.

Mr Roger George: I am Roger George, and I'm the president of the Ontario Federation of Agriculture. I'm joined by Cecil Bradley, who's our senior manager of policy and research and our chief economist in OFA.

We are pleased to be here this morning, and we have a document we wish to table with the committee for the official record. I have no intention at all of delving into the details on the 34 pages, but I will go quickly over the summary of recommendations and leave as much time as possible for questions.

The first four chapters of the brief essentially set the stage for a snapshot of Ontario agriculture today. Our message in the brief is very simple. It is that despite all the various challenges of change that Ontario farmers, indeed Canadian farmers, face, we are confident about the future of our industry and the agrifood industry as one of the largest parts of the Ontario and Canadian economy, and farmers are steaming ahead with new ideas, new investment and making new strategic partnerships.

All we want is to ensure that the government of Ontario, in conjunction with the federal government, provide us with the tools and the infrastructure to enable us to be competitive in the next century. We ask the question why a nation that's achieved agricultural excellence and world recognition for product quality would take a key economic sector for granted. It is almost beyond our comprehension. We suggest to you that competitiveness is more than price in this world; it's also an attitude, and we believe that we're approaching the next century with a positive attitude that Canadian and Ontario farmers can deal with the competition out there, providing that governments work with us and be our partners.

If I can go through the recommendations which are found immediately at the start of our brief, I'm going to go through them fairly quickly.

First of all, as I've just said, we want to be able to work with government in order that you help us and work with us, to leave us with the necessary tools of our trade. You can't send us into that global marketplace, for those who choose to be global marketers, without those tools; otherwise, we're going to end up like missionaries in the cooking pot.

Chapter 5 deals with a number of issues around safety nets. I have no intention of getting into the details of the somewhat complex nature of safety nets this morning. It is enough to say that there is a deal on the table from the federal government. There is a component of additional funds in there from the Ontario Ministry of Agriculture, Food and Rural Affairs. We are willing to work with both levels of government to ensure that the farmers of Ontario have the necessary safety nets they need to be able to carry on for the future, in an industry where from time to time, beyond the farmers' ability, there is the need for extraordinary aid, which is provided by safety nets.

Chapter 6 is an important one, and it deals with the need for the province to make a larger commitment to agrifood research and biotechnology. As an example, the province of Saskatchewan, under the leadership of Premier Romanow, has basically seized nearly half of the agrifood biotechnology research in this country, simply because the province of Saskatchewan is committed to its agriculture. They are going to make a real industry and they're going to have real economic benefits for the province of Saskatchewan by using the resources they have there for that. It seems somewhat ironic to the OFA that in a province like Ontario, where we have the University of Guelph and countless other research facilities, this province wouldn't be placing more emphasis on agrifood research and that type of thing for the total economic benefit of the province.

Chapter 7 deals with a range of issues around agricultural training. We have in Ontario, as you well know, the Ontario Agricultural Training Institute, better known as OATI. The federal funding for that has been under some jeopardy for the last little while. From time to time we do need to come to the province to ensure that we still have provincial support. Again in our brief, we are recommending to the government of Ontario that it does continue to provide support in cash or in kind where necessary to ensure that we can continue to develop a training culture for our farmers in order that long-term professional development is available as we move into a somewhat different environment in agriculture for the agriculture skills that are needed.

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Chapter 8 is an exciting one and deals with the environment. We have made some tremendous strides over the past three or four years in agriculture in developing environmental farm plans. We have a whole range of proactive issues, some of them centred around AgCare, one of our coalition organizations, where we have made tremendous improvements on the farm. We're dedicated to environmental remediation, and the exciting concept we put forward today is to join with the farm organizations and the federal government in establishing a revolving environmental fund where we can put money into long-term remedial action on our farms.

Many of these issues need significant amounts of capital, and we believe a revolving fund, similar to the tile drainage loan program, would be an excellent use of taxpayers' money. We would like to get this thing kickstarted with federal and provincial funding. We could maybe get into more detail on that, if you need, later on.

Chapter 9 centres around the Niagara tender fruit lands program, which provides easements for eligible properties in order to conserve agricultural land which is deemed to be in the best provincial interest. We simply say that we hope that experiment works. We encourage government to watch it carefully and maybe put more money into it in the long term. It may well be that we need to offer that program beyond the Niagara situation, and down the road it may need to be extended to other areas of the province where there are significant farm lands that are deemed to be of benefit to society which need protecting. This Niagara tender fruit land program may be the pilot project that we should be using for that.

Chapter 10 deals with the old chestnut of farm tax rebate. You will know that the order in council expired at the end of 1994. Ontario farmers are very nervous about the fact that they're now going to 1995 with no commitment at all other than a verbal commitment from all the parties about the long-term future of the rebate. Clearly, we wouldn't need the rebate at all if any government dealt with the basic issue of the unfair taxation to start with, but until such time as we can deal with the basic inequity, the OFA is calling upon the government of Ontario to send a long-term signal to farmers that their rebate will not be tampered with. We're not interested in making it a political football. We've been promised that it's cast in stone; I have yet to see the tablets it's carved on. That would be very helpful to us.

Chapter 11 deals with taxation issues. In particular, we are supportive of integrating the provincial retail sales tax with a national sales tax based on the same principles as the federal GST, and we encourage the government of Ontario to continue to explore those possibilities. We think that would be of benefit to our industry if those taxes were combined.

Chapter 13 deals with tobacco issues inasmuch as we believe that the government should continue to keep our taxation regime in line with neighbouring jurisdictions.

Finally, in chapter 13 we deal with some Ontario Hydro issues and remind you that Ontario agriculture is the second-largest, or maybe even the largest, direct-billed user of electricity in this province, yet many times we get forgotten in the shuffle when industry gets breaks. In the last go-round when there were some reductions, agriculture was once again neglected. So inasmuch as the government of Ontario has any control at all over Ontario Hydro, we ask that the agricultural component be dealt with.

In a nutshell, that's our brief. There's an awful lot of detail in there and I think it might be useful to leave as much time as we can for questions.

Mr Paul Klopp (Huron): How are you doing, Roger? Good to see you again. You make a number of good points. As one who's been around these things for many, many years, I think a lot of it has been discussed, and it's good to have these points brought forward to government at any time.

I think this government has recognized the importance of agriculture. I can remember a bureaucrat telling me that they don't even need a Minister of Agriculture, period, because the government doesn't listen to him anyway. I said, "I guess we'll throw that rule book out." Then I was told that agriculture was actually 18th on the list of ministry importance in the Ontario government. As a political person, I guess that didn't surprise me; I couldn't believe it, though. But, sure enough, we now have the Minister of Agriculture in the senior cabinet positions at all meetings, recognizing the financial importance. Frances Lankin, industry and trade: I think you're aware of that. Many farmers have told me they're pleasantly surprised now that they can talk to Frances Lankin and she always is aware of issues that happen in agriculture. We can look at many policies that have had to be modified to recognize agriculture.

The issue around taxes being put together: I can understand the argument, and I read that part of the brief and I've been aware of trying to stop duplication, and we're all for that. But one of the issues over two years ago was that integrating PST/RST into the GST formula was going to take about a half a billion dollars, $500 million, into the coffers of the Ontario government, which we could have no doubt used to lower the overall expenditures etc. Some of those things are what we buy at our farm: clothing for my kids, books etc. Do you have any thought on that side of it? Other businesses, myself included, talk about those policy lines and red tape, but the overall issue was another half a billion dollars out of the taxpayers' pockets. I know on my farm we buy some of these things. Have you given any thought to that side when you talk about women's clothing etc?

Mr George: Our specific reference deals with the input taxes on some of our farm goods, and we do have a number of things we buy on the farm where we now pay the 8% provincial sales tax. The element in our brief spoke about being able to recover that, the same way we do with GST. If I could recover all the provincial sales tax I pay on some of my inputs, particularly building materials, which has been a long-standing issue for farmers as we invest in new buildings and that type of thing, I'm sure that the sales tax I could find would enable me to get enough money to buy clothes for my wife.

Cecil may want to embellish a little the advantages of combining the two sales taxes from a business point of view from our farmers.

Mr Klopp: I realize all that. I'm just talking about the other side of the coin. Some farm women I talk to say that this is quite an issue. When you look at the overall -- and that's fair enough.

Mr George: If you're embarrassed about collecting the extra half a billion dollars, you could always lower the provincial tax rate.

Mr Klopp: On the issue of the commitments to NISA and GRIP, I think we've been very clear in leading the charge. The Premier has made that commitment a number of times, that this government will not play the games of promises and then change it. I've been in too many of those games: interest rate rebate programs where it's 100% during the election and, whoops, down to 25% the following year. It's awful hard to plan. So I think that commitment is there and we will work at that.

On the budget itself, your good point about the loan programs to assist farmers or whatever, do you think things like FarmPlus and issues like that -- it's for any kind of loans, but do you think we need to maybe promote that even more? I've even had some people on the green side who actually want to invest dollars, who want to get to our caisses populaires/credit unions that have these programs in place. Is there any way you can help us to get that promoted on that side? Maybe we can get even more dollars out there.

Mr George: On the whole investment strategy, I think there are two or three of those components which are quite exciting that obviously we can build on. Over the last three or four years we have a whole new attitude towards the farm loans and the farm credit end of things, and we're now obviously able to do it for a lot less money than we did before; maybe things we can more afford.

Based on what we've got with our commodity-based loans and our FarmPlus and those types of things, I think there is always room to improve and room to market. Certainly the FarmPlus angle is one that OFA would be interested in working with any government to promote, and maybe we need to extend it beyond the credit unions and the caisses populaires, because it isn't every region of the province where there's agriculture that's got access to those local institutions.

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Mr Klopp: Finally, with the farm tax rebate, I know it's something that I've been around since 1971 and I think it's been every year that every government has tried to say, "We're going to get it fixed and this year we'll keep it." Then the lobbying -- although I do believe the Premier made a commitment at the OFA convention that this is going to be there till something can be changed. We had the Fair Tax Commission. It is a tough issue.

Do you recall back about 1980-something when the Minister of Agriculture actually went out and said we were going to get rid of the farm tax on land and actually the farm community -- of which I wasn't part, but I know it was a tough issue. I was on the other side. I agreed with the then minister. It was actually turned down. Do you think that won't be out there again, that kind of discussion?

Mr George: I think you're going back as far in the past as Premier Davis and Minister Timbrell, and I don't think it was the farm community as much as five or six well-organized people who got some hysteria going out there about the issue: If you didn't pay taxes on the farm, you wouldn't own the land, which is absolute nonsense, but the Premier got cold feet and nothing happened.

Mr Klopp: You don't think that will happen again.

Mr George: We were encouraged to a large degree with the recommendations of the Fair Tax Commission and I hope that at some point in time there'll be a government of Ontario that's prepared to take a look at this very difficult issue. Until such time as that happens we're going to find ourselves with a farm tax rebate that's in excess of $150 million.

Mr Kwinter: Mr George, thank you very much for your presentation. In chapter 3 you talk about the successful conclusion of the Uruguay round of the GATT talks and its successor World Trade Organization, and you say that as a result those agreements have "forced the Ontario agricultural community to re-examine its production and marketing arrangements." But then you don't go on to say what that re-examination has led you to. Do you have some information for us as to where you see those particular international agreements affecting what we do in Ontario?

Mr Cecil Bradley: I think the changes that are being provoked by the new GATT agreement or the World Trade Organization are primarily in supply-managed-product areas, and there are national processes going on -- they have been going on for quite a number of months now -- in dairy and poultry to try and develop a marketing arrangement which is consistent with the new trading rules.

That's all being done in a context of I think profound uncertainty originating from south of the border. There doesn't seem to be any assurance that our main trading partner is prepared to recognize the GATT arrangement for the tarification of supply-managed-product import quotas and so on. So even while the dairy and the poultry industries are trying to rearrange their marketing to, I suppose, become more market-responsive, they're a little bit puzzled as to which way to jump given the unwillingness of the US to come to terms with the provisions of the GATT agreement. I think probably anybody who's been following the papers in the last year or so knows the kind of bilateral disputes there have been on peanut butter and sugar-containing products. Just -- what was it? -- 10 days ago the US formally asked for consultations under NAFTA on chicken and poultry tariff levels.

Mrs Elinor Caplan (Oriole): I appreciate the presentation that you've made before us today. While we don't have any farms in Oriole riding, all of the constituents know what an important role Ontario farmers play, not only in our economy but in our quality of life.

What I'm hearing from my constituents is their concern about fiscal responsibility. Within your recommendations to this committee, I've noted some of the recommendations would actually carry a pricetag. The question I have for you is whether or not you're recommending an overall increase in funding or whether you recognize that there might be opportunities for moving funding around to use it better in the area of support for agriculture, because clearly there's not going to be much new money available for quite some time in this province. Taxpayers, rightly so, are saying, "No more taxes."

Mr George: The issue of funding: I draw your attention to chart 4.1 on page 15 of our brief, where we do point out the historical decrease of the share of our budget in the provincial economy. Again, if we recognize that agriculture and agrifood is a major segment of the economy, we're somewhat puzzled as to why our budget should have to shrink that much.

We're always interested in looking at ways to better use the funding we have, and I think, as I mentioned to Mr Klopp, with our investment strategy we've moved away from all this ad hockery and some of the programs that cost us tens of millions of dollars back in the 1970s and 1980s are now replaced with farmer-driven programs based on the new realities. They are innovative and exciting efforts and, to the extent that we can work together with government to get a better bang for the dollar, we will.

I spoke about the environmental revolving fund. Again, far better than just flinging money out to the winds, let's put a system together where we can put a pool of money together and have that money revolving back to farmers at low interest rates or whatever so that it continues to regenerate itself. I'd like to see it administered jointly by government and the farm community. We've got examples of that within our investment program, with the Agricultural Commodity Corp, which is a joint venture of the farm community and the government of Ontario.

We've made a lot of progress, I think, over the last five years in taking grasp of some of these issues and we're not looking to be throwing money at the problems willy-nilly like we did in the past, but we are interested in making sure we've got that commitment, that there is funding there in the long term. You have to invest in order to get rewards here, and we're saying agriculture and agrifood is a good place for the government of Ontario to invest for the future of the province.

When we talk about agricultural research, that's a very good, demonstrated place for government to put a lot of money, because we can get a 40% return, in many cases, on agricultural research and the benefits come back to society over a period of time in the form of jobs and economic activity way beyond the farm gate.

Mr Phillips: You were saying that recommendation 8, I think, was one of your key recommendations, and you just talked about that and this investment fund. Can you give us just a very quick explanation of that fund and how it will work and what sort of funding --

Mr George: Over the last four or five years we've had $5 million of federal Green Plan money. We've developed what we call environmental farm plans, and we're going through a process now where farmers are voluntarily putting together confidential assessments of their farms. In many cases the farmer may identify the fact that he has a manure storage problem and, in order to prevent any runoff getting into the water system, in some cases that may need a $30,000 or $40,000 capital investment on the farm. We are suggesting that we have a block of money -- and if there's ever going to be a Green Plan II, that would be a good place to attract federal money -- in an environmental partners trust fund, of which the Ontario Farm Environmental Coalition would be a key player. That money would be loaned over a period of time, maybe a 10-year loan, and as that money gets repaid back into the system, the fund sustains itself.

We did that in tile drainage some 15 to 20 years ago and I think we could argue the case that for a fairly minimal investment on behalf of the province, probably $10 million or $15 million way back then, we have been able to tile-drain thousands of acres of land and create a whole bunch of economic activity, much of which goes beyond the farm gate.

Mr Gary Carr (Oakville South): Thank you very much for a fine presentation, as usual. I was sitting here thinking that the next government, if it was to take these in-depth proposals and implement some of them, we'd be a lot better off. So thank you as usual for doing a terrific job. I know your ongoing effort goes on even in between in putting all this together and letting the various parties know. So thank you very much.

I want to ask you a question regarding Bill 91. I want to see if the OFA favours the repeal of Bill 91.

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Mr George: Mr Bradley is our labour guru.

Mr Bradley: No. We're not calling -- when I say "we," I'm talking about our coordinating group in Ontario that was set up in early 1991, the labour issues coordinating committee. The OFA has provided secretarial and staff support to the committee, but the committee as a whole is broadly representative of the farm groups in Ontario that have a particular interest in the labour issue. Fruit and vegetable growers, tobacco growers, floriculture and that sort of thing are prominent players on the committee. The committee's view and advice to the various farm organizations which support it is that collective bargaining and the right to organize is an acceptable arrangement in Ontario, provided in the agricultural instance those rights are exercised in a framework which respects the unique qualities of agriculture.

The legislation goes a long way towards recognizing the unique situation of agriculture. Strikes are precluded. There's a dispute resolution mechanism called final offer selection mandated by the legislation. The legislation provides a basis in statute for an agricultural labour-management advisory committee to advise the minister on the ongoing administration of the act. That committee is going to have a hand in picking the vice-chair for the agricultural panel of the board and is going to be involved in the development of education and information programs.

I think the sense around the labour issues coordinating committee in the last several months is, "Leave it; let's see how it works." I think people are prepared to work within the legislative framework that is there and try to see that it can be implemented with the least disruption to farm businesses.

Mr Carr: The next question I have is, in the past you have voiced some concern over the WCB and various aspects of it. I wondered if you could maybe address some of the things specifically that need to be done to address some of the Ontario agricultural perspectives with regard to the WCB.

Mr Bradley: Can you wait a couple of months?

Mr Carr: Obviously something's in the works. Okay.

Mr Bradley: Yes. The farm organizations have had a sporadic history of involvement with workers' compensation issues. They were involved in the NEER exercise quite heavily back in the late 1980s. Then the level of involvement has tended to drop off.

With the headlines accorded to workers' compensation in the last couple of years, particularly with the appointment of the royal commission to take a comprehensive look at workers' compensation, the labour issues coordinating committee is going to develop a brief to the royal commission which we hope will set out our major concerns with workers' compensation, the way it operates as it affects farm businesses. We expect that we will find several recommendations for improvement in the system. We're looking for an early May presentation to the royal commission, and at or about that date you should have our best critique of workers' compensation as it affects farmers, and some of our suggestions for improvement.

Mr Carr: Just in time for the new government to take over and implement them.

Mr Bradley: Is there going to be a new government by that date?

Mr Carr: I'd bet my mortgage these guys won't be back, but I won't go further than that.

One quick question on taxes. You mentioned in here the problem with the taxes and you went through it very comprehensively. One of the things we've called for is a reduction in taxes, a 30% reduction in personal income tax. For the average household, two people making $25,000 for a combined household income of $50,000, the savings will be about $4,000 over the next three years. I was just wondering what your comment would be, what some of your members would feel about reducing the taxes in the province of Ontario. Do you think they'd agree with that?

Mr George: I'm sure we'd all agree with reducing taxes for farmers. I just wish we were in the position where income tax is the biggest worry of our life. I look forward to the day when we get resolutions coming into our board where farmers are worried about their tax position. If it weren't for the off-farm income that is brought into our farm families, we would be in a terrible plight indeed because the net farm income in this country is a national disgrace.

Mr Carr: Thank you very much and good luck.

The Chair: I thank the Ontario Federation of Agriculture for its presentation this morning.

Mr George: You're welcome, Mr Chairman.

Mr Randy R. Hope (Chatham-Kent): Mr Johnson, can I just ask legislative research for some information, if possible, or do you want me to wait?

The Chair: What do you need?

Mr Hope: I can ask now. It's very short and simple.

The Chair: Sure. Do you want this on the record?

Mr Hope: Yes, I'd like it for the committee because I think it's been thrown out this morning.

The Chair: Okay. Just hold for one second. We're just going to take a second to hear Mr Hope. He has a request of research.

Mr Hope: This morning, dealing with the home builders' association presentation, they talked about interest rates and debt. When we had the last recession, between 1981 and 1982, there were high interest rates of 23%. I wonder what the debt calculation was at that time comparable to what it is now around the debt calculation and the interest rates, because that's been thrown out quite a bit. I don't know if you're able to get it for this afternoon; we have the bankers coming forward this afternoon and it would be nice to --

Mr David Johnson: Mr Chair, this is something he can get by himself. What does this have to do with the workings of the committee? He can get that information separately.

Mr Hope: Wait a second. I have a right --

Mr David Johnson: That's the kind of information a member should get separately. Really, he's just taking an opportunity to speak further than most of us.

The Chair: He wants this information for all the committee members, Mr Johnson.

Mr David Johnson: He can get that information and he can provide it to us.

The Chair: If you don't need it or you don't require it, that's quite all right.

Mr David Johnson: Well, should I ask then? Should I take the time of the committee to ask for all the extra information that I want at this point too?

The Chair: If you think there's relevant information that committee members might require, you can certainly raise it with the Chair and the Chair will hear what you have to say.

Mr Hope: I asked the Chair first.

Mr David Johnson: He's going beyond the bounds.

Mr Hope: I asked the Chair if it was possible --

The Chair: At this point in time, I think the question has been noted --

Interjections.

The Chair: Order, please. I think the question has been notedated.

ONTARIO FOREST INDUSTRIES ASSOCIATION

The Chair: The Ontario Forest Industries Association has come forward. I remind you that you have 30 minutes within which to make your presentation and field questions from the committee members, and if you could identify yourselves for the purposes of Hansard.

Ms Marie Rauter: Thank you very much. I am Marie Rauter and I am president of the Ontario Forest Industries Association. I have with me today Martin Kaiser, who is our policy manager. We certainly are very pleased to have this opportunity. I would like Mr Kaiser to start and then I will continue.

Mr Martin Kaiser: The Ontario Forest Industries Association is a provincial trade association representing 20 member companies performing forest operations and manufacturing pulp, paper, paperboard, lumber, veneer, plywood and panel products throughout the province. Ontario's forest industry is a significant part of Ontario's economy, and we welcome this opportunity to participate here today.

In our submission on the 1994-95 budget, we focused on a few key points. We addressed the fundamental changes the forest industry has made to ensure its competitiveness and the tremendous opportunities for it to grow and contribute to a healthy provincial economy, and the need for government to contribute to that effort by becoming more efficient and effective and taking a hard look at its costs and by working in partnership with the forest industry.

We believe that this industry's performance in recent years bears out the value of hard decisions made in prior years and that these decisions have positioned us for the growth we're beginning to see. We also believe that the province faces a financial situation which is far more serious than that recently faced by the forest industry. Government will have to make some hard decisions if this province is to re-establish a competitive economic system. Before addressing our recommendations, we will provide an overview of the industry's recent financial performance.

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Following record losses in 1991 and 1992, the Ontario primary forest industry began to turn the corner in 1993, with most sectors seeing improved financial performance. This improvement is evidenced in the attached graphs, which show that in 1993:

-- Total sales increased to $4.4 billion from $4.1 billion in the prior year. This is largely the result of improved prices for solid wood products, increased production levels and a drop in the Canadian dollar.

-- Net losses fell to $121 million, a drop from $382 million in the previous year, again an indication of improved prices but also an indication of the cost reduction initiatives which were carried out.

-- Return on capital improved to 0% from a level of minus 4.1% in 1992, providing further indication this industry has turned the corner.

-- Finally, capital expenditures increased to $311 million from $222 million in the prior year, an indication of this industry's continued commitment to Ontario.

One result of this small improvement is that the industry's payments to governments increased to $785 million, as indicated in table 1. In fact, every dollar in sales generated by Ontario's forest industry generated 18 cents for government, with 10 cents per dollar of sales, or $449 million, being contributed to provincial and municipal revenues. You'll note that income tax and stumpage are two areas where increase was most significant. Both of these areas respond to profitability and increased activity in the industry.

While the industry's sales, earnings and return figures are encouraging, others clearly indicate that the industry has a long way to go to regain the financial strength of the late 1980s. The industry's debt-to-equity ratio remains high at 0.85 and employment continued to decline in 1993, though the rate of decline slowed. The industry's recovery gained strength in 1994 with increased production and shipment of Ontario pulp and paper and solid wood products, and improving prices for most product lines.

Indeed, the forest industry, along with other export-oriented industries, has played a major role in the improvement of the provincial economy in the last year. Continued improvement will be required for this industry to regain its competitiveness, and this government's actions will impact that effort.

Ms Rauter: We believe that there is a road to prosperity, and it means getting back to fundamentals. Although the forest industry is cyclical and we do expect downturns, the recent recession is the worst ever experienced by this sector. We are now starting to experience a recovery, but that recovery is tenuous. To remain on this road to prosperity, we must make sure all the fundamentals are right.

Government can facilitate the recovery of the forest industry and other key economic sectors and thereby reap the benefits of a strong industrial base. In order to do so, it must also make the hard decisions and create a competitive economic system in which industry can flourish. As you saw from some of the earlier comments, 18 cents on the dollar comes to government, and if the industry is paying taxes, the government is going to do well. Government must get the fundamentals right. It must become more efficient and more effective in the delivery of its services. This industry is willing and is able to work with government towards this end.

As a resource industry, we are more dependent on government than many other industry sectors, because most of our fibre comes from crown lands and most of our energy through Ontario Hydro. These monopolies do not allow for competition for our raw materials in the open marketplace, yet our final products are subject to competition in the international marketplace.

The need for a close working relationship is therefore critical, as it benefits both parties. Over the past two years, many members of the forest industry devoted a great deal of time to developing a new business relationship with the Ministry of Natural Resources. As a result, most companies holding forest management agreements have taken on the added responsibility of funding their renewal efforts, thereby reducing the financial burden on government and promoting a more effective forest management effort.

Part of the discussion on a new business relationship dealt with the need for a new stumpage system, one that would quickly and accurately respond to changes in the markets for our products. The industry was initially encouraged by government's willingness to jointly develop a new system, but was disappointed that this joint effort was quickly terminated and that the MNR introduced the new stumpage system in October 1994 with little thought for its far-ranging impacts. The result is that the new system and its impacts are not well understood by either government or industry and its implementation has created a great deal of uncertainty in this industry.

The treasury of Ontario can benefit greatly from a stumpage system which ensures that government revenues increase as the industry's profitability rises. However, the system must also respond to the inevitable downturns that the forest industry will face. The key to achieving these objectives is working in partnership. While the MNR has now established a joint government-industry working group to address issues presented by the new system, this province and industry would have been better served had a partnership approach been taken from the outset.

Our first recommendation is that the MNR work closely with the forest industry to refine the new stumpage system in a manner that ensures it respond to the cyclical nature of the industry.

Under its Forests Moving Forward initiative, the MNR is pursuing further opportunities to shift responsibilities to industry. If this government believes in the partnership concept, then this ministry must work closely with the forest industry and have thorough discussions on the financial difficulties of the ministry, the programs that need to be delivered, the programs that are no longer affordable, the best delivery system, and who should share the costs.

The MNR has accepted the concept of user pay, an approach that has been recommended by both the Ontario Round Table on Environment and Economy and the Ontario Forest Policy Panel, yet we see downloading of government costs to this industry and do not see the sharing of costs by the other users of the forest. There must be equity in how these costs are distributed. Where there are other users of the forest, these users must contribute their share of the costs.

Our second recommendation: The MNR must work closely with the forest industry and have thorough discussions on the financial difficulties of the ministry, the programs that need to be delivered, the programs that are no longer affordable, the best delivery system, and who should share the costs.

The third recommendation: Where there are other users of the forest, these users must contribute their share of the costs.

The efficiency and effectiveness of government and its agencies also has a direct impact on the forest industry. Ineffective process is one of the greatest impediments to efficiency and is costly to both government and industry. Processes must be streamlined so that they are effective and results-oriented. This has been advocated by several groups and accepted by this government, yet there are too many instances where only lip-service is paid to the concept.

The myriad of lengthy, unproductive consultation processes carried out by the MNR and the Ministry of Environment and Energy at great cost in recent years has hindered all parties' ability to provide effective input on policy development. The approvals process of the MOEE has severely hampered the ability of our members to pursue cogeneration opportunities that would enhance their energy generating abilities and contribute to their waste reduction objectives.

Each ministry should and must examine the various consultation and approval processes in place and report whether they are necessary and, if so, how they can be made more efficient and results-oriented.

Improved efficiency can provide benefits directly and immediately. An example is Ontario Hydro, which has provided industry with some relief through its recent pricing policies. While this is acknowledged, it is only a small step. There is a long way to go before Ontario's electricity rates are competitive with other jurisdictions. We urge Ontario Hydro to continue its focus on efficiency and on rate reductions and reducing its debt load.

The Ontario government must also direct its efforts towards eliminating duplication of effort between itself and the federal government. Both the federal and provincial governments have introduced environmental legislation in the last few years. The federal government has been working with the provinces to develop a single-window approach for the administration of regulations on pulp and paper mill effluent. It has signed agreements with Quebec and British Columbia, which have comparable legislation to Ontario, yet Ontario has not yet come to an agreement with the federal government that will make the system more efficient while ensuring environmental responsibility. This delay is costly and puts the Ontario industry at yet another competitive disadvantage compared to companies in provinces that have come to an agreement.

Our recommendation is that Ontario sign an agreement with the federal government to ensure a single-window approach for monitoring of the pulp and paper mill effluent regulations as soon as possible.

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In conclusion, this province and this country are in financial difficulty. That trough where governments have traditionally gone to get more water has dried up. There is no more. The international banking community, by dropping Ontario's credit rating, has been trying to tell us something. We cannot afford this rate of spending. That drop in credit rating cost the people of this province millions of dollars in additional interest payments. We cannot afford another drop.

It is no longer sufficient to just say that Ontario will balance the budget. We must get beyond a balanced budget and start to pay down the debt. Government must be fiscally responsible. It is not fair to mortgage the lives of future generations on this generation's inability to get its house in order.

Ontario's forest industry provides an example of the benefits of making the hard decisions. They are not easy to make, but they are essential and they do pay dividends in the end. They have positioned this industry to prosper in the coming years.

Government must also make the hard decisions, making sure that it delivers the essential programs in an efficient and effective manner. In this way, Ontario can re-establish a competitive economic system and pave the way for renewed, sustainable growth that will benefit all Ontarians.

Mr Kwinter: Thank you very much. I'm delighted to have got your brief, and I can tell you that I certainly appreciate the contribution that you make to the economy of Ontario.

There are a few areas I'd like to explore with you. In your FMAs, are you satisfied that you're getting security of supply of fibre? I know that a few years ago that was a major problem, and it was one that concerned a lot of the forest industry operators.

Ms Rauter: We have a couple of concerns on two fronts: One is that with this new legislation, the forest management agreements are no longer forest management agreements; they are forest management licences. There has been a difference of opinion as to how secure is the tenure and the future wood supply. That is still a very real concern of ours, and we are certainly hopeful that as time goes on we will have the tenure that we had in the past with the forest management agreements.

There is another concern that we have, and that is available fibre to be able to sustain not only the existing mills but some of the new mills that are being proposed, not only in the short term but in the long term. We're very concerned about the state of the inventory and where that will be taking us into the future. So yes, we do have some very major concerns.

Mr Kwinter: Another area I'd like to get your comment on is that I've noticed in the media in the last little while companies like Abitibi-Price are raising the price of newsprint. Is that an indication of world shortage, is it an indication of better productivity or is it just a matter of the Canadian dollar being where it is? How is the industry going to respond if the dollar goes to 80 cents?

Ms Rauter: It's a combination of all three. This is where I say that in terms of making some of the hard decisions over the last few years, you'll have seen that most of the companies have restructured and their productivity has increased tremendously, so we are trying to be competitive on that international market. Certainly the lower Canadian dollar is helpful, because we are an export market.

In terms of world supply, yes, there is a tremendous shortage of world supply, and most of our Canadian companies right now are operating at capacity. We anticipate in the future that for at least the next few years there will be a tremendous demand on wood products, and Ontario has a real opportunity to try and take advantage of that world supply. We just want to make sure that government has the fundamentals right so that we can be part of the picture of that growth.

Mr Kwinter: Given that a lot of investment in your sector is moving into regions of the world where they have shorter growing cycles, do we have the technology, do we have the will to compensate for that?

Ms Rauter: If we have good forest management, we have the potential to reduce our growing cycles considerably, to increase our productivity on a piece of land considerably and to be able to compete with many of those other jurisdictions of the world. It's a number of criteria that we have to put together, and certainly the cost of wood is one of them; the cost of energy is another. If those two factors are competitive, I think with our workforce and our infrastructure and the quality of our product we certainly can compete with just about any jurisdiction in the world, but there are some fundamentals that we have to have right.

Mr Kwinter: I know that one of your recommendations is that the Ontario government enter into an agreement with the federal government on effluent regulation. I know at one time the industry was concerned that the regulations were too stringent and couldn't be met with the current technology. Are you happy with the federal regulation, and do you feel the industry can comply?

Ms Rauter: With the federal regulations, we're quite pleased, and I think we can work with the federal regulations with no difficulty at all. With the MISA regulations, there is not a defined zero limit for the chlorine issue; it's to attempt to get to zero. Depending on the wording of that MISA regulation, we can probably live with it, but it depends upon what the government of the day will think about some of the periodic reports that are put in with respect to the kinds of research work they anticipate industry will do in the interim.

Mr Kwinter: I also notice with interest there's been a substantial increase in the capital investment in your industry. One of the knocks against the industry has been that there has been no capital invested for about 40 years. Where do you feel the industry stands vis-à-vis the global competition?

Ms Rauter: For the last four or five years, this industry has put very little into additional expenditures because there was no money to be had. Now that the prices have started to increase, they are going back into upgrading and trying to make some of their equipment more competitive. There are substantial dollars that will have to be spent. They have spent tremendous numbers of dollars in environmental improvement, because they are an environmentally responsible industry. With these dollars and with some of these improvements, I think some of our machinery and some of our capability is as good as any in the world. It will not be as good as some of the greenfield mills that obviously are being put up in other countries in other jurisdictions where they're starting from scratch. It's always easier to start from new than it is to modernize.

Mr Carr: Thank you very much for a great presentation. It was nice to see you again. I spent some time on the bill in the summer, as you know. We went all over Kapuskasing and we were all over the north and it seems like only yesterday we were together. I thank you for not only the presentation today but also for your efforts during that bill as well.

I was particularly impressed with your conclusions. I think you did a great job. I want to refer to page 3, your number one recommendation, which says you want the Ministry of Natural Resources to work closely with the forest industry to refine the new stumpage system. You go on to say the industry "was disappointed that this joint effort was quickly terminated, and that the Ministry of Natural Resources introduced the new system...with little thought for its far-ranging impacts...and its implementation has created a great deal of uncertainty in the industry." That first recommendation would seem something that any government should do in working with you.

What happened and why didn't this come out and what has it meant to you as a result of some of the problems?

Mr Kaiser: The initiation of the stumpage system, the review of a new stumpage system, took part under the new business relationship and the negotiations that were happening around framing that. It was one component. Early on in the process, after there were some initial meetings with industry and government to frame the principles and approach of a new system, discussions were essentially ended on that component of the negotiations and negotiations went forward on the silvicultural trust fund, which industry very much supported.

So while the industry very much supports the stumpage system and the notion of a more responsive market-based system, there was a great deal of work which had to be done between the framing of principles and the implementation of a new system. Unfortunately, that work didn't happen prior to the implementation of the system in October and we now have a very complex system which, while it can be somewhat effectively applied in the major sectors such as newsprint and pulp, the myriad of other subsectors -- red and white pine producers, OSB plants, sectors like that in the system -- it becomes very difficult to recognize the differences there, to respond to the market realities in those sectors and to not have significant negative impacts on investment in each of those sectors.

Mr Carr: Where are we at then in terms of going back and readdressing that? You can maybe comment why the government didn't see this coming but, more importantly, what can we do to eliminate? Where are we at now in the discussions with the government and are you confident that we're starting to head in the right direction?

Ms Rauter: One of our disappointments, I think, at the front end is, we had asked for a committee to be set up almost immediately when we first saw that stumpage system come out, and it would have taken at least three months, I think, before we got a response to set up a committee. Now they are in the process of setting up the committee but they still have not met yet and we're five months into the system. Martin, I don't know if you have a meeting date yet.

Mr Kaiser: Shortly.

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Mr Carr: With regard to Ontario Hydro and reducing the cost of power, as you know even the OFA that was in before you -- you heard their presentation comparing the cost between Quebec and Ontario and that's the one thing that we had an advantage as a manufacturing province for many years: power at cost. One of the reasons we became a manufacturing province was because of that, and that's slipped away. You mentioned some of the focus on reducing the cost of power. We've called for a five-year freeze on Ontario Hydro rates, but what else can be done in terms of reducing the cost, as you see it, looking at an organization like Ontario Hydro? Is there anything else that you can suggest needs to be done, because all parties need to tackle this, and want to.

Ms Rauter: One of the things is to take a look at cogeneration and the wheeling of power, for Ontario Hydro to be willing to wheel the excess power from cogeneration, because I think there is one major area we really could make some substantial savings on. The forest industry and the mining industry are the one-two big users of Ontario Hydro. So there are some other sectors that hydro, sure, it's a component of cost, but in the forest industry it's a major, major one, and certainly cogeneration would be one very effective way.

Mr Carr: As you know, this government I think in its discussions has said it's not going to proceed that way. What are you doing in anticipation of governments changing, getting ready for discussions? Is there anything you're doing? I think you're right; it is a big percentage of your cost. Where are we at with this, and how soon can we implement some of these things?

Ms Rauter: We have a number of position papers on several different areas in terms of where we think things can be improved and managed, and whatever the government of the day, we will be very happy to work with anyone in terms of trying to address what some of our concerns are.

Mr Carr: And some of these projects, in your estimation, can go ahead fairly quickly.

Ms Rauter: Some can go fairly quickly, some are just straight decisions and some of them will take some work and some thought and working together to try and move things forward.

Mr Carr: Good. Thank you very much and congratulations; a great effort. We look forward to continuing to work with you.

Mr Wiseman: I appreciate your presentation. There are some concerns that I have about what's happening in the economy in Ontario. I don't know if you heard, but I'm particularly interested in and concerned about the interest rates and the policy of the federal government, both Liberal and Tory, that the increase in interest rates is designed to keep people unemployed. How sensitive is your industry to an increase? For example, we heard that a 1% increase in interest rates in Ontario would put approximately 20,000 people out of work. How many of those people would be from your industry in a 1% increase in interest rates?

Mr Kaiser: We couldn't tell you certainly how many people that would put out. It would certainly have an impact. Even with a heavy capital structure, the industry, particularly with this current debt-to-equity ratio, is impacted significantly by interest rate increases.

Mr Wiseman: The other side of that, the flip coin to that argument, is also that when the interest rates go up, the value of the dollar goes up, and we have heard from the mining sector, or we will this afternoon, that when the dollar starts to go up, it can tell us how profit-sensitive it is. How profit-sensitive is the forestry industry in terms of the value of the Canadian dollar?

Ms Rauter: As the dollar goes up, we have individual companies that it means a difference of several million dollars on their profit line, but even if the dollar goes up today, this is one of the reasons that the companies have really tried to restructure so that they are more competitive internally in their infrastructure. But, yes, certainly the Canadian dollar plays a tremendous role.

Mr Wiseman: My next question has to do with the whole controversy between Canada and the United States over stumpage fees. While we've won a couple of rounds, it seems that we spent an awful lot of time in courts and so on. I thought the free trade deal was supposed to put an end to that. Where are we at now in terms of that issue? I understand that there's lobbying now by forestry-dominated senators to go at this again.

Ms Rauter: And they probably always will. But we won this last round, we're getting our money back, and the only reason we're getting our money back is because of the free trade agreement, because that free trade agreement gave us a binational committee, and it was that binational committee that decided in Canada's favour. The Americans kept appealing it, but it played out at the end of the day we're getting the money back, and what is now currently under negotiation is that the Canadians and the Americans are working very closely together to try and ensure that this will not happen again. But it was because of that binational committee; it is the only reason we won. That was one of the reasons we lost some of those earlier rounds, because we did not have a free trade agreement.

Mr Wiseman: My next question has to do with alternative pulp sources. My understanding is that there are developments now to try and find fibres that are non-forest-related that are similar to pulp and can be used in the manufacturing of paper. Where internationally are we with that and how is the Ontario and the Canadian industry responding to what looks like some interesting challenges?

Ms Rauter: There's a lot of research work that's been looking at alternative sources. Those of you who know your Bible will know that papyrus was your first raw material for paper. So there is papyrus, there is hemp, there's a whole variety of other materials, but in terms of the volumes, the quantity that you need to be able to produce the kinds of products that we want today, it's probably going to be a long time coming. In fact, in one of the countries in Asia that normally uses cotton for production of rayon products there was a very bad cotton crop and they've actually gone back to using wood for the production of rayon. So yes, even though there are alternative sources, you will always need wood.

If you take a look at what the projections are for the need for paper in the future, even given the electronic world that we're entering into in countries like Canada and the United States, Third World countries are going to have tremendous demands for paper. That is why it is so important that we practise sustainable forestry. Trees are a renewable resource, and if we manage good forestry, we'll have it not only for today but for tomorrow.

Mr Wiseman: Thank you. I just got the signal.

The Chair: I'd like to thank the Ontario Forest Industries Association for making its presentation before the committee this morning.

This committee stands recessed until 2 pm this afternoon.

The committee recessed from 1206 to 1408.

ONTARIO MEDICAL ASSOCIATION

The Chair: The first presentation this afternoon is by the Ontario Medical Association. I ask representatives of the association to come forward; please identify yourselves for Hansard and the committee members. I'll remind you that you have 30 minutes within which to make your presentation and field questions from the committee members.

Dr Michael Wyman: Thank you, Mr Chairman. I'm Dr Michael Wyman, the president of the Ontario Medical Association, and I have with me Mr David Pattenden, who's the chief executive officer of the OMA.

The contrary pressures of decreased resources and increased demand for medical services have placed immense pressures on the ability of the system to continue to provide necessary patient care, and this government's social contract has only served to exacerbate this serious situation.

Under the provisions of the social contract, a cap has been placed on expenditures for medical services during the fiscal years 1993-94, 1994-95 and 1995-96. Any payments to physicians in excess of the prescribed cap are being recovered, dollar for dollar. In this year alone, the limit on payment for medical services is $145 million less than the total expenditure in 1992-93, despite an aging population, a growth in population of 1.5% per year and massive reductions in hospital beds that have meant a shift to community-based care.

The profession agreed to the cap on the condition that the government would implement changes that would bring medical service volume down and so mitigate against expenditure recoveries. In that regard, government has not met its obligations. Failure to introduce new photo ID cards in a timely fashion, to establish effective public education campaigns on responsible use of the health care system, to implement regulatory changes to require third parties to pay for services they request, to remove marginal services from OHIP coverage, to initiate physician resource planning measures and to involve physicians in reforming delivery of mental health and primary care services have continued to waste tax dollars and to needlessly drive up utilization.

One part of the agreement to which government has fully committed itself is the implementation of both holdbacks and clawbacks from physician payments to meet the expenditure caps that were mandated under its social contract. In effect, physicians will have provided more than $300 million of free services in fiscal year 1994-95 alone. Attempts to negotiate an effective means of reducing service levels, as mandated by the social contract, have met with continued and great resistance on government's part.

Meanwhile, government continues to expand provision of health care in what appears to be a piecemeal and add-on fashion. Recent government-initiated expansions of cardiac surgery, dialysis, mental health and oncology programs, while laudable and necessary, have not incorporated funding provisions for the additional physician services that will inevitably be required. Physicians are expected to be responsive to the needs of their patients, to accommodate expansions in needed health care programs, and to do this within an expenditure cap and without any effort or intervention by government to ensure control in service volume.

Matters are likely to get worse as the federal government grapples with its deficit problem. However, even as federal transfers are cut, the per capita escalator for the health care component of established programs financing will revert to GNP growth less 3%, and the EPF escalator was frozen at population growth in 1989. The federal government will make up the difference by cutting transfers in areas other than health. The distinction between cuts in health and other programs does not make it easier for provincial governments to contend with the decline in transfer payments. Nevertheless, this action by the federal government shows the importance it, and the public, we believe, places on medicare.

The response of the government of Ontario to its own fiscal problems has been to reduce actual levels of expenditure. Operating expenditures of the government in 1993-94 are expected to be lower than in 1992-93, an occurrence that has not been experienced since 1942, and government health care expenditures are following suit. Total expenditures by the Ministry of Health declined in 1993-94 as well as 1994-95, largely as a result of cuts in hospital budgets and in payment to providers under the Ontario health insurance plan. At the same time, however, the Ministry of Health will increase spending by $300 million on community and public health and long-term care over the social contract period.

The increased priority assigned community and public health and long-term care is a reflection of the movement by the Ministry of Health towards a community-based health care delivery model. But the details of this model are sketchy and involve distribution of resources to communities based on some measure of health need, and with some freedom given to communities to structure delivery in accordance with local priorities.

Integration and coordination of health care services, particularly in the area of primary care, also play an important role in the ministry's realignment of funding priorities, with midwives and nurse practitioners garnering special attention. It remains to be demonstrated that these services are cost-effective or that their introduction will achieve overall system savings.

Finally, as a statement of its support for the concept of population health, the Ministry of Health announced that the government is "shifting resources to the broader determinants of health. For example, significant investments are being made for subsidized child care, pay equity, affordable housing, training and job creation."

At the same time, 7,900 hospital beds have been closed in the province. Just over 10,000 beds have been lost since 1988-89: Acute treatment beds in public hospitals, excluding psychiatric beds and bassinets, have dropped from over 35,000 in 1989-89 to 25,000 as of October 1994. Hospital utilization has dropped from roughly 1,200 bed-days to 700 bed-days over the same period. And total payments to physicians from OHIP have been capped at 3.7% below 1992-93 levels, although, as a result of cost shifts from third parties and other parts of the system to OHIP, total losses to physicians are far greater.

Recognizing the fiscal pressures faced by the government of Ontario, the medical profession is not confident that the province can maintain the level and quality of care required to meet patient needs. Although government officials repeatedly state their commitment to the continuation of universal medicare, and we have no reason to believe they are insincere in this respect, assumptions about increasing affordability as a means of saving the system have gained perhaps more credence than they deserve.

Do not be mistaken, however, about our cautionary note. We believe strongly in the need to address waste and inefficiency, to eliminate fraud and to deliver the most appropriate services in the most cost-effective ways. We have demonstrated our commitment to all of these objectives and will continue to do so.

The caution we offer is against the belief that affordability will be sufficient to sustain what Ontarians, patients and providers alike, have come to expect from our health care system. The gap between optimal health care and publicly insured health care is widening and will continue to do so for the foreseeable future. The questions left to the government, the profession and the public are whether that gap should be bridged and, if so, how.

The profession believes that the fundamental elements of medicare must be preserved. It supports the notion that access to basic health care services should be determined by personal need and without regard to an individual's financial means. Maintaining medicare, though, will require government to be more stringent in deciding what services will be publicly insured to improve the efficiency and administration of health care delivery and to ensure that access to health care is more closely aligned to health needs than it is to the demand for health care services.

The use of expenditure caps to meet government budgetary targets cannot be sustained in the long run. Either the budget conforms to the level of resources that will be expended within the health care system or government must plan and restructure the health care system to efficiently fit within its budgetary targets. It is unconscionable that government abrogate its responsibility to the public by relying upon reductions in the payment for services consumed in the health care system.

With the growth and aging of the population of Ontario, the need for medical services will continue to grow. Further arbitrary budget cuts will only lower the quality of care in the system unless there is a willingness to enter into meaningful negotiations on the restructuring of the system. Health care delivery in this province can no longer be determined more by fiscal priority than by the actual health needs of the population. This requires at least an interest in meaningful change and real improvements in efficiency.

That is the end of the brief and presentation to the committee. I'd be happy to answer any questions.

Mr Carr: I'll go for a quick one, hopefully, and then Dave Johnson as well.

I'm interested in the question of quality. It was surprising: Today on the way in I got a call from a constituent who was upset. Her husband was on a waiting list for heart bypass surgery, and she was all upset and wanted me to call the Minister of Health and so on; we're putting the details together. As you know, there's been a report that said our waiting lists are getting longer, that for some procedures we're two and three times longer than the US now. In terms of quality, are the waiting lists for some surgeries getting worse? If so, maybe you could give some examples of what's happening, as a result of the financial pressures out there, to the quality of the service. I'm thinking specifically of waiting lists for various procedures. Would you care to comment on that?

Dr Wyman: The difficulty in giving you a precise answer to that is that in most cases there is not a defined waiting list that you can pick up and say, "Here is the process."

Mr Carr: Sorry to interrupt, but why is that? I know I've heard that from my doctor. Why is it that we don't keep the stats of what the waiting lists are for hips or whatever?

Dr Wyman: In some areas we do. For example, in coronary bypass surgery there is a Metropolitan Toronto program that has a defined waiting list. The difficulty is that with freedom of choice of physician, freedom of choice of hospital, patients have an option to go to the physician they'd like to go to; as a result, each individual physician may have their own waiting lists, but there isn't any overall program. So it becomes difficult.

However, there are groups within the province, such as the Ontario orthopaedic association, a group of orthopods aligned with a section of the Ontario Medical Association, who do their own surveys. They've determined that the waiting list for knees and for hips in fact is probably three times what it was a couple of years ago and four to six times what it might be in the States.

Mr Carr: I wish we could go on; I had a lot of questions. I know Dave does. We'll maybe chat later.

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Mr David Johnson: Thank you for your deputation today, which I'm sure accurately reflects the state of affairs within the province of Ontario. I was interested in your comment towards the end of the brief which indicated that either the budget should conform with what we're spending or changes should be made in restructuring the health care system. That only makes sense, and I'm glad you've brought that forward.

I was also interested in your comments with regard to priorities. The home builders' association was before us this morning and indicated that there is a considerable amount of money being spent on non-profit housing; indeed, I think the budget is about $800 million this year. You've mentioned affordable housing, and the subsidy is I believe in excess of $15,000 per unit, per year, of non-profit housing within Metropolitan Toronto. That says something to our priorities. It's nice to have that sort of housing, but at the same time as we can't afford proper medical care, apparently, we can afford that kind of subsidy in housing. I think something's wrong.

You've mentioned a number of areas: the photo ID, third parties paying for services. Where do you sense that the efficiencies and the kind of cost reductions that may be required may come from?

Dr Wyman: I think the majority of efficiencies within the system still are in the administrative level. Beyond that, the major efficiency to be made is in terms of public education related to the appropriate use of the system. What we have found is that there has been little interest in and little willingness on the part of the ministry to actually become involved in meaningful statements towards the public to identify how to use the system and when to use it as opposed to working towards the wellness model.

Mr David Johnson: I assume the OMA has been active in terms of putting forward suggestions to the government in that regard.

Dr Wyman: We have put forward several options for the government to consider, and there's been little interest in pickup.

Mr David Johnson: In terms of a third party paying for services they request, that sort of thing would be if one has to have a checkup for employment for a company; the sort of thing that really has nothing to do with the immediate health considerations of an individual but is perhaps for a job or something else. What sort of magnitude are we looking at in that regard?

Dr Wyman: There's a very large proportion of the health care budget that's currently being used for purposes other than direct health. We've been trying over the last while to have regulations implemented in order to have that inappropriate use of the system shifted out. It's probably somewhere between $200 million and $300 million per year.

Mr David Johnson: The other aspect you mentioned was the photo ID. I assume that would involve people who wouldn't be eligible for medical attention, perhaps Americans. We hear about Americans using our system. Do you have any sense of the magnitude involved in, shall I call it, illegal use of our medical system?

Dr Wyman: When we went through this about two years ago, the government's own figures were suggesting that there was anywhere up to $400 million or $470 million worth of services being provided. We believe it's probably significantly less than that, but even if it's somewhere between $100 million and $150 million of services being provided to patients who do not qualify as residents of Ontario, we think that's a significant saving. The delay in the institution of the health card until this year has just added those services on an ongoing basis to the system.

Mrs Karen Haslam (Perth): As you can tell by my voice, I have a cold. I have this urge to say: "Excuse me, I have a cold. What do you recommend?" You'll forgive me if I have that urge to ask you.

Mr Carr: Don't go to the doctor.

Mrs Haslam: "Don't go to the doctor." I haven't gone to the doctor for this one.

There are a couple of things you said. Number one, you talked about the registration of the photo ID cards. But the previous government did bring in health cards, and that was trying to bring to the front the fact that only those people eligible should be receiving health care. When you talk about the new photo ID cards, we are trying to bring those in. I have a concern when you say, "This isn't working, and this isn't working, and this isn't working," when I see it as a progressive step that we are trying to address some of those concerns.

You talk about bringing medical service volume down, and you talk about education. Does this include doctors saying to patients, "Instead of coming back on Thursday," some of that can be part of what the doctors do to help the education of patients and to help bring down the service volume?

Dr Wyman: It does indeed, and in fact we've been doing that for the last five or six years. In fact, we have reduced the utilization of the system over the historical increases by somewhere between 6% and 7% in addition to the level that it's at now, so that we have, by doing exactly that type of service modification, reduced the use of the system by over $350 million.

Mrs Haslam: Would that include lab tests for seniors? We know it has been stated that one of the major reasons seniors end up in hospitals is overmedication on drugs. So part of that bringing down the volume, bringing down the cost, would be checking on the amount and the prolific number of different drugs that are prescribed by doctors to seniors. For instance, I've heard pharmacists say that they've caught overprescription of drugs or they've caught, at their level, through the new computer system that's been put in as an initiative also, that the seniors are having too many drugs, too many different kinds, prescribed.

Dr Wyman: I think that if the computer system was set up in a way that would provide access for physicians to be aware of doubledoctoring and overprescriptions on the behalf of patients, it might be a lot easier for us to pick up a lot of that. As patients get older they require more treatment, they require more services. In fact, the only way in which we can be aware of what is happening with seniors is by seeing them more frequently. It's difficult to reduce the total use of the system when the population is getting older and larger and we need to see them more frequently.

Mrs Haslam: You also mentioned the shift that we've done to putting it into community and public health and long-term care in the homes, which also would help some of those seniors maintain their health within their own community rather than in an institution, which is much more expensive. You also talked about removing marginal services from OHIP. I know through a joint committee that some of these things have been done when they delisted certain things covered by OHIP, even delisting some of the drugs through the ODB. Some of these suggestions are being worked on?

Dr Wyman: The move to community services is a very laudable and very appropriate approach. The only problem is that the proper infrastructure has not been put in place and there has been no compensation for the increased use of services required as you move from one to the other.

With regard to removal of services from the OHIP package, the difficulty there is that in fact the amount of services that were delisted was about half of what the agreement called for. As a result, the government did not fulfil its obligation in that process.

Mrs Haslam: So you would be suggesting delisting further things that are covered under OHIP for the general population? There are still things that you feel should be taken off the coverage of OHIP?

Dr Wyman: The Canadian Medical Association is in the process of developing a very comprehensive approach towards defining what are known as core services, as opposed to discretionary services. That provides a template for looking at the way in which services ought to be covered across this country with regard to insurances. I think that there are a lot of services within the Ontario basket of goods that perhaps could be identified as being discretionary.

Mrs Haslam: Was there ever a dollar amount in your mind when you talked about education campaigns on responsible use of the health care system? That's an outlay of a lot of money, and I'm sure that if that was done we'd get some people saying, "How dare you spend $1 million on an ad campaign when $1 million could be going into our OHIP or going into our health care?" Do you have any idea about the amount of money that you would tie to an education campaign?

Dr Wyman: I think we perceive it as being an investment. The amount of dollars that would be put forward would depend on the type of service that's being educated on. If we're talking about trying to educate people on the appropriate use of cholesterol testing, then I think you could afford to spend considerably more than you would if you were dealing with the type of education campaign required for the use of a particular type of anti-clotting mechanism for heart attacks. I think it would depend on the type of issue. We have items that would go anywhere from $50,000 to $500,000, depending on the willingness to be involved.

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Mr Phillips: I've often felt that we manage the money the province spends on health but we're not really managing the total health system. My understanding is that the province spends a little more than $17 billion on health, but that there is another $8 billion, $9 billion, maybe $10 billion spent on health in the province that isn't provincially funded, to get it up to around $26 billion. Am I correct in that ballpark as the health spending in the province?

Dr Wyman: Yes. There's a very large part of the health care system budget expenditures that are out-of-pocket, related to dental services, over-the-counter medication, physiotherapy and a large number of other types of services; so yes, I think you're in the right area.

Mr Phillips: I've always used the assumption that a little less than 10% of the gross domestic product is spent on health, and that would be close to $30 billion actually. The reason I raise that is that my belief is that we are fairly systematically moving health spending off the provincial books and on to other areas, and that the percentage that is funded outside provincial funding is increasing. Am I right in that assumption?

Dr Wyman: I think that is correct. I think what you'll find, if you take a look at the industrialized countries and look at the percentage of public expenditures and then add in the private expenditures, is that there is a pretty standard consistency across all of these countries. What is variable is how much is private and how much is public. The total expenditures will not shift terribly much if some were moved from public to private.

Mr Phillips: This is important, because the government often talks about managing the health budget. I think we're managing how much money the province spends on health as opposed to the health budget.

Your recommendation is to continue that trend, to funding more from private sources, or at least non-provincial sources. I think that's your recommendation here, which is to say that the system has to conform to the level of resources and that the government must restructure to efficiently fit within its budgetary -- I think you're saying we should identify more things that should be funded outside the provincial funding.

Dr Wyman: I think what we're really saying is the government has to make a fundamental decision whether it intends to try to fund everything or to fund what it can with the highest quality. If it continues to want to provide all of the services within its budget then inevitably there will be a crunch on quality, and that fundamental decision may mean moving some things to the private sector; it may mean reducing some services altogether. I think that's the decision that has to be made and has not been made to date.

Mr David Pattenden: Gerry, if I could add to that, it's also how you come at the financing. You can't simply say we're going to spend X dollars on something without knowing what you're spending on it and whether it should be spent on it. For example, you constantly get people standing up and saying, "Well, we spend $385 million" -- or whatever the dollars -- "on certain kinds of health care; that's enough."

As you know, I'm from the outside; I have nothing to do with the medical profession. I could care less about particular professions. I feel more like a citizen or a taxpayer in this role that I have right now, and so I look at it from a very businesslike position and I ask the question: How do you know? For example, if David had said $385 million is enough, I'd say: "David, what about $380 million? How about $410 million? Why not $270 million? Where's your evidence that it's enough?"

Government's in a bind here. They're taking this global budget and they're saying we're going to allocate so many dollars, and they intend to use historical numbers to build up a case. I tell you from the inside, no one in this room, or probably in this province, has a really good idea as to what the appropriate amount is to spend on health care because you don't know what you want to provide in health care or how to do it. You've got the cart driving the horse here.

Mr Phillips: I tend to agree. I think we're going to have to look at quite a creative solution in the health area. To use the jargon, I guess, we're dealing with silos right now of spending and they don't relate to health needs of the community: the hospital budget, the OHIP budget, the long-term-care budget. Also, we have these two huge sums of money: $17 billion funded by the taxpayer and then I think another $10 billion, or thereabouts, funded through premiums and everywhere else. We're going to have to find a way to pull all of that together and make our health decisions and then figure out how much of that is funded by the province.

Mrs Caplan: I think this is a very important discussion and I know there isn't enough time to really get into it, but I think the issue of how much is enough is a very important one, and that's why, in my own view, you have to look beyond the absolute dollar and do what Gerry is saying, and that is, look at it as a percentage of GDP or per capita expenditure as compared to the rest of the world and see how much those dollars are resulting in improved health status and the health as opposed to simply just the treatment of illness within your society.

That's where I think it's very positive, the discussions we've been having on the determinants of health. I know the medical profession is clearly interested in the health of their patients as opposed to just seeing them when they're sick. I think that's the challenge for our society, but I think the yardsticks are to take a look at the bigger picture around the world and see what the results are, and that's why the approach to outcomes is an important one.

Dr Wyman: The outcomes are critical, but you cannot afford to forget that illness still occurs and you cannot in any sense continue to fund wellness at the expense of illness. Illness will eventually disappear if you deal with illness, but not really. I mean, people still get ill before they die.

Mrs Caplan: But I think we agree on the importance of prevention strategies.

Dr Wyman: Yes.

Mrs Caplan: And testing the dollars we are spending on illness to make sure we're getting good results.

Dr Wyman: Absolutely.

The Chair: I'd like to thank the Ontario Medical Association for making its presentation before the committee this afternoon.

ONTARIO MINING ASSOCIATION

The Chair: The next presentation this afternoon is by the Ontario Mining Association, if the representatives would please come forward. Make yourselves comfortable. If you would identify yourselves for the purposes of the committee and for Hansard, I will remind you that you have 30 minutes within which to make your presentation and field questions from the committee members.

Mr Patrick Reid: Thank you, Mr Chairman. I'm Patrick Reid. I'm the president of the Ontario Mining Association. With me is my colleague Peter McBride, who is manager of communications and a string of other responsibilities.

We're sometimes known as the other OMA. You've had the one before you. We're the second one. We probably, in terms of the alphabet, should have been on first, but we won't argue that point.

We're also wealth generators in the province, and that's what we're going to talk about largely. We're not going to read our brief, and my experience in this room is that as soon as people said that, they proceeded to do so in excruciating detail, but I'm not going to. We'd prefer to have the time to answer questions.

We have presented you with our latest economic and fiscal study. It's entitled The Economic and Fiscal Contribution of the Mining Industry in Ontario. It's dated November 1994. This has been done for us by Ernst and Young, and we do this every two years to try and indicate to this committee and others what contribution the mining industry makes to the province of Ontario.

One of the thrusts of this government, and I guess everyone else, has been that we're in the high-technology business, high-technology-research-oriented. Well, this industry, the mining industry, in Ontario and Canada is probably one of the highest-tech industries that we have. If we weren't, frankly, we couldn't compete on the international markets where prices are set. If we weren't on the leading edge of technology and research and development, we couldn't compete with the Chileans, the South Africans, the Mexicans and so on. In fact, a lot of people say, "Why is there a mine left in Ontario or Canada?" and it's primarily because in terms of Chile, for instance, we're about five times as productive at the moment as are the Chileans.

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Our point basically is that this industry contributes a great deal to Ontario. Our workers are the highest-paid industrial workers in Ontario. You'll see as you read the brief that we make the comment that there were a number of people lined up in Oshawa for jobs in the automotive industry. If we could get the mining industry chugging along much better, they'd be lined up for mining jobs because they pay much better than in fact the auto industry does.

There are more than 50 cities and towns in Ontario that owe their economic existence to mining. Some of you may be surprised that a number of those are in southern Ontario. They're primarily industrial mineral producers. But Toronto probably is more dependent on mining than a lot of these other communities, in the sense that there are a lot of mining head offices here in Toronto, the Toronto Stock Exchange -- about 20% of the value of shares traded on the TSE are mining-related and they're also about 20% of the volume.

A final point before we get into what we're here for is that mining adds more value per employee to its production than many other major industries in Ontario. Mining creates more than $100,000 in value added per employee annually, which is almost twice the value added per employee as the average for the entire manufacturing sector. For instance, the motor vehicle and parts sector checks in at approximately $85,000 per employee using this particular mine economic yardstick. We spend about $50 million annually in pure research and development, $250 million annually in environmental protection and more than $3,000 annually per employee in training in health and safety.

Our employment has fallen considerably in the last few years in the mining sector in Ontario. Part of those we attribute, obviously, to the global recession, low metal prices, but also because of government-mandated costs. These costs that are imposed on not only the mining sector, the manufacturing sector, everybody else who does business in Ontario, you have to realize are killing jobs in this province. You can't keep upping the UIC, which I understand is federal, but the health care premiums, the WCB, other wage packet taxes without making the investment climate pretty shaky compared to other jurisdictions.

There's a graph in your package in this presentation on non-profit taxes and levies. This is a study that was done over five provinces and a territory. If you notice, the CPI went from 100 in 1988 to 118 in 1992; non-profit taxes and levies went from 100 in 1988 to 156 in 1992. You can see on the next chart that non-profit taxes and levies as a percentage of operating costs have gone up substantially, and if you look at the third chart you'll see that environmental compliance has gone up substantially.

The last chart I'd like you to look at, for now at least, is the Workers' Compensation Board costs. On the first chart you'll see that the number of injuries reported by the WCB in the mining industry since 1975 has followed a steady progression downwards. We're the third-safest industry to work in in Ontario, hospitals I think being one of the other safer ones. But if you look at the chart on the next page you'll see the Workers' Compensation Board total cost of claims has gone up exponentially. So you've got one line that's tending down this way, the accidents, but the cost going up like this.

We've done our best to get our costs under control. If you'll look on page 5, you'll see that according to the Canadian industry program for energy conservation, mining has improved its overall energy efficiency by more than 10% between 1990 and 1992, which represents the largest energy efficiency gain by any industrial sector. That's just one small example of the fact that we are working both environmentally cleanly and conservatively to get our own costs under control, but government costs haven't done the same.

One of the requirements under the Mining Act and environmental legislation is that mining companies provide closure plans for their operations and plans of financial assurance. This the mining industry has agreed to do, but we think the tax system should catch up to the environmental regulatory system, and we're asking that Ontario support an RRSP type of fund for reclamation funds for mine cleanup at the end of mine life.

This fund would act like your RRSP, or mine, in which the money is put into a fund that will build up over time to pay the closure costs and the post-closure costs for mines, and the interest or income generated within the fund would not be taxed so that the many millions of dollars that are necessary can be there at the end of the mine life.

We see this as absolutely critical to the future of mining in Ontario, because otherwise, if we don't get this kind of tax treatment, it's going to make a lot of mining developments uneconomic. We ask this committee to recommend to your Treasurer that the mine reclamation funds and the non-taxation of the income within them be in this budget to give a positive signal for investment in the mining industry in Ontario.

That's it, Mr Chairman. We'd be prepared to answer questions.

Mrs Haslam: I've enjoyed some of the information you have here, especially around the wages and the productivity of your sector. I had starred this RRSP idea because I wanted a bit more information, but you've already indicated fairly clearly what it is. Wouldn't the average consumer see that as another tax break for a corporation versus what I can get out of my RRSP, because I have to pay taxes on it and you're asking that it be put into an RRSP but you don't have to pay taxes on it if you take it out?

Mr Reid: You would pay tax when the money is taken out to provide for mine closure and/or, in our case, sometimes we have ongoing acid mine drainage problems that have to be monitored and lime put on them. But when it came time to take the tax out, yes, you'd be taxed on it. Now, if you had other income or you had the expenses as against that income that came out, then it might be a wash. On the other hand, it might not be if you were a single mine.

Mrs Haslam: I thought you had said that there was no tax on it, and I would have a concern about setting something up like that when I, as an individual person with an RRSP, am being taxed and you're not. I didn't quite understand what you --

Mr Reid: I'm sorry. It's tax deferred, so you would pay tax when the time came to take the money out.

Mrs Haslam: I'm not sure I agree with that either, but at least you've clarified the point for me.

The other thing I found very interesting in your proposal was that on page 3 it says, "Without affecting the integrity of these laws to protect the environment," which I think is very important. After all, that's why the environment legislation or environment laws are brought in, to protect the environment, so any suggestion that you take away that protection in environment legislation would be of concern to me. I see that you're saying, "Without affecting the integrity of these laws to protect the environment...tremendous potential to eliminate conflicts and overlaps." Would you elaborate a little bit on that?

Mr Reid: I can give you two or three quick examples, I guess. In Ontario we've gone through a MISA program, which is water-based environmental standards. The federal government is going through the same thing in Aquamin and a whole bunch of other things. That's one. Environmental assessments are another. As to who is on first, let's have one environmental assessment, whether it's the provincial or the federal government that does it, but let's not require a mining project or any other kind of project to go through a provincial environmental assessment and then somebody gets all excited and then we have to have a federal one as well.

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Mrs Haslam: I have one more question. I know I have a colleague who wants to ask a question.

In The Economic and Fiscal Contribution of the Mining Industry in Ontario, on page 21, you talk a little bit about R&D. There was some money put into R&D and some breaks given for companies engaging in R&D. Was that of benefit to the mining industry?

Mr Reid: I can't tell you that. I think there was some benefit to the industry in that sense, yes.

Mrs Haslam: Okay, thank you.

Mr Reid: I wouldn't call them breaks, though. I have a little problem with that.

Mrs Haslam: Well, there were incentives and there was a reduction in taxes for research and development. There were opportunities to look at research and development as a prime effort of any company, and I think this government realized that by doing some things within the budget, that would help research and development.

Mr Reid: Yes.

Mrs Haslam: All I'm saying is that I would see that as being of benefit to the mining industry as an industry that looks at R&D, exploration and development.

Mr Reid: Yes.

Mr Klopp: Good afternoon. As a person who has a mine in Goderich, a salt mine which does a lot for our area as a major industry, I can appreciate maybe a whole lot more than some about how important our minerals are. As one who also uses the odd block of salt in our cattle barns or whatever, it is an important factor for many of us.

But this issue around the RRSPs, on page 2 it says something: "The House of Commons standing committee...helpful suggestions...on mine reclamation trusts" Is this a federal-provincial area, or do they have a mine reclamation plan and we have one too in Ontario?

Mr Reid: As you probably know, the federal treasury regulates the federal income tax and two things seem to have to happen, at least from some peoples' view, and those are that the federal government must pass an act to allow for tax deferral at the federal level and the province would have to pass an act at the provincial level or change the provincial Income Tax Act. We're not sure whether or not this is going to happen in the federal budget -- if we knew that, we'd probably be out making money on the market or something -- but the House of Commons natural resources committee has recommended to Mr Martin that they in fact do that this year. We're asking this committee to recommend the same thing to the Ontario Treasurer.

Mr Klopp: You mentioned about the different ministries, having federal regulations, provincial, the Ministry of Environment and Energy etc, and I think you're right on. I think it's time we get away from that. At the Ministry of Agriculture, Food and Rural Affairs we are, through the two levels of government, under expenditure control, finally getting that we're going to have one person walk into a meat plant to inspect instead of having two. Before it just couldn't happen. But also, when you have an incentive, it can happen.

What do you think it's costing the industry? Maybe some people can catch on now. We had numbers in our own ministry, once you could see it, that got people to move, because we really want the environment checked. I think it's good, in your interests and in everybody's interests, because you don't want to be seen as being bad on the street. I think the polls show that every time I see them. But what do you think it's costing, having the federal regulation and provincial regulations, if they couldn't come together, in savings?

Mr Reid: I'm sorry, Mr Klopp, I can't give you a figure, because when we try to gather these figures, they're not kept by individual companies, but one of the associated costs with it is that if you have two inspectors come in, then you've got at least one person or maybe more who has to take that inspector around or be with him or her. It's just that the overall regulatory burden is pretty heavy, and it's also quite possible that a meat inspector might be able to inspect for something else from another ministry, so he might be able to do some of the environmental stuff or he might be able to do some of the labour stuff or whatever. But some places complain that they can have as many as 12 different inspectors in a week, all from a different government ministry or within sometimes different parts of a ministry. Everybody's got a different piece of the cow, it appears, if I may use that agricultural --

Mr Klopp: Oh, yes. Thank you.

Mr Kwinter: I'd like to pursue a couple of areas with you. I've had the good fortune over the last couple of years to be heavily involved in the mining industry. I've spent a lot of time with people in Ontario who are leaders in the mining industry. Unfortunately, I haven't spent any of that time in Ontario. Canadians, and I assume probably the Australians, have the reputation of being the best mining people in the world, yet you find Canadian, and by extension Ontarian, mining people spending their time in Cuba, in Mexico, in Chile, in West Africa, in Central Asia, in China. When you talk to them, other than the existing mines that are still being developed and being exploited, in the finest sense, at a very high level, most of them tell me that there is no way they would do any new exploratory work in Ontario. Has that been your experience?

Mr Reid: The figures for mining exploration across Canada have plummeted; there's no doubt about that. They're very low. A lot of people are looking elsewhere in the world. I suppose your next question is why?

Mr Kwinter: Yes.

Mr Reid: I think there are two or three reasons. One is that I think that through more, in some cases, benign neglect than anything else, we're killing the resource industries in Canada, and in that I include mining, agriculture and the forestry industry.

Secondly, we've had an onslaught from the environmentalists who see nothing but bad about any of the natural resource industries, and you've had some arbitrary decisions made by governments in various jurisdictions -- the Windy Craggy situation in BC, where the government arbitrarily decided to not even follow its own process, but turned a potentially large mine and potential wealth creator into a national park, which maybe in itself is what should have happened, but they didn't even allow their own process to follow through.

Thirdly, we are, as Canadians, overregulated and overlegislated. There's an apocryphal story -- I understand it's true, but I'll say it's apocryphal -- about a mining executive arriving at the airport in Santiago, Chile, and the minister of mines is there to meet him in his limousine and says: "I'm the minister of mines. I'm here to help you. What can I do to help you get your mine going here?" The reverse of that story is you go into some government office in Ontario and say, "I want to open a mine," and somebody hands you a stack of documents like this and says, "After you've read those, come back and let me know if you've got any questions."

The investment climate is not very good in this province or in this country, and part of it is the stacks of regulations that people have to follow.

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Mr Kwinter: One last question and then I'd like to turn it over to my colleague: Most mining people tell you that everything starts with geology. From what my colleagues tell me, the geology in Ontario or in Canada is as good as anywhere in the world, so we should be able to have that vibrant mining industry, but because of what you're talking about, it isn't happening. Do you agree with that?

Mr Reid: Yes. We still have some of the best geology in the world. The Precambrian Shield in Ontario, Quebec and part of Manitoba has the oldest rocks in the world, and that's where you find the metals. We still think there are a lot of geological possibilities in Ontario and Canada.

Mr Phillips: Just to comment first and then ask the question, I think you've got your hand on a problem that isn't unique to mining. I think for a variety of reasons there is a feeling that Ontario simply hasn't been open for business. I hear the same comments from my colleagues who are opening plants, and they will say, "I have a choice of Ontario or I'll go to a US state, or I'll go to New Brunswick for a discussion and when I go to the state or New Brunswick it's the Premier or the Governor who talks immediately to me, and there's a less welcoming environment here in Ontario." I agree 100% with your comment that we have to find a way that we open Ontario up for business again, and part of that is the regulatory burden.

My question is on what you called the RRSP for mining reclamation. Just so that I understand what your recommendation here is, it's that the industry be allowed to set aside a certain percentage of perhaps its sales each year in a trust that is non-taxable until the money is either used to fix up the environment on the mine closing or used to -- if all those funds aren't necessary, then if a dividend's declared, the tax is paid on it. Is that the essence of your argument?

Mr Reid: Yes.

Mr Phillips: What sort of annual cost do you think there is for the Ontario taxpayer in that?

Mr Reid: We tried to estimate that and it's difficult to do because each mine property is different and some have this acid mine drainage problem and some don't. The cost varies in closing a mine from a couple of million dollars to potentially $50 million or $75 million. But every company wouldn't automatically use a mine reclamation fund. They might use letters of credit, there might be bonds, there might be treasury bills, there might be that dreaded word, "cash." It's difficult to say, but the estimates that we've done in conjunction with the Mining Association of Canada are that it might amount to between $10 million and $15 million a year.

Mr Phillips: Lost taxes or the amount of money that you would put into the fund?

Mr Reid: Lost taxes.

Mr Phillips: Lost taxes. Is that the federal --

Mr Reid: Yes.

Mr Carr: Thank you very much, Pat and Peter, for a fine presentation. It was very in-depth.

You talked about some of the costs, of WCB costs going up, Ontario Hydro, employer health tax. Isn't it true that one of the problems you also had is that while your costs were going up, your prices across the board were going down as well? Are the prices starting to look better now, and what do you see for the future? If you, as many of your companies have done, remained efficient, if the prices go up, do you see a good period now for your industry?

Mr Reid: The mining industry or the metal and minerals industry isn't homogeneous, so prices for different metals vary, unfortunately.

Mr Carr: Yes. It's tough for all of you.

Mr Reid: It's hard to forecast. The base metal mining, which is better than 50% of all mining in Ontario -- zinc, copper, nickel -- has been quite depressed for the last two or three years, but those prices have been doing reasonably well within the last six months to a year. Most people are forecasting that they will continue, hopefully, for another year, but the peaks seem to be shorter and the troughs seem to be longer in the commodity business.

Mr Peter McBride: To expand on that a little, one thing that is really helping right now is the low Canadian dollar, because mining companies in this province are incurring costs in Canadian dollars, and as commodities, basically everything's exported and sold in US dollars. That's helping, and you're seeing some good results coming from mining companies now issuing their fourth-quarter results. The exchange rate, as bad as it is for many parts of the economy, can help the resource sector.

Mr Carr: The principle that people and your member companies have had to go through is the same thing we think the government should be going through. As you know, they're complaining about revenues being down at the same time as cost pressures are going up, and we believe there is a tremendous amount that can be done on the government side, a lot like your industry, in terms of getting costs down. Everybody, including individuals, has had to do more with less. It's only governments, at all levels, that really haven't.

I wanted to talk about the WCB issue a bit, because you had talked a little about the costs versus the number of injuries. The graph you put together showed the number of injuries going down in the mining industry, class 5, and then costs going up. It's sort of a broad question, but I was wondering if you'd like to comment on what you would like to see done with the Workers' Compensation Board and how we're going to be able to control the costs in that area. What does it mean to you and what would you like to see happen with the WCB?

Mr Reid: I'd preface that by saying that for every new job you take on a burden of $45,000 in unfunded liability from the present workers' compensation system. It's really gotten out of hand. I don't have to tell you about the potential $11-billion deficit they're running.

We're hoping that the royal commission might deal with some of these issues, but the first principle is that it has to be fiscally responsible. I guess the best answer to that is exactly what you heard from the other OMA, when he talked about, what services are you going to provide and at what cost? Are you going to just have an open budget and say that whatever comes in the door we'll do?

To a large extent the WCB has become, in our view, part of the social safety net. Instead of paying for traumatic accidents on the job, it's paying for a lot of other things that should be looked after in some other area. If we could get back to the first principles of WCB, I think that would help. In some cases, the awards are fairly generous, particularly compared to other jurisdictions.

The Chair: Our time has expired. I'd like to thank the Ontario Mining Association for its presentation.

ONTARIO RESTAURANT ASSOCIATION

The Chair: The next presentation is by the Ontario Restaurant Association: Paul Oliver, president; Rachelle Wood, manager, government affairs.

Mr Paul Oliver: We've even brought doughnuts from one of our member establishments.

Mrs Haslam: My favourite establishment. Is coffee included?

The Chair: Thank you. Please proceed.

Ms Rachelle Wood: Good afternoon. I'm Rachelle Wood, the manager of government affairs for the Ontario Restaurant Association. With me today is Paul Oliver, president of the ORA.

On behalf of the association, we are very pleased to participate in the pre-budget consultations regarding the development of the 1995 provincial budget. We see this as a great opportunity to outline a number of issues which we believe are important to Ontario, to consumers and to Ontario's foodservices sector. We will try to limit our comments to leave as much time as possible for questions and discussion. Our submission, which has already been handed out, is self-explanatory.

In developing our submission, we have been very cognizant of the financial constraints placed on the government of Ontario and the overriding goal of all political parties to create new and more jobs in the province. Since we took part in last year's pre-budget consultation, Ontario's foodservices industry has experienced a growth in real terms of approximately 2.5%. This is unfortunately below the Canadian average of 3.7%.

Earlier this year, Canada's food and beverage industry reached a plateau of restoring all of the sales, in real dollar terms, that were lost during the recession. This took place everywhere in Canada except in Ontario. At current levels of projected growth, we are projecting that Ontario's food and beverage industry will not return to pre-recession levels until 1999, unless action is taken now to stimulate that growth.

What we have done today in our submission is outline a three-step approach which we believe will help stimulate growth in the foodservices industry, create substantial jobs -- somewhere between 20,000 and 40,000 new jobs -- and do this all at no cost to the government of Ontario. In fact, not only will this be of no cost to the government but it will also generate in excess of half a billion dollars of new revenue for the government of this province.

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While experiencing growth of 2.5% during 1994, jobs continue to decline in the food and beverage industry in Ontario. Since last year, 5,000 jobs have disappeared from the foodservices industry. Current projections are of a further decline during 1995. We believe this trend can be reversed.

The first step we would like to recommend is the implementation of video lottery terminals in Ontario's licensed bars and restaurants.

With the recent announcement several months ago by the government of British Columbia to bring forward video lottery terminals, Ontario is now the only province in Canada which is not benefiting from revenue from VLTs. We estimate that the implementation of VLTs will generate in excess of half a billion dollars in new revenue for the government of Ontario and generate approximately 16,000 jobs in the food and beverage industry. We believe this is a positive step which, balanced with social concerns, is still one that should be pursued.

It is important to note that we are not advocating gambling for the first time in Ontario. Already, billions of dollars are wagered in Ontario today. As well, we do have some 1,800 video lottery terminals in the Windsor casino.

We believe that by bringing VLTs into licensed establishments, we will be able to substantially enhance job creation, help stabilize the licensed sector of the hospitality industry, reverse the outflow of Ontario residents to competing jurisdictions such as Quebec and Manitoba which have VLTs, and begin to address the massive black market which has already developed for video lottery terminals.

Estimates now are that there are between 20,000 and 25,000 illegal machines in Ontario, machines from which the government of Ontario and its taxpayers receive no benefit. With the rollout of 30,000 machines in Quebec which will displace the black market in that province, we, as well as law enforcement officials, believe that many of those machines will flow into Ontario and the number of illegal machines will grow rapidly. By acting now we will not only prevent the growth of the black market but we will create large numbers of jobs and be able to redirect the money that is going into criminal activities into the treasury of Ontario.

We would therefore urge this committee to recommend that the government of Ontario move quickly to introduce video lottery terminals.

The other two major components of our pre-budget submission look at tax changes, one being completely in the jurisdiction of the province of Ontario, the other being the GST-PST harmonization which is in the federal-provincial sphere. I will ask Paul Oliver to briefly comment on these two items.

Mr Oliver: The high level of taxes imposed by both the federal and provincial governments on beverage alcohol has placed Ontario in an uncompetitive position relative to hospitality operators in border areas as well as when competing for international tourism.

We have already heard many times that consumers are extremely frustrated with the high level of taxes they pay on beer, wine and spirits. However, in spite of this fact, the level of taxation applied to patrons in restaurants and bars is even higher than is paid by consumers who purchase their product for home consumption.

Contrary to popular belief, hospitality operators do not receive large-volume discounts for their large-volume purchases. In fact, in Ontario today, restaurant and bar operators and their customers are penalized for purchasing beverage alcohol.

While the level of taxation on beverage alcohol is burdensome for home consumers, it is devastating for hospitality operators and their customers, who are required to pay a special provincial gallonage tax of 12%, which more than doubles the amount of taxes that restaurants and bar patrons pay.

As you will see from our submission, we recommend the elimination of the gallonage tax in Ontario. We've also enclosed with our submission an economic model which explores four different approaches to accomplishing this goal. The study concludes that the elimination of the gallonage tax and the resulting stimulation of sales in the hospitality sector will in fact be revenue-neutral for the government of Ontario and will create 5,000 additional jobs in the food and beverage sector.

Just to give you an example of the gallonage tax, I've brought with me a few props today, two identical bottles of wine, actually not bad bottles of wine, which sell for about $7.40 in the LCBO. On this one, if it's purchased by a consumer for home consumption, the government of Ontario gets $4.16; on this one, if it's purchased by the same customer in a licensed restaurant, the government gets $5.51 -- the same product but different taxes. We think if it's the same product, it should be taxed similarly. We recognize that the high level of tax is applied in order to act as a social control on adult beverages, and we won't quarrel with this approach. However, what we don't understand is why identical products are taxed differently when the only difference is the location of purchase.

As you will see from the submission and the supporting documentation, Ontario's gallonage tax and alcohol tax paid by licensees is more than any other jurisdiction in Canada. No other jurisdiction discriminates against hospitality operators or penalizes restaurant patrons for purchasing adult beverages. Even if our restaurant operators wanted to charge the identical price for a bottle of wine as is sold in the LCBO, financially they could not do so. They would do so at a loss because of the additional 12% gallonage tax which is applied only on bars and restaurants.

We believe there is an opportunity for the government to explore a new approach to tax policy: Look at tax policy as a job creating tool and do it in an environment where there is no revenue loss for the provincial government.

Once again I'd like to reiterate our recommendation to eliminate the gallonage tax and make sure that all alcohol is taxed equally, regardless of whether it's purchased in the LCBO, Brewers Retail or a hospitality operation. The same product should have the same tax.

Speaking of the same product having the same tax, this brings me to the last issue I'd like to address: the proposal to harmonize the provincial sales tax with the federal goods and services tax. From the foodservice perspective we do not see this as a viable option. The federal government has indicated that it plans to eliminate the GST in Canada and we strongly support this commitment. We do not believe that simply harmonizing the tax with provincial sales tax accomplishes this goal. In fact, we would strongly urge the government of Ontario not to harmonize because it would only exacerbate the inequities embodied in the goods and services tax. We would urge you to look at the GST not only in a revenue or fiscal context but to look at it as an employment-job creation opportunity.

The introduction of the GST on restaurant and food sales resulted in a 7% decline within our sector. As well, it represented a loss of 45,000 jobs across Canada and 20,000 in the province of Ontario. The GST is not only a despised tax, it's also a job killer, and it's important to keep that in mind. The foodservice industry has lost significant market share to grocery and convenience stores due to the inequities entrenched in the GST.

Since the introduction of the GST on only some foods but not all foods, the foodservice industry percentage of market share has declined dramatically, from 42.5% to 36.6%. With identical products being taxed differently solely because of the point of sale, we believe this is simply an inequity in the tax system which needs to be addressed.

I've also brought a few more examples with me: the pizza which is tax-free and the identical pizza which is taxed; the chicken nuggets which are not taxed and an identical product, 20 chicken nuggets which are taxed. Some people would suggest that we have this inequity in the system so that basic food is not taxed, but that may not hold water either.

When I bought a carton of milk for my niece on the weekend I paid tax on it, but when I went out shortly afterwards and bought a container of caviar it was tax-free. To me this just doesn't make sense. Milk is taxed, but caviar, which I think of as a luxury, is not taxed. By harmonizing the PST with the GST we believe that the inequities in the system will only be exacerbated. Today Ontario at least has an exemption on low-cost food, which is $4 and under. The harmonization would eliminate that exemption and place an even further tax burden on low-income residents, students and senior citizens.

In stepping back from the situation, looking at it not only from the food and beverage industry, we are concerned that harmonizing with the GST will mean a massive increase in taxes on Ontario's consumers. To be revenue-neutral on a GST tax base, the PST would have to remain at its existing 8% level, but that 8% would not only be applied to the limited base of the PST now; it would be placed on a large range of new services and new products that are currently exempt under the PST. We estimate that this would be somewhere over $2 billion in new, additional consumer-focused taxes.

As well, we estimate that a harmonized base, with the input credits on exports, would mean that an additional $700 million to $900 million of taxes would have to be applied to residents of Ontario to make up for input credit on zero-rated exports that are presently taxed under the PST either directly or indirectly.

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All three parties at Queen's Park have pledged not to increase taxes. We believe harmonizing with the GST would break this pledge. Harmonizing would mean a tax increase. No matter how you cut it, it's a tax increase. For this reason, we would strongly urge the government of Ontario to use the opportunity of the GST-PST harmonization talks to push for real reform to the federal tax structure and to use it as an opportunity to continue to pressure the government of Canada to eliminate the GST.

By eliminating the inequities between grocery stores and food and beverage operators, we believe 20,000 new jobs will be created in Ontario. That's 20,000 people, many coming from social assistance, which in turn will result in further savings for the province of Ontario as social assistance dependence is reduced.

To recap, the Ontario Restaurant Association is urging this committee to recommend a three-step approach to stabilize the food and beverage industry, create new government revenue and create desperately needed jobs in the food services sector. These are: the introduction of video lottery terminals, the elimination of the gallonage tax, and continuing to pressure the federal government to eliminate the inequities in the GST. These three steps, if implemented, would mean half a billion dollars in new revenue for the province of Ontario and over 40,000 new jobs. As well, it would mean no increase in taxes for Ontario's consumers.

We thank you for the opportunity of appearing here before you today and welcome any questions. I would note that as to the doughnuts I brought, if you take one out of the bag with the red mark on it, that's been taxed, because there were five in that bag; if you take one out of the one with the black, it's not taxed, because there were six in that one.

Mr Wiseman: That's GST. That's what the Liberals are going to eliminate in Ottawa. Have I got that right?

The Chair: Thank you very much, Mr Oliver. We have about five minutes per caucus.

Mr Phillips: As to your first recommendation, the video lottery terminals, we've heard concern expressed about their addictive nature and that individuals may end up losing a lot of money on them and things like that. Have you any evidence one way or the other from other jurisdictions of whether there's any validity in that argument?

Mr Oliver: Manitoba has the longest experience with VLTs in Canada. There was a study completed recently, and I think it was provided to most MPPs, which looked at the addictive nature and what the profile is of the user of VLTs and what the average user spends. The Brandon University study found that it was a person who would set a limit and go in and spend $20 over the evening, and they saw it as entertainment. They weren't going in and betting huge amounts of money.

It's important to keep in mind that with VLTs you're not going to go in and change your lifestyle. This isn't going in and winning $1 million or $2 million, so you're not betting the rent and everything on it. The most you can win is $400 if you hit the jackpot. The payout on it is higher than most other gambling activities.

The Brandon study, which is the most comprehensive I've seen, clearly points out that it's not the addictive nature that some people would suggest. Certainly there is a small percentage of the population which finds addictive a variety of activities, be it lotteries or horse racing or other activities like that. What we're recommending is that resources could be focused specifically on that 1% or 2% of the population.

Mr Phillips: Where does it stand right now from the government's perspective? What's the latest word you have from the government in terms of whether it's going to proceed with this?

Mr Oliver: At this point, we haven't had direct word back one way or the other. We understand that cabinet has looked at it but has decided at this point not to pursue them.

Mr Phillips: On the elimination of the gallonage tax, you say it can be revenue-neutral. What is the basis for it being revenue-neutral?

Mr Oliver: It would be the shifting of less than 1% of the market share of home consumption and licensed establishment consumption from home to licensed establishment. The tax level, even if you eliminate the gallonage tax, would still be higher on alcohol that's purchased in a licensed establishment, because of the application of a 10% PST on the resale. So you're taxing the markup, you're taxing the labour that goes into it -- just shifting that market share. The study that I've included with the submission looks at three or four different options, doing it all at once, doing it phased over three or four years, and it's at the back of the binder.

Mr Phillips: Right. That would be useful. The GST-PST argument: Your recommendation, I gather, is that from your perspective the worst outcome would be the total harmonization of the two, that this would be your least preferred option. Is that --

Mr Oliver: Yes, because it would actually increase the amount of tax paid by restaurant and foodservice patrons. We would first recommend that the federal government address some of the inequities in the GST system. There are other options that need to be looked at, be it a business transfer tax or other varieties, that can be done solely at the federal level. We don't see that it would need provincial support to do a business transfer tax.

For the saving of the harmonization for businesses that some people would suggest, a lot of business people have already invested in transferring their system over and putting the PST-GST collection process in place. It would actually be an additional cost for some operators to go back to a different system. Combining provincial tax collection is probably going to be more savings for small business than combining the GST and PST.

Mr Phillips: So you're saying that a lot of businesses now have a system that makes the actual collection of the taxes not as burdensome as it was?

Mr Oliver: No. They've already had to go out and invest in a new cash register or get the cash register and computer reprogrammed or change their bookkeeping process. That's already done. To change it all back or to make another major change in the future is just going to be another cost that they'll have to incur.

Mr David Johnson: Thank you very much, Paul and Rachelle, for your deputation today. A lot of food for thought here, if I can use that expression, in more ways than one. Your industry is one of the key industries in Ontario, because it's what I would think of as an entry-level industry. Many people get their first jobs through a restaurant.

Ms Wood: Over 30%.

Mr David Johnson: Over 30% -- I didn't realize the precise number; well, yes, it says so right here, as a matter of fact -- and then go on from there. When we think of unemployment in our population, of course unemployment is so much higher among young people and young people are looking for their first job. So it would seem to me only to make sense to do whatever is possible to put in place a good environment for an industry like this that is the starting point for employment.

You made an excellent case for your VLTs and on the harmonization, and the points. I just wanted to explore maybe one or two that you didn't get an opportunity to talk about. We think, for example, that the employer health tax is a disincentive. Our proposal is to reduce the employer health tax for businesses with payrolls of under $400,000. I wonder what your view on that proposal would be.

Mr Oliver: We would certainly, from the foodservices industry, support changes which would tie corporate taxation or business taxation closer to profitability. Our industry is a very cyclical industry. In the late 1980s it was a very profitable industry and it's not profitable across Ontario today, but we still have high levels of taxes that are either property taxes, employer health taxes -- they're fixed regardless of how profitable you are.

We've done studies and the Conference Board's done studies that look at our jurisdiction and they don't find the overall tax burden in Ontario much higher. They find it slightly higher for the hospitality industry, but when we get those cyclical downturns it becomes two or three times higher. Part of it is tied because you've got fixed taxes that are tied; regardless if you make no profit at the end of the day, you're paying the employer health tax, you're paying these high property taxes. We'd like to get a system that moves maybe higher corporate taxes on profits provided you are profitable.

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Mr David Johnson: Two of the highest taxes that we are paying in Ontario -- the property tax in Canada is the highest in all OECD countries, but the personal income tax in Ontario, in Canada, is the highest of all the G-7 countries. We're also proposing to reduce the WCB costs by 5%, but particularly on the personal income tax our view is that the Ontario rate is too high, it's too high relative to other competing jurisdictions and we need a significant reduction there. We think that kind of reduction would put more money in people's pockets and they would use that money to go out and buy goods and services, for example in restaurants. I wonder what your view on that sort of proposal would be.

Mr Oliver: Any proposal that would assist consumers in enhancing the disposable income that they have, we would be supportive of, and that tied with changes to make sure that the commodities, be it in a grocery store or a restaurant or wherever, are taxed similarly so that we don't have an incentive to go to one sector over another. It's got to be a balanced approach, but certainly our industry benefits when consumers have more money to spend. Proportionately, our industry suffers substantially more than any other sector when consumers have less to spend. So our first recommendation would be to make sure that we don't increase taxes on consumers, period, and secondly, let's start putting more money into consumers' pockets.

Mr Jamison: I'd just like to go back to the issue of VLTs and really look at that. Number one, I wasn't aware that -- you said all the other provinces in Canada have VLTs up and running. Is that right?

Mr Oliver: Except for BC, which is only now starting. They are expecting to have them up any month now. They've announced, I believe, 10,000 of them for the province.

Mr Jamison: Okay. As you're aware, we've taken a very pragmatic approach to casinos in the province of Ontario and we want to see how that works, the result, the effects on the community. When we talk about the community -- and by the way, when this type of gambling was brought forward in the Legislature, both other parties voted against that. You know what I mean. I just want to put that on the record because it almost seems like they're in favour of that today.

But when we look at VLTs and casinos and so on, we've brought the issue, and very rightly so, we believe, down to a community level, the issue of casinos. Without community support behind a casino there simply wouldn't be a casino established.

Now, when you look at VLTs and your business, technically you could say that there might be a small casino in an establishment, given whatever size. Don't you believe, as we do -- we feel that communities and the representatives at the municipal level should have some say in whether or not casinos or gambling, video lottery gambling, is available.

Mr Oliver: We would see casino gambling and VLTs as very distinctly different issues. There's a difference between putting two or three video terminals in a bar in the neighbourhood pub and putting down a huge complex with 1,800 VLTs and 20,000 visitors a day. They're completely different. They're different target markets; they're different clientele profiles. Casinos are very much targeted at an international tourist or domestic tourist market, whereas VLTs are an additional entertainment factor. The BC example is perfect. The community of Vancouver was very much opposed to the casino going into the port, but there was no public outcry when VLTs were announced, because the public saw them as different issues. The announcement was made, the government of British Columbia expected some backlash, and it was a one-day newspaper coverage. There has been very little coverage of it subsequent to that.

Mr Klopp: They haven't got the opposition parties that we've got.

The Chair: A little over a minute, Mr Klopp.

Mr Klopp: Thank you. I worked in a restaurant Saturdays, farmed all day and worked all night and enjoyed it and kept my money. In fact, I guess I could say I worked on both sides of the bar.

Mr Oliver: If I could add, you, like many people also in the farm community, relied on the hospitality industry for the off-farm income.

Mr Klopp: But there's another side of the industry. You need people with money to go to eat and drink and whatever. The horse racing industry is a major industry in this province, and one of the other sides of the VLT issue, because it is something that we looked at very seriously, I can tell you, is they are looking at around 50,000 jobs that they think will be affected by the whole issue, and the numbers in the States, Manitoba, they are bringing those numbers up. This is something that's taken very seriously by this government and that's just on the other side of the coin.

On the elimination of the gallonage tax, I have sympathy for where you're going and I appreciate how you brought that forward. I think you've got some good examples there and I think there should be something done there.

The pressure of the GST: Earlier today a fellow colleague in the farm sector showed that it would maybe do some good for that sector. However, there is the other side. Just to show that's the balancing act that we need to have here, I tend to agree with where you're coming from, and I think Floyd would be very happy to hear that we should be very proactive with the discussions federally. We don't just need to harmonize, because our numbers show millions and millions of dollars which would be coming out of the system, and that's why we didn't harmonize it. I think your remarks were good and I'll do all I can on the gallonage thing.

Mr Oliver: If I could just comment on a couple of things. One, the horse racing concern, certainly we're aware of that. We don't think that 50,000 jobs will be lost from it. In fact, we think there may be a blending of the opportunities. If you see the horse racing industry -- and my father is in the horse racing industry, so I'm quite aware of it and I hear quite a bit about it from him -- US tracks are actually blending poker parlours, horse racing and VLTs together to provide that additional entertainment to get people out and keep them at the horse racing tracks. That is an option that we certainly see, blending, the same as the hospitality industry is being blended now with the off-track betting.

Relative to the agricultural concern, I would point out that most of these products that are processed actually come in from outside of Ontario, are not Ontario agricultural products, a disproportionate share of the non-taxed products, whereas the stuff that comes through the foodservice industry, because of supply management or for other process reasons, is predominantly domestic agriculture. So you may actually see a major sales increase for Ontario's agricultural community.

Mr Klopp: By not harmonizing.

The Chair: I'd like to thank the Ontario Restaurant Association for making this presentation before us today.

CANADIAN BANKERS ASSOCIATION

The Chair: The next presentation this afternoon is by the Canadian Bankers Association. As soon as the restaurant association has removed its wares, I would invite representatives of the Canadian Bankers Association to come forward.

If I could ask people who are having private conversations to please take them outside the committee room, it would be very much appreciated. We'd like to continue with the business of the committee.

Please make yourselves comfortable and, if you would, identify yourselves for the purposes of Hansard and the committee members. I'll also remind you that you have 30 minutes within which to make your presentation and field questions from the committee members.

Mr Michael Green: Good afternoon. My name is Michael Green. I'm the Ontario director for the Canadian Bankers Association and I represent the Ontario committee today.

I'd like to introduce the panel from the CBA that will be making the presentation. On my far left is Judith Bussey. Judith is vice-president of the Toronto-Dominion Bank. On my immediate left is Harri Jansson, an executive vice-president with the Bank of Montreal and chairman of the Ontario committee. On my right is Barbara Amsden, who is director, financial affairs, for the Canadian Bankers Association. We'd like to start our presentation today with Judith Bussey.

Ms Judith Bussey: We're pleased to be here today on behalf of the Canadian Bankers Association. What happens in Ontario is very important to us. Almost half of our staff and operations are in Ontario and more than half of the provincial and municipal taxes we pay are paid in Ontario.

The federal government's small business working committee recently reported on the primary challenges facing small and medium-sized businesses. They're the same challenges faced by all businesses. They are massive government debt, an alarming deficit, high taxes and a rigid regulatory regime. We'll address these matters here today.

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With respect to debt and deficits, I will not go through the statistics again; I'm sure you've heard them. We do believe that there is general agreement that we cannot grow our way out of the debt and deficit problem right now. Most governments appear to have recognized that the goal must be a balanced budget and that now is a good time to do it, perhaps the only time to do it in a rational way, while we're in a period of growth.

We believe that the following five points are critical to obtaining and maintaining taxpayer support for the process of cutting the deficit:

(1) Canadians must be made to understand the link between persistent deficits and job creation. To create jobs and economic growth, we must stop the growth of debt. Governments must explain clearly and unanimously the dire consequences on employment and our lifestyle if the deficit is not faced squarely now.

(2) Accounting for government debt and deficits must be consistent across jurisdictions. Taxpayers question their governing bodies when successive governments restate the financial picture, when rating agency analyses conflict with government data and when unfunded liabilities are not recognized. The banks support Alberta's approach of presenting the annual budget on a consolidated basis, which brings in all provincial funds and agencies, of issuing quarterly financial updates and releasing public accounts earlier. There is only one taxpayer. There should be one consistent set of reporting principles across the tax jurisdictions. We urge Ontario to work with other governments towards this end.

(3) Governments need a score sheet to identify problem areas and measure improvement. Governments must report to Canadians on their progress in the deficit and debt battle.

(4) A number of provinces, including Ontario, have promised no new taxes. These promises must be kept to maintain government credibility. High tax rates reduce compliance and competition, and Canada already has high tax rates compared to its key competitors.

(5) Governments must continue efforts to ensure consistent economic planning and policies. For planning, the provinces must have a good idea about transfer payments. On the policy side, it does no good for one government to cut taxes if others raise them.

We urge you in the strongest possible terms to continue to press the Finance minister to balance the budget as soon as possible. We believe the above five steps will be important to this end. We also believe there is merit to studying Alberta's approach to more quickly address the problems while the economy is stronger.

In terms of taxes, the banks' 1994 financial results have received much attention, and this in turn has led to a focus on bank taxes. The banks are concerned that misunderstandings about earnings and taxes are being used by some critics to advocate that banks be singled out for tax increases in upcoming budgets.

With respect to earnings, yes, the numbers look big, but we are big companies. When looked at by several benchmarks, banks' returns are in fact not high. As a percentage of assets, Canadian banks earn lower fees and narrower margins than do US counterparts, and Canadian banks' return on assets and equity are lower than those of US banks. In 1994, the banks' so-called high profits yielded an average return on equity of 11.6% for the big six banks. This is less than the 12.1% allowed regulated industries by regulators. And compared to credit unions, banks have earned lower average returns on equity over the past decade. The perception that banks pay little tax is also incorrect. A recent Conference Board report shows that financial institutions paid considerable and increasing amounts of taxes in the 1991-93 period. Governments are depending more and more on the financial sector for tax revenues. This is partly because they are imposing more and more levies that are not based on earnings, many of which levies are unique to the financial services industry. In Ontario, for example, in 1993, $1 in every $8 of corporate income and capital tax came from the big six banks. In 1985 the number was $1 in every $30.

Here are some facts about bank taxes:

For 1994, the six largest banks estimate their cash taxes here in Canada totalled $3.4 billion. To put that in perspective, their worldwide after-tax income was only $4.3 billion, and once the 1994 federal budget measures are fully effective, the tax numbers will be even higher.

Banks are already one of the most heavily taxed sectors in the country. They are subject to income tax at the highest corporate rates. Here in Ontario, for example, the rate imposed on banks is nine percentage points higher than the rate imposed on manufacturers.

Research and development tax credits have received some press lately. The industry has made claims, as provided for under the Income Tax Act. These claims, however, are insignificant compared to taxes paid. They represent about 1.5% of the $16 billion of taxes paid for the same period, and these expenditures go to support a lot of software firms in Canada.

Banks also pay other government levies as regulated industries, such as the $400 million in CDIC insurance premiums and fees to the superintendent of financial institutions.

The tax load of Canadian banks is high compared to that of their international competitors, particularly US banks. This contributes to the lower returns on assets and equity relative to US banks that we referred to earlier. Canadian banks have lost their place in the international scene. Ten years ago, four Canadian banks were in the top 50 in the world; now there is only one and it's in 50th place.

Why should you care, you might ask? Aside from the tax revenue numbers I referred to before, we think the banks' financial health is a matter that should concern many Canadians. We estimate that more than one in two working Canadians are bank shareholders through pension funds or mutual funds. Almost 50% of bank earnings are paid out in dividends to these shareholders. Earnings that are not paid out are used for capital investment, research and development, virtually all of which is spent in Canada.

Taxes cut into both what can be paid out and what is reinvested. Canadians are sending a clear message that they are strongly opposed to tax increases, but if tax increases are being considered nevertheless, we urge that they be applied evenhandedly across all sectors of the economy and types of enterprise. The historical tax system bias against the service sector and towards manufacturing should not go further. Secondly, taxes should be based on earnings alone. Taxes which do not relate to earnings, such as those on payroll and capital, must be strongly resisted, as they greatly undermine job creation and economic growth.

My colleague will now address regulatory issues.

Ms Barbara Amsden: In terms of the regulatory burden, the small business working committee report that Judy Bussey referred to earlier said:

"Too many regulations are developed and administered with little consideration given to their impact on the competitiveness of small businesses. Government must regulate less, simplify paperwork, limit information requirements and get out of the way so that small business can focus on creating wealth and jobs. Reducing regulatory burden will save the government money and will yield tremendous benefits in terms of small business productivity and competitiveness. The committee recommends that the federal government remove unnecessary, ineffective or uncompetitive regulations, rationalize existing regulations across departments and encourage regulatory flexibility."

The same can be said of large businesses as was said of small businesses here, and the recommendation this quotation made to the federal government applies equally to the provincial governments. While we agree that different regions of the country have different characteristics and sometimes different needs, we do not understand why the regulation to protect deposits of a Newfoundlander, of an Ontarian and of a British Columbian should be any different. Financial institutions should be regulated by one jurisdiction only. Not only would the Ontario government save if it deferred regulation of financial institutions to one jurisdiction; businesses would save in compliance costs and could thus earn and pay taxes on higher income.

We know that the Ontario government has begun to tackle the red tape costs for small business. The federal government has just announced a very broad initiative in terms of regulatory rationalization and we urge the Ontario government to continue in these efforts to free both the Ontario government and businesses of costs.

Mr Green: I'd like to continue now with independent business initiatives and job creation. I'd like to just recognize Jim Mahaffy, who's a senior vice-president with Hongkong Bank of Canada, who is also a member of the Ontario committee, and Harri Jansson from the CBA.

We've entered into a number of initiatives during the year and one of the key ones was a partnership with government called Running Start, with a partnership with the Ministry of Economic Development and Trade. This is a mandatory educational program for all applicants under the new ventures-youth ventures loan program. It's proving to be extremely successful and in 1995 we hope to put through some 5,000 entrepreneurs. One of the key aspects of the course we've found is that much better quality business plans are being produced to support applications for loans and we see that as a very positive initiative.

The Ontario committee has also committed to running small and medium-sized business seminars throughout the province and we delivered about 10 of these last year as part of our commitment. As a matter of fact, we're running one tomorrow in Oxford county and this is to educate small and medium-sized businesses on government programs, what the banking perspective is and what we expect to see from the perspective of completing business plans.

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The Ontario committee this year is also supporting an initiative with the Ontario centres of excellence, recognizing that innovation is a very key aspect to financing businesses under the new economy. This is a big challenge to the banks and we're sponsoring a one-day conference on March 9 with the Ontario centres which will concentrate on how to finance new economy businesses.

During the year, we have a subworking group called the Ontario working group on employment equity projects. That reports to the Ontario committee and is concerned with employment equity. They have today agreed to provide up to 15 to 20 part-time positions for people with disabilities. It's a training program that we established with Humber College and the Canadian Council on Rehabilitation and Work.

In 1994, the CBA delivered two international trade finance seminars in Toronto and we also delivered another six around the country. We developed these as a partnership with the federal and provincial governments and the Export Development Corp to support small and medium-sized businesses in endeavours to enter or expand their export sales. As a matter of fact, we're running another seminar for small and medium-sized businesses on May 15 at the Etobicoke Board of Trade.

In 1994, the Ontario committee agreed to support the Ontario Investment Service and will be a founding member of the service. During the last two years, we've also provided support as a member of the advisory committee in establishing the service.

The CBA is also a member of the executive committee of the advisory board for the Canadian Chamber of Commerce led project to establish up to 30 small and medium-sized enterprises -- SME -- business networks across the country. The aim there is to try and encourage small and medium-sized businesses to grow where they lack, through critical mass. Through networking with other companies they can share technology. With the assistance of brokers they can also help tap the international marketplace.

We have a working group of the Ontario committee which is geared towards agricultural issues in Ontario. Already, they are working with the Ontario Pork Producers Marketing Board, the Canadian Grain Commission and the Ontario Cattlemen's Association to try and seek ways to provide better financing to that particular industry.

The Ontario committee is fully committed to supporting the small and medium-sized business sector of the economy in Ontario. We urge the government to continue the partnerships with us in developing key educational programs which can help our small businesses grow.

I want to just close by saying that the small and medium-sized business part of our portfolio represents the lion's share of the banking portfolio. Small business loans are continuing to increase. We still have a way to go to find proper solutions to some of the new-economy-based businesses, but the banks are working very hard to do this and are seeking new ways of innovation.

On that note, I would like to leave it there so that we can then field questions from the members.

Mr David Johnson: Thank you very much for your presentation today. You indicated that we cannot grow our way out of, I believe it was, the deficit situation and that higher taxes are not acceptable. I agree 100% with you on both accounts.

Looking at the economy, the American economy, in the expectations of many people, has peaked and is probably going to slide down a little bit in the years ahead. Our economy was driven by exports over the past year, so our economy could follow that trend. You've indicated the necessity to balance the budget to tackle the deficit situation. First of all, have you made any estimates yourself of the Canadian growth, the growth in the GDP over the next four or five years? Can I ask you that question first?

Ms Amsden: We don't have that information with us here, but I am sure we could approach the banks' economists and provide that information to you, if you'd like.

Mr David Johnson: I would certainly like to have that, if I could, over the next four- or five-year period. Is it your expectation just in general that, let's say, a 3% growth would be --

Ms Amsden: That's what I've heard over the next two or so years. I don't know whether we actually project out five years. It's going to be so much dependent upon what happens in the federal budget and whether other provinces continue to get their fiscal house in order.

Mr David Johnson: I guess my point is that if the outlook is for diminishing growth and we have a deficit, the auditor says, of over $10 billion in the province of Ontario, we cannot rely on growth to balance that budget. Do you agree with me, then, that there's going to have to be downsizing in the provincial government to balance the budget?

Mr Harri Jansson: If I could just jump in, it's between a rock and a hard place because inflation, being what it is, is going to limit growth, and if inflation's running at 1% and 2%, you most likely are not going to get 7% and 8% and 9% and 10% growth that we got in the early 1980s as we spun out of the recession. That's what's going on in the US. They're worried about inflation so they're raising rates and it has a whiplash effect on us. So we can't grow out of it. I think that's the point that the CBA is making.

Mr David Johnson: So expenditure reductions are going to be necessary in government?

Mr Jansson: Absolutely.

Mr David Johnson: My time is going to expire, but in terms of the loans to small and medium businesses, you've gone into quite some extensive analysis of what you've done in that regard, but there is a perception out there, I'm sure you'd have to admit, that the banks have not been kind, particularly to small businesses. It seems to be that there's this opinion that it's cyclical and that there are periods when the reins are loosened up and the money is more available to small businesses, and there are other periods when in fact it's very difficult for small business, even legitimate ones, to get assistance from the banks. I wonder, is that your perception and why is that so and what can be done to have a more uniform, helpful approach to small businesses?

Mr Green: That's a good point, David. The recession certainly has had a big impact on businesses that would normally perhaps have borrowed to expand but didn't. There was certainly no shortage of funding for good, qualifying businesses. I think where we've seen the biggest problem is on the quality of the presentations, that many businesses did not understand how important a complete and viable business plan is, and that's what we're trying to overcome with a number of these seminars.

One thing I would say, though, is that over the past three years, despite the recession, we've seen continued growth in the small business portfolio and I think it stands somewhere in the region of about $30 billion right now, which is a sizeable portfolio, across the country. The Small Business Loans Act changes that took place last year have been a particularly effective program. The program has since been under review with the government, as you know, but lending by the industry has been increasing sixfold over the last year. In fact, we oversubscribed and they had to review the lending cap.

Mr Jansson: If I could jump in, 80% in numbers of loans that the Canadian banks make are to small and medium-sized businesses, so it's the biggest commercial loan portfolio we have in numbers of clients. Surveys tell us that 70% of the small business community are happy with the service they get from the banks. That leaves 30%.

Yes, I think we're recognizing that we haven't done as good a job as we should. All the banks have started what we call emerging economy lending or high-tech lending, because a lot of the growth in small business has been in the intelligence business, the software business, and it's a very difficult business for us to lend into in that we're traditionally asset-based lenders. We've had to learn what that business is all about and we are all starting to do business there, but the assets go up and down in the elevator every day and you'd better understand that business before you lend to it. But I think we've all recognized that there is a future there and that's where the growth is coming from and so we have to do a better job.

Mr Hope: I'm going to start off first by complimenting you on the work you're presenting to us, that you're saying you're doing, because I'm going to now shoot this report full of holes.

When I'm hearing the banks come before this committee and saying what good work you're doing with the small business community, then I have to ask you: Why are you allowing regional decisions to be made on local economic growth instead of allowing those local bank managers, who you're supposed to be paying money to to do this decision-making process for you -- allowing it to be done in regional aspects. You're calling in notes of small businesses because they fall in a category -- they're not looked at as an individual -- called high risk. You call those notes.

The government has to come in and support those businesses in order to make sure we can maintain those jobs in those communities. So when you talk about your small business working together, I'm saying I'll give you a prime example to go to, right into Chatham, and talk to some of the businesses there about the attitudes of banks, the regional decision-making process out of Hamilton for Chatham.

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The issue of taxation: Let me tell you what some of the small business people who deal with the banks -- about your instant tellers and how they're taking away from the human element of things where I can start dealing with a person. When I'm depositing my money or doing anything in the bank I want to talk to a human being. People are saying, and people are very frustrated and this is everywhere from seniors to young persons, that they're being forced into this instant teller process. They're saying that if you're moving away from paying somebody a wage, you should pay taxes on that machine itself, that there should be a tax levied against it, because what you're doing is taking away a potential opportunity of an individual to pay taxes by hiring him there, by putting a piece of technology in there.

I hope you're following me, because I've only got four minutes. I wish I had more time. I'd like a longer discussion. The unfortunate part: CIBC out of Hamilton won't return phone calls.

The issue dealing with debit cards, where you're saying we want -- because you work off debt. You make your money by my borrowing money for a house, a car, a snowmobile, a boat and all that good stuff that I'd like to have that I can't afford, but you give me the money anyway because you make interest off that. Those are the things. As soon as you start talking about a debit card, you allow me to now access my banking, but the small business person is being charged a levy fee for having that special service at his video store or whatever.

I must express these views because, I'll tell you, I have a lot of people angry at the banks right now, and it didn't help when you raked in a $14-billion profit.

Interjection: Four billion.

Mr Jansson: I think you're a little confused.

Mr Hope: No, well, this is what they're saying. I know what it is, but they're saying these things are coming at me and they're attacking us. The small businesses are very angry with the banks because no local decision-making is being allowed by the local bank managers. I understand what the banks are talking about in their report, but I'll tell you, it's not reality happening in our communities where regional decisions are impacting on employment opportunities and growth in our communities. Hamilton doesn't know what Chatham's all about. Chatham knows what Chatham's all about. Wallaceburg knows what Wallaceburg's all about. The citizens there are asking that they be serviced in the human element of things when you're dealing with money.

The Chair: Mr Hope, you've pretty well expired your time, and if you'd like the banking community to answer you, you should give them some time.

Mr Hope: I'm asking the banks what they've got to do. It's nice that they come before us here, but they've got to get out and start talking to the people in the smaller communities who are being devastated by decisions that are made in regional aspects instead of the home base and the small community aspects.

Mr Jansson: I can't speak necessarily for all the banks; I can speak in particular for the bank I'm employed by. Decisions in Chatham are made in Chatham, period, for 99.9% of all loans we make.

Mr Wiseman: It's the worst bank. I get the most complaints from the Bank of Montreal.

Mr Jansson: Well, you may not like our decisions, but they're made locally.

Turning to ABMs, the branching network in Canada has pretty well stayed stagnant. We have not closed branches, on average. The number of people we employ in Ontario, for example, borders on 90,000 people. So we are not shrinking the branches. The ABMs tend to take up the slack, where for people who want to do a simple deposit or pay a bill, it's easier and it's cheaper for them to do it that way.

Debit cards are a lot cheaper for your merchants, for the business people, than charge cards, plus the money is credited to their account instantaneously. So it's a product they have asked for in unprecedented numbers. We can't get the manufacturers to make the debit card machines fast enough because the small businesses out there are saying, "That's the best way I can handle my cash."

Mr Hope: My chamber of commerce will likely be notifying you about your comments. I'll show them the answers, so that way they understand what you're saying.

The Chair: Mr Kwinter. We've got to move along. Our time's running very short.

Mr Kwinter: I'd like to pursue another area, your recommendation number 3 in which you strongly urge the Ontario government to reduce its costs by withdrawing from the regulation of financial institutions.

I'd like to just briefly give you an example of why in theory I agree with you, but in practice it's a lot more difficult. I was the Minister of Financial Institutions, I'm sure you know, between 1985 and 1987 and brought in the Loan and Trust Act.

To give you an idea of the variance across various jurisdictions, the province of New Brunswick adopted our act in total, including typographical errors. They just substituted "New Brunswick" for "Ontario" and issued that regulation.

The province of Alberta's minister at the time, Elaine McCoy, laughed at me at a financial ministers' meeting to say, "We have no need for any kind of regulation," and I'm sure you know that shortly after that they had a major financial collapse that in fact caused ministers to resign because there was no regulation.

Then you have the federal government. I can tell you that when I brought in that legislation, the then-minister, Tom Hockin, said it was unnecessary because in a matter of a month the federal government would be bringing in its regulations. Well, it took four years for that regulation to come out, not a month.

What you have is a situation where you have said yourself at the beginning of your presentation that half of your activities are in Ontario. Ontario is the financial centre of Canada and I have no problem with regulations that are adequate, if they're administered by the federal government, as long as they're not at the lowest common denominator. That is the problem; that's the practical problem. So I'd like to get your comments on that.

Ms Amsden: When you introduced your comments you read part of the recommendation, but if I can read the remainder of it: "We...urge the Ontario government to reduce its costs by withdrawing from the regulation of financial institutions which are, or through coordination with the federal government and other provinces can be, effectively supervised by another, single regulatory body...."

We agree absolutely you need regulation. The point is, you need effective regulation. We don't necessarily think that, just because you're being regulated by two and three and four and five and six different provinces, you're having better regulation than just through one. The key is working and getting that one type of regulation working well.

I think we are beginning to achieve it. I recognize absolutely your point that you had to introduce regulation because the federal government was not acting quickly enough. That's very unfortunate, and we had urged the federal government to take action a lot earlier than it did as well. We will continue to work to see that we have one level of effective regulation.

The Chair: I'm sorry, but our time has expired. I thank the Canadian Bankers Association for making its presentation before the committee this afternoon.

INCOME MAINTENANCE GROUP

The Chair: The next presentation this afternoon is by the Advocacy Resource Centre for the Handicapped. If representatives of the centre would make their way forward, and if you would please make yourselves comfortable and identify yourselves for the purposes of the committee members and Hansard. I'll remind you that you have 30 minutes within which to make your presentation and field questions from the committee members.

I would ask those who are having private conversations if they would please go outside the committee room so that we could have some order and continue with the business of the committee.

Mr Scott Seiler: My name is Scott Seiler and I'm with the Income Maintenance for the Handicapped Co-ordinating Group. The gentleman on my other side here is Mr Harry Beatty, legal counsel for the Income Maintenance Group and also legal counsel for the Advocacy Resource Centre for the Handicapped.

I think what I'll start to do is introduce the Income Maintenance for the Handicapped Co-ordinating Group by saying that we've been in existence since 1978, dealing with income-related issues for people with disabilities -- everything from social assistance issues to work-related issues, removal of barriers in the work environment or to the work environment, looking at accommodation needs of people with disabilities, as well as insurance, workers' compensation and other issues.

Mr Harry Beatty: We'll try to be brief in our presentation so as to give time for questions.

Disability compensation and other disability programs are often discussed very generally and we thought we would provide some figures today, even though they have to be used carefully, just to give a bit of factual background. The figures are taken from the Health and Activity Limitation Survey which has been done following the last two censuses by Statistics Canada. We have only given Ontario figures though, not national ones.

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Page 3 of our submission gives the best estimate by HALS of the extent of disability among the Ontario population. You have to keep in mind that this includes people with only a mild functional limitation as well as a moderate or severe one. The total is considered to be 15.9%, and you can see that for children of 14 and under it's about 6.7%, rising to a rate of over 43% for seniors. However, as you'll see, many of the people, notwithstanding disability, are active in the workforce and living in the community.

As we note, the rate of institutionalization in health care facilities is only 1.7% for adults under 65. So the vast majority are in the community. Again, it is a figure that has to be looked at, though, because our understanding is the HALS data just look at regulated facilities, nursing homes, homes for the aged and so on. We all know that many thousands of Ontario citizens with disabilities live in unregulated settings: boarding homes, care homes and the like. Even for seniors, until you get to what you might call the very elderly group, the rate of institutionalization is not that high. In the 65 to 74 group, it's only 4.2%, but as you would expect, when it gets to 85 or older, it approaches 50%.

Another interesting figure is that looking at the 15 to 64 group -- for some reason Statistics Canada seems to start the age of adulthood at 15 for its data -- actually the majority do not receive any disability-related income. This may be because people are working, because they are supported by spouses or other family members, and of course the 15- to 17-year-olds who are included and who are living with their families are not eligible to get disability-related income on their own. As well, others, especially in the older group, may have some kind of pension or other early retirement income.

Of those who did receive disability-related income -- now on page 4 -- and again we have to be careful with the data, the plan that most people depend on is actually the CPP, or a few Ontario residents get a Quebec pension too. Workers' compensation was received by close to 80,000. Then there are UI, sickness benefits, motor vehicle benefits, disability insurance, social assistance or welfare such as family benefits. Also, a lot of people with some degree of psychiatric disability wind up on welfare if they cannot meet the test of permanent unemployability to get family benefits.

It's clear to us I think that these data are not perfect, because the number of people on social assistance has been underestimated by HALS. This is 1990, not 1995, but even then the estimate was low. There are now over 130,000 people on family benefits as persons with disabilities alone, and as I've indicated also, some with fairly significant ongoing health problems on the general welfare system. Nevertheless, it gives an idea of the extent of the problem. It's also clear that many people receive income from more than one source and often there's an offset where one is deducted from the other.

In terms of employment -- these are the last data to look at -- looking again at all levels of disability together, close to 50% of people with disabilities are in the workforce, but of course the percentage of those with a mild disability, 62.8%, is much higher than moderate or severe disabilities. Nevertheless, I think it's significant that close to 20% of those considered as having severe functional limitation by Statistics Canada were still working. The unemployed group, under the Statistics Canada definitions, includes only those who have been recently looking for work. Even among the group that is not in the labour force or that reports itself that way there were a great many who answered questions in the HALS data showing that they did believe they could work if employment barriers were addressed and if other things were accessible, like job training and so on. So I think this would lend a little bit of an overview to some of the recommendations we have to make.

Starting on page 5, clearly we're concerned that many of the disability compensation programs just listed above in paragraph eight are being cut back in some manner. Family benefits levels, like all social assistance levels, have been frozen for a couple of years. There has been a de-indexation begun, albeit a partial one, of workers' compensation benefits. There are proposals to reduce motor vehicle accident benefits. It's hard to comment on disability insurance plans because they vary from insurer to insurer and employer to employer, but very often, in the private sector especially, there is no inflation protection at all, which again affects most the people who are most disabled and who are disabled younger. One of the major problems in that area is actually finding out what people are entitled to, as usually what folks have is a pamphlet in which the most important statement is usually that you can't rely on the pamphlet. The actual entitlement is given by the policy and short of litigation you usually can't get the policy.

The plans that are primarily in federal jurisdiction are cause for a lot of concern as well; it seems that the Canada assistance plan may be cut significantly. Our best estimate, and we have to admit it's just a ballpark, is that about 30% of the cost-shared programs under CAP in Ontario are in some way related to disability. I've already mentioned over 130,000 people on family benefits Gains-D. We find that the federal government is also restricting Canada pension plan disability. The plan has an especially strong work disincentive in that they are very quick, in our experience, to cut off people who attempt training, employment or return to work, or in some cases even volunteer work.

There's also concern that as part of the social security review UI sickness benefits will be cut or put into a lower tier for repeat users. Well, some frequent users are people with recurring disabilities. Also, the disability tax credit is being restricted by the federal government.

We thought it was useful just to bring together all these threatened cutbacks in one place to show that there is a real concern about cuts to disability compensation. We feel that if there were some more systematic review of how these programs fit or don't fit together, it might be more useful than what is usually done now, which is to look at the programs one at a time, and the result is simply an offloading of costs on to another program. For example, the Ministry of Community and Social Services and the federal Human Resources Development seem to be sort of going back and forth in terms of the provincial government getting recipients of Gains-D or family benefits to apply for CPP, and now CPP is doing its own review, which presumably will result in some people being cut off and sent back to social assistance. We think it could be done better.

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Another example of offloading, we believe, is that motor vehicle no-fault benefits have been made secondary to workers' comp and long-term disability. Now, perhaps that'll be reversed in the current review of workers' compensation, but this kind of thing, making one program secondary to another, is not any true saving to the public or to business or anyone else, and just seeing how costs could be shifted from one program to another, one level of program to another, is somewhat distracting from what would be more useful: to see if there's a way in which program costs could be reduced over the long term by making people more independent and by in particular encouraging return to employment, where we believe there's a real potential. Scott, perhaps you could pick up on employment, since you've been quite involved in that issue.

Mr Seiler: Sure. I think the barriers to employment are one of our biggest problems with people with disabilities at this particular time. We have many, many barriers.

The primary barrier in the social assistance system today for people with disabilities is the barrier of categorical exclusion from most training because of how people are qualified on the system as being unemployable. That is one of the largest barriers that people with disabilities face in getting training to go out and get a job.

We also have many barriers around education as well and other things that must be remediated prior to going to an actual training program that is looking at training people for a specific job.

One of the problems with remedial programs is that they're often difficult to get any kind of accommodations for. People have problems accessing them because of physical locations for academic upgrading. There are all kinds of barriers there that make it very difficult for somebody even to start the process, let alone to get really involved in the process where they're actually in a real training program.

We also have barriers in the province where most people have been on provincial social assistance systems for a long period of time -- the average is approximately seven years -- and people do not get access to training, because of that, in fast-tracked ways. They have to wait around for what we call VRS, which is vocational rehabilitation services. The waiting lists vary across the province. They can go anywhere from three years in some jurisdictions to 18 months, a year, in other jurisdictions, depending on the area and how the area office is dealing with the issues.

We're also looking at a lot of barriers around people accessing the kinds of equipment in a timely manner that they need to get employed, or if they're offered a job and they need a computer, it doesn't do well for them to have to wait six months to get one. The job is now, we need a computer now, and that's what has to happen. We need fast-track methods of that going on; either that or people will lose opportunities they could have gained if they had had the equipment faster.

We have another really significant issue, and Harry has mentioned this: the transfer from the FBA system to the CPP system where there's a shared cost involved of the person's income. That saves the government money, but the problem is that it's creating a system where the most employable people with disabilities who become unemployed and, for instance, run out of UI and end up on social assistance and then are referred to the CPP system end up permanently unemployable. Quite often the FBA system here in the province will ignore the issue of people permanently unemployable and will still try to help people obtain some employment, but once they end up on the CPP system they're stuck, and it's not for a short time; it could be for a lifetime. So we have a really significant issue.

We've also got lots of problems in programs. For instance, there was a lot of work done to create Jobs Ontario. Jobs Ontario has worked fairly well for many, many people, but it has not for people with disabilities because there is no budget for accommodations, and accommodations are what is going to make training work for people and employment work for people. That has to be there or people will not be able to work. All the goodwill in the world won't help.

We also have some other models. During our discussions with the federal government around the reforms and our proposal for the reforms, we very much backed up a system of the Roeher Institute here in Ontario, which is a think tank dealing primarily with issues around people with developmental handicaps. I think their idea is fantastic, which is basically to take services for people with disabilities out of the welfare stream, where you do not have to be on social assistance to get programs for instance, you don't have to be on social assistance to get specialized equipment or to get an attendant or to help pay for an attendant.

It is very important for people with disabilities to have that kind of access to accommodations outside of just a computer. People who want to go out and work, go out and get trained and go to school sometimes need an attendant to go with them and somebody to be with them the whole time during the day. It's very important for those things to be done, but, at the same time, if those types of services are only connected to the welfare system, that means that the person who is out there and is working has to pay for that or the employer has to pay for that somehow out of their own pocket, and quite often that means the person doesn't work. That becomes another barrier.

One of the ways and means that the income maintenance group believes is a primary method of getting people employed in this economy is through specialized initiatives. For instance, self-employment and CED, community economic development, initiatives are primary ways of getting people with disabilities employed.

We do have problems. Even though we have an employment equity system in Ontario, it will not cover a huge portion of the labour market. Many small businesses, in fact all small business, will be exempted from it. That's where 87% of all jobs in the last 10 years have come from all across this country. If those small businesses are exempt and we've got lots of people who would like to be employed, it's going to be in the small businesses that they get employed, or to become self-employed.

Opening up and getting resources to those people who would like to start their own businesses is very important in this community, and there have been some initiatives that have been quite successful. The Innovations section of the new JobLink program has been quite successful in helping disabled people. In fact, that's the main group that program has helped, not that it was put together to help them specifically or them only, but it has ended up helping a huge number of people.

We've got some really good programs out there where we can do things, but we just need some expansion on these ideas.

I'll open it up to questions.

Mr Jamison: Thank you for your presentation. On page 4 there are some numbers, and I just want to verify them and put a small question: The people with disabilities who are attached to social assistance or welfare programs directly in the province number some 79,195? Is that figure correct?

Mr Beatty: It's the figure that Statistics Canada came up with, but, as it says below, we believe it's low. I don't know if that's a consequence of their methodology or whatever, but it clearly is lower than --

Mr Jamison: And basically the unemployment rates are running at 37% for mild disorders, mild disabilities, 59% for moderate and 80.2% for severe. That's the calculation I get here.

Mr Beatty: Adding "unemployed" and "not in the labour force" together, yes.

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Mr Jamison: I've asked this question at other times here. These are some of the most vulnerable people in our society that we're talking about, and the issue is around budgetary measures, deficits, how we deal with the real problems that governments are having along the way. There has been a policy put forward by another party to reduce welfare rates by some 20%. What effect would that have on people --

Mr Carr: Seniors and the disabled are excluded.

Mr Jamison: -- within the system with disabilities? Again, UI assistance has been cut, time on UI, sending people that way quicker, I guess. What effect do you see that having?

Mr Seiler: Any dramatic cut in the rates of social assistance today will affect thousands of people who are so marginal that they pay their rent and from then on in the month a food bank is how they eat. It will actually, I believe, cause thousands of people to be homeless in this province if there are dramatic cuts in the rates of social assistance today. Most people are very marginal, especially in the large metropolitan areas, where they're paying $700, $800, $900 in rent and only receiving $930 for a welfare cheque, and that is the average FBA cheque for a single person with a disability.

Mr Beatty: Actually, the maximum.

Mr Seiler: The maximum, yes: $900 is about the average; $930 is the max.

Mr Kwinter: Thank you very much for your presentation. You list the various organizations that are active members, and you also list some groups that are corresponding members. I don't know whether People First is a corresponding member.

Mr Seiler: Yes, they are.

Mr Kwinter: They are very active in my riding and I meet with the president and their members on a fairly frequent basis. As a matter of fact, they seem to have latched on to me, and I meet with them an awful lot.

These people are developmentally handicapped, and one of the big problems that they have, of course, is that they don't fit in: They haven't been handicapped because of an accident or because of a disease or whatever reason, and they're out there kind of in limbo. Mr Seiler, I was very interested in what you had to say about some of the help that could be provided to them if they could go out of a sheltered workshop and into a regular workshop and have somebody with them, or if they could have someone there to help them along as they try to overcome some of these problems. Can I just have you expand on that a bit?

Mr Seiler: Sure. Many people in the field we're in very much state that if there were adequate supportive work programs, there would be very, very few, other than people who are actually in bed in a hospital, who would not be able to do some form of work. That might be on a very low competitive level for some people, but they would be occupied in doing something that would be productive for themselves.

The supports needed are many, and vary depending on the types of disabilities. The supports could be financial to get specialized aids and devices into a place to fix the environment so the people can go in and work, or you could see a human support put into place so people have job coaches and have some form of supportive employment where people go in and assist the person in working.

You must remember, though, that's not just an employment for one person; that's really an employment for two people, because that supportive person is also employed there. It's not just looking at one person; it's two, really. You're employing two people, basically to help to employ one. Some people might say that wouldn't be cost-effective, but I'll be very honest with you: Institutionalization isn't very cost-effective either, and keeping people at home doing nothing is also very inefficient in terms of cost-effectiveness, as well as the human value that is lost there.

Mr Carr: Following up on Mr Jamison's comments, I don't want anybody to believe me or Norm. What they can do is call 1-800-903-MIKE, get the plan and read it themselves. It's either 903 or 905. Or call my constituency office at 905-842-5592. In it we say that the seniors and the disabled, whom this government has frozen over the last two years in terms of the rate, should be taken out of the social assistance system. The cuts we're talking about are for the able-bodied people, and again there are classifications of that as well. We believe that seniors and the disabled have been punished, because what happened with social assistance is that when the numbers grew they're the ones who had the rates frozen. The most vulnerable have fallen farther and farther behind.

As I say, don't believe me or Norm Jamison; read the plan yourself. Our program calls for taking the seniors and the disabled out of the social assistance system and protecting their rates. In fact, I submit to you that we could probably give you more in terms of inflation protection if we took the other people out. Are you in favour of that program, of taking the seniors and the disabled out of the social assistance system?

Mrs Haslam: At the expense of other people?

Mr Carr: Yes. You can read the plan and what it means. Other people will be cut. They will not.

Mrs Haslam: Twenty per cent out of your social assistance budget, at the expense of other people.

Mr Carr: Let him respond. I don't want to hear from you, quite frankly.

Mr Seiler: There has been all kinds of talk in the past around things like guaranteed annual incomes for people with disabilities, which is the same thing as taking people out of the regular rolls of social assistance. There is not a lot of difference from that. Even in those schemes there was always talk of there being a difference for those who are on a guaranteed annual income for a disability, so this is not a new thing, really, in many ways.

But the disability movement has always resisted anything that would harm other people as well. So we would very much caution that single parents and the single employables must be dealt with in a compassionate way that will end up doing the same kinds of things for them as we are wanting for ourselves.

Mr Carr: What we've got is that a single employable right now is punished on social assistance: You can't work; anything you make, they take away. We're going to also eliminate that so that if you've got a part-time job, you would get the social assistance and you would also be able to keep that. I understand that you don't like to pit people, and I understand what Karen was saying --

The Chair: Mr Carr, our time has expired.

Mr Carr: Time is up, but I hope you realize that unfortunately your people are being cut as a result of the increase in social assistance, and I don't think that's right. Thank you and good luck.

The Chair: Thank you for your presentation.

Interjections.

The Chair: Order. If members would like to discuss this, would they please take it outside. Order, please.

Mrs Haslam: I find that offensive, to blame people on social assistance --

The Chair: Order, please.

Interjections.

The Chair: A five-minute recess.

The committee recessed from 1639 to 1643.

ONTARIO ASSOCIATION FOR COMMUNITY LIVING

The Chair: Come to order. Our next presentation is by the Ontario Association for Community Living.

Ms Cheryl Easton: Just before I start officially, I want to tell you that Mr Kwinter and I have a friend in common who regularly humbles us from OACL about exactly what we are doing right and what we're doing wrong. He always seems to be more aware of what we're doing wrong than what we're doing right, and he wants it solved like that. I think that's interesting, that we have him in common.

Scott Seiler was saying what the Roeher Institute, which is overseen by the Canadian Association for Community Living, was asking for around the social reform in Ottawa: a level playing field, that people with disabilities would have a level playing field before they had to compete.

We appreciate the fact that perhaps that would mean that money would have to be pumped in up front, but we have proven time and time again around employment, from my own experience in Mississauga, that the first year costs $6,000, then $4,000 and then $2,000 on an average. It's worth it because a lot of times people will then take over the support where the person is working; the other employees will support people. So I think it's really important, when you hear about the social reform, that it is definitely a level playing field as opposed to much more. That was just a comment I felt you should have.

Mr Chairman and members of the finance and economic affairs committee, I am Cheryl Easton, president of the Ontario Association for Community Living. I will be sharing this presentation with Barbara Thornber, our executive director.

We are participating in these pre-budget consultations on behalf of people who have an intellectual or developmental disability. Our members share a vision of community which welcomes all people and provides the support people need to participate effectively. Our association has a wonderful history of over 40 years and today we are a federation of 116 local associations with a combined membership of approximately 12,000 people. You do not have to be a member to enjoy supports, which I think is important.

The other thing is, what you have is not what I'm saying; it's a backup.

Although advocacy was the prime activity at the local level in the early days, it has often been coupled by necessity with the development and provision of various community-based educational, vocational, residential and family support services.

Over the past years, Ontario has been faced with a deep recession and the government has been forced to make painful cuts to social programs. We acknowledge that the government has had to make hard choices, but lack of consultation around decisions to cut funds to particular programs has strained our faith in this government. In November 1992, our frustrations with the government's unilateral actions led to a massive rally of more than 4,500 people on the Queen's Park lawn.

We appear before you today because we recognize that we must continue to dialogue with the provincial government if we are going to affect the course of public policy and ensure the successful achievement of our mutual goals. Today we are going to present to you our position on individualized funding and seek your support for increased spending on the special services at home program.

We believe that individualized funding is the key to ensuring that people with disabilities can live full lives in their communities. For the last two years, the pursuit of this policy has been one of OACL's two priorities, the other being efforts to achieve inclusive education.

Individualized funding is a system in which funds for services are individualized, meaning they're tied to the person, not a program or an association or anybody else. The individual either manages the funds and engages support staff himself, works through local associations for community living or hires a manager to perform this function. Funding is based on the cost of providing the supports required to achieve the planned lifestyle and is flexible and portable. A lot of people get left behind when their families retire and go to another area of the province because they haven't got any money tied to them and they can't get into a program in that area.

Individualized funding is based on the principle of individualization, which asserts the basic human right of the person to have his or her unique capabilities, interests and needs recognized and used as the basis for planning, developing and delivering such supports as are required by an individual to live, learn, love, work and spend personal time. In other words, what we're talking about is someone basically just having a life like we do.

We are seeking your support for increased spending on a program which is already demonstrating the success of the concept of individualized funding here in Ontario. This program is known as special services at home. We are seeking a shift in the Ministry of Community and Social Services funding, away from institutions to at-home family support.

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OACL is seeking the closure of all institutions serving people with developmental disabilities in this province, and that can be argued on a whole bunch of levels, so that these funds totalling over $280 million in 1993-94 can be diverted to individualized funding systems, such as special services at home. Currently, the province is spending over $110,000 each year on average to keep approximately 2,500 people in institutions, which we consider to be dehumanizing.

We see a need for a budget of $52 million to meet the groundswell of demand for the special services at home program. This program provides funding directly to families to support the special needs of a child who has a developmental or physical disability and adults who have a developmental disability who are living at home with their families, and a lot of times these people are in their 70s and 80s.

To be eligible, they must have an ongoing functional limitation as a result of a disability and must require support beyond that which is a normal family responsibility. The funds are used mostly to hire support workers. Families may administer the contracts themselves or they may use the help of a transfer payment agency. The special services at home program was established in 1983 and in 1993-94 it supported 10,000 families in Ontario at a cost of $26 million. The average grant in that year was $2,600.

Compare the average of $2,600 to the average-per-person expenditure of $29,000 that year for another 30,000 individuals served by institutions and transfer payment agencies in Ontario. The special services at home programs are the least expensive and the most cost-effective programs for people with developmental disabilities. Why? Because it uses less overhead. It can be individually tailored and it builds on the commitment of family members and it gives everybody a lot of dignity.

In 1994-95, a $3-million increase in the special services budget to $29 million represented a 10% increase, but netted a drop of $300 in the average grant, down to $2,400. The reason is the growth in the number of families served. Why are demands on this program increasing? Because of constraints on other programs and because more people are living at home with their families by choice.

In response to the increase in demand, Minister of Community and Social Services Tony Silipo announced on January 1, 1995, an additional $6 million in support for this program. This increase is in the right direction and makes the goal of $52 million seem more attainable. However, the increase will average only about one more hour of support per family per week.

The media attention on the Wilkieson tragedy has highlighted the seriousness of the need to make supports easily accessible for families caring for people with significant disabilities at home. While no one can know what precipitated this tragedy, it is confirmed that the Wilkiesons had had their special services at home appeal turned down. They were asking for about two hours more per day of support for their son Ryan.

On January 1, the Honourable Mr Silipo further announced a $1-million commitment for community innovation funds to promote individualized funding approaches for people with disabilities and their families. This is another small but significant step in the direction towards a support system which recognizes the uniqueness of individuals.

My friend Barbara will now speak.

Ms Barbara Thornber: The point I'd now like to talk about is the expenditure control plan. Our local associations have been asked to take a 1% cut in expenditures for 1995-96. This is a real blow to these service providers who are already devastated by last year's 0.5% cut. While a cumulative decrease is 1.5% for next year, it's just added to a variety of other cutbacks which have combined with rising costs and have totally impacted the bottom line by considerably more than that 1.5%.

The first example, of course, is the social contract. The social contract had represented a 0.75% decrease in funding to all our local associations. We felt very confident that we could manage that 0.75% decrease straightlined over three years. In fact, Cheryl and I were very active in negotiating that for the community services sector, but we didn't realize that on top of that we'd be hit with the 1.5% and also various government programs which have increased programs.

Rising costs also include the increase in minimum wage and increases in the cost of benefits to staff. Of course, we're not arguing that there isn't significant merit in increasing minimum wage, but without a corresponding increase in the allocation dollars from the province, the effect simply means that there are fewer hours of staffing available to support individuals.

The increased cost of workers' compensation coverage is causing us incredible alarm. Costs appear to be out of control. Many of our associations have actually backed out of the WCB program, are going to private carriers and are having a fair bit of success in that. I think you're going to see more and more associations looking to the lead of these associations that have done that.

Other cost increases that our sector has had have been insurance premium increases, and of course the addition of retail sales tax to insurance premiums on all our health plans, higher UIC rates and unavoidable increases in utilities, taxes and rents. So it's not just the 1.5% and it's not just the 0.75%. It all adds up to a very significant decrease in funds all of which relate to services and supports to people.

At the same time, the burden of administration has also increased, because in addition to managing these budget cuts, our local associations are also responding to various government initiatives such as pay equity; the MCSS restructuring; employment equity, for which we are very thankful and fought long and hard to get but it also has an administrative cost to implementing that program; also the MCSS accountability project, as well as various new government legislation, one being Bill 120.

Again, these are all things that we support, but what we have to do then is find ways to find more dollars to work on these tenancy agreements, which we've never had to do before, and to share those across our sector.

What's happened is that as we've had to take these different cuts through cost increases and cuts from government funding, it's been the management and administrative support staff who have been eliminated as we've downsized. So the very people whom we need to assist our locals in dealing with these government initiatives and programs are no longer able to be on our payroll. We've downsized, we've flattened out our associations and we have very few people now who can do the kinds of jobs that we're being faced with.

Just as an example, over the past two years our largest association, the Metropolitan Toronto Association for Community Living, has eliminated the equivalent of 26 full-time staff positions, primarily all administrative. In 1995-96, MTACL anticipates reductions based on the percentage figures I've just given you in the neighbourhood of $400,000 to $500,000. Proportionate reductions will be felt even more painfully by our small associations, many of our associations in the north, that have budgets of $2 million and less. If you just look at what is happening to Metro and look at that on the same ratio with the smaller associations, you can understand what that means to cuts in services and supports.

These cuts proposed for 1995-96 are hurting the most vulnerable people in our society. We're reducing the hours for alternatives to sheltered workshop programs, we're having to reduce the family support staff and we're having to reduce respite services. All of these will have a direct effect on families who have kept their sons and daughters at home. We have a whole new generation of families who are now keeping their sons and daughters at home, and that's what we ask for, for special services at home.

But we have another generation of families who went against the trends of the times and also kept their family members home, and they're the ones who are now aging, who are 70 and 80 themselves and have adult children in the 50-plus era who also need support at home. Without significant increases to special services at home and without a stop on the cuts to our local associations, we're afraid that additional cuts are going to push some families beyond their coping abilities. We see families who are already stressed and doing more for their sons and daughters than anyone can expect.

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We're concerned that we may see an increase in abuse, because having a child with a disability at home 24 hours a day, 365 days a year, no matter how much you want that child to be at home, can be very taxing sometimes. Many of these families don't have extended families to go to and are all alone or are living on fixed incomes, and many of the families are elderly and facing new and significant needs in their own lives that they never dreamt of.

We've reached a point where our sector can no longer do more with less. We've tried very hard to cooperate with the social contract program, but we're at a point where we just can't take any more cuts. I don't know how we're going to take what's proposed for 1995 and 1996. These cuts are threatening the basic human rights of our most vulnerable citizens.

We appreciate this opportunity to spend a few minutes just touching on some of our concerns to the standing committee. We've presented our views on the need for increasing the funding for special services at home to $52 million and the need to avoid further cutbacks to our sector's expenditures. We haven't touched on employment programs, but ARCH did that very nicely for us. We believe that our remarks today represent the views of our 12,000 members, most of whom are people who have disabilities, and their family and friends, people who daily experience the consequence of disability labelling.

We've tried to be constructive with some concrete suggestions in some areas and we really want to move ahead together to ensure that we can build a society which includes people with disabilities, and by "including" we mean exactly what Cheryl said at the beginning, that if we could all start off on a level playing field so that the cost of a wheelchair or the cost of a support person or any other kind of accommodation did not have to come out of the basic need assistance that other individuals get, we think that would make for a much better Ontario.

Mr Kwinter: Thank you very much for your presentation. I'd like to ask you a couple of questions, just because I don't have the basis for a comparison. You call for an increase of expenditure of a budget to $52 million. What does that represent? What is the current or present budget?

Ms Thornber: It's $29 million.

Mr Kwinter: So we're talking about a substantial increase.

Ms Thornber: Yes, and then we got the $6 million on top of that on January 31, so we're up to $35 million.

Mr Kwinter: The other thing I'd like to know about is that in your program, the special services at home program, you talk about children or individuals who are in the care of their families. What about those who are developmentally handicapped but are not living with their families? To give an example, I don't think our friend lives with his family; I think he lives on his own. How does he fit into this program?

Ms Easton: He doesn't.

Ms Thornber: Not into the SSAH program, no.

Ms Easton: He can get supports for other things through APSW workers and advice of friends and things like that, but there is no money to help him live on a daily basis, no.

Mr Kwinter: To give an example, and I don't want to personalize this but as I say, he's the one contact and his group is the one contact I have where I live with them literally on a weekly basis. One of his great concerns is that he has a female friend who is also handicapped -- he's got to be fortyish or something; I'm not exactly sure of his exact age, but he's in that age group -- and he would like to have a so-called normalized life and he feels that there are economies of scale if the two of them got in and lived together. He has found resistance from the bureaucrats who say, "No, you can't do that." To me that doesn't make any sense.

Ms Thornber: No, it doesn't to us either, Mr Kwinter. We know lots and lots of people who certainly do live together or are married. We haven't really encountered that kind of resistance, so perhaps we could delve into it a bit more and see if there could be some assistance.

Mr Kwinter: I've heard stories from these people that are just horrendous. Unfortunately, given their problems, I have difficulty in separating what is actually happening from what they think is happening, and that's probably my fault, not theirs. But certainly some of the concerns they've brought to my attention are things that I think there has to be some way of resolving: threats like if they don't comply they're going to take them somewhere and give them electric shock treatments, things of this kind. Whether that's so I don't know, but it's certainly things that have been advanced to me as problems. Have you found any of these kinds of things in your context?

Ms Thornber: I think the concept of being readmitted to an institution is always going to be a fear for everyone who has experienced being in an institution. I think it's a given that whenever people with an intellectual disability read in the paper or hear anything about cutbacks at different levels of government, it's their greatest fear that somehow they're going to be forced to go back to a situation they found totally dehumanizing.

We also talked earlier in our presentation about individualized funding, and that's a kind of approach that would help people like your friend. It wouldn't be through special services at home, but it would be through a new program of individualized funding. That person could then take whatever dollars they needed for support and go out and purchase that support wherever they wanted it. It could be from a generic community association or it could be from a community living association or it might be just four hours' support a week that this person might need.

Mr Carr: Thank you for your presentation. On page 5 you talk about some of the problems as a result of the budget: reduced hours, the day programs, reduced family support, and you talk about pushing some families beyond their ability to cope. Comparing our services now with, say, a few years ago, do you think the services we are providing now are worse than they were?

Ms Easton: I have a daughter who is 23 years old. When she went to nursery school she was picked up at the door and brought home. I was afforded to ride the bus to do volunteer work and so on and so forth and that cost $15 a month. They did everything they could around physiotherapy, around all kinds of things that enabled my daughter to walk and feel good about herself.

Mr Carr: When was this?

Ms Easton: Well, 21 years ago. That is no longer available to people. They don't have the transportation. There are a lot of single mothers. If someone needed the support we could always find some way of providing it, but with costs rising, with our belief that people should be out in community day care centres, it's just hard and there's more of an isolationist feeling.

One of the things about our movement is that you hang out together and you feel good about yourself, and that is no longer possible. We have waiting lists for everything. We have waiting lists to have an intake worker come and visit you to find out what you need.

Mr Carr: On page 2 you talk about how financially we'd be better off having people out in the community. One of the problems that you've got, and I think Thistletown's a perfect example where the parents and workers have been hounding the minister and the Premier, is that they're afraid, in situations where they close down a Thistletown, the services won't be out there in the community before something gets closed down. Do you have the fear too that the services won't be there? You've been very good on page 2, talking about the costs and how it could be less expensive, even forgetting about the quality of care which should be the most important issue. The parents, I think, of the people of Thistletown who are out there protesting and literally hounding the Premier and the minister, are concerned that the services won't be there. For somebody like yourself who's been around and seen it, would the services be there for these families right now if in fact Thistletown gets closed down?

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Ms Easton: Of course. We don't want anybody to be in the community without the proper supports. One of the luxuries is that institutions and schedule 2s, or whatever Thistletown is labelled right now, can show you how to do it, how they do it there.

Mr Carr: Why are the parents so upset, then?

Ms Easton: Because they're afraid. They're afraid because bricks and mortar and being enclosed is very secure to them.

Mr Carr: The reason I ask is I'm in a similar situation with Oaklands in our area, right around the corner from where I live, and the parents are in the same situation. They're looking at it, and if they felt as confident as you -- and I don't know how we do that, whether the ministry can --

Ms Easton: I sat on that board.

Mr Carr: Yes. I don't know how we can help those parents, because they're the same as the Thistletown parents. I know this is a difficult question, but is there anything we can do for the parents?

Ms Easton: Of course there is. I believe what we have to do is that 20 or 30 years ago people made a decision based on the best information they had, or even 10 years ago. They were told, "This is what's best for your child," and all that guilt of not being able to cope, all of those things, landed young people and adults in institutions. Now we're saying to them: "We've evolved. We've become more sophisticated in the community around supporting people."

We started, unfortunately, when they started deinstitutionalization, with what was deemed as perhaps the easiest people to support, and they presented certain problems because we didn't know how to do it. We now know how to do it better and we are learning as people come to us. As long as there's good planning and good sharing between staff from institutions and staff from the community, we'll always be able to do it, and that commitment, it might even mean that the people who are working in the institution might come and work for a local association because they know the person best.

Mr Carr: Do you believe that we'll still have to have some people in institutions?

Ms Easton: No. Are you asking me personally?

Mr Carr: Yes.

Ms Easton: No.

Mr Carr: Thank you. Good luck: a great job.

Mrs Haslam: I couldn't agree with you more. I think individualized funding is an excellent way to look at it. I notice, though, and I would be remiss if I didn't point out, that there's been a $3-million increase to special services. There's been a $6-million increase to some of those programs. Where it may not be everything you want, there has been an extensive amount of increase given the fiscal restraints that the ministry and the government overall have. I think I'd be remiss if I didn't remind people that there is additional funding out there that this government has put into, in particular, these issues.

You're now seeking a $17-million increase in the special services at home. I know that I looked at some of the facts and figures, and families on the waiting list, approximately 835, would require additional expenditures of approximately $3 million a year; families with reasonable appeals that have been turned down that are listed as possibilities of coming into the program is an additional $1.1 million a year; and families likely to appeal or have the opportunity to appeal that process could look at an additional $1.9 million just to meet the minimal estimated need of a program like this.

You talked about changes that are coming from internal reallocations and the restructuring of the developmental services framework. Those are kind of long-term situations where we can look at the framework and find the money in a long-term way for some of the programs that you're looking at having an increase in funding for, but right now we don't have that money. Right now that option isn't here. So we're faced with the idea that we could look at increasing the taxes to put the additional money in right now, or we could look at a more long-term way of doing it internally.

You talk about the decreased costs over long-term savings. Again, where do we find that money for the increased interest rates and the increased debt costs that we're dealing with now? When you take all of those things into consideration, where do we come up with the extra money for a $52-million program? Would you tell this committee that you feel taxes can go up, the debt can be handled and the money should be put in now? That's my first question. Do you feel that there is ever a need for institutional care? Since we have some out there and the possibility of closing them all and bringing them all into the community is very expensive, do you think there's ever a need for institutional care?

Ms Easton: On number two, about institutionalized care, there is no way on God's green earth that I believe that it is cheaper to live in an institution than it is in the community, on the average.

Mrs Haslam: I didn't mean just looking at it in the economic way; I meant in a living way. Is there ever a need for some people to be in institutional care?

Ms Easton: No. I think that some people will always need 24-hour support. There are people I know who will never live without that, who are totally incapable, but are very productive people. But they will never be able to make hard decisions. They don't have the verbal skills. I have a friend, and I've told this story before, whose daughter has no speech, but I certainly know when she's angry with me and when she's pleased with me. She is supported on a 24-hour basis -- it's one of the luxuries we have in Mississauga -- and what happens is, she now works two days a week in a pet shop. Heather has a wicked sense of humour. So she gets to bathe the birds. Squirt, squirt and they go "Awk, awk," and she thinks that's wonderful. She also gets to cuddle all the puppies and kittens when their cages are being cleaned. Do you understand? Her physical limitations are great. She walks, but she was born with arthritis. The pain this child suffers is phenomenal. Well, she's not a child, she's a young woman.

Mrs Haslam: You're saying economically that 24-hour care is efficient?

Ms Easton: Yes, it is. That she goes two days a week and works in a pet store where people support her is wonderful. My daughter had Harrington rods put in, $800 a day in the Toronto Western Hospital. I come home to home care. Six weeks in the hospital at $800 a day, six weeks in bed and longer with $35 a visit, three times a day, then twice, then once, and we were at home where I could drink out of my own cup and we could watch our own TV and people could sit in our dining room --

The Chair: I hate to interject, but if we could get some comment on the first question, because we're going to have to conclude.

Ms Easton: Okay. What's the other one? Do you want to do it or do you want me to? Repeat it, please.

Mrs Haslam: You're asking for a $17-million increase. Given all of the issues I've laid out for you, would you be saying to this committee: "We think it's needed. Raise taxes to do it. Forget the debt. Forget the deficit"?

Ms Thornber: No, we're saying that we think the money is in the institutions. We think there's money that goes beyond the figures that we see around institutions. We think that there's money that actually is costed through government services that relates to institutions that also could be used to support people in the community. So we think the money is there in the institutions and we need to get people out and get the money out as fast as we can.

Ms Easton: And it's preventive.

The Chair: I'd like to thank the Ontario Association for Community Living for making its presentation before the committee this afternoon. Thank you very much.

I'd like to remind committee members that tomorrow the committee will be sitting until 5:15, barring any unforeseen problems. Thank you. This committee stands adjourned until 10 am tomorrow morning.

The committee adjourned at 1719.