ONTARIO PUBLIC SERVICE EMPLOYEES UNION
CANADIAN CHEMICAL PRODUCERS' ASSOCIATION
ONTARIO PHARMACISTS' ASSOCIATION
COUNCIL OF ONTARIO CONSTRUCTION ASSOCIATIONS
INNOVATIVE PRODUCTS AND SERVICES
ONTARIO ASSOCIATION OF CHILDREN'S MENTAL HEALTH CENTRES
ONTARIO SOCIAL SAFETY NETWORK SOCIAL PLANNING COUNCIL OF METROPOLITAN TORONTO
ONTARIO RESTAURANT ASSOCIATION
CONTENTS
Wednesday 7 February 1996
Pre-budget consultations
Ontario Public Service Employees Union
Leah Casselman, president
Canadian Chemical Producers' Association
Alan Chesworth, chairman, business and economics committee
David Goffin, vice-president, business development
Ontario Pharmacists' Association
Wayne Marigold, president
Gary Sands, manager of government relations
Council of Ontario Construction Associations
Paul Douglas, chairman
Frank Bisson, chairman, tax and development committee
Innovative Products and Services
Stuart Weinstein, president
Angelita Elliott
Ontario Association of Children's Mental Health Centres
Sheila Weinstock, executive director
Larry Elmer, president
Rod Shantz, secretary-treasurer
Ontario Social Safety Network; Social Planning Council of Metropolitan Toronto
Susan Eagle, chair, OSSN
Andrew Mitchell
Ontario Restaurant Association
Paul Oliver, president
Rachelle Wood, director of public affairs
Dave Beatty, member
Older Women's Network
Grace Buller
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président: Chudleigh, Ted (Halton North / -Nord PC)
Vice-Chair / Vice-Président: Hudak, Tim (Niagara South / -Sud PC)
Arnott, Ted (Wellington PC)
*Brown, Jim (Scarborough West / -Ouest PC)
*Castrilli, Annamarie (Downsview L)
*Chudleigh, Ted (Halton North / -Nord PC)
*Ford, Douglas B. (Etobicoke-Humber PC)
*Hudak, Tim (Niagara South / -Sud PC)
*Kwinter, Monte (Wilson Heights L)
*Lankin, Frances (Beaches-Woodbine ND)
Martiniuk, Gerry (Cambridge PC)
*Phillips, Gerry (Scarborough-Agincourt L)
Sampson, Rob (Mississauga West / -Ouest PC)
*Silipo, Tony (Dovercourt ND)
*Spina, Joseph (Brampton North / -Nord PC)
*Wettlaufer, Wayne (Kitchener PC)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Bassett, Isabel (St Andrew-St Patrick PC) for Mr Arnott
Carr, Gary (Oakville South / -Sud PC) for Mr Sampson
Marland, Margaret (Mississauga South / -Sud PC) for Mr Martiniuk
Clerk / Greffier: Carrozza, Franco
Staff / Personnel:
Drummond, Alison, research officer, Legislative Research Service
The committee met at 0932 in committee room 1.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Ted Chudleigh): I call the meeting to order. Our 1:30 appointment, the Insurance Bureau of Canada, has cancelled, so our lunch period will be extended until 2 pm. We have a full afternoon after that, so I ask you all to return promptly and be ready to go at 2 pm.
ONTARIO PUBLIC SERVICE EMPLOYEES UNION
The Chair: The Ontario Public Service Employees Union is with us this morning, Leah Casselman. Good morning. Could you identify yourselves for Hansard, please. We have 30 minutes.
Ms Leah Casselman: Good morning. Leah Casselman, president of the Ontario Public Service Employees Union. This is Jim Onyschuk, an economic researcher on our staff with the Ontario Public Service Employees Union. As many of you, I'm sure, are aware, I'm the president of the Ontario Public Service Employees Union, still representing 110,000 workers in this province, and those are the real workers who are out there providing public service. Those folks are employed, directly and indirectly, by the Ontario government.
It goes without saying that OPSEU members have a keen interest in what's in the next Ontario budget. There are 67,000 of us working in the Ontario public service doing everything from plowing roads to inspecting meat to flying around saving lives in air ambulances to supervising young offenders, which is what I do when I'm not being the president of OPSEU.
Another 16,000 or so OPSEU members work as faculty and support staff in the Ontario community college system. Close to 30,000 of us work in the broader public service as technicians in hospitals, children's aid society workers, university support staff and so on. We pretty much cover the waterfront in terms of the number of different jobs we do to serve the public.
As you can imagine, we've taken a keen interest in the contents of the next Ontario budget. All indications are that that budget, if it goes ahead as planned, will cost the livelihoods of thousands of our members. We don't think that's very funny.
We're here to go on record to say that slashing public services and increasing unemployment are not the only options available to deal with Ontario's deficit problems. This province and this country are not facing any problems we haven't faced before. We have dealt with economic problems bigger than these before, and we can do it again. The key to it all is learning from history. That's what we've called our brief that you have in front of you.
So far we don't seem to be learning from history. All we're doing is repeating it. We're just moving into that season of the year when bankers, corporations and business reporters get together to write the stories which will soften us up for cuts to public spending at both the federal and provincial levels. I think any of us could write the headlines that will soon appear in the Globe and Mail: "Deficit Demands Deep Cuts, Top Banker Says," "Public Spending Unsustainable, Eves Says," and my favourite of course is, "Cut Public Services to Save Them."
We've been reading these kinds of quotations at least since Joe Clark was Prime Minister. Every year we hear the doom and gloom about how we're about to hit the debt wall, go bankrupt and so on, and that cutting public spending is our only option. This kind of talk goes back a long way. In fact, in terms of the language used, the 1990s have more in common with the 1930s than with any other decade.
In the 1930s, at a time when there were few social programs to speak of and unemployment had already gone through the roof, federal and provincial politicians across Canada latched on to the idea that balancing the budget was the road to salvation. Disaster was routinely predicted if budgets weren't cut back. They worried a lot about saddling future generations with debt at the same time that present generations were flat broke.
What happened to all their predictions that the world would end if we didn't cut back? None of them came true. History ignored them completely. When the Second World War came, governments got serious. They cranked up government spending as high as it would go. The effect on the economy was instant.
Public spending during the Second World War was massive. By 1945, the federal debt alone was 155% of the country's gross domestic product, nearly twice as big as the federal debt today. All that money created the biggest economic boom ever during the war years. Unemployment went from 22% in 1933 to practically zero in 1944.
But there was still the problem of the debt. According to Depression-era economists, the same brand of economists we read in the papers today, that debt should have sparked an economic emergency. Governments should have cut their spending back to nothing just to deliver us from our debts. This did not happen. Despite the massive levels of government debt after the war, the years from 1946 to 1974 were the most prosperous years in Canadian history. This is very interesting. In fact, I think I'll say it again: Despite the massive levels of government debt after the war, the years from 1946 to 1974 were the most prosperous years in Canadian history.
Government spending did not stop. On the contrary, it was during this period that Canada's most cherished economic and social programs came into being. We put together unemployment insurance and medicare in this country at a time when we were dealing with the biggest public debts this country had ever seen. How could this be? In this room we cannot ignore these facts, because they beg a very important question. If we organized an economic boom and built up some of our most expensive social programs at a time when public debt was at record levels, why can't we do that now? Anyone know?
Mr Douglas B. Ford (Etobicoke-Humber): Yes, I know.
Ms Casselman: Good, we'll get to you.
Why can't we do it now? The answer is, we can. At the end of the war the people who were running Canada used some basic principles of economics and the tools that were available to them. "Tools" seems to be a popular word these days coming from this government. We're not using those tools today.
0940
The biggest tool of all is something called the Bank of Canada. At the end of the war, the Bank of Canada took its mandate seriously. The mandate says that part of the bank's job is to "promote the economic and financial welfare of Canada." This means policies that create jobs. This means policies that meet the social and economic needs of our citizens.
Back in the old days, the Bank of Canada created most of the new money in circulation, and then it turned around and lent it to the federal government at interest rates as low as 0.37%. That's right -- 0.37% rate of interest.
What happens today is very different. The Bank of Canada creates only about 7% of the new money in circulation. The rest is created by our beloved chartered banks. The interest rates they charge, which the Bank of Canada has a role in setting, come directly out of our tax dollars to become their profits. We are paying the chartered banks for storing the public debt in their computers. In 1994, this form of bank welfare amounted to a $3-billion subsidy from taxpayers to the chartered banks. This is close to three quarters of the pure profit they made in 1994.
In the last 20 years, the Bank of Canada has gone from being a strong advocate for all Canadians to being a brainless lapdog of the richest money-lenders in the country. The privatization of control over monetary policy in this country is the biggest scam ever in Canadian political affairs. Because the Bank of Canada is no longer serving the people of Canada, we are all being tortured on the rack of high interest rates. And I think we all know that interest rates are what is killing us.
Despite what some people say, public spending is not out of control. It is actually starting to go down. Some of the studies talked about in our brief have shown very clearly that big government debts are not caused by public spending. They are caused by the year-after-year effect of compounding interest rates. The high interest rate policies of the Bank of Canada have guaranteed that no matter how fast you cut public spending, interest charges will keep adding debt faster than you can cut it.
I want to say more about what Ontario can do about the interest rate crisis in this country, but first I'd like to talk a bit about this idea of what we have to do to cut public service in Ontario. I'm not going to worry about cuts to health, education or law and order in my remarks here, because the Common Sense Revolution says quite clearly that these areas will not be cut. I am not one of those cynics who say that the Tories lied to get elected. I am not going to talk about the abused women and children who have been unable to leave abusive situations because of cuts that have already happened. I just want to talk about impacts on the economy.
Some people still don't seem to realize that a public dollar spent in their community has exactly the same economic force as a private dollar. This is why we are very surprised when cuts to public services cause the economy to slow down. But it's a fact. The $5.5 billion in cuts already announced by this Ontario government represents close to 2% of the annual gross domestic product of this province. If we were going to have a 3% economic growth, we are now going to have 1%. Coupled with the federal cuts by that man of the people, Paul Martin, we are probably looking at zero growth or less; in other words, a recession.
A recession means more people end up on welfare. This costs the province money. It costs the government more. The public debt goes up. Bay Street calls for more cuts. More cuts mean more people on welfare. The technical term for this process is "death spiral."
OPSEU predicts with absolute certainty that the kinds of cuts being contemplated by the government will end in further devastation of our economy. These cuts will do nothing whatsoever towards creating the 725,000 jobs this government has promised to create. I might remind the government that the clock is ticking on that promise.
Fortunately, there is an alternative. All it will require of the government is some guts and some leadership. Here's what to do. I want you to get your burliest cabinet ministers and load them in a large car, probably a Lincoln. Take some copies of the Bank of Canada Act to read on the way. Throw some sawed-off two by fours in the trunk in case you need them. Drive to Ottawa. While you're driving to Ottawa, phone all the other provincial finance ministers on your cell phone and tell them to come to Ottawa too. When you get to Ottawa, go visit the Prime Minister, the Minister of Finance and the governor of the Bank of Canada. Explain to them what you want to do.
As you will learn on your trip, under article 18(1)(j) of the Bank of Canada Act, the bank can lend any province up to one quarter of its projected revenue for the fiscal year. With this in mind, you should instruct Jean Chrétien, Paul Martin and Gordon Thiessen that Ontario wishes to borrow $12.098 billion from the Bank of Canada and that you are prepared to bargain on the interest rate. I suggest you start at 2% and settle for 3.5%. If they require persuasion, you have the entire force of the Ontario government to persuade them with, plus you will have the other provinces with you. Who knows? You might even give Quebec an extra reason to stay in Canada.
If we can get our interest charges under control and use our money to speed up the economy instead of slowing it down, we can save our social programs and create jobs at the same time. We did it before, and we can do it again.
I'm sure you're thinking that someone will have to pay for all this, and it's true. In order to save our province and our country, we're going to have to stop subsidizing the profits of chartered banks and other bloodsuckers of the financial world. I know, I know -- banks need money too. Too bad. I can't believe that a Finance minister who once ran a business like Tudhope Cartage out of Parry Sound has a soft spot for bankers. It just doesn't make any common sense.
The above strategy is a suggestion only. I leave it to the government to figure out the specifics. But everything I have said today is based on the answer to one question. That question is, if we fought a world war, loaded ourselves with debt, and then turned that debt into an economic boom and built up our cherished social programs, why can't we do it again? The answer is, we can if we learn from history. Thank you very much.
The Chair: Thank you very much, Ms Casselman. We have 15 minutes. We could do a five-minute round, with cooperation from the participants. Shall we start with the official opposition this morning?
Mr Gerry Phillips (Scarborough-Agincourt): We'd be happy to. Thank you, Mr Chair.
One of the big decisions in the budget is around staffing levels. You really haven't talked about that too much in your presentation, but I wonder if you can be helpful to us in terms of the implications. I went back and looked at the staffing levels of 10 years ago and the staffing levels today, over a 10-year period. According to these numbers, 10 years ago the staffing in the Ontario public service was 81,000. Today it's 81,000. It's essentially the same as it was 10 years ago.
Ms Casselman: That's correct.
Mr Phillips: The change in it, though, has been in what's called the justice portfolio: the police, correctional services, Attorney General and what not. That's gone up by 9,000 because -- I'm rounding -- 10 years ago it was 15,000 and today it's 24,000, so by definition, the social resources in general government have gone down by 9,000. According to these numbers from the government, there is no change in the numbers, but there's been a fairly substantial increase in the law-and-order part and a fairly significant shrinking in all others.
0950
Have I interpreted these numbers properly? I may not be using the exact numbers you used, but is that generally the impression from OPSEU?
Ms Casselman: First, you're not implying that we're moving towards a police state, are you?
Mr Phillips: Not at all. I'm just trying to --
Ms Casselman: Just checking. I thought it would fit the pattern we're into here.
Anyone who's worked in public service -- I have an advantage because I've worked with young offenders for 17 years. You have to figure out where you want to spend your dollars to get the best bang for your buck, quite frankly. If you want to spend $400, $500, $1,000 on a young kid when they need help at a children's aid society level, or even back in school -- if you look at the Alberta school system, they now have more children on Ritalin in school because teachers are telling parents, "If your child's not on Ritalin, they are not in my class," because they've lost all the support workers who are in the class to help kids maintain and learn.
It all comes down to, where does our society want to spend its money? You can spend less at the front end when the kids are smaller and support the families that need help, or you can spend it at my facility where it costs a very large amount of money to keep dangerous young offenders locked up, or you can spend it in the adult system where you've got more police officers, a bigger court system, maybe more expensive bracelets to put on their legs. You're going to end up spending a lot more as soon as people get older.
In Ontario, we've moved away over the last 10 years from dealing with children and trying to ensure that children grow up safely and with all the proper tools and understanding of what society is all about and where they need to fit into it, as opposed to just waiting until all the problems blossom and then we deal with it in the criminal justice system. That's where you see the growth industry is in the province.
Mr Phillips: What I'm trying to get at is that there's a public impression that the government's got to wrestle the "bloated" bureaucracy down, and I'm just trying to get a definition of how big it's bloated.
May I correct the record? I now see I misled myself and others, because the OPP was in a different section of this. Actually, 10 years ago the justice portfolio was 20,000 and today it's 25,000, so it's gone up by 5,000 and the rest of the bureaucracy's gone down by 5,000. It isn't quite as dramatic.
I'm trying to get an idea of the impact if we look now at saying we're going to reduce the 81,000 by some number. We don't know what that number is; you may know it. I'm just wondering where the 13,000 or 15,000 or 18,000 are likely to come from, because I gather the government is very firmly committed to what you called -- I think you called it law and order or maybe I called it law and order, but the justice portfolio. We assume that's not going to be touched, the policing, correctional officers, the court system, and that's the one that's gone up. So we're talking about cutting 13,000 or 14,000 or 15,000 out of 55,000, something like that.
Ms Casselman: My guess would be, since the government has only taken the opportunity to deal with the senior bureaucratic levels of the ministry in regard to where they think they can cut the civil service, that it won't be at that level. It will be on the front-end delivery in the communities, in whatever ministry they choose. I'm not convinced, Mr Phillips, that they wouldn't cut back in the criminal justice system. They may not cut crown attorneys or judges, but I think they'll go after the workers who move --
Ms Frances Lankin (Beaches-Woodbine): The family support plan.
Ms Casselman: Yes, the family support plan, clearly. That's a money-maker for them, but they want to make sure they create more managers as opposed to workers out there who can work hand in hand with people to make sure they get some justice.
If they're talking with only those folks to determine where they might want to downsize the civil service, I'm a bit dubious that it will be anywhere that would be effective. We know they've announced some cuts that the public has determined and other people have determined would not be effective in delivering service. If that's where they're getting their advice, I'm a bit leery.
The Chair: Thank you very much. We'll move to the third party.
Ms Lankin: Yesterday, we had some folks here from the Canadian Federation of Independent Business. I thought the members of the opposition parties were very respectful even though we might hold a different point of view, and I hope the members of government will be to you as well.
Ms Casselman: I wouldn't expect anything less.
Ms Lankin: I detected a certain antagonism growing on the benches over there as you were making your presentation. But I think you have provided some very helpful information, and I will take the time to read your full brief.
Within the context of what Ontario can do today, I think the arguments you make about all governments -- it doesn't matter what political stripe -- across all provinces taking a look at the federal government's monetary policy and interest-rate/exchange-rate policy is very important. In fact, more provincial governments of all political stripes are taking up that argument, but it's still dependent on an answer from the federal government. So while I don't disagree with that, there is an issue about what will happen in Ontario today if the federal government doesn't respond in a positive way to that.
Mr Phillips was getting at an interesting point. There is certainly a perception -- underscored every day by some of the comments that Minister Johnson, for example, has been making in the debate about the negotiations that have been ongoing -- that the Ontario public service has become bloated, has grown dramatically over the last 10 years with the "tax and spend" policies the government refers to of Liberals and New Democrats and the increasing and bloated bureaucracy. All those words evoke images, particularly done in a way to scapegoat public sector workers.
Yet when you look at the numbers, you can see that over the course of the 10 years, there has been an increase and a decline, and it's actually flat-lined. If you look at the number of civil servants per capita in delivering service, we're actually one of the lowest of all of Canada.
It's important that there's an opportunity for you to actually translate those images into what is happening in real communities. You talked a bit about the fact that a public sector dollar paid out or spent is the same as a private sector dollar. I'm wondering if you could talk about, in communities you've visited recently over the course of the last few months in the province, the local economies' reliance on stable public sector salaries and what the likely result will be of any more dramatic cuts in that area.
Ms Casselman: You mentioned the Canadian Federation of Small Business. I've actually had the opportunity in my travels over the last couple of weeks to talk to a number of business people across the province. They come out to our meetings because they're concerned about people's buying power in their communities. They understand the housing starts are down, car sales are down; public sector workers aren't buying.
In their comments, first of all, they usually denounce that group because it's actually special-interest; they would rather spend their $500 membership for that group on buying business cards to promote their business.
But they clearly understand the link between government workers, public sector workers and local economies. When you get out of Toronto and you get into the smaller communities around the area -- Mr Chudleigh lives over near Maplehurst Correctional Centre. There are 1,500 public sector workers in Milton who add to the local economy in Milton. Who would've thought it, right? But there are all those folks over there.
When you get further afield, whether it's up in the Owen Sound area or whether it's farther north in Timmins or Thunder Bay or Fort Frances, for God's sakes, where you've got one jail -- it's a border town. You close the jail; you then put the responsibility on the district, the municipality up there, to pay to transport inmates up to Kenora. So there's your policing dollars, which should be spent making sure people are safe and protected, being spent on running inmates back and forth and they're losing well over $2 million in that local economy, which is extremely fragile.
1000
The Chair: We'll move to the government side, and please, keep your questions brief. I have seven speakers.
Ms Isabel Bassett (St Andrew-St Patrick): First of all, Ms Casselman, thank you so much for coming here today with your presentation. We are listening to you because we feel very strongly we want to work with you and to hear your views, and we will consider them politely.
Ms Casselman: Thank you.
Ms Bassett: I really mean that. I want to start with some common ground because there are so many things you've been talking about. Am I correct in hearing you say that you agree that the deficit is a big problem for us, our nearly $10-billion deficit?
Ms Casselman: I agree that there is some room to make the public service more efficient and more effective, which we've talked to successive governments about over the years. We're looking for an opportunity to sit down with governments and talk about how you do that.
Ms Bassett: I know, but do you think the deficit per se, this big millstone around our necks weighing down government and business, is a problem, or do you not see it as a problem? I just didn't quite get what you meant.
Ms Casselman: There is a problem. It's not a crisis. The narrow focus of what the solution should be is what's of concern to us. So if you're looking at the spending end without looking at the revenue end, you're narrowing your solutions.
Ms Bassett: Do you think that all sectors should take part and share cutting back in handling this problem?
Ms Casselman: That depends on whether they're really involved. If you've got yourself, MPPs and senior bureaucrats, determining what the public service should look like without involving the workers who deliver the service -- those aren't the ones who sit around the boardroom tables and develop the policy; they're on the front line in the communities delivering the service. You need to be talking to those folks. You can't just rely on those senior bureaucrats, because they're as far away from the front line, quite frankly, as you are.
Ms Bassett: I just wanted to know if you thought that everybody should share equally in this problem, in cutting back.
Ms Casselman: I would love to share in the wealth of the chartered banks. Yes, I think that's very important.
Mr Jim Brown (Scarborough West): I notice on page 35 you're talking about bank welfare, and it's interesting to note that little tinge of Social Credit policy about creating money. I'd just make that comment.
The real question I have for you is that we're spending $1 million more an hour, $24 million a day. I notice in the current negotiations that you have defined what are "essential services," and in the case of --
Ms Casselman: We've negotiated what are essential services.
Mr Jim Brown: Yes. You of course would like to get it down and management, I guess, would like to get it up, but --
Ms Casselman: Those negotiations are completed.
Mr Jim Brown: So for correctional services, for example, I think the figure is 48% of your staffing would be deemed to be essential.
Ms Casselman: No, 32%.
Mr Jim Brown: It's even less. The definition then would be that the prisoners would have their safety of life and limb. How could we get by on 32%? Wouldn't the difference of 68%, which means a savings of approximately $10 million a day of the $24-million deficit a day -- 68% is a tremendous fat factor. How can you explain that?
Ms Casselman: If you want to get into how negotiations are going, I'll gladly do that.
Mr Jim Brown: No, just this particular question.
Ms Casselman: Yes. What I want to try and explain to you is what the essential service agreement is for and what the emergency service agreement is for.
It's actually in a piece of legislation called the Crown Employees Collective Bargaining Act. When we were given the right to strike, we were also given the obligation, with the employer, which happens to be you folks right now, to negotiate what would be essential services in the event of a strike or a lockout. So we know that in the event of a strike or a lockout, there will be less provision -- as in GM, there won't be any cars going down the line. In public service there will be less service delivered. We're able to withdraw some of our labour or you're able to lock out some of our labour in a labour dispute.
The negotiations that took place between the parties were just that: How can we provide the essential services that are necessary to keep institutions open? It's not the health and safety of the inmates I'm worried about, it's the health and safety of the jail guards we represent who will be left inside that I'm concerned about. I would anticipate that most of those institutions would be in a lock-down situation so that no one gets hurt in the event of a labour dispute.
What I want to caution you about -- and I know you guys have your lines you trot out every second word -- is you can't use that as an example because that's in the event of a very serious breakdown in labour relations in the event of bargaining a collective agreement, which we're anticipating we won't get to.
Mr Jim Brown: But you would be prudent in coming up with the 32%.
The Chair: That concludes our time. Thank you very much, Ms Casselman and Mr Onyschuk, for joining us today.
CANADIAN CHEMICAL PRODUCERS' ASSOCIATION
The Chair: The next group joining us is the Canadian Chemical Producers' Association, Mr Chesworth, Mr Carlos and Mr Goffin. Welcome. We have half an hour.
Mr Alan Chesworth: Good morning. My name is Alan Chesworth. I am manager of the environment and safety department of Imperial Oil's products and chemicals division. I am also chairman of the Canadian Chemical Producers' Association business and economics committee. With me I have my colleagues John Carlos, who is from DuPont Canada Inc and is director of taxation, and David Goffin, who is vice-president of business development for the association. I believe you all have copies of our submission, and I will go through it.
As an introduction, the Canadian Chemical Producers' Association is pleased to have the opportunity to provide our views on the pre-budget consultation process. We represent 68 companies across Canada producing a broad range of petrochemicals, inorganic chemicals and specialty chemicals. A list of our members is attached in the appendix to our presentation.
About 60 members of our association have plants in Ontario, and Ontario produces 55% of all Canadian chemical shipments, so this is an important industry to the province of Ontario. Our members account for approximately half of the chemicals and chemical product sector which is represented in the province. This is the third-largest manufacturing sector in terms of shipments and value added and it provides about 53,000 jobs to Ontario residents.
A report on our most recent year-end economic survey of members appears in the second appendix; 1995 was a record and I'd say an excellent year for our members in terms of sales, exports and operating profits. The chemical industry is a very cyclical industry and these positive results helped us significantly over some of our low after-tax profitability but also loss years which we had suffered in the 1990-93 period.
We're also becoming an extremely export-oriented industry; 53% of our sales are accounted for by exports. This is up from 33% in 1985. The impact of the free trade agreement has been very positive on this industry. Today, the United States is our largest export customer and takes 80% of our exports, compared with only 65% of our exports back in 1985. Last year, in 1995, exports again led the increase in our sales, rising 33% over 1994 and far outpacing domestic sales growth, which was only about 2%. So the export market is very important and our competitiveness in the export market is very important to this business.
Last year's stellar results unfortunately will not be repeated in 1996. Our members believe we're at the top of the cycle for industrial chemicals, and although our sales volumes will increase in this year, prices and margins have already peaked -- they peaked about the middle of last year and have been declining steadily -- so sales value is likely to decline. Nevertheless, 1996 still promises to be a good year for chemical manufacturers, with results which will make a positive contribution to helping this government achieve its budget goals.
1010
The Ontario business climate has changed and is changing significantly for us. In last fall's fiscal and economic statement, Minister Eves said, "This government will support business by providing a positive business climate, with competitive taxes, responsible fiscal management, and fewer barriers to investment and growth." A positive business climate is critical for the chemical industry, because the chemical industry is a global business, characterized by very strong international investments and trade flows. Ontario is a very small player in this worldwide business and with a modest domestic market.
The province needs to be more than equal on a competitive basis to help our member companies compete and to attract new chemical sector investment. A positive economic climate is essential to our customer base in Ontario, which also faces global pressures. It will be to the advantage of all Ontarians if investment in high-value-added sectors like chemicals and its customers can be maintained and gradually expanded. We believe that the policies being introduced by this government are providing the foundation to make that happen.
A CCPA score card and text assessing the competitiveness of Ontario business and policy environment for chemical manufacturers as of the beginning of this year is attached in appendix 3. The previous version of this score card showed that Ontario had lost its competitive edge, primarily due to negative government policies and perceptions about those policies. I would emphasize the word "perceptions" as being equally important, because perceptions are more difficult to change than are realities.
Now we are confident that the declining competitiveness has been arrested and the government is on the right course to restore business confidence. Fiscal responsibility and better-balanced labour laws are key components of this process.
Turning to the government's commitment to fiscal responsibility, the Canadian Chemical Producers' Association fully supports the government's aggressive spending cuts as a means to achieving a balanced budget. While these measures will have a dampening effect on economic growth this year, they are rated positive both by the capital markets and the business community. Eventually, the spending restraints and other positive government policies will help the private sector to grow and offset the effects of government restraints. In the shorter term, the promised reduction in personal taxes will help cushion this blow.
Spending cuts are never popular and there is no doubt that they do involve hardship, but the Canadian Chemical Producers' Association is convinced they are necessary ingredients in obtaining a balanced budget. Personal taxation reduction is a key to stimulating the province's economy, and ultimately this will help towards a balanced budget.
As for corporate taxes, the CCPA's analysis in appendix 4 shows that for chemical manufacturers, there is no room for increased taxes. The province's corporate tax system is marginally competitive with those of our major competitors on the US gulf coast. I have to emphasize that this is definitely global competition that we're talking about, and our immediate competition is Texas and Louisiana, so when we look at our competitive basis, we have to look at Texas and Louisiana.
International investors in chemicals considering Ontario for potential investment need to be assured that corporate tax systems will be both stable and competitive. Changing tax systems is not viewed positively by the international investment community, and they have to be competitive with the jurisdictions with which we compete which are outside this country.
As you may be aware, Alberta is another leading province for the chemical industry investors and it now has a balanced budget. It is also considering some tax reductions for manufacturers both of chemicals and in other industries in this year's budget. This is specifically in the area of machinery and equipment tax which puts the Alberta chemical industry at a disadvantage from those competitive benchmarks in Texas and Louisiana.
The burden of government spending restraint is shared by companies as well as individuals. It has already resulted in substantial reductions in business subsidies, which the Canadian Chemical Producers' Association supports. The government must be cognizant of how other jurisdictions use subsidies, with our goal of seeing Ontario's overall business and policy environment surpass those offered by other jurisdictions.
Spending restraints will also mean increased cost recovery for government programs and services, a process that the business community generally supports so long as it is implemented in a manner that does not undermine companies' competitiveness. appendix 5 proposes a number of measures in support of appropriate cost recovery which have been provided to the federal government. I would add, though, that I believe those are equally applicable to all levels of government in this country.
Regulatory reform. The minister is counting on his Red-Tape Review Commission to remove barriers to growth, promote economic prosperity and create jobs. The CCPA agrees that the regulatory systems need to be redesigned to provide a stronger margin of competitive advantage. We plan to participate in the reviews of existing regulations and to promote greater reliance on voluntary initiatives in future to improve industry competitiveness and government efficiency.
We believe that the Canadian Chemical Producers' Association's responsible care ethic provides a sound basis for formally recognizing voluntary pollution prevention and reduction efforts in our sector. Responsible care is a formal commitment that our members make to a set of principles and codes of practice covering the responsible management of chemical products throughout their life cycle.
In conclusion, the government has already made tough choices and difficult decisions in its two 1995 economic and fiscal statements. This year's budget promises more of the same. Our association urges the government to stay the course towards balancing the budget and restoring a competitive business environment. In our view, this is the only way to return the province to a period of sustained economic growth.
Thank you very much. I'd welcome questions and have my colleagues help me answer them.
Mr Tony Silipo (Dovercourt): Thank you very much for the presentation. I'm looking at appendix 2. I'd like to probe a little bit. You made the point that 1995 was a very good year for the industry, and I think that's good. I want to look at it from the perspective of one important way, at least, of how that growth would affect people out there. I note with some interest that while sales were up and profits were up, the number of people you employed in the industry went down.
Mr Chesworth: Yes.
Mr Silipo: You expect it to go down further in 1996.
Mr Chesworth: Yes.
Mr Silipo: I just want to challenge, in a very polite way, your assertion that therefore these cuts and the government's economic strategy are going to be good for all of us at the end of the day. If that doesn't translate in the private sector to more jobs, how is it going to be good for the people of the province?
Mr Chesworth: I need to explain the dynamic of the industry to you. I said it has to be a globally competitive industry. If we look at pricing and we look at volume of our commodity products produced, you are on a continuously declining cost of producing to stay competitive, and that is exclusive of raw materials. So we have to produce our products, every year, smarter and smarter. That means, per ton of product, lower cost. We can do that by producing more and selling more -- we do that. We can do that by looking at our organization structures and looking for efficiencies. We can look for ways to have people work smarter. We use all those tools to keep ourselves on this treadmill of ever-increasing productivity, the only way we stay competitive.
Mr Silipo: I don't quibble with that. I think that's what has to happen.
Mr Chesworth: That's the dynamic you've seen going on here. The next thing we have to do is to compete in a global competition -- and many of us international companies, so we're competing with our international colleagues -- we have to compete to get investment so that the next chunk of major investment gets located in Canada. That's where having a very competitive government environment to operate in, having a government environment which encourages investment and is seen to support investment, is critical. This is why I mentioned very early on that perception was important. In our global system, there is a perception that Ontario has not been a particularly good place to do business. The facts behind that are changing, but the perception takes more time to change than some of the structural pieces around it.
1020
Mr Silipo: I understand the importance of perception, as you put it. As I said, I'm not disagreeing with the need for your industry and many others to be competitive and for us to recognize that certainly, your industry being very good example, competition today is worldwide and that we can't isolate ourselves as a province or as a jurisdiction from what's happening elsewhere. So I don't argue at all with that assertion; I think it's in fact part of the reality of good government and good business today.
I guess I'm using this as an example of something that I am becoming more and more troubled by, which is that if the assertion by you and by many others in the private sector is that government needs to do what this government is doing because at the end of the day -- I think you said yourself that initially it won't help, but I think you're saying that over time it will.
Mr Chesworth: Yes.
Mr Silipo: We saw the Minister of Finance tell us that even with all of the cuts, and the tax cut included, he doesn't expect any real positive growth in terms of jobs being created at least for a couple of years down the line. I'm troubled, because when I listen to economists, as we've been listening to, I don't get that sense of comfort that out of all of this pain will come those jobs. While I think it's good to have the petrochemical industry being able to compete across the world, it's good to have banks continue to make the profits they have, if that doesn't translate into more jobs for people in this province, as a legislator I ask myself, why are we further ahead? How are we further ahead if we're going to have a level of unemployment over the next couple of years that's going to be at best at the same level that we have now?
Mr David Goffin: Could I jump in for a moment? If you look a couple of lines up in the chart, you'll see our fixed capital expenditures in Ontario are not very outstanding either. That's the part we have to turn around. Take this policy environment that has just changed here. A year ago we were having a great deal of difficulty selling Ontario. As Mr Chesworth says, we have to turn that perception around, and we'll do our part to do that. If you look at our fixed capital expenditures, most of those are in terms of plant retrofits and incremental expansions in plants that add to capacity but add virtually nothing to employment.
What we've got to do is sell the new climate here to get new investment into our sector. We particularly need it in Sarnia. We have two new plants that come to mind immediately coming into Ontario now, but just two. We want to see that expand considerably over the next couple of years. So you're right; it's going to take some time. But with the changes that we see taking place here, we want to see the new investment that comes in that provides employment not only in our sector but also in the downstream sectors that we supply.
Mr Wayne Wettlaufer (Kitchener): Thank you, gentlemen, for appearing today and for your submission. I'm going to ask a couple of very short questions, and I'd like on the record whether you feel that the $10-billion deficit is a major problem.
Mr Chesworth: Yes. We consider it's a major problem because it's an ever-escalating debt service problem.
Mr Wettlaufer: You would agree that we all have to share in the solution to that problem.
Mr Chesworth: Yes.
Mr Wettlaufer: Keeping in mind the ever-increasing growth of public debt interest and its effect on the deficit, you have mentioned already that you expect that in 1996 your sales and your profits in your industry will flatten compared to 1995.
Mr Chesworth: In terms of sales volume we'll increase, in terms of sales revenue and margin profitability decline, from 1995.
Mr Wettlaufer: How do you see an increase in the deficit and public debt interest affecting that?
Mr Chesworth: It doesn't have a direct impact, because what's causing the decline in revenues is part of the commodity chemical cycle, and excess supply on a world basis is depressing prices. Very directly, the deficit within Ontario is not going to impact that in 1996. Our concern vis-à-vis the deficit in Ontario is creating the right business climate so we can attract investment. That's the linkage for us on reducing the deficit. Maybe my colleagues can add something to that.
Mr Goffin: I think Mr Chesworth is right. We see CEOs in major chemical companies in Canada stand up and say that the country has moved in a positive direction on many of the competitiveness basics for us over the last couple of years. The big negative that a CEO of a major chemical company had to overcome in the last couple of years was government here in Canada and what government had done at the federal and provincial level in trying to bring that new investment into the country.
Mr Tim Hudak (Niagara South): Gentlemen, if I could just ask a bit beyond 1996 as well, if the debt spiral continued and debt interest charges increased substantially, as they would have done if this government hadn't made some of the difficult choices it's already made, does that have an effect simply on the CEOs, the ownership of the corporation, or does that affect the workers here in Ontario?
Mr Chesworth: If our competitive position on a global basis deteriorates, then we are in a position where we're going to have to consider closing plants down, and that impacts on employment.
Mr Hudak: So you run, as you said, a very competitive business.
Mr Chesworth: Extremely competitive, and what has happened in the last five years is that we've gone from a business which was essentially built to serve a domestic market and so was scaled to serve a domestic market -- with free trade and the removal of tariff barriers, which we supported, we have had to find ways to take those below-world-scale plants and make them operate at world-scale competitive costs, and we have done that. We need a positive economic climate to be able to keep doing that. If the economic climate turns around on us, then we are going to lose our competitive position and that will have a snowball effect on employment.
Mr Hudak: And the negative impact of debt financing on the chemical industry, is that unique to the chemical industry or do you expect that --
Mr Chesworth: No, I believe this is true for industry and business in Ontario across the board, not just for the chemical industry.
Mr Jim Brown: You're a major competitor in Louisiana and Texas, and I know they have right-to-work legislation and they have probably fewer regulations. If we were to do some more changes in our structure, would changed labour legislation or changed health --
Mr Chesworth: Let me say something about regulatory regimes. I'm maybe thinking more about permitting and environmental regulations, things like that. We have a better process in Ontario than they have in Louisiana and Texas, particularly in Texas, and it's because it is a much more consultative process that goes on. That we consider is one of our sustainable competitive advantages and we encourage the regulatory reform because we believe it enhances what we think is a competitive advantage.
Now, there are other areas. You will see that Ontario is a problem for construction costs when it comes to new investment. That's not because our construction workers are any less skilled -- in fact, we have very skilled construction workers -- but that is to do with flexible labour practices. That is an area that we have to address to improve the competitiveness with which we can put investment in the ground, and we are working with the Sarnia Construction Association to try and look at improving work practices so we get higher productivity in the construction area.
1030
That is one of the areas where Louisiana and Texas certainly have the benefit over us, and that's not to do with the dollars per hour that a mechanic or a rigger gets. That's to do with how efficiently they work and it's to do with work practices.
I'll give you an example. If I'm rigging piping in Sarnia, I have to have two fully qualified riggers at $27 an hour. If I do it in Louisiana, I have to have a guy who's being paid $27 an hour, or even a little bit more in Canadian dollars, but he has a helper who is unskilled -- and that's all you need, is a helper, and he's probably only being paid $10 or $12 an hour. That's what I mean by flexibility, and that's an area we have to address, because our construction costs in Ontario, which impact the investment decisions, are not as competitive as they need to be.
Ms Annamarie Castrilli (Downsview): Gentlemen, I want to say that it's very useful to have you here, primarily because it assists in understanding how the government's plan would trickle down, would work down at your level. The Minister of Finance has stated this week -- indeed as has been the position of the government and, before that, through the Common Sense Revolution -- that cutting taxes will create jobs. There's no dispute with respect to that. I'd like to pick up on that again, with your indulgence.
I heard you say that in order to get the total picture of jobs and investment, we need to look at not just the number of employees and the salaries but also at fixed capital expenditures. As I look at it, I see some trends. Every third or fourth year capital expenditures go down. There's a really big blip between 1990-91 and 1994-95. When I look at your projections for 1996, it looks to me like you're pretty much on target, given what the figures are here.
With that in mind, I'm still a little confused, because the minister and government have indicated that their projections for job creation are in the nature of 725,000 over the next five years. We've got 72,000 that would be created in 1995; 81,000 in 1996; 100,000 in 1997; and then another 180,000 in the remaining years. When I look at your charts here, I wonder how you feel about those projections with respect to your industry. I realize that you're not going to create the bulk of those jobs.
Mr Chesworth: I can't answer the broad question you've asked, but I think I can answer some specifics. When we look at capital investment -- and you mentioned there were peaks through that capital investment profile -- first of all, you have to have some concept in the petrochemical industry of what a major investment is. If we build a polyethylene plant, we're talking about a $200-million investment. If we build an ethylene cracker, we're talking about $400 million or $450 million. So some of those spikes when the industry investment went over $1 billion was because there was a cracker being built.
When we look at next year -- well, this year, 1996 -- our members are projecting $850 million in investment. That investment will not come on stream until 1997-98, so it will not impact directly on employment in our companies. Where it impacts is in the construction industry, because that $850 million is going to be spent in the construction industry on materials and labour. There's a knock-on effect which I don't have the details of, but I'm sure that we have some numbers which will tell you how many jobs are created through an $850-million investment.
Ms Castrilli: With respect, that would probably be offset by a decrease of employment in your industry.
Mr Chesworth: I don't know whether that's the case or not.
Mr Phillips: Just two or three quick observations. I thought the letter to Mr Eggleton was a good letter and I think the government should look at that. I hope they do. I think it's good advice.
Mr Chesworth: Thank you.
Mr Phillips: I won't ask you the political question they were trying to get at, and that is, does it make any business sense at all, if you've got this huge deficit, to cut taxes by $5 billion? Is it not more important to get the fiscal house in order before you -- I'm from business too. I would never declare a huge dividend when I'm bankrupt. But I won't ask you to comment on that, because that would be unfair.
Interjections.
Mr Phillips: No, it is unfair and they don't want to be putting the political comment on a political matter. I just say to them they talk about $24 million a day for interest costs. They want to give a $14-million-a-day tax break.
You mention in here that costs, wages and benefit costs, are a significant competitive advantage for Ontario, 10% to 40% lower, I gather, than other jurisdictions.
Mr Chesworth: Let me clarify that. When we talk about our professional costs, that's our managers, me, and we look at comparable salaries in the US, depending on which company you're working for, and you take together both the salary and the total benefit package; that's the number we're talking about. When we look at total remuneration of our wage people, it's much closer to being similar to the US. So we have compression between wage employees and salaried employees in Canada compared with the US.
Mr Phillips: Okay. But still, I gather, an advantage.
Mr Chesworth: It is an advantage. A lot of it's driven by exchange rate.
Mr Phillips: Yes. Historically, the Ontario government has provided funding, assistance to businesses, often looking to get a plant located here in Ontario. It's often in the auto industry, and it's been seen sometimes as the thing Canadian companies need to compete with other jurisdictions when you're competing for plants. Am I interpreting your recommendation here that that's not a factor and you don't think that is needed?
Mr Chesworth: We believe as an association in a level playing field. If you look at our tax models, you'll see in our tax model we didn't simply just look at corporate tax. We looked at the whole payroll tax, whether it be for health, education, municipal taxes. So we included all that, and you see some big differences. I'll get to you information on the subsidies. It's the same on subsidies. On subsidies to industry, we support removing those so long as you're not throwing the baby out with the bathwater. If a competing jurisdiction has a subsidy to industry that you have to compete with, then we better have some offsetting, compensating control on that.
Mr Phillips: I think there were three or four auto plants that if there had not been the money available may not have come here. That's all.
Mr Chesworth: I can't speak for the auto industry.
The Chair: Thank you very much, Mr Chesworth. We certainly appreciate your presentation. Mr Carlos, Mr Goffin, thank you very much for joining us today.
1040
ONTARIO PHARMACISTS' ASSOCIATION
The Chair: The next group that we have is the Ontario Pharmacists' Association, Mr Gary Sands and Mr Peter Struthers.
Mr Gary Sands: And, Mr Chair, we have our CEO, Barb Stuart, who has just stepped out for a second. She'll be sitting at the table too.
Mr Wayne Marigold: My name is Wayne Marigold. I'm the president and chairman of the board of the Ontario Pharmacists' Association. With me in a moment will be Barb Stuart, our chief executive officer; Peter Struthers, one of our executives; and Gary Sands, who is our manager of government relations.
On behalf of over 4,500 pharmacists across Ontario who are members of our association, I wish to thank the committee for its invitation to put forward our suggestions for the 1996 Ontario budget.
Today we want to talk about the role pharmacists can play in helping the government to reduce costs throughout the health care system. Pharmacists are drug therapy specialists. By preventing and solving drug-related problems through pharmaceutical care and drug use management strategies, pharmacists can save the system tens of millions of dollars that can be used to maintain other essential health services.
Budget time is always a time for difficult choices. Costs must be reduced and spending must be brought under control. But as the government moves forward to reduce and control spending, it must ensure that essential services are maintained at appropriate and sustainable levels.
Ontarians have said that maintaining the quality of their health care system is the number one priority for their government, but health care costs are the largest and most rapidly rising segment of government expenditures.
The challenge is to deliver health services with less money and better quality. This challenge of course applies to drug therapy programs, which are a large and essential component of the health care system.
Drugs prescribed, dispensed and consumed appropriately are very cost-effective health care interventions. Quality drug therapy can even replace, delay or prevent the need for more expensive health services. This makes it imperative that all Ontarians have access to prescription drugs.
In terms of the 1996 budget, we estimate that program improvements, cost-saving measures and an expanded role for pharmacists can save between $150 million and $400 million annually. A small investment in pharmaceutical care can free up millions of dollars to be reallocated throughout the health care system.
In the attached paper, Strategies to Reduce Health Care Costs Through Pharmaceutical Care and Medication Management, the Ontario Pharmacists' Association has set out the challenges and opportunities facing both the government and pharmacy.
The key challenge is to control and reduce rising drug benefit program costs, which are forecasted to be $1.3 billion in fiscal 1995-96, and rising health care costs due to inappropriate drug use and non-compliance, estimated at billions annually. There are several reasons for these problems:
-- The rapid increase in the number of beneficiaries. There are about 1.3 million seniors and 1.2 million people receiving social assistance in the ODB plan. These numbers will continue to rise. We believe the welfare-social assistance numbers are decreasing, but from a demographic point of view, we all know that there's an increasing number of seniors and obviously those numbers will rise significantly.
-- The large number of prescriptions per beneficiary. Over 300,000 seniors receive 20 to 50 prescriptions per year, and more than 150,000 seniors receive over 50 per year. Those are the government's own numbers; that's what's been reported.
-- The costs of new drugs. The average cost of existing therapies per claim is estimated at a third less than the new therapies. That's not to say that the new therapies aren't worthwhile, but that is a fact.
-- Inappropriate prescribing. Studies report rates of inappropriate prescribing in Ontario of 25% to 40%. Based on a total of ODB costs of $1.3 billion, this could be costing between $250 million and $400 million annually.
-- The large number of people, over 17,000 annually, who are treated for prescription drug problems in Ontario.
-- The high incidence of hospitalization for seniors related to medication misuse. Estimations are that approximately 20% of seniors' hospitalizations are due to adverse drug reactions.
-- The $25 million to $250 million worth of drugs that are wasted each year.
-- Finally, the failure to take prescription medications or non-compliance costs the health care system millions a year in terms of hospitalization, physician visits, lost productivity and premature deaths. Many studies have shown that up to 50% of patients are non-compliant with their drug therapy. We have had instances, one in particular that we are aware of, where with inappropriate counselling, prescribing and follow-up and compliance, an individual had a prescription for the nicotine patch, continued to smoke and died. That is probably not an isolated issue.
Sensible solutions would be:
-- To improve prescribing practices through physician training, prescribing guidelines, counselling by pharmacists and improved access to drug information for health care professionals. A 10% improvement in prescribing practices could potentially generate $25 million to $40 million annually.
-- To reduce drug wastage by implementing a trial prescription program which would see patients receive an initial seven-day supply of a prescribed drug, and if tolerated and suitable, then receive the balance of the prescription. Based on experience in British Columbia, a trial prescription program in Ontario could potentially save $27 million to $45 million annually.
There was an incident just last week in the company I work for where a senior received a $600 prescription, and in a matter of a couple of days the spouse brought back the prescription to our store and asked whether or not we could refund her the money, or at least refund the government. Obviously, due to legislation, we're not allowed to take back medication and reuse it, and $600 went down the drain in the system. A trial prescription program could have prevented that.
-- To further control the use of sustained release formulations. A 1% or 2% saving could generate $13 million to $26 million annually.
-- To establish a protocol for pharmacists' therapeutic intervention that would allow for the interchange of the most cost-effective drug. Obviously that would have to be done in consultation with the physician. We would not be doing that alone.
-- To require mandatory drug use evaluations by pharmacists on each ODB recipient. That could save $13 million to $26 million annually and reduce other health care costs related to misuse.
-- To develop a medication passport using smart card technology to reduce overuse, misuse, drug wastage and inappropriate prescribing and save $13 million to $26 million annually. As you may know, the current Health minister was very supportive of the smart card technology prior to the election.
-- To undertake a comprehensive, public-patient education program to address the $250-million drug wastage problem.
-- Finally, for government and pharmacy to explore the potential cost savings and feasibility of all these initiatives in order to save from $150 million to $400 million annually.
In addition to these cost-saving measures, there are significant opportunities to rethink and redesign the entire drug benefit system:
Eligibility requirements could be reviewed to ensure that all those receiving assistance truly need assistance.
The ODB program could be redesigned using a mix of public and private plans to extend coverage to all Ontarians on a premium basis. It is possible to provide coverage to an additional 2.5 million Ontarians with no protection at no or little additional cost to the government.
A major review could be conducted on the ODB focusing on ways to streamline operations, to make greater use of technology to assist pharmacists and physicians in providing optimal drug therapy and to expand the role of pharmacists in providing pharmaceutical care and medication management.
No matter what other objectives the government wishes to achieve in the 1996 budget, the health and quality of life of the citizens of Ontario, through our health care system and equitable access to quality drug therapy, must be sustained and protected.
Pharmacists are in a unique position to have a positive impact on the way drugs are prescribed, dispensed and consumed in order to protect the future of drug therapy programs and control health care costs. Can pharmacists really save this much money? The answer is a definite yes.
In 1993, the Canadian Pharmaceutical Association established the Community Pharmacist Intervention Study. The study examined the interventions that resulted in a check or change in drug therapy for prescription drugs. It also examined the advice given by pharmacists to consumers on minor health problems and over-the-counter drugs. There were approximately 600 pharmacies across Canada in the study. It was a well-designed study and will be published in much more detail shortly.
1050
Based on this study, the estimated savings to the health care system were substantial. The numbers I'm going to state are based on extrapolation of the 600 or so pharmacies to all pharmacies in Canada -- this is a Canadian number; we can do our mathematics based on Ontario's population -- and this is on an annual basis.
There were approximately 6.16 million prescription interventions by pharmacists across Canada. There were approximately 15.28 million over-the-counter interventions across Canada. The prescription interventions saved the health care system between $80 million and $103 million. Helping patients to use medication properly saved the health care system approximately $20 million. Pharmacists counselling on over-the-counter medication saved approximately $167 million to $266 million. Obviously, part of that would be in reducing the number of visits to physicians, and potentially hospitalization as well, and maybe visits to emergency departments.
Established total savings to the health care system in 1993 across Canada from pharmacist interventions were $268 million to $388 million, or approximately $44,000 to $64,000 per pharmacy. Those are national numbers.
The Ontario Pharmacists' Association believes that government and pharmacy must work together on a range of initiatives to achieve these goals. We will be setting forth our objectives in our upcoming meeting with the Minister of Health. The 1996 budget provides an opportunity for the government to set realistic and achievable cost-saving targets that will enable it to maintain the health care system in the future with no additional costs.
It is therefore recommended that:
-- The government establish a formal partnership with the Ontario Pharmacists' Association through a memorandum of understanding with the Ministry of Health to co-manage the drug therapy programs and implement specific measures to improve their quality and cost-effectiveness.
-- The Ministry of Health and the Ontario Pharmacists' Association, in consultation with other stakeholders, undertake a fundamental redesign of the drug benefit programs to ensure all residents of Ontario have equitable access to quality drug therapy.
-- The savings generated through program improvements and redesign be utilized to maintain the quality and accessibility of Ontario's health care system.
-- The Ministry of Health and the OPA initiate a trial prescription pilot project as soon as possible.
In closing, I would like to thank you for the opportunity to put forward our suggestions for the 1996 Ontario budget. The Ontario Pharmacists' Association is confident that by working in partnership with government, our colleagues in health care and the citizens of Ontario, we can improve the quality and cost-effectiveness of drug therapy programs and help control or reduce costs in other parts of the health care system.
Mr Ford: Welcome here today, you and your colleagues. I noticed you were talking about cost, savings, and then you talked about $25 million to $250 million worth of drugs wasted each year. This is why this government was elected, to set the budgets and keep costs under control. I'd like to know if you agree that the $10-billion deficit must be addressed.
Mr Marigold: Absolutely. I think it goes without saying that a deficit of that magnitude has to be looked at and reduced. We believe we have some ways in which we can help to do that.
Mr Ford: I was listening and reading and following along with you. You point out a lot of controls and costings that could be saved, and we appreciate your opinions on that.
Ms Bassett: Thank you for your submission today. I understand that the Minister of Health will be meeting with the association tomorrow. Will you be discussing the memorandum of understanding about a formal partnership?
Mr Marigold: Yes, it is our intention to discuss that tomorrow, and a number of other issues as well that were outlined today.
Ms Bassett: It was your fourth recommendation I was particularly interested in, that the Ministry of Health and the Ontario Pharmacists' Association initiate a trial prescription pilot project as soon as possible. Will you be raising that tomorrow?
Mr Marigold: Yes, that will be raised tomorrow as well.
Ms Bassett: Could you outline a little bit about that pilot project?
Mr Marigold: Obviously, we would have to meet with the minister and discuss the details for that. The way it's currently working in British Columbia is that there's a prescription written for whatever quantity it is, but the pharmacist dispenses a seven-day supply. At about day six the pharmacist follows up with the patient, asks specifically: "Are you tolerating the medication? Have you had any side-effects? Is it helping?" That being the case, the rest of the prescription is dispensed. The statistics so far for a reasonable number of drug categories is approximately a 50% saving.
Mr Wettlaufer: On the seven-day prescription, I had discussed this with a member of your association a few weeks ago and I just want a clarification. There is no double prescription fee; is that correct? In other words, you've received a prescription fee or dispensing fee the first time but not the second time.
Mr Marigold: In British Columbia there are two fees, but in spite of the two professional fees, there is still a 50% saving in the cost of the program. Obviously, we would wish to discuss protocols for this in setting up a pilot project, so these details have not been worked out. But that's the current situation in British Columbia.
Mr Wettlaufer: When we were talking about the seniors and how they get medications mixed up and what have you, partly this is due to the fact that they are under stress when they are receiving their medications and of course when they receive the prescription from you. Have you ever given any thought to having a printed sheet large enough for them to read, as opposed to the label on the bottle, that seniors could read better? Has that ever been thought of?
Mr Marigold: The majority of pharmacies in the province do in fact generate a computer fact sheet which indicates things like the reasons for the drug, potential side-effects and how to take it properly, so that's in addition to the label.
Ms Castrilli: I've not had an opportunity to read in detail your strategies, but from the cursory glance that I've given to it, I'm very impressed with some of the cost saving measures that you propose.
I notice that on page 3 of your supplementary document you set out what you think are the nine principal ways to control costs. How many of these have been discussed with the minister to date? I know you have a meeting tomorrow.
Mr Marigold: Specifically with the minister, we have talked about a couple of ideas. We have talked about trial prescriptions very, very briefly. Prescribing guidelines, as you may know, are already in effect for anti-infectives and anti-hypertensives, I believe. Obviously, that will be discussed as well. So we have been involved in setting up those particular guidelines. But the detailed information has not been discussed with the minister at this point.
Mr Sands: One of the things we're trying to convey to the committee, because of these initiatives that we're talking about that we believe will generate significant saving -- we're looking to this committee for some support vis-à-vis the Minister of Health in being able to discuss them. We are meeting with the minister tomorrow, but we're not anticipating that we're going to be able to come to an agreement on all of those issues in a one-hour meeting. That's why we thought we'd take this opportunity to bring it to the attention of the committee.
1100
Ms Castrilli: As one member of Her Majesty's loyal opposition, I'm certainly impressed. Have you had a consultation process and has it been satisfactory so far? Is tomorrow part of that consultation process or is it a beginning?
Mr Marigold: We had met with the minister early in September. We've communicated --
Ms Lankin: That's when you had your input into Bill 26.
Mr Marigold: I guess you could say that. We had met with the minister early in September and there has been some correspondence back and forth. We have not really had an opportunity to do much consultation at this point but we are meeting with the minister tomorrow and we certainly believe that we will be able to discuss most of these issues.
Ms Castrilli: I hope you will have that opportunity.
Mr Phillips: I gather the current cost of the drug benefit plan for Ontario is around $1.2 billion or $1.3 billion.
Mr Marigold: Yes, somewhere around there.
Mr Phillips: And with the announcement that was made in the fiscal statement the plan is that that would reduce the cost to the province by $225 million. Am I working with the right numbers here?
Mr Marigold: That's the estimate, yes.
Mr Phillips: The user fee comes in effect, I gather, April 1. Is that right?
Mr Marigold: The user fee is June 1.
Mr Phillips: June 1, is it? What is the practical application of that? I'm just interested in what's going to actually happen as seniors and others come to their pharmacy. Will this come as a surprise to them, or have you pretty much let everybody know that, effective June 1, they will be looking at a user fee?
Mr Marigold: I believe it depends on whether the seniors have been reading the media reports and watching the media. I would make the assumption that the ministry will send out information to seniors prior to June 1 outlining the fact that there will be the $2 copay. Obviously, at the point of encounter at the dispensary we will be sending a claim down to the network, and there will be information coming back that we are to collect $2 or whatever. We're certainly hoping that there will be communications to the seniors. Obviously we will be bringing that up with the minister as well tomorrow, to see what plans there are for the communications to the seniors and the social assistance.
Ms Lankin: In fact we know at this point in time the ministry does not have all of the plans in place with respect to the administration of that and the collection of that and the relationship between pharmacists and the consumer, so there's a lot to be worked out there.
I support very much the thrust of your argument and I believe profoundly that there is tremendous cost saving to the Ontario drug benefit program to be found by following that prescription -- excuse the pun -- that you've set out, but also much better, higher-quality health care.
I urge the government members to listen to Mr Sands's plea to take this up and to argue it internally, because these solutions have been and are being worked on. As you've heard, the prescribing guidelines are something that had been initiated, and there are prescribing guidelines for anti-infectives and for some other sets but the process is taking a long time.
One of the reasons for that is because in our health care system doctors have been essentially at the centre of the range of professionals in the health care system, and doctors also understand that there's a shift taking place and that more of a multidisciplinary team and approach are required. Pharmacists, in terms of pharmacological care, play an important role and a growing important role -- or can, if we allow that in the way we structure the system. So there are some really important changes to take place here. If too many seniors are getting too many drugs, it's because they're being prescribed too many, and the prescribing guidelines are important to have scientific and peer pressure on changing the behaviour of medical practitioners who are doing the prescribing.
The concern I have is that many of these arguments were put forward, have been in the past and are being worked on, but were put forward very clearly during Bill 26. You said we're not debating it, but we are. The pharmacists' association said: "Don't do the copayment. That's not good health care. It's going to cause those people who require but can't afford to make bad choices about their health care." I would argue it will bring down the costs one time, but the majority of the costs in the system, the new costs and additional costs, growing costs, have been from the high price of new drugs coming on to the system and the inappropriate guidelines to allow for interchangeability and other sorts of things. We really have to move to that.
They also said, "Don't deregulate the non-ODB market." Pharmacists are on the front line in the retailing business and they know that there is the potential of additional costs not just from the drug manufacturers but also -- and they indicated it themselves in their presentation -- in some small towns where there are monopoly situations of independent pharmacists; or from the fact that independent pharmacists are going to have to pay more to purchase it because the large chains and the large institutional purchasers have driven down their price but the drug manufacturers have got to make that up someplace, so the small independent pharmacist pays more and passes those costs on.
The government was moving very quickly and didn't listen to those recommendations. That's history. But we can still improve pharmacological health care dramatically by taking some of these steps that have been recommended here and save the government, the taxpayer, a lot of money in terms of the administration of that Ontario drug benefit program, which can be put back into the kind of health care expansions that you know are needed in other areas.
I wanted to use my time to really reinforce the message that you've brought forward, to tell you that, just on a non-partisan basis from my experience in the health care system, I believe these are really crucial developments that are being recommended. I hope you will take the opportunity to recommend that through your caucus to cabinet and in the discussions with the Minister of Health as very important cost saving measures but also improvements in the quality of health care.
Mrs Margaret Marland (Mississauga South): Wasn't it your government that took cigarettes away from the pharmacists?
Ms Lankin: Yes. I think it was a good move.
The Chair: Thank you very much. We appreciate your presentation today. Thank you for coming and spending the time with us.
COUNCIL OF ONTARIO CONSTRUCTION ASSOCIATIONS
The Chair: We now have with us the Council of Ontario Construction Associations, Paul Douglas and Frank Bisson. Gentlemen, we have 30 minutes. You can make your presentation, divide it in questions or use the entire time. It's up to you.
Mr Paul Douglas: We intend to make our presentation and then allow time for questions. My name is Paul Douglas, and with me is Frank Bisson. I am the president of PCL Constructors Eastern Inc and I have the honour to be chairman of COCA, the Council of Ontario Construction Associations. Frank is involved in many facets of the construction industry and is chairman of our tax and economic development committee.
We've both played active roles in the huge but little-understood sector of Ontario's economy that comprises the non-residential construction industry. I mention our personal, and extensive, experience in the construction industry because this committee and the people of Ontario need to know directly and urgently the sad state of the construction industry. This information can best be related by those of us who have tried to stay alive, win contracts and provide employment during the most prolonged and serious downturn in our industry since the 1930s.
Frank and I are here to let you know at first hand how difficult things really are. We are here to provide a voice for the more than 9,000 companies in 50 associations which have come together under the banner of COCA and are fighting to stay alive. As you can see by the listing of member associations in our brief, we represent men and women from all parts of the industry, contractors who provide almost 10% of all the employment in the province when times are good.
The problem is that times are not good and have not been good since 1989. In fact our industry is the only sector of the economy that has shrunk in size every year for seven straight years. We are not looking for handouts, however; the very opposite is the case. COCA has made representations to Finance ministers and this committee for years. What we have urged is the creation of an economic environment that will allow Ontario's economy to grow and expand. What we have opposed are impediments to investment, growth and expansion.
1110
Let there be no mistake. There is rational self-interest in what we have said. Of course construction companies can benefit in a healthy economy, but a truly healthy economy benefits everyone. That is why we cautioned about spending beyond our means and urged getting the deficit and debt under control. We warned about waste and inefficiency at the WCB and spent thousands of hours to come up with suggestions to provide security to injured workers while providing incentives to employment.
We warned about mismanagement at the Workplace Health and Safety Agency and made numerous suggestions about how to improve the safety of work sites. And speaking of safety, we in construction have put a very strong emphasis on that problem over the last decade and the incidence of lost-time injuries per thousand workers has dropped to an all-time low. We're proud of that fact but we're still concerned that our WCB costs have skyrocketed despite our success. But that's a story for Cam Jackson, whom we'll be seeing again shortly.
As members of the previous government will know, we also warned strenuously about creating an imbalance in labour relations, not because we were anti-union but because we knew that imbalance scares investors, the investors we need to get the economy growing.
There were many, many issues addressed by COCA in the past decade that cried out for attention and now we have a government that shows a willingness to deal with them all. Our intention, therefore, is to give you some understanding of the depth and breadth of the problems in Ontario's second-largest industry, to suggest solutions and to offer to help implement those solutions.
Here are some figures that should give you pause. At the peak of activity in 1989, Statistics Canada reported that there were 396,000 people who gave construction as their line of work in Ontario. Of those, approximately 360,000 had jobs and unemployment was just under 10%. In October 1994, five years later, the construction workforce was down to 352,000 and only 289,000 were reported as working. In October 1995, our workforce had dropped to 305,000 and 275,000 workers had jobs.
In brief, approximately 85,000 jobs had been lost since 1989 and just under 100,000 workers had left the industry. Those losses have been devastating. By most objective standards Ontario construction workers are considered among the best in the world, and we have lost about 100,000 of them.
Those lost jobs also indicate lost investment. The construction secretariat, a non-partisan body with equal representation from management and labour, uses a formula to estimate job creation, and that formula suggests that approximately 20 jobs are created for every $1 million invested in industrial, commercial, institutional and engineering construction.
Applying the secretariat's formula to the job loss figures, we can see that Ontario lost over $4 billion in ICI investment from 1989 to 1995. The reality is that construction is vastly different from other sectors of the economy, and this fact has been recognized in workers' compensation, health and safety, employment standards and other legislation which makes special provision for our industry. What is missing is attention to construction's specific economic needs, and that is the principal reason we are here today.
While my own company has been doing well, thousands of my colleagues are not so fortunate. Innumerable construction companies have closed their doors and thousands of highly skilled tradesmen are on unemployment insurance or welfare. What bothers us is that no one seems to have noticed and no one seems to have listened, at least until now. We have outlined our difficulty year after year and we have made positive suggestions to the Minister of Finance to help our industry.
We are firmly committed to the elimination of the provincial deficit but we also firmly believe in the boost to the economy that results from the multiplier effect of capital expenditure in construction. In the recession of the early 1980s, the Ontario government of Bill Davis increased capital spending by 48%, and the effects on construction were not nearly so severe as they have been over the last five years.
We understand that the 1990s are different from the 1980s and the Ontario government has very little leeway with regard to capital, so what we have suggested is that the government make economies in current spending and place some of the savings into capital expenditures. But over the last many years, the government has erroneously made countercyclical current expenditures instead of countercyclical capital expenditures. To us, this is bad economics, and we know things can be done better.
I'm going to turn to Frank Bisson to give some positive suggestions, but before I leave off, I want to make an important point on behalf of our industry. Despite overwhelming evidence that non-residential construction is both very large and very important to the Ontario economy, there is no single division, department or agency in the government that champions our industry. No singular attention is given to us, as it is to agriculture, mining, tourism or even housing -- industries that are substantially smaller than ours.
I invite members of the committee, especially those from the government caucus, to look at the roster of COCA member associations appended to this brief report. Every major sector is included, and within each sector are Ontario's leading companies. We have member companies doing hundreds of millions of dollars worth of construction in Michigan, Georgia, Alaska, Dubai, Palestine, Hong Kong and China. Many of our companies are sought out for joint ventures all around the world. Last year, we recommended that the government of Ontario take advantage of the knowledge and experience of COCA's experts and create a permanent panel of public and private sector leaders to make recommendations to the government regarding capital expenditures.
Such a group could advise on the role that public-private partnerships might play in assisting the government to meet its long-term capital requirements, as well as its shorter-term plans for job creation in small and medium-sized businesses across Ontario.
To be blunt, what our industry requires is to be involved on a regular and continuing basis with the Ministry of Finance and Management Board Secretariat with regard to capital planning and the economic needs of our giant industry. With respect, coming before this committee once a year doesn't seem to help our giant but ailing industry. You may have sensed some frustration in our delivery today. This very committee voted last year to accept our idea for a permanent committee to advise on capital expenditures, and I hope you will reaffirm this concept. What I ask is that we be invited down to Queen's Park to give freely of our expertise and help restore a healthy economy.
Mr Frank Bisson: As Paul has noted, countercyclical spending by government is only one side of the problem facing the Minister of Finance. The other side is countercyclical spending in the private sector. As I have done for some years now, I'd like to reflect a positive suggestion to increase capital spending without increasing either the provincial deficit or the provincial debt.
The core of our suggestion, of course, is private-public partnerships. Tony Clement and the government caucus have recently received a great deal of information on this topic from our colleagues in the Institute for Public-Private Partnerships, but for the benefit of all the members of this committee, I'd like to go over some basic points.
What we are suggesting is that the government, indeed all levels of government, seek out and facilitate appropriate capital projects that can be accomplished through partnership with the private sector -- and I emphasize the word "appropriate." By appropriate projects, we mean those that would be self-financing, in other words, truly off the government's books. We would like the Minister of Finance and colleagues to set the legislative and economic climate to foster public-private partnerships and encourage the private sector to build needed projects. Such projects could be completely off the books, as in the case of toll roads, or they could be projects that involve leaseback to the sponsoring agency.
To date, there has been only a partial response to our suggestions, and that is the Highway 407 project. But much more is needed to alleviate the crippling unemployment. What we have said for the last many years is unfortunately true this year as well: Recovery for construction is going to be a very long, slow, painful process. Reducing capital expenditures without putting in place alternative methods of financing obviously did not alleviate the effects of the recession for construction. In fact, we believe that capital reductions have actually harmed our industry.
Between 1991 and 1994 Ontario cut capital spending by almost 10%, and it cost us over 25,000 jobs. Because there was no corresponding encouragement of the private sector to make up the difference, the deficit was kept a little lower, but the result is thousands of unemployed construction workers.
1120
In keeping with the government's announced plans, we are suggesting that spending be curtailed in a variety of areas covered by the budget and that some of the savings be invested in construction where it is not appropriate for private investment, such as in the administration of justice.
As we have said many times, the multiplier effect of spending on construction is extremely high: $1 million not only generates 20-plus person-years of full-time work but it also stimulates the provision of other goods and services. If we could give you but one solid example of a win-win situation, it would be the province's sewer and water services where annual savings of hundreds of millions of dollars could be realized.
One of the leading members of COCA, the Ontario Sewer and Watermain Contractors Association, has been attempting for years to impress on governments the absolute necessity of upgrading Ontario's seriously deteriorating water infrastructure. COCA naturally supports the sewer and watermain contractors in this quest, and we both lobbied strenuously for the creation of the capital corporations and specifically the Ontario Clear Water Agency.
Unfortunately, however, we have seen very little movement towards public-private partnerships in sewer and watermain development. These types of developments, by the way, would be truly off-book, in our minds. We are hoping that the recent report of the Provincial Auditor, which pointed out the serious state of water infrastructure in Ontario, will spur governments to action. This area of activity would be an absolute natural for partnerships. Not only could treatment plants be built by private enterprise at no cost to the provincial government, but movement towards full-cost recovery, raising the rates paid by consumers gradually to reflect true costs, would allow the provincial government to eliminate the current subsidization of local plants.
We realize the government's natural aversion to raising taxes, but every householder pays the full cost of heating, lighting, cable, telephone and virtually every other service, and we believe the principle could and should apply to water and waste water. The approach to full-cost recovery would have to be slow, but we believe it can be accomplished, with little pain, within a decade. By our estimation, movement towards full-cost recovery by local authorities could eventually save the general revenue fund between $200 million and $450 million per year. In addition, since these projects would be self-financing user-pay projects, they would be completely off the government's books and would not increase deficit or debt.
Everyone is aware of Highway 407, but the user-pay concept is the only part of public-private partnerships that has been put in place on this job. Private funding of the project is missing, and the costs of the highway are therefore on the books of the provincial government, it being a capital lease.
By contrast, British Columbia appears to be jumping into the lead in terms of public-private partnerships. The BC Finance minister was recently quoted as saying that the province is considering privately owned hospitals, schools, toll bridges, roads and other projects. The possibilities for creativity are endless, and we implore the government to look at public-private partnerships as a way to help reduce the approximately 20% unemployment levels we still suffer.
For the last two years, COCA has called on the government to cut its operating expenses and increase its use of private sector financing to facilitate a capital budget of $4.7 billion. This did not happen.
The details of our recommendations suggested that ministry capital budgets remain at current levels and that the capital budgets of the capital corporations be increased by $400 million through partnerships with the private sector. With the Common Sense Revolution calling for reductions in capital spending, it is clear that you must create the environment necessary for similar investment by the private sector or we will plunge even deeper into this abyss.
By our estimation, keeping the capital budget at $4.7 billion for 1994 and 1995 would have created 29,000 desperately needed jobs in Ontario, 16,000 of them in the construction sector. The goals we suggested would have reduced unemployment in construction by 23%. But as you saw earlier, our suggestions went unheeded and unemployment in the construction industry, year over year, dropped only marginally. There are very few large public projects under way in 1996. The trade centre and the expansion of the convention centre are the most obvious. Large private projects are just as rare. The industry overall is still in serious decline.
Another matter of great concern to contractors is the image of Ontario as a place to invest. We applaud the government for restoring balance to labour laws, for attacking waste in the Workplace Health and Safety Agency, for moving to reform the WCB as well. All of these are positive moves that help potential investors to start thinking again about moving to Ontario. For years we have called for an aggressive campaign to lure businesses to Ontario, and now Mr Harris is off and running.
We want to leave plenty of time for questions, so I'll just briefly remind you that one of the most important things you could recommend as a committee is that we in the construction industry be invited to help with decision-making regarding public-private partnerships and the whole subject of capital spending. Thanks very much.
Mr Phillips: I think the consulting recommendation is a good one and almost a no-brainer. It probably doesn't cost much money either, so it's particularly attractive.
I just want to be clear. In the Ontario Economic Outlook, it shows non-residential construction spending at around $5.7 billion. Is that how we should think of your industry? Does that $5.7-billion number include most of your industry?
Mr Bisson: I don't have the numbers in front of me, but just from an overview point of view, the industry we're representing is ICI, industrial, commercial and institutional, then it's quite separately the housing industry and then quite separately heavy engineering. The relative numbers are 50% to housing, about 25% of the industry is ICI, and the other 25% is heavy engineering.
Mr Phillips: Fine. In the economic outlook it shows the residential at about $10.5 billion, $5.5 billion for --
Mr Bisson: For ICI.
Mr Phillips: So that's your industry.
Mr Bisson: Right. You're correct.
Mr Phillips: The government spending in this area historically has been around $4 billion.
Mr Douglas: That makes some sense.
Mr Phillips: So the non-government spending is $1.5 billion to $2 billion?
Mr Bisson: In that range, yes.
Mr Phillips: So government is the player in your industry.
Mr Douglas: It sure has been, yes.
Mr Phillips: Has that always been the case or is that a more recent phenomenon?
Mr Douglas: During the 1980s and when the economy was healthy, I think the balance was more in the other direction of private sector. It was evident in downtown Toronto, for sure, with all the tower cranes going; they were all private sector industry projects. Not that we expect to see office buildings jumping up in the immediate future over the next three years, even. Once growth starts coming back, residential will actually pick up before us. Once real growth happens, then we'll see the office type of market improve. We're just starting now to see growth in the private sector more on the industrial side, warehousing expansions, whether it's Toyota, Honda or whatever; those are now starting to come.
Mrs Marland: Mr Chairman, I think it would be nice to welcome a former member of the Legislature, Mr Larry South, to the committee room this morning.
The Chair: Welcome, Mr South.
Mr Silipo: Thank you very much for the presentation. I too would certainly be very supportive of your recommendation and hope we could act on that and that the government would proceed to act on that.
I want to pursue also this point of the industry and the role of government and the private sector. Your position is quite clear and something that certainly I'm interested in learning more about. I think it would be fair to say that during the last five or six years, given the decline particularly in the private sector in terms of investment in your industry, were it not for the continued investment by government -- I appreciate your saying it should have been more, could have been more, but it was at least at a relatively sustained level -- the industry would have been in even deeper trouble. Is that a fair comment to make?
1130
Mr Douglas: If capital spending is reduced by any government, particularly when the private sector is in a downturn, yes, it would have a more negative effect on our industry.
Mr Silipo: Is it fair to say that through the kind of consultation process or discussion process you're recommending to us, while obviously there'd be a lot of details to be discussed, what you're really interested in getting at is trying to sort out what areas -- you used the 407 as an example of where some of that is happening in terms of the public-private partnerships. The essential point you would want to pursue, as I understand it, is to really come to grips with where there may be other areas of private-public investments and partnerships as you describe them.
Mr Douglas: That's a key focus for sure. The other one is that when decisions are being made on capital expenditures, as we are the ones really affected and with the jobs generated through our industry, that the government have a full appreciation through our input on what projects go and what don't go and what effect that is going to have on the economy and on our industry. That should be part of the overall decision-making process that we believe is absent right now.
Mr Bisson: I wonder if I could add to that. We know that government's cupboard is bare, and we believe that if this committee was set up, we could work effectively with government and perhaps help guide it in terms of making true public-private partnerships that are off the books so we don't have the problems there have been recently, where one set of books says it's off the books and the Provincial Auditor says it's on the books and so on. There are ways of structuring contracts so that these contracts are truly off the books, don't add to deficit or debt, and the private sector finances them too without government guarantees. We would like to provide some input so that can happen.
Mr Gary Carr (Oakville South): Thank you for your presentation. As usual, it was very thorough. I know there have been difficult times, and I've sat through some of them. David's worked closely with us in the past and we really appreciate that.
I want to give you some direction and see if you agree with what I think is going to happen over the next little while in terms of some of the municipal building that needs to be done. As you know, the roads are deteriorating at a rapid rate. That is part of this whole process. The provincial government has basically said to a lot of municipalities, "You're taking care of that now," and they are under tremendous pressures as well. I don't think any of them are in a position to do any vast infrastructure building, so the way to do it is through the private sector.
It seems like a lot of the roadbuilding -- I say roads, but the whole construction that will be going on at the municipal level. The municipalities will have to be doing that, and they will have to take the initiative in doing some of the privatizing and the structure. I was interested to know if you have some idea of what the framework would be that you could participate in. I say that knowing we might not even have a Metro Toronto. We don't even know what the regional structure will be.
In particular, how can we do some of the things like water and sewers, which, just like roads, need to be improved? If we don't, we're going to have environmental problems. Do you see water and sewer, for example, being taken out of municipal hands, where you would buy the services from a private corporation that would then build and you'd pay for the services? Is that how you see it working? Maybe you could give me an idea a bit more specific of how you see it working.
Mr Douglas: There are some specific examples, specific models out there now. Actually, Nova Scotia is getting to be a real leader in these public-private partnerships. One of their most current ones that's out right now is a request for proposal for the private sector to come in and take over all their correctional facilities. They've spelled out that their annual budget is $17.9 million and they're reducing that to $17.2 million. "We want you to buy all our facilities. Here's the present value. Here's our needs over the next little while, which means you have to build another 300-bed prison. You have to manage it and meet these criteria."
The private sector buys it, meets the criteria, has an annual operating budget given to them transferred from the province, and the same would apply to a municipality. That is then transferred to the private sector, that now must increase the scope and manage with less money; come back with the best proposal to the province on how they're going to do that and maintain the level of services and so on.
That same philosophy could be given on areas like your sewer and watermain. There are other sectors that, if you're going to take over -- Halton and York regions are proposing right now that a private sector group will come in and do a public-private partnership where there will be joint ownership of the facilities, but there will be guarantees on behalf of the operating group and the consortium to be able deliver at certain costs.
To specifically answer your question is tough. Each situation has to be examined to see whether it's a real partnership or a real turnover of the facilities. But in each case you'll be able to generate dollars for needed capital expansion and improvements, and have guarantees on caps of costs, and guarantees on rates of return so the evil private sector doesn't get too --
Mr Carr: The Ontario-federal government infrastructure program that was going to produce some of the jobs, what's happening with that? You know, the federal government's promise to create jobs through construction, with one third and one third from the different levels. What's happening with that, if anything? Do you see that as helping and it should be continued?
Mr Douglas: A number of projects were generated from that, from the trade centre that we're building right now to roads and bridges. It really ended up going to a diverse infrastructure, as it turned out. Those jobs were created, and I think they were created at a time when they were very much needed right across the country. They are coming to a close. Most of the money has to be expended by I believe March 1997, so those projects are all well under way. They were helpful to the industry.
The Chair: Thank you very much, Mr Bisson and Mr Douglas, for your presentation on behalf of the Council of Ontario Construction Associations. We appreciate your presentation.
Is there anyone here from the Ontario Coalition for Social Justice? We seem to have lost this next group. We've checked outside and we have phoned.
The committee has been so gracious and polite and behaved itself so well, and the 1:30 appointment from the Insurance Bureau of Canada has also been cancelled, so you get an extra-long lunch-hour today. We will return and reconvene at 2 o'clock.
Mr Wettlaufer: Mr Chair, do we thank Gerry and Frances and Tony for being so gracious today?
The Chair: No. Actually, I was going to thank you people for being so --
Mr Phillips: We're always gracious.
The Chair: They've been delightful.
The committee recessed from 1139 to 1400.
The Chair: I call the committee to order.
Mrs Marland: Mr Chair, could we agree to discuss this letter at the end of this afternoon, please?
The Chair: Which letter is that?
Mrs Marland: This is a letter to the deputy minister from the committee clerk.
The Chair: The one that was agreed to yesterday?
Mrs Marland: Yes. I recall one of the questions, but I didn't realize there were two questions agreed to.
The Chair: The questions come out of Hansard. If we'd like to discuss it at the end of the day, that would be fine.
INNOVATIVE PRODUCTS AND SERVICES
The Chair: We have with us Innovative Products and Services, Stuart Weinstein.
Mr Stuart Weinstein: Thank you, Mr Chairman, Mr Vice-Chairman. Nice to meet you. Isabel Bassett is my MPP. Jim Brown is in the program I'm in. It's a pleasure to have everybody here.
I'm here today to say that we have to start working positively together. The idea of bashing or blaming government doesn't work, so what I'm going to try and give to you in my presentation is a feeling and a way of working together so we can get this economy moving.
Just a word of warning: I don't want anyone to panic, but I need to show you one of the tools you're going to need for this upcoming budget. I brought it with me, so just so you know beforehand, the chainsaw's coming out right now. I'll just give you a quick demonstration, if I can figure it out without taking my hand off. Good luck with the budget.
The Ontario government can set a precedent for what we need to get this economy moving for the rest of Canada and for North America. So what I have today is a slide presentation as to some of the things that I think need to be done to get it moving.
To get this economy moving, we're going to need a combination of imagination, goals and risk, which leads to challenges, which leads to success. I'll try and give you a better breakdown of that.
Imagination: A mind, once stretched by a new idea, never regains its original dimensions.
Goals: No one can predict to what height you can soar. Even you will not know until you spread your wings.
Mrs Marland: I hope you've got the one on teamwork.
Mr Weinstein: I was going to put teamwork; it's all together. Teamwork is implied in this.
Risk: You cannot discover new oceans unless you have the courage to lose sight of the shore. That equals challenges. Anyone can steer the helm when the sea is calm.
When you put all that together, you end up with success. I never get near the whole. That is, some people just dream of success; other people wake up and actually do something about it.
The breakdown as to what I'll be discussing: the whole idea of welfare, workfare and learnfare; the whole idea of the whole social services and the responsibility and what needs to be done; the whole aspect which is a big hot issue is capital access and what the government's role is and what we can do to get this economy moving; the whole idea of deregulating the education system so we meet the needs of the 1990s versus what's happening now; and 393 University overhaul, which I'll refer to further later.
In respect to the whole welfare payments, the whole process of social services in the province of Ontario, the concept of just giving money is not working. We need a tie-in to the kind of program that I'm in now, which is called Youth Capital Inc -- and it's actually located in Mr Brown's riding -- which is, instead of just giving welfare, the whole concept of a self-employment assistance allowance that ties in to training and learning to get into your own business. You're given a living allowance so you can get out there and work hard and get to a point where you can become successful. The way to do that is by working hard, working smart.
People I've spoken with, a lot of people who are single parents, when they get into a program like this they need to incorporate the idea of day care and other support services. By doing that and investing in people, we're going to get this economy moving.
I should thank Mr Spina for taking the time to speak with me, as well as his assistant, Mike Heenan. There are some people who are not going to be in a position to start their own business; the whole concept of the new system of workfare and learnfare, of taking the stigma off of being on welfare, taking the stigma away from having to get through that initial roadblock before you can prove what you can do.
In terms of the whole social services, they need an entrepreneurial overhaul. The current system is trying to be supportive, but there's no way of calling it anything else but a kick-in-the-teeth philosophy, the whole philosophy of the insults, the disrespect that the social service department gives to people, even people who take the 18- and 20-hour days trying to get themselves off the system. The concept of privatizing the whole system of social assistance needs to be revisited, because the private sector is more understanding of what it takes to become successful, whatever product it is, whatever industry it is. In fact, there are a couple of entrepreneurs within this group whose families are related. So the whole concept of starting up I'm sure you're well aware of.
Held together by the mentor, there would be that working towards, moving them in a positive environment and then getting them so that they can create jobs for other people down the road. Really, one of the largest expenses of government, and there have been different amounts that have been given, but as high as one half of any particular budget goes to any type of community and social services. There really needs to be a lot of chopping of the fat and dead wood of that department. I'm sure you're already aware of it. I just wanted to reiterate it.
Like anything else, these refer to services of the able-bodied. People who are not in a position to get out of it by just sheer effort -- you need to have some safety for that. There always needs to be a bridging of the gap to getting people self-employed or to a point where they can control their own financial career.
There really needs to be -- and this is the whole aspect of the Capital Access Network which I have started, from that press release that you all received -- a whole revisiting of how we finance startup in the seed area. Now, I was speaking to a bank colleague, and they had indicated that New Ventures at this point has been put on hold subject to a reallocation of funds. I think that's good because the whole new youth and student venture programs all need to be merged together, and we need to look at a different way of dealing with it.
The financing option of $15,000, which is generally a minimum to get things started, should be kept. But if you're looking at other methods of capital as well, possibly loan funds -- I understand right now that this option is being looked at by Minister Al Leach at this point, and we'll see where that goes in the near future. There's the whole concept of being able to access capital at the seed level and at the early expansion level in order to move this country forward, this province forward.
1410
Another thing which is a real problem is the gap. Programs that are there sort of stop at age 29, and between 29 and 35 there's a real need as well to get this country moving, to get this province moving. So I really appreciate, when you're looking at revamping the systems of seed and early expansion capital, that the age limits are considered to go to at least 35. The whole idea should be focused on potential rather than current collateral.
Personally, right now I'm in a program called Youth Capital Inc, which is 21 people trying to get their businesses started. As I indicated, we happen to be located in Mr Brown's riding, so it's a pleasure. You graduate, the employment opportunities aren't there, you can't get startup capital. Even in a program like this we're still having problems with the startup capital and the early expansion capital, and that needs to be looked at.
The biggest change that I'd like to offer for the whole seed capital, early expansion capital level is that every summer, and coming this summer it will be the same thing, students aren't able to find employment. So what needs to be done and what I would like to suggest is that people who start their own business go in September, with a major course credit so they can continue keeping their business going, they can continue building it, so when they graduate, not only do they have a degree, but also they have self-employment and the opportunity down the future to create employment for other people.
I was on the student venture program twice as an undergraduate when I was at York, and both summers, at the end of the summer, despite sweat equity, I had to give my cash flow back. So what did it end up doing? It ended up that I graduated, couldn't find work, spent a year on social assistance, got into the MBA, busted myself, couldn't find employment, ended back on social assistance. And believe me, once you're on social assistance, it's very difficult to get off. So I went from social assistance, being welfare, to social assistance, the self-employment program, trying to get my business started.
Now I hit the area that I've talked about -- getting access to capital. So it's a real gridlock that really needs to be looked at. There needs to be a liaison between government and the private sector. It shouldn't be falling upon the government to solve all the problems, but once again, we need to be bridging those gaps.
In the whole aspect -- and I talked about it before -- of deregulating the education system, tying it in to more proactive programs, more real-life entrepreneurial and practical programs, the educational system should be taking a lot of responsibility to getting people self-employed or getting them into a system now. The way it is now, it's currently not working, in my opinion. So by doing that and being more affordable and taking more responsibility, what we're going to end up with is a tuition based on streamlined, efficient services, and that will deal with the whole aspect of tuitions going through the roof. Actually, I was going to be speaking today at a rally at Varsity Stadium, but because of conflict I wasn't able to. I was going to be indicating the same thing, that more efficiency would deal with the whole issue. I think that's really important.
Because education and training is tied in to self-employment, there needs to be a merging. We can't be having all these different processes that deal with self-employment in all different ministries. So the Education and Training ministry, a lot of that I feel could go in with Economic Development, because they're tied in together, and head into a streamlined superministry. I think that's what the government's going to have to do, one way or the other, to get the province moving so we can operate government as a business. It should definitely be earning a profit every year. It's going to take time, but we have to start moving in that direction.
As a tie-in to what needs to be done, I don't want to go into it in full detail, because I understood when I met with Mike Heenan and Joe Spina that's it's going to be dealt with, but the whole aspect of duplication on a municipal level. We don't need so many mayors -- six mayors, seven school boards, six library boards, six fire departments, chairpeople. There are just too many chiefs and too many Indians. We need to really, I'd like to say entrepreneurially, re-engineer, because the people who are in that position don't have to lose. They just need to be in a position where they can use their experiences somewhere else. I think that really is important to look at.
The other thing I want to touch on briefly is this whole idea of abolition of rent controls, which ties in to another system. I'm glad, actually, that it's been suggested that they move. The reason is, and this might be somewhat ironic for someone generally in my situation -- I was just able to make last month's rent, so the difference between me being homeless and having a place to live month to month is minuscule proportions in any one month -- I'll be the first person to tell you that rent controls and anything else that holds down the system need to go. Once again, that bridge is there. Someone living in a house doesn't worry about rent controls. Someone with a car doesn't worry about TTC cutbacks. Someone with money to go away on vacation doesn't worry about how cold it is in Toronto at any one time.
Right now in Toronto, for example, there's 217,000 people unemployed, over a million across Canada. You wouldn't see those people complaining on the other side of the fence, and a lot of people want to get to the other side of the fence, a lot of people have the capability of getting to the other side of the fence; they just need that help to get on the other side of the fence -- not to motivate them, but just give them the bridge that I'm talking about. That's why I'm saying keep up what you're doing with the vision of turning this government into an entrepreneurial, businesslike, tight, streamlined one, but please do what you can to help me and thousands of entrepreneurs like me, young, women, minorities, who can be very successful in their own businesses but just need that foot in the door.
I want to talk to you about 393 University, which people have referred to me, when I went down there, as ground zero for the entrepreneurial movement or the place to start a business. Well, unfortunately there's a problem here. The hours of 8:30 to 4 just do not handle the entrepreneurial spirit. there need to be 7 am openings, 11 pm closings; they need to be open weekends, they need to have access by Internet, by fax, by phone. You name the information superhighway and it should be connected into that area.
There needs to be more one-stop shopping. I tried to get information from Clearing the Path. Unfortunately they didn't have the time to help me or give me the information but they did have time to talk among themselves. It's the only place where I feel there needs to be a real entrepreneurial twist directly, because that's what they're supposed to be doing. The rest of the government, we talked about streamlining and we know we have to do in this budget, that we need to cut and we need to cut deep. But I can certainly tell you that this department that's supposed to encourage entrepreneurial pride, entrepreneurial ambition, does just the opposite. I think it's really important that people look at that. Right now it's not called customer service there; it's called customer disservice. I don't want to knock any specific organization or any specific part, but that place really needs an entrepreneurial overhaul.
Ms Lankin: What office is that?
Mr Weinstein: 393 University is the Ministry of Consumer and Commercial Relations, where if you start a business they're supposed to give you all the information.
It ties in, though, that once again that division should be moved out of Consumer and Commercial Relations and into the Ministry of Economic Development. We need to have one ministry, and maybe call it the Ministry of Entrepreneurship, in order to get this country moving, this province moving. I'd be more than happy at any time to come in and offer suggestions. I appreciate all you MPPs being here for me today. I want you to be able to work with me on a regular basis. I don't want this to be a one-shot deal: Stuart Weinstein, the man who came in with a chainsaw. I want it to be Stuart Weinstein, one person who wants to get himself moving and has been kicked in the teeth enough times, has taken that and turned it into a positive thing.
The press release that was given to you is this Friday, regarding the capital access meeting. I just want to reiterate that someone in a suit with words is much more powerful than someone storming the Legislature, swearing, bashing, calling names. We don't need it, it's never worked, it won't work and none of you should have to listen to anything like that. So I applaud not having to listen to that and the opportunity of a forum like this. What I think is even more important is that there's some sort of Speaker's Corner equivalent from CITY-TV for the government. You can come in, you can put your loonie in, the money goes to -- who knows? -- startup seed capital, and you can say what's good and bad about the government. I cannot say this government has been anything but accessible. I appreciate Joe Spina giving me the chance to speak with him and speak with the committee today. There's no question that of all the governments I've dealt with in a long time, this one has been one of the most accessible.
The meeting is this Friday at 9:30. If anyone's available, the whole concept and the whole aspect of it is to get this country moving, get this province moving. I just started from not being able to get anywhere, speaking to other people, we got into the Globe, and I just think this is something we have to start working together on. But it won't work if the communication channels are closed and it won't work unless we keep it in a win-win situation.
1420
I just want to finish off by saying that I appreciate the government taking the time today and I appreciate being able to address future members of cabinet. The idea of being able to see where this country is going and where this province is going is extremely important. We can break the gridlock; it's extremely important to break the gridlock. I'd like to work with you to do that and I applaud your attempts to finally start doing that. Thank you very much.
Ms Lankin: Stuart, I appreciate much of what you've said and had the opportunity, when I was Minister of Economic Development and Trade, to work on a number of these issues. I think your comments about Consumer and Commercial Relations are interesting, the problems that you faced. We worked to establish with the federal government the Canada-Ontario Business Services Centre, which is designed to do exactly what you said. It has phone, FaxBack, all of that, for information to entrepreneurs starting a business.
The terminals for starting up a business -- you criticized that they weren't all in the self-help centres. That was particularly done in conjunction with the Economic Development Council of Ontario, municipalities and others who wanted to see this in places in municipalities where they were working with entrepreneurs in their community as well, not just provincial government offices. So it was seen to be sort of a mix and a range.
On the issues of access to capital, again you've hit a really big problem right on the head. We had meetings with the Canadian Bankers Association in looking at that. We put them together with small business. There was some exchange which brought together 200 or more CEOs of small, innovative growth firms where we know the majority of the growth potential for jobs in the future is. We looked at a number of issues where they're facing barriers and started the process of creating the networks and links to training, on marketing, on exporting, on access to capital, all the stuff that you're talking about. That unfortunately has been put on hold but would be a good thing to continue with.
The community loan funds and the community investment share corporations -- the legislation we passed as a government is there. Communities are able to move ahead and do that. It needs an advocate inside government to see that continue and I hope it will.
You've touched on a number of things that are important to continue working on and very important in terms of responding to needs of entrepreneurs. I believe that entrepreneurs and the small, innovative growth firms are where we need to concentrate; it's where I think you could see a growth over a two-year period of 200,000 jobs in our economy quite easily -- high-tech companies, small, innovative growth firms.
I don't have any specific questions for you. I really do appreciate your presentation and will take an opportunity to read through it, as well as having enjoyed your verbal one. Thank you.
Mr Weinstein: I appreciate that. I just want to say that I'm trying to do this as an advocate, but I'm also trying to get my career going. There's only so much you can do for nothing. I'd be very happy to just blend into society and be able to do, but it's been long unfortunately that things haven't been done and I want to work together but keep it as a win-win situation. I appreciate your comments. Thank you very much.
Mr Hudak: Thank you, Mr Weinstein, for your presentation and for the card you dropped off in my office. Was I the only one who got a card?
Mrs Marland: Yes, and I'm feeling very upset.
Mr Weinstein: I apologize. Isabel Bassett and Ms Marland, I am sorry. I didn't know that you'd be subbing, but I'll owe you both cards, believe me.
Mrs Marland: Nothing to do with gender, is it?
Ms Lankin: No, but it sure has to do with political party. I didn't get one.
Mr Weinstein: You got one. I sent everybody one.
Mr Hudak: Joe's already spoken to me about your ambition in entrepreneurship and I salute you for that. I have a couple of quick questions about small business in the modern economy.
The equity sector had about $10 billion a year for the past five years, and a substantially higher proportion at the federal level. When the government enters into borrowing to finance expenditures at that level, what kind of effects does that have on capital for small businesses? I'm just wondering, if the government borrows to a large extent, takes a larger chunk of existing capital in the economy, does that mean there's less capital available for you to finance your businesses?
Mr Weinstein: I apologize, I'm not exactly sure -- currently it costs as much to write a loan at a higher level, for say $500,000, as it does for $5,000, if that's what you're asking. I apologize if that's the --
Mr Hudak: No problem. Maybe I'm not making myself clear enough. If there's a given level of capital available in the economy through banks and such and the government enters into borrowing, takes a substantial proportion to finance expenditures, if the government borrows at a rate of $10 billion a year, I would think that would mean there's less capital available for small business startups. Does that make sense?
Mr Weinstein: This is another colleague from my program, so if she has the answer, by all means.
Ms Angelita Elliott: Good afternoon, ladies and gentlemen. My name is Angelita Elliott. I'm a young entrepreneur too and a full-time student. I'm here today to address several different things.
I believe, to answer your question, yes, there will be less money available for young entrepreneurs like myself. One of the things we face is that our youth is being held against us and that we don't have any stable financial backing. So whenever the government puts up a certain amount of money for businesses and for entrepreneurs, they are leaving young entrepreneurs like myself who are in no financial and economic stable situations to really back whatever loans we would be pursuing.
I think it's very, very important that the government assist young entrepreneurs like myself and Stuart, because we are tomorrow's economic strength of the country. Right now, youth in general are in a lot of turmoil because of the lack of interest within the overall community for their future and what is good for them or not good for them. I find that a lot of young people, if they have more of a positive outlook for their future and for the community they live in, they will take a greater interest in doing the best they can to become full citizens in the community. But when they're faced against economic downfalls and cutbacks in educational funding and recreational programs and all the rest, they have little positive outlook for their general surroundings. So therefore they find themselves doing other things to make time for themselves.
If we don't invest in young people now and get them on the right track, we're going to pay for it later as an overall society. If you calculate how much it takes to keep one person in jail for one year, it would be feasible for the government to spend $3,000 or $5,000 now to put that person in a better position not only within the community and the society but for himself. Once you have self-confidence and once you know that you have a good objective in life, you are more prepared to face whatever obstacle you might encounter in the future.
The government has to think about this. This is not a situation that can be resolved overnight; this is a long-term situation that has been going on for years. The young people have been getting the brunt of all the economic cuts. If we save one young person today, it'll save us hundreds of thousands of dollars tomorrow. So I think that it's very important to get your perspective in order.
I'm a young single parent. I go to school full-time. Most of the funding that I had an opportunity to get a few years ago in order to help myself and put myself into a better position has been cut. Now I have to think about sharing the small amount of money I do have to get to school, to get my children to school, to exist and try to get myself into a better economic situation.
1430
As far as funding for young people right now as entrepreneurs, most of us can't find that initial investment we have to put up in order to incur the loan. Also, another thing we're facing with all the funds out there is that they're broke and the governments are not putting anything back into that pot. So there are many young people out there who want to do better and can do better who do not have the opportunity. Also, corporate Canada has not assisted young people or young entrepreneurs to look towards a brighter future. I think it's everyone's responsibility here, mine as well as every young person and every adult person in this society, to help each other, because if you don't do it today, you can bet your last bottom dollar that tomorrow you will be paying for it some way or another.
Mrs Marland: I feel like I want to applaud.
Ms Bassett: Yes, me too.
Applause.
Mr Monte Kwinter (Wilson Heights): We don't have enough time, unfortunately, but I want to really support your enthusiasm, support what you're doing. But I think there's a kind of naïveté here. You know, it's interesting, the Minister of Economic Development, Trade and Tourism stood up in the House and said economic development cannot be created by government assistance, period. That's what he said in a statement.
I wrote a letter to the deputy minister saying: "If economic development cannot be created by government assistance, what kind of boondoggle are you running over there? Why don't you send everybody home, turn out the lights and save the taxpayers of Ontario a lot of money?" There is a ministry over there whose sole purpose is to help economic development and yet the minister says that is not the role of government.
But the concern I have is that when you talk about the Capital Access Network, you're really talking about startup risk venture capital. You're not talking about capital per se. There is no shortage of capital in the market. As a matter of fact, there's lots of funds available looking for investments. The problem you have is that no one is prepared to give you any money because you have no track record, no seed capital, no equity, and you're saying to them, "Give us money so that we can go out and do our thing because we're going to be great." That is a huge leap of faith for investors and for governments, and most moneys being put out don't belong to the people who are doing it; there are other investors who are looking for a return and looking for some security to that return.
So we as a government, and the government before us, had programs, the venture program, we had programs for entrepreneurs, but they are very, very high risk. I remember as the minister when the Ontario Development Corp told me that their bad loan ratio was somewhere around 4% or so, I said: "That's too low. You should be risking more money because the banks' attitude is 1.5%, 2%. You should be up around 7% or 10% and it doesn't matter if you're losing. If you're not losing money, you're not doing your job because then you're just replacing the banks, whereas you should be providing capital for this risk."
How you do that in this economic climate and with this particular government? And I'm not trying to be partisan. I'm just saying they've made a decision that government has no role to play in these sorts of things, that you've got to go out and do your thing and, "Sorry, we don't have any money for you."
I support the thrust of what you're doing but, as I say, unfortunately this isn't the 1950s with a Mickey Rooney-Judy Garland movie where, "Let's get some drapes in the barn and let's put on a show and let's save the town because we're young and we're enthusiastic and we're going to do it," you know, and at the end of the movie they do it. That is not what happens in the real world.
Mrs Marland: Monte, you didn't mean to deflate them, did you?
Mr Kwinter: No. I just wanted to bring a tone of reality to what they're talking about.
The Vice-Chair (Mr Tim Hudak): Thank you very much for your presentation.
ONTARIO ASSOCIATION OF CHILDREN'S MENTAL HEALTH CENTRES
The Vice-Chair: The next group is the Ontario Association of Children's Mental Health Centres. Please introduce yourselves for Hansard and then begin when you're ready.
Mrs Sheila Weinstock: I'm Sheila Weinstock. I'm the executive director of the association.
Mr Larry Elmer: I'm Larry Elmer, president of the association.
Mr Rod Shantz: My name is Rod Shantz. I'm the secretary-treasurer of this association and I'm a citizen member. I'm also a board member of one of the major children's services organizations in the province.
Mr Elmer: We're pleased to be here to have an opportunity to speak to this committee about children's mental health. I'm not here this afternoon as a carpenter defending his trade, nor as a doctor protecting her profession. I'm here to speak on behalf of a population of children and youth whose lives are profoundly affected by emotional and mental brokenness. In the province of Ontario, 110,000 children are served by children's mental health centres annually.
Government decisions must be driven by the factors influencing the future economic viability of the province, and we are here to emphasize the fact that it makes good economic sense to invest in children's mental health. The children of today will become the workforce and leadership of tomorrow, and if they are to succeed in those roles, they will need to be confident, flexible, and adaptable. It is incumbent upon us to provide them with the resources they need to develop those skills: good education; effective, affordable health care; and access to supportive programs to help them deal with their mental and emotional problems which would otherwise impair their capacity to learn and develop. It is critical, therefore, despite constraint and cutbacks in public funding, that we continue to invest in the mental health of our children, your future taxpayers.
We must do all we can to enable our young people to overcome mental health problems so they are free to focus their energies on growth and development. Family breakdown, school failure and criminal behaviour are all costly social problems and are linked to mental health problems and traumatic events in childhood. When mental health problems escalate into major societal problems, we face a human disaster and an avoidable financial loss.
Services for children with mental health problems have never been on the public agenda. While the health and education of children have always been topics of public debate, children's mental health has traditionally been treated as if it were a private matter. We know, however, that the mental health of children and youth directly impacts the quality of our family life, the safety of our schools and streets and the future costs of health and correctional services.
Allow me to present a snapshot of children's mental health in Ontario. Ontario is fortunate in having a specialized system of mental health services for children which offers a range of treatment programs designed to respond quickly and effectively to the needs of each child and family. Province-wide, more than 110,000 children are served by children's mental health centres annually, most of them as outpatients in community clinics who are in their homes, many in day treatment programs, which combine treatment and classroom learning, and some require a residential setting.
The impact of these programs is being monitored by an outcome measurement system. Through these data we know that children involved with children's mental health centres have extremely high levels of emotional disorder and that treatment in children's mental health centres is associated with a substantial reduction in these disorders. Only one child in 10,000 is as disturbed as the children entering residential treatment, and they come with conditions which are unlikely to improve without treatment. These are the children who overburden teachers and cause chaos in the classroom. They stress their parents to the breaking point, and contribute disproportionately to the violence in our communities. All too often their problems, when left unattended, explode into our headlines. Truly, these are not kids with runny noses or broken arms, these are seriously challenged individuals.
1440
By providing help to these young people as soon as their problems are identified, we give them a chance to turn their lives around and become contributing members of their communities.
And now the good news: The goods news is that children's mental health is low-cost and good value. Children's mental health services are exceptionally good value for funds invested. In 1995 the cost of providing service to 110,000 children in 97 children's mental health settings across Ontario was less than the budget for one large, urban hospital. Children's mental health services are community based, and the majority of the children are served as outpatients in community clinics or in their homes. Day treatment, residential services and prevention programs are also offered, and the average annual cost of service in a children's mental health centre in 1995 was less than $2,500 per child.
The cost of this treatment needs to be compared with the cost of not helping troubled children and their families. Children who do not get the help they need are likely to require more costly services as adults. For example, it costs $45,000 and up annually to keep an offender in prison. Doesn't it make good business sense to spend $1 today and not $100 tomorrow?
A word about sound management: Children's mental health centres place a high priority on sound management. The services of children's mental health centres in Ontario are provided in accordance with a demanding set of standards of excellence which have been refined over a period of 15 years by experts in the field. A provincial accreditation program requires compliance with these standards which promote effective, multidisciplinary treatment and achievement of desired outcomes for clients.
Faced by diminishing resources over the past few years, children's mental health centres have managed, within their budgets, by changing their treatment models to reach more people. Agencies are finding efficiencies by sharing resources with others and by restructuring their overall administrative systems.
Before closing, let us look at the impact of reductions. Cost savings and sound restructuring are fiscally responsible and reflect sound and creative management. However, it must be recognized that fewer services and fewer options are now available to children. The cumulative impact of reductions across the ministries is creating a truly alarming shortage of supports to children and their families.
The Ministry of Education, for example, and school boards have been cutting back on support services to children with mental health problems in the schools, and recent reductions will likely increase this trend. This will place enormous pressure on teachers who have an obligation to provide the best education they can for the majority of students.
The Ministry of Health funds some children's mental health services through hospitals in some areas, but there is no consistent approach here. Recent announcements to reduce funding to hospitals may well affect these programs since they have not been a priority to the ministry.
Public health and other programs which support children are funded through municipalities, but this varies across the province. Many voluntary agencies providing important counselling and community support programs for children have been dependent on municipal grants. All these will suffer as a result of recent announcements.
The cumulative effect of all these changes is that families, schools and physicians who are searching for help for children with problems will find fewer and fewer resources. Children's mental health centres, under the Child and Family Services Act, offer such a resource, but they too are at risk. All of this comes at a time when there are more than 6,500 children awaiting, sometimes up to six months, mental health service.
The Ministry of Community and Social Services is struggling with how to continue to fund children's mental health services, which are not mandated, and this in a ministry facing major financial pressures and already carrying the legislative mandate for social assistance, child welfare and young offenders. They are in the process of defining their core services and restructuring plans, and we want you to join us in urging them to establish children's mental health services as a priority and a distinct function. Treatment services to children with emotional and behavioural problems must not be allowed to inadvertently disappear, only to be re-created again at a greater cost in response to a public crisis.
Funding decisions are being made by all these ministries in isolation from one another, and the cumulative impact of these decisions on the overall children's mental health service capacity cannot be planned or predicted. Efficient and effective coordination is currently impossible. Each ministry is leaving children's mental health services to the others, but there is no one there with a mandate to take responsibility.
In closing, what can be done? There are two fundamental problems which make effective planning for children's mental health impossible, and both need action from the provincial government. Firstly, there is no mandate for children's mental health. Secondly, there is no one minister responsible for planning these services across the ministries or accountable for their overall impact. There is no legislation which mandates children's mental health services in Ontario, and not one department in the entire government which claims children's mental health as a priority. Our children's education is assured through the Education Act, and their physical health through our health care system. However, there is no parallel mandate for the mental health of children.
Government must leave behind the silo mentality and create a comprehensive system capable of planning and coordinating all children's mental health services. In the case of children's mental health, restructuring is not the issue, but rather structuring for the first time all children's mental health services under a single authority.
Finally, our recommendations to government.
Firstly, invest in children's mental health. It makes good business and budgetary sense. It is that ounce of prevention.
Secondly, establish children's mental health as a distinct function, and don't let it fall between the ministerial cracks.
Lastly, identify a single cabinet minister accountable for children's mental health services.
If nothing else, from a service and a budgetary perspective, these make good common sense. Thank you.
The Vice-Chair: Thank you. This leaves us about four minutes each for questioning, beginning with the government side.
Mr Carr: Thank you very much for your presentation. You mentioned that the waiting list is 6,500. I'd heard it was as high as 10,000. Has it come down, and why did it come down, in your estimation?
Mrs Weinstock: The waiting lists have varied over the years. The reason it's coming down is because many organizations have stopped keeping waiting lists. In others, the numbers of children who are being served have gone up, because agencies are working with children in groups. They're trying very hard not to have waiting lists, recognizing that it doesn't help these children. They've come up with new and better ways of working with larger numbers of children. So that's a reflection of agencies adapting to the current situation.
1450
Mr Shantz: I'll give you a specific example. I mentioned that I'm on the board of a large Ontario agency. When I joined that board four years ago, we were serving 1,300 families annually, and in 1995 we served 4,700 families. We did that with a reduced budget and with a slightly reduced staff; different treatment methods, not as many intrusive cases that are kept inside a home.
Mr Carr: You talk abut coordinating, and as you know, this is the same with Health and Comsoc with all these issues. But in terms of children's mental health services, where do you think they should be: Health, Comsoc or Education?
Mr Elmer: That's a very difficult question. Perhaps we know some of the history of the issue, that children's mental health formerly was with the Ministry of Health and then was severed from that some years ago. I think the issue is an enormously complex one and it's one that, if the government takes very seriously our recommendations that it all be brought under a single umbrella, we would be more than willing to work with such a group and establish a proper home for children's mental health centres.
Mr Wettlaufer: I'm quite interested in mental health because many years ago I was involved in the Kinsmen organization, which set up a number of facilities around our community, and that's where it all started, with the Kinsmen Club. Along with the facilities that the Kinsmen have set up, there's also a private home in our community, in Kitchener, and it does an exceedingly good job with these mentally retarded children. Do you see a place for private centres?
Mrs Weinstock: The agencies that we work with are all non-profit agencies, but we work very closely with the private agencies as well. I think there's room in the community for all kinds of services.
Mrs Marland: I just would like to ask you very directly, because I recall when Cam Jackson would stand in the House year after year and say that he had a tremendous concern because of 10,000 children on waiting lists -- and I commend you for what you've been able to do in terms of servicing 4,700 with fewer resources: Are you concerned about the fact that servicing our debt now costs over $9 billion and that if we didn't have that debt, we would have $9 billion to spend on services such as you're here advocating on behalf of? I guess the bottom-line question is, are you concerned about the deficit that faces this province and do you agree that if we don't get that under control, we will have fewer and fewer resources for the children for whom you are concerned and for whom we are concerned?
Mr Shantz: We're absolutely all of us concerned about the debt. We don't want the debt, and we understand it. I think I can safely say that all of our member agencies understand, and the people who serve on these boards. I retired from 35 years in an industry, in the oil industry, and I went on to this board. It's all volunteer, and each one of these boards will have usually 15 members. Most of the people there come from the business community and understand very clearly the fiscal problems that this province has.
Mr Kwinter: Thank you for your presentation. I'm curious to know one thing when you talk about children's mental health. Yesterday we had a witness who was obviously disabled, and other members of her particular team of presenters were complaining that "disability" was being redefined, as to what is a disability. I can tell you that there was no doubt in any of this committee's mind that the woman appearing before us was disabled. But when you talk about children's mental health, it covers a pretty broad spectrum of mental abberations, if you want to call it that.
I'm just curious. With no real ministry taking charge, first of all, how do you capture your client base? How are these people diagnosed? What is the range of diagnosis that categorizes those people with a mental health problem and how do you deal with that?
Mrs Weinstock: That's a very big question to answer in a very short time. All I can tell you is that children's mental health centres are multidisciplinary. They have the staff with the knowledge and the expertise to measure the problems and to determine what can be done and also to measure the effectiveness of what's being done. I think perhaps I could give you some material at a later date that could give you more detailed information.
Mr Elmer: Certainly, in terms of developing a client base, referrals are obviously from parents first and foremost, and school boards and physicians.
Mr Kwinter: And the law.
Mr Elmer: And the law; thank you.
Mr Phillips: I won't get you involved in the political debate that you can see going on here about, are you concerned about the $10-billion deficit? If I were playing the game, I would say, does your organization support taking $5 billion in the tax break, or should we be taking a portion of that to ensure that we provide adequate services? But that's unfair to you, so I won't ask you that.
Mrs Marland: It's not fair to me either, Gerry.
Mr Phillips: If you persist in saying to the group, "Do you understand why you're going through all this pain?" I insist on saying that $5 billion of the pain is to fund a tax break, and the more you make, the more the tax break. So I just think we all have to understand the priorities of the government.
But the challenge for us all, I think, as we move to community-based care and things like that is that it becomes far more difficult for governments of any stripe to keep track of the impact of that, because it is out there; you've got 100,000 young people involved in your program here spread right around the province. You talk about measurements here. Is there any tracking that your organization does that can throw up for all of us the caution signals, the red signals, as we're heading down this new route, and can you share with us any of those now? I suspect we may very well see you a year from now at these hearings as well, and it would be useful if you can provide us with measurements of how well we're doing or how well we're not doing.
Mrs Weinstock: We have, as I mentioned, a system of measuring the impact of services. It's a system that's based on the Ontario Child Health Study, an epidemiological study which indicated that about 18% of young people have some kind of mental health problem. We've taken that system and used it to measure the level of functioning of the children who come into centres, and again the level of functioning when they go out. It also compares the level of their functioning with the average child who isn't in a centre.
The important thing, however, is that this government has not stated that it cares about children's mental health, that there is no stated priority, there is no sense that this is something that the government cares about and is willing to look at the most efficient, effective ways of dealing with. That's really what we're here to ask you for.
Mr Phillips: That's at least one thing we can do.
Ms Lankin: I appreciate your recommendations. I certainly am aware of the debate over the years about the consolidation of children's services -- not just mental health services, which is a big piece of what needs, certainly as a first step, to be consolidated, but the debate that's taken place in government and in the community around that. In particular, I recall after the Premier's Council report some very active discussions in the last couple of years that I was in government about even the possibility of the creation of a children's ministry. There are pros and cons in terms of how these things get organized, and I think you're right that that's a discussion you need to be part of that needs to take place.
One thing I caution you on, though, and you may have heard this already: The buzz out there is that the Ministry of Community and Social Services is being looked at potentially with a view to taking out some parts of it and farming them out to different areas. The word on the street is that the income support programs, which would be family benefits and general welfare, might be moved over into a finance and/or employment kind of ministry and that the children and family services and the children's mental health services might be moved over into the Ministry of Health.
From one point of view, in terms of some step towards your rationalization, that might be an interesting prospect. What I urge you to keep your eye on is the budget, because we've got a commitment that the Ministry of Health budget will be flat-lined or capped or enveloped at $17.4 billion or $17.3 billion, and there's been $1.3 billion cut out in hospital services. The speculation is that that's going to get built back up with taking some portions of Comsoc's budget and moving it over, which actually will mean less for everybody when you put it all together. So it's a big caution for you.
1500
I don't have any specific questions for you. I appreciate your presentation. I would like to ask a question of the clerk and then perhaps the committee could discuss it at a later point.
When we were asked to provide names for expert witnesses, it was in light of an expectation of pre-budget consultations that actually would have been focused on information from the Ministry of Finance on revenue projections and expenditure projections, which we don't have. So this has turned into, I think, a different kind of pre-budget consultation. I think issues like this group brings forward around, with a shrinking pie, where the priority of government expenditures is, is perhaps one area left to us as a committee to comment on.
It strikes me that there's someone out there quite credible on this issue. I'm thinking of Dr Fraser Mustard, who's done a lot of research about children and what we need to be doing in terms of support for children and what we risk in costs in services in the long run if we don't. I think that he might be actually very helpful to this committee and I just put it forward as an idea or suggestion. Could the clerk inform us tomorrow if there are any potential time slots not taken up, and particularly if there is a way of working in a 45-minute time slot. If each of the parties could think about that, maybe we could, as a three-party committee, consider requesting Dr Fraser Mustard to come forward to talk about this issue of, within a shrinking pie, what priority you put on children and why it's important for us to consider doing that.
Mr Elmer: This is the best news we've heard in a long time.
Ms Lankin: It's a request, so maybe you could do some lobbying of the committee members.
The Vice-Chair: Thank you, Mr Elmer, Ms Weinstock, Mr Shantz, for your presentation.
ONTARIO SOCIAL SAFETY NETWORK SOCIAL PLANNING COUNCIL OF METROPOLITAN TORONTO
The Vice-Chair: The next delegation is the Ontario Social Safety Network. Welcome to the standing committee on finance and economic affairs.
Ms Susan Eagle: My name is Susan Eagle. I am the chair of the Ontario Social Safety Network. I have with me today Andy Mitchell, who is also a member of that network but is also working with the Social Planning Council of Metropolitan Toronto, and they are sharing our time today. This is a joint presentation from both organizations.
First of all, I want to thank you for providing us with this opportunity to present to this legislative committee today. Opportunities for consultation and input into the government decisions which affect people's lives so profoundly are a fundamental principle of social planning and a minimum requirement for a functioning democracy. Democracy does not begin and end on election day.
The Ontario Social Safety Network is a province-wide organization which was formed to inform communities across Ontario about changes in the social programs that make up our social safety network. The network includes low-income individuals, anti-poverty groups, faith communities, people with disabilities, labour organizations, legal clinics and social service providers. In fact, we have about 470 members, of which 356 are organizations, and we connect directly to 71 communities across the province and indirectly to many more. Part of our goal is to build linkages between communities around social issues.
The Social Planning Council of Metropolitan Toronto is an independent social policy research, planning and public education body. The council, in partnership with other community organizations, undertakes research and policy analysis and sponsors community forums. I might say they have provided much useful information for our organization, the safety network, and many other community groups.
While we are alarmed at the speed and size of provincial spending cuts to date, perhaps as disturbing has been the process by which the province is being transformed. As we mentioned at the beginning of our presentation, consultation and input are minimum requirements for democratic government. Massive spending cuts have been announced outside of a budgetary process that would allow for greater public input. Indeed, many cuts were announced before the Legislature was even in session. This means that many cuts have been announced without the scrutiny that the Legislature or the budgetary process permits. Many groups have sought opportunities to make their views known to the government, without success.
Often, the policy changes implemented by the government have had consequences opposite to those intended. The cuts in welfare benefits, for example, were promoted as a cost saving measure and a way of discouraging dependence. As recently as yesterday, the Minister of Community and Social Services repeated the offensive and unproven notion that welfare promotes dependency. The government's own research reveals that people are on social assistance because of unemployment. Most people on social assistance, including single parents, have recent work histories and are on assistance because of job loss due to the recession and economic restructuring. Most people on assistance are doing everything they can to get off assistance.
Perversely, the cuts have forced some single parents to leave school in order to find a job, any job, to provide adequate support for their families. If they were allowed to complete their education, their chances of finding better jobs would be greatly improved and their chances of needing support from social assistance in the future reduced, enabling them to provide better support to their families and to pay more in taxes; or perhaps it was a father who was forced to turn down a job promotion which would have helped him get off assistance because after the benefit cuts he could no longer afford child care.
Similarly, the province's workfare proposals may interfere with people's attempts to find real jobs. In a recent meeting with leaders of the Anglican and Roman Catholic churches, the Premier referred to the "unintended consequences" of the dramatic cuts in provincial government spending. We wonder if these are the unintended consequences the Premier was referring to. Perhaps the unintended consequences include the numerous people who are losing their shelter because of social assistance benefit reductions, the increasing numbers of families and children in shelters, the growing numbers of people forced to go to food banks. We would like to hear further about what those unintended consequences were that the Premier referred to.
There are numerous examples of how thoughtless cutting for cutting's sake results in short-term gain but long-term pain, as the costs of a growing social deficit are imposed in the form of growing social polarization, a less safe and stable community and lost productivity. The government believes that future generations will thank us for eliminating the deficit, but it is unlikely that they will thank us for leaving them with impoverished schools, non-existent or degraded health care and public schools and poor job prospects.
The government campaigned on a platform of fiscal responsibility and austerity. We know that the deficit and the accumulated debt cannot be ignored, but we would like to point out that the deficit belongs to everyone in Ontario. If it is a problem, it is a problem for all of us. The deficit cannot be blamed on runaway social spending, yet the measures the government has undertaken to correct the province's deficit situation have been primarily at the expense of the less fortunate.
The largest spending cuts have occurred in programs which benefit the most vulnerable: social assistance, housing and users of social programs. Cuts which affect middle-income groups may simply show up as disguised tax increases in the form of user fees, which they may avoid where they can by not using the services.
Social assistance benefit cuts alone account for $1 billion of the approximately $5 billion in cuts announced to date. More will be cut through eligibility restrictions. The 21.6% cut in social assistance benefits is equivalent to a tax of that magnitude on social assistance benefits. But instead of suggesting a comparable tax on everyone else of that magnitude to erase the deficit, the government is instead proposing to cut taxes on others, and in a manner which will disproportionately benefit the more affluent.
Mr Andy Mitchell: We believe that a balanced and rational approach to public finances requires that we engage in an honest appraisal of Ontario's fiscal situation. A hysterical campaign to characterize all government spending as out of control is not going to advance informed public debate about the role of government or the proper financing of that role. Instead, it simply feeds on a program of thoughtless cutting and tax revolt.
1510
When you actually go to the figures, it shows that Ontario's spending has not risen wildly out of control and is not high in relation to other provinces in Canada. Ontario's expenditures per capita are lower than the average of the other provinces and territories and have been lower for over 20 years. Similarly, our expenditures, as a percentage of provincial GDP, are lower than the average of the other provinces and territories and have remained relatively constant over time. The rise in expenditures that has occurred in the past few years is due to the recession which began in 1990 and the resulting unemployment and should be of no surprise to anyone.
Ontario's own-source revenue is also lower than that of other provinces, both in dollar terms per capita and in relation to provincial gross domestic product.
It's our position that the income tax proposal that the government is pitching will be unfair in the first instance and will not create the numbers of jobs that they suggest it will.
Over time, the Canadian tax system has shifted more of the responsibility of financing public programs onto individuals, while the share of total taxation from corporations has fallen. Coupled with this has been the tendency towards making the tax system more regressive by flattening the income tax structures and raising more revenues from consumption taxes. As a result, the overall tax system in Canada today is basically proportional, which is I think something not everyone understands. The rising taxes paid by the middle- and lower-income groups in Canada, coupled with their falling earnings and job insecurity, are the source of resistance to taxes and calls for tax reductions.
During the election campaign the government promised an income tax cut of 30%, which would cost the government about $5 billion. If this promise is implemented, as I said earlier, it will make the tax system more unfair and will not generate the 725,000 jobs that the government has promised it will.
It will be unfair because our estimates show that a simple reduction in Ontario income taxes will tend to benefit the more advantaged over the disadvantaged. Households with incomes over $95,000 make up less than 10% of all households in Ontario, yet will receive nearly one third of the total benefits of the tax cut as proposed.
The tax system in Canada, as I said, is already roughly proportional, and income tax is the only progressive element of the tax system, and a cut in income taxes will simply make the tax system more regressive.
An income tax cut will not create jobs. The planned tax cuts will be matched or exceeded by spending reductions in other areas. These represent direct losses of income and employment for those people directly affected, and in reduced economic activity because of the spinoff effects.
These spending reductions fall most heavily on lower-income groups, while the tax cut will disproportionately benefit upper-income people, as I said earlier. The research that we've undertaken at the social planning council shows that households with incomes under $30,000 spend nearly 95% of their after-tax income, while households with incomes over $80,000 spend only about 60% and save the remaining 40%. Because upper-income households tend to save a significant part of their income, a tax cut will have a more limited effect on consumption than would a tax cut for lower-income people alone.
In addition, one of the consequences of globalization and new production technologies is that increased consumption can easily be met from existing capacity here or internationally. So even if there is a desired increase in consumption, it's by no means certain that this is going to result in jobs here -- or anywhere else, for that matter.
Widespread fears about job and income security suggests that people will not use a tax cut to go on a spending spree. They are more likely to save it for contingencies or to pay down their debts.
Lastly, to the extent that municipalities are forced to introduce user fees to pay for public goods, this will further undermine any possible stimulus from an income tax cut.
If the tax cut is unsuccessful in creating jobs, it will simply result in increased inequality and a worsened provincial deficit. The argument for a tax cut plays on the myth that only money spent by individuals creates jobs while money which is spent by government is by definition unproductive and does not create jobs.
I also want to take a moment to point out that, in many ways, the budget cuts undertaken to date undermine voluntarism.
Like many governments today, the provincial government is urging individual citizens to volunteer or give financial support to the services which governments are no longer willing to support. In the November 1995 Fiscal and Economic Statement the Treasurer said:
"I ask all Ontarians to consider what they can do directly to support health care, community services, education and cultural institutions in our communities. Each of us has the opportunity to make a difference -- by volunteering our time, our skills, or our financial support. Together, Ontarians can give back to their communities far more than government can provide alone."
These comments reveal a serious misunderstanding of how the voluntary sector actually works. Voluntarism works in partnership with the government sector. Volunteers cannot operate in a vacuum. Volunteers operate within the framework of community-based services, which are presently at risk because of government funding cuts. Even if an individual's desire to volunteer is strong, without funded community agencies there will be no organizational base to recruit, train, organize, coordinate and screen volunteers.
Inequality, as I've been talking about, has already grown substantially in Ontario. Employment and earnings are increasingly polarized between those with good jobs and high earnings and those with poor jobs or no jobs and low earnings. As a result, income inequality among families with children is growing rapidly, especially in market income. Only the existence of transfer programs has somewhat modified this trend, but it's precisely these supports which are presently under attack in Canada. The government's initiatives will only exacerbate this trend, whether through increased unemployment or the proposed tax cut.
Widening inequality is not simply undesirable from the point of view of exclusion and marginalization of growing numbers of Ontario residents. A growing body of economic research suggests that widening inequality undermines economic efficiency and productivity as well. Contrary to accepted wisdom, it is those societies which deliberately intervene to prevent too much inequality which have better growth and productivity records.
Ms Eagle: In conclusion, we call on the government first to stop its one-sided and unfair approach to deficit reduction and the targeting of the poor. We call on the government to reconsider its ill-advised income tax cut; it will simply exacerbate the deficit without substantially improving employment. If the government wishes to boost purchasing power where it is needed the most and where it will have the greatest economic impact, it should restore the incomes of Ontario's lowest income residents, people on social assistance.
We call on the government to stop undermining the legitimate role of government by portraying taxes as a burden rather than the price of living in a civilized and democratic society. We receive good value for the money we pay in taxes. In comparison to our American neighbours, we are far better off.
We call on the provincial government to act as an advocate on behalf of Ontarians in negotiations with the federal government and not simply endorse the budget cutting of the federal government and the downloading of federal fiscal problems to the provincial governments.
The solutions to Ontario's deficit lie in addressing the problems of poverty and unemployment where they begin. Some require the active leadership of the federal government, while others are within the power of the province. For example, provinces can ensure adequate employment standards. Conventional economic wisdom, which dictates that higher minimum wages will destroy jobs, again seems to fail as the evidence either doesn't support this contention or suggests the opposite. Minimum wages have been allowed to decline substantially in real value, which has simply subsidized the emergence of the "bad jobs" economy without eliminating unemployment.
The province can also play a leadership role within the Canadian federation to encourage a strong federal government role in shaping national standards in social policy. To devolve this responsibility to the provinces is to invite unhealthy competition among provinces to provide the lowest standards; in fact, a race to the bottom.
Mr Phillips: One of the things that's of interest to people is that it appears the number of people on social assistance, what's commonly called the welfare rolls, is dropping. It's been declining steadily for the last six months, as I understand it, in spite of the fact that there are still not that many more jobs, so something's happening. Why is it that we're seeing fewer people on social assistance?
Ms Eagle: First of all, there's always a turnover in social assistance caseload, a constant turnover. I know that from serving on the province's advisory committee on social assistance legislation. We were looking at the data over a number of years. There's constantly a turnover. What's happening right now is that as some people are going off, the ones who would be coming on and who need to get on aren't getting on. That's one of the things we're starting to see happening.
Let me give you an illustration. Right now if you lose your job, if you're fired, you have to wait three months to get on social assistance. I'm a community worker. I've had people in my office in the last week who are desperate. They lost their job, but because technically they were fired, they are not eligible for social assistance. So they're not going to show up for three months on the welfare rolls, but they're out there. They're struggling; they're going hungry; they're not paying their rent for the next three months; they're going to be homeless; they're going to be in the shelters. You're going to find the cost of them down the road all over the place. Those are some of the people who aren't showing up right now because of the way in which we have changed the regulations for people's eligibility. So some come off; others who should go on can't get on.
1520
But there are a number of other things in terms of people who have been pushed off who previously had been eligible, some around the spouse-in-the-house kind of thing, people who were eligible for a minimum amount of assistance, and when the benefit levels went down, they were pushed off. The reason they were getting the minimum amount of assistance was so they could continue getting the drug card, so if they were single parents they'd be able to pay for drugs for their children. They were getting like $2 or $3 a month, but that made them eligible for the health card. With that 21% cut, they're gone. Those people are also desperate. A huge drug bill and they'll be back on assistance, because they can't keep themselves --
Mr Phillips: Let me interrupt you. We run out of time here very quickly.
Ms Eagle: I'm sorry, but they're some of the --
Mr Phillips: It would be very helpful, I think, to our committee if you can quantify that, because I think we're all wrestling with what's happening out there.
Ms Eagle: It's not because they've got jobs.
Mr Phillips: But I was just saying, if you can quantify it for us and say, "Listen, there's X, X, X." I don't think -- at least we don't know what's happened, and you're an organization that --
Mr Mitchell: We have some guesses as to why this is happening, and Susan has described one. And there's a package of regulatory things that have meant more people are ineligible who might have been eligible prior to the regulation changes. The rate cuts have simply knocked some people off. The number of applications is down for reasons we don't understand. Presumably if all these people were getting jobs, they'd be affecting the number of people on the caseload, not just those who no longer have to apply. So we simply don't know enough.
I think your question is a good one. Maybe it should be put to the minister himself, because the ministry is the group that's in command of the information. They're the ones who can do the follow-up and find out what's happening to people. They're the ones who are in command of the resources, who can undertake this research. We can make educated guesses and we know a lot from people we talk to in the community, but only the government can answer it authoritatively, I think.
Ms Lankin: The question you raise around the income tax cut of course I think is a troubling question for many of us. I think the government itself is struggling with what model to come forward with. There have been real legitimate questions raised about whether 30% across the board is going to be stimulative, because it has the effect that you talk about in terms of providing a greater proportionate share of that returned dollar to high-income people, as opposed to some kind of tax change which affected to a greater degree lower-income people, where any disposable income tends to go into the economy more. Those are real questions that I think are out there.
I guess my concern is embarking at all upon a tax cut at this point in time when there is still the issue of an outstanding deficit, when we're looking to try to deal with the deficit and we are concerned about debt interest charges and about starting to pay down the debt. The only way to finance in the long run that tax cut is by greater expenditure cuts. So I think we get past cutting the fat -- the old analogy -- and get into the bone unnecessarily.
It's not that I think there isn't a tax burden that people have felt or that there isn't a resistance to paying more taxes or a demand for more efficient services for the taxes that we pay. I knock on doors in elections and I hear what people are saying. But this to me feels like it's the wrong time, like there is no guarantee even from the minister of a stimulus effect. We're going to pay more interest charges to borrow the money to do that and we're going to cut deeper in the long run.
Could you comment about what an alternative model might look like to propose to the government, because this committee is going to have to be making recommendations. We know the government's way out there on that commitment, but I for one would like to try to give them room to change their minds on that one promise, because I think it's very damaging to the economy.
Mr Mitchell: We share your reservations. Suggesting a tax cut is problematic because of the deficit problems that you've identified, but it also feeds on this myth that people are overtaxed and they're not getting good value for their money and therefore they deserve a tax cut.
I balance that with the observation I made that it is lower in modest-income people who have seen their taxes go up quite a bit and it is the insecurity that they're experiencing that kind of feeds into this revolt against taxes. That being said, I think maybe what needs to be done is something that makes people feel like they have some security, some place in society, and they probably wouldn't object to taxes.
A specific model is a difficult thing to come up with. We confined our comments to pointing out who has suffered the most so far as a result of cuts, and if you want to restore stimulative power where it's needed most, to the people who have suffered the most, then it's those people on social assistance -- who, by the way, wouldn't benefit at all by a cut in income taxes in any way, shape or form.
So I think an income tax cut is a problematic thing and I'd be hesitant to even go so far as to recommend one that's strictly a credit to low-income people, but that would be the only conceivable thing that could be tolerable because it would rectify the lack of progressivity in the income tax system. I share your reservations.
Ms Bassett: First of all, thank you for explaining your point of view to us. I think I heard as you began -- but I've been so caught up in everything else, if you can just clarify -- that you did agree that the deficit is a problem. I'd just for the record like to know.
Ms Eagle: We've never said that the deficit was not a problem. I think the place where we would disagree is how you solve the problem of the deficit.
Ms Bassett: Exactly. That's what I wanted to move on to. Could you give me some advice, and I know again you've said it in many things, but to take back to the minister on what we could be doing better or how we could be cutting up the pie? Where are we going to get the money to pay for the people who are on a much lower income?
Ms Eagle: First of all, one of the things we have said, and our organization has also made presentations to the federal finance committee, again in the area of revenue, is that we don't believe cutting social programs is necessarily the answer at all. We think you have to be looking at the revenue side of bringing in the money you need for the programs that you need to have.
We realize that the province has more limited access to revenue. On the other hand, the province could be doing far more in advocating around its needs in dealing with the federal government. In fact, we think there's been some complicity here in terms of simply giving in to that move towards cutting programs and not looking at revenues. The province has not stood out and said, "Wait a minute," and challenged the federal government. That would be one thing. Andy may want to add a couple of more things.
Mr Mitchell: Just to reiterate that if we agreed in our presentation that the deficit is a problem, I presume all those people who would be the beneficiaries of a tax cut would agree as well and would forgo their tax cut to help correct the deficit. A tax cut should probably wait until the deficit or the debt is not a problem, is under control.
Ms Eagle: We're aware too that it isn't just personal income tax that needs to be looked at. We're aware that as a country we're one of the lower-taxing jurisdictions for corporate taxes. There are a number of places that we could be looking at revenue, and not just increasing individual income tax.
Mr Wettlaufer: I'd like a clarification, if you don't mind. You say Ontario is one of the lowest areas for corporate taxes?
Ms Eagle: Canada.
Mr Wettlaufer: Wrong.
Ms Lankin: Absolutely right.
Mr Wettlaufer: Absolutely wrong.
Mr Mitchell: No, this comes under --
Ms Eagle: Ministry of Economic Development, Trade and Tourism competitiveness reports.
Mr Wettlaufer: Anyway, I won't get into an argument with you on that.
Ms Lankin: Look at the government's own statistics and reports.
Ms Eagle: Let me provide you with something that comes from the government of Canada, comparing Canada to seven other countries, and Canada is the lowest in the corporate taxes.
Mr Wettlaufer: Canada is.
Ms Eagle: That's what I just said.
Mr Wettlaufer: Ontario, I said.
Ms Eagle: I didn't say Ontario. I said Canada.
Mr Wettlaufer: That's why I asked for the clarification.
Ms Lankin: Take a look at Ontario's nine corporate income tax rates.
Mr Mitchell: Federal and provincial.
Ms Eagle: Andy's done some research on those.
The Vice-Chair: Ms Eagle, Mr Mitchell, thank you very much for your presentation today. I regret our time has expired.
Ms Eagle: Andy has done some research on Ontario if you want to take a look at it.
The Vice-Chair: Again, thank you for appearing before the standing committee.
1530
Mr Phillips: Mr Chair, maybe we could request the ministry staff to give us the corporate tax rates for Ontario and Canada, a comparison. That may solve the challenge. Is that all right with everybody? Everybody is in agreement with that?
The Vice-Chair: Any discussion on that?
Mrs Marland: What did you say?
Mr Phillips: We'll ask the Ministry of Finance to give us the relative corporate tax rates. Mr Wettlaufer I think indicated that Ontario's is, I gather --
Mrs Marland: I think it's in the material that was presented to us on Monday.
Mr Phillips: That's baloney, actually; there was no material on Monday. If you can find it on Monday, I'd like to see it.
The Vice-Chair: Seeing no agreement --
Ms Lankin: Wait a minute. We don't need agreement to ask a question of the ministry for information. I'm sorry, Mr Chair; I don't believe that there's all-party agreement required. If we have a question, that can be placed. If in fact it's not placed on behalf of the committee, certainly we can ask the clerk to forward that request for information on behalf of the Liberal Party or the New Democratic Party, if the Conservative Party doesn't want to join us in the request for that information. But I would object to us not being allowed to ask questions of the ministry through the course of hearings.
Mrs Marland: Well, that's what I want to discuss about this letter later on, because you can ask for information, Frances, at any time.
Ms Lankin: Exactly, that's the point that I'm making.
Mrs Marland: But we have a letter here that says on behalf of the standing committee --
Ms Lankin: I'm talking about right now. I just heard a ruling from the Chair that said because there was no agreement the question wouldn't be asked. You can make your point on that later, Margaret; I might even support you in terms of how it's worded, in terms of what the history was. But if a question is placed by a member of the committee, either through the clerk's office to the ministry for information following up on this or to legislative research, it does not require all-party approval.
Mrs Marland: No, it doesn't. You can ask a question whenever you want.
Ms Lankin: I'm looking for the Chair's ruling, Margaret, not your permission, with all due respect. The Chair made a ruling. I'm objecting to the Chair's ruling.
Mrs Marland: I'm helping you, Frances.
Ms Lankin: Well, talk to him.
The Vice-Chair: Perhaps we could defer the discussion to after the presentations today. This group's been waiting and we're already about 10 minutes behind in the presentations, so the Chair would like to defer discussion of this issue to after the presentations.
ONTARIO RESTAURANT ASSOCIATION
The Vice-Chair: Our next delegation is from the Ontario Restaurant Association.
Mr Paul Oliver: Good afternoon. I am Paul Oliver, president of the Ontario Restaurant Association, and with me today are Rachelle Wood, our director of public affairs, and Dave Beatty, a McDonald's owner-operator from Brampton and a member of the association.
On behalf of the association, we are pleased to participate in the pre-budget consultations regarding the development of the 1996 provincial budget. We welcome this occasion and see it as a great opportunity to outline a number of issues which we believe are important to Ontario, important to consumers and important to Ontario's foodservices industry. We will try and limit our comments so as to leave as much time as possible for questions and answers at the end.
Our submission is relatively self-explanatory. Recognizing the immense amount of paper you receive, we have this year tried to limit our comments and recommendations to a few succinct briefing notes. It's a unique concept.
In developing our submission, we have recognized the financial constraints placed on the government of Ontario and the overriding goal of the government to create new jobs and work towards balancing the provincial budget. What we have done today in our submission is outline a multistep approach which we believe will help stimulate growth in the foodservices industry, create sustainable jobs and do this all at no cost to the government of Ontario. In fact, not only will there be no cost to the government; there is potential revenue generation in the area of half a billion dollars.
First, I would like to take this opportunity to walk through a few of the charts that were handed out, which will give you a bit of an understanding as to where our industry stands today in Ontario. The charts are under the Foodservice Facts thing.
The first one just gives you a bit of an outline as to the market share for the commercial restaurant sector. It's quite diverse, but it's probably broken into four dominant categories of licensed and unlicensed establishments, contract caterers and takeout-home delivery establishments. In total, the industry does over $10 billion in sales in Ontario.
Market share in Canada, as you'll see, has been declining steadily since 1989. Today we represent about 36% of all food dollars spent in Canada, the restaurant sector, and that's down from 42.4% in 1989. This decline actually parallels very closely the introduction of the GST in Canada, which has had a very detrimental impact on our industry. While we've seen the decline in market share, we've also seen a decline of about 40,000 jobs in the foodservice industry in Ontario since 1988.
On the next page, you'll see the Canadian-American comparisons of food market share. What you'll see is that actually the Canadian numbers paralleled very closely to our counterparts south of the border up until 1989, and subsequent to that, while the American trend has continued upwards, to 44% today, we are now 20% below that, at 36%. One of the major issues that's contributing to that, because the dining out patterns, expenditure patterns, consumer expenditure patterns are very similar in Canada and the United States, is the impact of the GST coming into Ontario and into Canada.
On the next chart you'll see just the growth for the industry and you'll see that our industry took a substantial, and I mean very substantial, hit in 1990 and 1991 during the recession in Canada, with a combined decrease of about 16.3% over a two-year period. We have yet to recover all of those sales across Canada in real-dollar terms. The next page outlines Ontario's, actually an even deeper decline of 21% between 1990 and 1991. We've had a bit stronger growth in Ontario coming out of the recession, but the numbers are still very, very weak compared to the period going into the recession, and we're still looking at the year 2000 before we see a recovery in those food-dollar sales.
The next chart outlines the impact on individual operators. This is where you can really see the impact. For the last five years, foodservice operators in Ontario have suffered under a per-sales decline every year. Even while the sales in the industry were declining, we still saw a number of new establishments opening. The numbers speak for themselves as to how precarious a position some of the operators are in.
The bankruptcy numbers in Canada re-emphasize that. What we've seen this past year in 1995 is actually an uptick again in bankruptcies in the foodservice industry. As the industry is a bellwether of consumer spending and consumer confidence, it does not bode well for the overall Canadian economy or the Ontario economy.
People see the industry, they see it everywhere, they think it's a very profitable industry when in fact it's not. This gives you a bit of an indication as to the average of establishment in Ontario, which does $375,000 in sales. Average profitability at the end of 1995 was 5%. That leaves the operator with about $18,750, and from that is their profit, return on investment and take-home pay before taxes. So the ability of many operators in the industry to continue to sustain themselves is very limited.
At this point, I'll ask Rachelle to discuss in more detail some of the specific issues that we want to raise.
Ms Rachelle Wood: The first initiative we would like to recommend action on is the implementation of video lottery terminals in Ontario's licensed bars and restaurants. We estimate that the implementation of video lottery terminals will generate between $700 million and $1 billion in new revenue for the government of Ontario and generate significant new jobs in the food and beverage industry. We believe that this is a positive step which, when balanced with social concerns, is still one which should be pursued.
We believe that by allowing VLTs into licensed establishments we will be able to substantially enhance job creation, help stabilize the licensee sector of the hospitality industry, reverse the outflow of Ontario residents to competing jurisdictions, such as Quebec and Manitoba, which already have video lottery terminals, and begin to address the massive black market which has already been developed for video lottery terminals.
Current estimates are that there are now approximately 20,000 illegal machines in Ontario, machines from which the government of Ontario and its taxpayers receive no benefit. 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.
1540
The next issue I would like to discuss with you is PST-GST harmonization. From the foodservices perspective, we do not see this as a viable option. The federal government had indicated that it has plans to eliminate the goods and services tax in Canada, and we strongly support this commitment.
Since the introduction of this GST on only some foods but not other foods, the foodservice industry's percentage of the food market has declined dramatically, from 42.5% to 36.6%. With identical products being taxed differently solely because of the point of sale, we believe that this is simply an inequity in the tax system which needs to be addressed. We are particularly concerned that harmonizing with the GST will mean a massive increase in taxes on consumers in Ontario.
To be revenue-neutral on the GST tax base, the PST would have to remain at 8%. But that 8% would not only be applied to the limited base of the PST now but would be placed on a large range of new services and new products that are currently exempt under the PST. We estimate that harmonization would mean an increase in consumer taxation of over $2.5 billion. For these reasons, 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.
I would now like to turn over the floor to Dave Beatty, a small business franchise owner from McDonald's Restaurants.
Mr Dave Beatty: Good afternoon. The first issue that I'd like to discuss is the $4 PST threshold. As you've all become aware, the restaurant industry has suffered tremendously in the 1990s since the recession and the GST introduction. We've never properly recovered since that time.
In 1987, a $4 PST threshold was introduced to the restaurant business. At that time margins were healthy, the economy was growing and it was not a hindrance to the business. In the 1990s our margins have eroded a great deal. We have moved to a point where our controls, the only line left that we can attack, is the labour line. This has great ramifications for everyone.
But the biggest issue that I'd like to talk about is, first off, in my own experience over the last four years my investments back into the business have been approximately $100,000 a year. To find the margins that I need, that started to erode in 1995 and will continue to erode greatly in 1996. The money is not there to reinvest in the business and so it won't be.
My employee hiring plans: I now have 210 employees and operate three restaurants in the Brampton area. That will be an area of my business that I will have to reduce and look at very closely. Margins are running under 2% return after debt service. Many of us are wrestling with a debt level that is much higher than I think most people realize and much higher than any personal worth.
I believe this $4 PST threshold is a barrier that truly, if it can be moved to $6 as recommended, or even $5, is a barrier that has more gains economically than what would be lost from tax revenue. It would give us the capability to work our own business and manoeuvre within our own business. Entire marketing strategies are now set up at $3.99 because we don't dare hit the $4 barrier. I think all of you are aware that the average fast-food restaurant out there has most of its meals priced at $3.89 and $3.99, and customers are at a point now that we don't dare go above that level. It has not left us any room to move.
We have families walking in on us, families of four, who will split off into four separate lines to be able to achieve the sale rate of under $4 and not have to pay the PST. The customer is dictating our market. We are in a very hostile situation and very competitive. My belief is that if gentlemen like myself are in this situation, I believe the ma-and-pa operation out there, with three or five or 10 employees, is struggling much worse. So my thought and my wish would be that it could be raised, at least indexed with some type of inflationary rate. It would give us room to improve our margins.
The one other issue that I would like to talk about is the employer health tax. As an employer, the EHT is not only confusing and burdensome, but it significantly limits my ability to hire new people. In these hard economic times, I believe that government and business need to work together to create these new jobs. I am very supportive of the government's decision to reduce the red tape and cumbersome regulations placed on small businesses. I believe that the elimination of the EHT on the first $400,000 of payroll is an initiative that the government can take and that will be of immediate positive effect on me hiring more people. It is for this reason that we would urge the government to maintain its election promise of eliminating the EHT on the first $400,000 of payroll.
Mr Oliver: The last issue I'd like to touch on is that of alcohol taxation. The high level of taxes imposed by both the federal and provincial governments on beverage alcohol has placed Ontario in a very uncompetitive position relative to hospitality operators in border areas, as well as international tourism.
We have all heard many times that consumers are extremely frustrated with the high level of taxes which they pay on beverage alcohol. However, in spite of this fact, the level of taxation applied to patrons of bars and restaurants is even higher than the taxes paid by consumers who purchase the identical 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 for resale.
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 substantially increases, and in some cases even doubles, the amount of taxes that a restaurant or bar patron is required to pay. As you will see from our submission, we recommend the elimination of the gallonage tax in Ontario.
We recognize that the high level of taxes imposed on beverage alcohol is designed to act as a social control, and we don't quarrel with this approach. However, what we don't understand is why identical product is taxed differently when the only difference is the location of purchase. 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, they could not do so. They could not do so because they would be at a loss because of paying the additional 12% gallonage tax.
We believe that there is an opportunity for the government to explore this tax policy, look at it as a job-creating tool and do it in an environment where there is no revenue loss for the government of Ontario. Economic modelling which we have undertaken on this issue suggests that the elimination of the gallonage tax can be done in a manner which is not only revenue-neutral for the government but has the potential of creating over 5,000 new jobs in the food and beverage industry.
Once again, I would 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 at the LCBO, the Brewers Retail or in a hospitality establishment.
To recap, the Ontario Restaurant Association urges the committee to recommend a multistep approach to stabilizing the foodservices industry, creating new government revenue and creating desperately needed jobs in the foodservices industry. These recommendations include the introduction of VLTs; the elimination of the gallonage tax; continuing to pressure the federal government to eliminate the GST and not to harmonize the GST with the PST; removing the EHT on the first $400,000 in payroll; reducing red tape and regulations; and increasing the $4 PST threshold on low-cost prepared food to $6. This multistep approach, if implemented, would mean half a billion dollars in new revenue for the province and new jobs for the people of Ontario. As well, it would mean no tax increase to consumers.
We thank you for the opportunity of appearing here before you and welcome any questions you may have.
1550
The Chair: Thank you very much. An interesting presentation amidst a little outside music being played. Could we start the questions? I believe we can have almost four minutes with the third party.
Ms Lankin: It would be helpful if you just took a little bit more time to talk about the gallonage tax in the proposal, because you still haven't convinced me on video lottery terminals, Paul, we've had this discussion so many times, so let's put that one aside. I'd like to learn a little bit more about that, because I think that and some of the other tax issues in the alcohol and beverage industry are important and raise themselves as important social issues, as well as cross-border issues and all of those other things.
Mr Oliver: We have, and I'll have it handed out, a discussion paper actually on that very issue, as well as the economic modelling that we've had done. We weren't sure if it would be of interest to the committee or not. But it virtually boils down to when a bar or restaurant purchases their product through the LCBO, they don't pay the PST at the time they purchase, but they pay a special 12% hospitality gallonage tax, and then, when they resell the product, they have to build that 12% into the price plus apply another 10% on top of it, so in effect what you're getting is a 22% sales tax, and for operators, it isn't viable to continue to sell product.
We now represent, spirits and wine, about 13% of sales in Ontario. South of the border, the hospitality industry represents somewhere around 24% or 25%. It's a value added product that we're selling. Every bottle of wine that we sell isn't just taking it off the shelf from the LCBO. There is the overhead cost, there is the service, the jobs that come with it, the additional property taxes and a variety of things like that.
The modelling that we've done would suggest that if you take off the gallonage tax, you're going to get a net shift of alcohol sales of about $100 million back into the hospitality industry, and that, coupled with the food sales that go with it, would actually generate about 5,000 new jobs, and the sales tax uptake on the resale of that actually more than covers the cost of the elimination of the gallonage tax.
Ms Lankin: What happens to where you're shifting the sales from? So you're suggesting that --
Mr Oliver: You're shifting it from the LCBO or the BRI. What you have now is this person sits and they say, "Well, do I sit home and have a frozen pizza, heat it up and buy a case of beer or a bottle of wine and take it home, or do I go out to an establishment?" Our price point has just been pushed, because of the GST, the PST and the gallonage tax, to a point that for a lot of people the decision is to stay home, and they're losing that value.
Ms Lankin: There's no net loss to government or to Brewers Retail, then, because you don't see an increase or decrease in sales as a result of this?
Mr Oliver: Because they still sell their product to us. What it is is the government, instead of taking their revenue from the gallonage tax, they would take it from increased PST on the value added product that we're selling.
Ms Lankin: So as long as you don't put it all into self-serve operations, it will actually create the jobs?
Mr Oliver: The LLBO won't allow us to do self-serve.
Mr Joseph Spina (Brampton North): Thank you for a great presentation, because it touches on many of the points that I think are the real flash points that impact particularly on small businesses, which are the majority, I know, of your industry.
I wanted to clarify something. Rachelle, you had indicated a number of jobs with respect to VLTs that would be created. What was that number, if you could please refresh our minds?
Ms Wood: It's just over 16,000 from the studies that we've undertaken and from experiences in other jurisdictions as well.
Mr Spina: Have you done a little total? If this government was to raise the $4 tax exemption, bring in the VLTs, modify the beer and alcohol and change the employer health tax, any idea what kind of quantity of jobs we could expect from that over the period of a year?
Mr Oliver: It's hard to put a specific one in particular on the $4 one. We haven't done modelling on that. We've done it on the VLTs, which is 16,000, 5,000 on the gallonage tax. The EHT and the $4, we would estimate probably would be in the area of somewhere from 8,000 to 10,000 jobs. So it's substantial.
In particular, what is important with those jobs that is some people look down on foodservice jobs. We in the industry certainly wouldn't do that, but it's jobs being created that disproportionately bring people from social assistance back into the meaningful workplace. The work that we've done on transitional employment shows that our industry hires 49% of all of who are considered underemployed, low-skilled individuals who are coming back into the workforce. So if you're not creating jobs in our industry, those jobs aren't going to be created out there for a lot of the ports of opportunity.
Mr Spina: I just want to emphasize that it is the lesser-skilled people who can use the hospitality industry as an entrance point into new jobs.
Mr Oliver: Yes, because we have such a wide range of job opportunities. There are high-skilled and there are low-skilled in the industry.
Mr Hudak: As you were waiting, an argument or a discussion developed about levels of taxation and the economy: Are taxes right now high enough or at a satisfactory level? In your opinion, what effect do higher taxes, whether they be personal income taxes or consumption taxes, have on the hospitality industry, especially with respect to employment in your industry?
Mr Oliver: They have a direct correlation. I didn't bring some of the work we've done on consumer expenditures in the foodservice relative to available consumer spending, but most consumers have about 20% of their dollars that they earn for discretionary spending, and that goes to industries like ours, the entertainment industry, the tourism industry, retail. If you get a 5% increase in taxes, people are still going to pay their rent. They have their fixed costs. It's going to come directly out of that discretionary spending area.
Mr Hudak: So lowering the level of taxes, you think, if you can keep them at a permanently lower level, will have substantial long-term benefits for your industry?
Mr Oliver: Yes.
Mr Kwinter: I'd like a clarification. I have to apologize. I should know this but I don't. When you go into a restaurant and you buy something that is $4 or under, there's no tax. When it goes over the $4, you pay a tax. Is that tax on the total?
Mr Oliver: Yes.
Mr Kwinter: So in other words, if you buy something for $4.01, you're paying provincial sales tax on the whole $4.01?
Mr Beatty: Yes. The way it works is, GST is applicable to whatever amount you buy in a restaurant but the PST $4 threshold is -- at $3.99 you pay a 7% tax; at $4 you pay a 15% tax on the entire amount.
Mr Kwinter: What I would suggest that you might look at to make it more palatable for the Minister of Finance is that they apply the same kind of formula as you're asking to be applied to the employer health tax, that there be a threshold on the first $4 -- so the Treasurer's not losing anything because if you get that first $4, he doesn't get tax anyway -- and that the tax be applicable to just that portion above the $4. So if you go to $6, you're only paying 16 cents or 14 cents. Does that sound like something that might --
Mr Oliver: Certainly we would support either approach of moving the threshold up or introducing it as a deductible or whatever you want to treat it as, but it would apply to the first $4. The real problem takes place when you hit that $4.01. People do everything possible to stay below that and it's a case of even ordering your coffee separate and things like that. So if you have the threshold either as the first $4 and it is deducted off any order -- if it's $6, you then only pay on $2, or moving the threshold up. We are flexible on that and we would look to either one of those to address the current problem that we face.
Mr Kwinter: It would just seem to me that if you're having to pay the tax on the whole amount, there would be a real deterrent. As you say, people try to figure a way how to get around it. If you're only paying the tax on the incremental amount, then there'd be less of that tendency because the amount is relatively small and, from your perspective, as far as your margins are concerned, the larger the number the greater the margin.
1600
Mr Beatty: You're exactly right. The marketplace is so price-sensitive right now that on many of our menu meals we do not dare go to $4.01 because the demand will drop significantly in the marketplace, and the margin is now gone at $3.99 that used to be there.
The Chair: Thank you very much for your presentation. I apologize for the interruptions, but these things come to try us.
Mr Oliver: We have the additional handouts. More paper. I said I was going to cut the paper down, but --
The Chair: We'd be pleased to distribute those for you. Thank you very much. Ms Lankin?
Ms Lankin: Mr Chudleigh, I know there is a discussion we will be having, and I'm just wondering -- if I could get Mrs Marland's attention while I request this -- if we could have that discussion at an appropriate time tomorrow morning. I actually would like to be party to that discussion and I have an appointment that I have to leave to get to.
Mrs Marland: It's fine with me. Including this letter, right?
Ms Lankin: I suspect that's what your discussion was about.
Mrs Marland: That's fine.
The Chair: Could we ask the next group to come to the table while we do a little housekeeping here? Thank you very much. Yes, Mr Wettlaufer?
Mr Wettlaufer: I would just like to emphasize that the letter should not go out prior to our discussion.
Ms Lankin: It's already gone. It went yesterday.
Mr Wettlaufer: Oh, as long as the committee doesn't expect a reply then.
The Chair: That'll be the minister's decision, I would think.
Ms Lankin: With all due respect, the query with respect to the tax options was one that I read from Hansard, and the commitment of the minister. The letter went with that inquiry. The deputy minister in fact, as I saw him walking down the hall today, was on his way to have the discussion with the minister, so I suspect that we will get an answer.
Mr Wettlaufer: But, Ms Lankin, the point is that the committee is not the one that requested this information.
Ms Lankin: That's interesting. I thought Mrs Marland was specifically referring to the question with respect to the employer health tax that --
Mr Wettlaufer: That might be her point, but my point is the committee is not the one that requested this information.
Ms Lankin: So you don't want this information, is that your position?
Mr Wettlaufer: I didn't say that.
Ms Lankin: I'm asking you. Is that your position? You don't want information to come to this committee?
Mr Wettlaufer: I think we have to have the discussion first. You're putting words into my mouth. I said I think we should have the discussion first.
Ms Lankin: My position on this is, if you as a government member are going to try to influence the Ministry of Finance not to provide an answer to my question until we have the discussion --
Mr Wettlaufer: You're playing politics.
Ms Lankin: -- then I would insist on having the discussion now, and I don't want to interrupt this group.
Mr Carr: On a point of order, Mr Chair: If we could get to the people who are waiting, we could do this later, if that's in order.
Ms Lankin: No, Mr Carr, perhaps you weren't listening. My point was that unfortunately I have to leave and I can't wait to have that discussion. I had suggested putting it off till tomorrow and I'm fine to do that. However, one of your colleagues has suggested that that would be reason to stop the ministry from providing us with any answer to my question.
Mr Carr: Tomorrow we'll have the debate when you're here. We'll make time tomorrow.
Ms Lankin: Yes, but not if one of your government committee members is going to be suggesting that therefore it would be inappropriate for the ministry to answer the question contained in that letter, irrespective of who the author of the question was.
Mr Carr: What do you think, that you're going to get an answer back overnight?
The Chair: I think we're aware of your concerns, Ms Lankin.
Ms Lankin: Will you assure me that nothing will be done to ask the minister to delay the response? That's all.
The Chair: I don't think I have that authority. I don't believe that will take place, but I don't think I have the authority to request that.
Mrs Marland: Mr Chair, you do have the authority to agree to the request Ms Lankin is making. She's just saying, can she have all-party agreement that this discussion that I initiated take place tomorrow morning when she's here? We all have different schedules, and I appreciate that. Let's do it.
The Chair: I think we have agreement for that. I might suggest we convene at 9:15 in order to have that discussion.
Ms Lankin: Okay, great.
The Chair: Hopefully, it will be a 15-minute discussion.
Mr Carr: Better make it 9.
OLDER WOMEN'S NETWORK
The Chair: The ladies of the Older Women's Network, Mrs Frances Chapkin and --
Mrs Grace Buller: Grace Buller.
The Chair: Welcome to our committee. We are not usually this cantankerous, so it's totally out of character for us. It was because of the demonstration outside, I'm sure. But if I could ask you to proceed, you will have a full 30 minutes.
Mrs Buller: This is Kathleen Repka on my left. The Older Women's Network is a voice for older Canadian women. Its purpose is to overcome injustices and inequities at home, in the workplace and in society at large.
In the 1996-97 fiscal year, the Ontario government budget anticipates spending reductions of $4.5 billion to $5.5 billion, as well as the previous $1.9 billion in cuts announced in July. What effect will this have on the lives of Ontarians?
The Older Women's Network is interested in society as a whole, as well as the welfare of older women. We have children and grandchildren who will be affected by these budget decisions made in 1996.
For seniors, the Older Women's Network is especially interested in funding for health care, drug benefits, housing co-op and non-profit housing projects as well as transfer payments to municipalities. The government economic statement suggests that $1.3 billion will be saved by constraining transfers to hospitals by 4% in 1996-97, 5% in 1997-98 and 6% in 1998-99. What effect will this have on hospital care?
The aging population, especially of women, who are living considerably longer than men, will be acutely affected in their later years by the lack of sufficient care, especially long-term and transitional care. This was dealt with in the submission we presented to the standing committee on Bill 26 on December 18, 1995.
As far as the drug benefit plan, seniors on the guaranteed income supplement will certainly suffer from the $2 cost for each prescription. Many seniors must budget severely now to pay for rent as well as adequate food. If a number of prescriptions are required, the added payment will bite severely into their food budget.
Many senior women live in rental apartments. Some of the best-maintained of these have been co-op and non-profit housing projects, where the rent is geared to income and the residents serve on committees which oversee a standard of maintenance for the buildings. If these kinds of housing are not developed with government funds, how will older women manage to live a life of dignity in their senior years?
The Chair: Excuse me, I'm sorry, but we have a disturbance in the building and they have broken through the security. I think we're going to have to suspend our committee hearing and move into recess. I believe we're to go downstairs.
Clerk of the Committee (Mr Franco Carrozza): You have to go downstairs through the tunnel to exit, please.
Interjections.
The Chair: I doubt if we'll be back today. I think we'll recess until tomorrow morning and then we'll try to go to extended sittings tomorrow.
Tomorrow morning, we'll commence at 9:15 for the discussion, 9:30 for the first witness.
The committee adjourned at 1608.