PRE-BUDGET
CONSULTATIONS
CANADIAN MANUFACTURERS' ASSOCIATION
CANADIAN UNION OF PUBLIC EMPLOYEES
TORONTO INTERNATIONAL FILM FESTIVAL GROUP
SUN LIFE ASSURANCE CO OF CANADA
COUNCIL OF ONTARIO UNIVERSITIES
ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION HOUSES
CANADIAN AUTOMOBILE ASSOCIATION ONTARIO
CONTENTS
Monday 12 February 1996
Pre-budget consultations
Canadian Manufacturers' Association
Paul Nykanen, vice-president, Ontario division
Brian Collinson, executive director
John Allinotte, chairman, taxation committee
Canadian Union of Public Employees
Sid Ryan, president
Cathy Remus, researcher
Toronto International Film Festival Group
Piers Handling, executive director
Allison Bain, director of public affairs
Sun Life Assurance Co of Canada
Don McIver, chief economist
Paul Duffy
Retail Council of Canada
Peter Woolford, senior vice-president, policy
Leonard Eisen, chair, tax committee
Council of Ontario Universities
Bonnie Patterson, president
Ontario Trucking Association
David Bradley, president
Citizens for Public Justice
Gerald Vandezande, national public affairs director
Glaxo Wellcome Inc
Bill Laidlaw, director of government relations
Ontario Association of Interval and Transition Houses
Victoria Roth, president
Eileen Morrow, lobby coordinator
Canadian Automobile Association Ontario
Pauline Mitchell, member, public and government affairs committee
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
Crozier, Bruce (Essex South / -Sud L) for Mr Phillips
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 room 151.
PRE-BUDGET CONSULTATIONS
CANADIAN MANUFACTURERS' ASSOCIATION
The Chair (Mr Ted Chudleigh): Seeing a quorum, we can proceed with the standing committee on finance and economic affairs and our pre-budget consultations.
This morning we welcome the Canadian Manufacturers' Association; Paul Nykanen, John Allinotte and Brian Collinson. Gentlemen, we have half an hour, if you'd like to make your presentation, and then we can proceed to questions and answers. Thank you for joining us this morning.
Mr Paul Nykanen: Thank you for the opportunity to present our views. We appreciate that very much. Before we get into our formal part of our presentation, I'd like to give a very brief overview on how we see manufacturing in Ontario right now. In terms of who we're representing, our member companies in Ontario represent over 75% of the total manufacturing production, which translates to about $140 billion a year. So you can see that it is a very key factor in the economic health of Ontario.
Our principal focus is the strengthening of the competitiveness of Canadian industry and we are quite concerned about the deterioration that we have seen over the last four or five years. Any of the increases in production that we have experienced, and certainly there have been significant increases over the past year or so, have been primarily as a result of exports. The domestic market has been very flat. In fact, our market share has declined over the last 10 years on a steady basis. Everything that is happening in Ontario right now is export-oriented, and of course 80% of our exports are to the United States -- so that represents quite a concern -- and of those exports, the automotive production is a large part of that. As the US economy goes, consumer demand goes, so goes manufacturing here.
Also, some of the concerns that we have right now, two fundamental things as far as the domestic business is concerned: One is that consumer debt is at an all-time, 47-year high right now and savings are very low, so that in 1996 we expect little or no growth. The manufacturing jobs themselves: We're down to about 960,000 jobs right now compared to a 1,000,076 in 1989 in the pre-recession time.
Investment last year, in 1995, has been fairly strong, but in real terms we're really only up to the levels of 1989 at this stage. Comparing the two, investment in Ontario was 11.8% of GDP in 1989, whereas in 1994 we were at 2.6%. That's in terms of net real investment when we don't consider the depreciation. It's also important to note that most of the investment we have made in Ontario has been in machinery and equipment and very little in bricks and mortar, and that's part of the reason you have seen the drop in manufacturing jobs.
I turn it over to Brian to make a few comments.
Mr Brian Collinson: Mr Chairman and members of the committee, the general state of the economy gives rise, in the CMA's opinion, to several conclusions.
Firstly, it is essential that the government exercise a good deal of conservatism in the budgeting process. In recent times economic forecasting for budgetary purposes has been horrendously overoptimistic. CMA believes that the most responsible approach would be to budget on an assumption of 0% real growth. If, as we hope, a surplus results, it can be applied as needed.
Second, the CMA believes that two strategies for growth must be pursued. First, there must be cuts to government spending. The CMA congratulates the present government on its excellent beginning. However, CMA is firmly convinced that spending cuts cannot be the only priority. There must also be expansion of industrial growth and development through the enhancement of capital investment. Only economic growth will give Ontario the revenue to apply to permanent elimination of the deficit and to minimizing the debt.
The CMA believes that deficit reduction and cuts in government spending must remain the primary priority of the government for the next budget, but CMA believes that the task of truly licking the deficit over the long term can only ultimately be realized through competitive measures which make Ontario the most attractive place to invest in North America. Government expenditure must be completely reshaped and repriorized so that a truly competitive environment is created for industry.
I would now like to call on Mr John Allinotte to comment on some of the key taxation issues.
Mr John Allinotte: Mr Chairman and members of the committee, we've delivered this morning a brief that details the issues that our members believe should be taken into consideration and this morning I am simply going to highlight some of the more significant tax issues for you.
First of all, we'd like to address the deficit cutting as a first priority. CMA strongly is supportive of the deficit-cutting measures of the government. We acknowledge that deficit cutting should take precedence over reductions in taxation. Many of the people of Ontario have seen pressure being brought to bear on the government to hold back on these cuts, but CMA is supportive that the government continue in this fashion. A favourable climate for business must be created in Ontario and that favourable climate can only be achieved when we have the deficit under control. CMA heartily supports the government's efforts and urges it to stay the course for the long-term good of the province.
To supplement the deficit-cutting actions that the government has introduced and will introduce, we believe it's in renewing the open-for-business concept that has been in Ontario before and we suggest it should be brought back. There are certain specific tax measures which we think should be taken into consideration. Firstly, harmonization of GST and PST.
CMA was pleased with Premier Harris's recent comments that the harmonization discussions with the federal government were proceeding. This has been identified as a priority issue by our members. Harmonization of GST and PST would enhance the competitiveness of the manufacturers in Ontario. It would allow Ontario to expand its tax base more equitably across businesses. It would result in a simpler and more efficient system, both for administration and compliance. Harmonization with full-input tax credit would benefit Ontario through reduced administrative burden and cost to government, reduced compliance cost to both small and large businesses, increased competitiveness of Ontario products abroad and increased competitiveness of Ontario products at home against imports.
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Harmonization should be provided for immediate full input tax credits with one harmonized tax rate and one tax base, with no exceptions throughout Canada. Consumers will ultimately obtain the most benefit from the harmonized system, which provides full-input tax credit to business through reduced prices of goods. Harmonization does not represent a shift in tax burden from business to consumers, nor does it represent windfall profits to business. It allows Ontario goods to be more competitive, both at home and abroad, through lower prices.
CMA believes Ontario should take a leadership role in this objective and take advantage of the current opportunity to negotiate with the federal government, an opportunity CMA believes may not be present in the distant future.
Research and development superallowance: The current Ontario R&D superallowance is a key factor which ensures research is done in Ontario. It is a vital aspect of the Ontario tax regime. The superallowance in its current form is both complex and difficult to calculate and administer. These complexities impose an unnecessary burden on both government and business.
CMA believes the current problems can best be addressed by making the allowance a single-rate, non-incremental credit, with an appropriate increase in the rates to offset the benefits that would be otherwise given up on the incremental allowance. This proposal would greatly reduce the onus of administration of the superallowance, with no loss of tax revenues.
Corporate minimum tax: CMA and its members recommend the repeal of the Ontario corporate minimum tax. This tax legislation provides little, if any, revenue to the government while being viewed both as a nuisance and punitive by the business community. This legislation is primarily operative when corporations are faced with economic downturns and already limited cash flows. It is viewed as a negative stimulus to investors contemplating Ontario as a place to operate. It is injurious to the tax competitiveness of the province. These adverse consequences can in no way be offset by the minimal revenue that it should raise.
Lastly, capital tax: CMA supports the pre-election stance of the current government that capital tax should be creditable against corporate income taxes. Ontario is desperately in need of capital investment. This tax in its current form effectively functions as a disincentive to capital investment by taxing investment rather than income.
If the committee should have any questions, I'd be prepared to answer them now.
The Chair: Thank you very much, gentlemen. We have approximately 18 minutes. We'll start with the opposition. Mr Kwinter.
Mr Monte Kwinter (Wilson Heights): It's not 18 minutes each?
The Chair: No, it's the total.
Mr Kwinter: Thank you for your presentation. You covered a whole range of areas, but I'm interested in pursuing some of your observations about the economy and the fact that, if it weren't for exports, we'd have very little growth in the economy in Ontario. What do you feel, the fact that the Canadian dollar is what it is contributes to that particular situation, and what happens if the Canadian dollar was to go to 80 or 85 cents? How would that impact on your sector?
Mr Nykanen: You've hit on one of the key things as to why we have been successful with our exports, and that is that we now have at 72 to 74 cents a properly valued Canadian dollar, which allows us to be very competitive in the United States and overseas. So it has been a very significant factor. The other consideration of course is the interest rates that exist in Canada and in the United States, and the dropping of interest rates has actually helped people in making decisions, develop a little bit of confidence, particularly in the United States where we have seen more consumer confidence, if you will. So those two factors have been a key thing.
When we had a Canadian dollar at 82 cents and 85 cents roughly, we believe the Canadian dollar was overvalued at that time and our export businesses suffered quite significantly. You can almost track the curve in increase in exports with the path of the Canadian dollar.
Mr Kwinter: To get back to your presentation, you talked about consumer debt being at a 47-year high and savings are low. I assume you're in favour of the government's proposal to give a tax break, a tax reduction. Do you see that as improving that situation?
Mr Allinotte: As far as CMA's position with regard to the proposed reduction to personal income taxes, as an association we are neither for nor against it. But one of the things we've found in our experience with our friends in Ottawa, if an income tax reduction is in the offing it should be phased in with the proposal to harmonize PST and GST. As far as a stimulus to the economy, industry believes we would see reduced labour costs from a tax reduction; there would be more funds available to our workers in take-home pay. It has to mean a stimulus someplace along the line.
Mr Kwinter: You mention the fact about the harmonization. We're getting conflicting recommendations. Last week we had the Ontario Restaurant Association before us. As small business, they represent a relatively significant sector of the economy. In their presentation to us they opposed harmonization. So here we have two sectors in the business community: the Canadian Manufacturers' Association advocating harmonization; on the other hand, we have the Ontario Restaurant Association opposing it. How do you reconcile those differences when you're both businesses, you're both in the same economy?
Mr Allinotte: I think what the restaurant people are somewhat concerned about is that when that harmonization is done, the marketing job, if it's done in the same fashion when GST was introduced, will be a hard sell to the purchaser. If the harmonization is marketed properly, combined with a reduction in the Ontario personal income tax rate, the consumer I'm sure will be more receptive to the harmonization than they were to the GST. I think what the restaurant people are talking about is just being gun-shy.
Mr Kwinter: When you talk about the stimulus of the tax cut -- and I am of two views: One, either the tax cut is being done to stimulate the economy, which the government certainly says it's doing; the other one is that it's to make the consumers feel good. They're getting some money back, the tax reduction is lowering their taxes. It would seem to me, if it's to stimulate the economy then it would be far more effective that instead of giving the money to the consumer who would be then acting as the agent of the government to put it back into the economy in a way that the consumer decides, which means they could not put it back into the economy if they decide -- they could use it to pay down this record debt; they could use it to build up their low savings -- you have a situation where that money -- really, there's a slot of slippage. You have no way of really determining how much of that benefit to kickstart the economy is going to find its way back into the economy.
If the government's true purpose was to kickstart the economy, I think it would be far more efficient for them to not use the consumer as the agent and just use it to stimulate economic activity by government projects. We had the roadbuilders in saying roadbuilding in Ontario is at a dramatic low. Here's an opportunity to get those jobs going, to get that going, by direct government expenditures as opposed to, as I say, putting it out to the consumer and taking their chances as to how much of that money's going to come back into the economy. Do you have any comments on that?
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Mr Nykanen: One comment that I might like to make there is that there are certain infrastructure projects that are needed. We must have ongoing maintenance and that sort of thing, but there is a finite end to every job created with capital spending on some specific projects. We feel that it is much more important to have an ongoing stimulus to that. There are two considerations: one is from the consumer side, where a person would have more disposable income, have a greater confidence; but the other is the investment climate itself.
If we can stimulate the domestic climate with the low interest rates that we have right now and also the personal tax cut -- by the way, I'd like to emphasize that the personal tax cut is not a huge issue as far as we are concerned, we're really commenting on that as to what the impacts and stuff might be. But certainly it would have an impact on stimulating the economy, and that would be an ongoing type of thing rather than a sunset on a capital project.
Ms Frances Lankin (Beaches-Woodbine): Good to see you again, Paul. Welcome, gentlemen. I was interested in some of the positions you've put forward with respect to different taxes, but let me just pick up on the point that Monte left off with around the personal income tax break. I guess it would be helpful if we were provided with some detailed information from the Ministry of Finance. On the first day of the hearings, we requested that kind of information. We know in previous years at pre-budget consultations we've been given projections of medium- and long-term revenue and expenditure and the pressures in the system and some of the costs around what various options of a 30% income tax cut would look like, but we haven't got any of that.
So in some ways I guess we are working a bit in the dark. Any of the consumption studies that I saw when I was in government indicated that an income tax break of this sort that's just 30% across the board will obviously put greater amounts of dollars in higher-income earners, because of the progressivity of the tax system, and there were real questions about whether that would in fact be stimulative. Instead, the advice that finance officials used to give in those days was to gear your income tax breaks to people at the lower end of the income scale, because it becomes disposable income more quickly and back into the economy.
I think the thing that concerns us today looking at the situation is, with the amount of cuts we have seen to municipal budgets, for example, and Bill 26 allowing a wide range of new user fees, which is another form of taxation at the municipal level, for middle-income and low-income earners, we suspect that the value of the tax break is going to be more than offset by increased user fees. For the higher-end folks, there will be the fair-share health levy that they will have to pay, but there will be some additional money, and of course the more you earn the more money you will get back. Speculation and looking at any kind of consumption studies suggest that much of that money might go into investments, and much of that not necessarily domestic; it could be offshore.
Have you taken a look at whether or not you think that is the best kind of stimulative tax break, or would you prefer to see a tax break on sales tax, for example? Would that, in your opinion, have more of a stimulus? Are there any other alternatives you could suggest to this committee that we might look at and be able to recommend to the Minister of Finance?
Mr Allinotte: We have not looked at a quantitative analysis with regard to the reduction in the personal income tax. As was pointed out, we are simply commenting on what we believe would be the stimulus from our members relative to our employees, because one of the things that keeps putting pressure on us is that as the take-home pay goes down, because more and more taxes are being levied on it, our costs increase. That cost increase impacts as competitive, dealing offshore with our competitors in the US.
Ms Lankin: Could you just explain how that works?
Mr Allinotte: To the extent that an employee has less take-home pay, which is directly affected by income taxes, they demand higher wage settlements, or increases in wages. Consequently, that increases the cost of manufacturing in the province of Ontario, and consequently our goods in the export market cost more than our competitors' do.
Ms Lankin: So if most of the manufacturing employees, let's say, are in the middle-income range, which is probably a good assessment, if they're going to be faced with fees at the local skating rink for their kids, and libraries, and all of the kinds of municipal user fees and potentially higher property taxes, which is not income-related -- we see that shift happening -- is that likely to put pressure on your wage packages in your plants?
Mr Allinotte: The impact of something of that nature would, but let me just comment as a tax professional for the last 25 years. Ontarians have become fed up with the Ontario government taking their money and spending it for them. If it's a question of reducing personal income taxes and installing user fees, the people in Ontario would prefer to have the choice as to what they spend it on than to send it to Queen's Park to have them spend it for them.
Ms Lankin: I think that might be true for people who have the disposable income and can afford to spend it. I guess again one of the things I worry about is the nature of progressivity of the income tax scale. We hear a lot about Ontario being overtaxed in terms of our income taxes, and I think that all of us, any person, would appreciate paying less if we could. The question is, is this the right time?
With all of the focus that you've put in your presentation on how important it is to deal with the deficit, and I agree with you on that, I think some of us wonder whether this is the right time to be spending -- borrowing -- $20 billion over the next number of years to pay for that tax cut, paying debt interest on that money to pay for the tax cut, when the stimulative value of it is at the very best questionable at this point in time. We've seen no data to indicate that is actually going to accomplish what the government hopes, which it's projected to be 725,000 jobs as a result of that tax cut.
Mr Allinotte: Let me just reiterate a point that Paul made. CMA is not recommending nor discouraging the government to lower personal income taxes. We have not done a quantitative analysis. We know what we believe will be the effect on our members, and that is all that we would put forward to you.
Mr Wayne Wettlaufer (Kitchener): One of the questions that we constantly hear is the reduction of taxes, but in so far as the CMA is concerned, I would like to find out how we can increase our competitiveness vis-à-vis the United States. I believe that with OHIP and some of our other welfare schemes we are very competitive with the United States, but I wonder too if by increasing R&D we could not be more competitive. I wonder what we as a government could do to encourage more partnership between business, ie, the CMA in this case, and the universities. As you know, there has been some talk of cutbacks in R&D at the university level.
Mr Allinotte: To the extent of R&D and the superallowance, CMA would be the first to admit that Ontario, in the area of research and development, tax credit grants, is much more competitive than our competition in the US. As far as we are talking to the administrative side of it, we naturally would welcome an increase in the rate, and I'm sure that R&D would increase with an increase in the rate.
One of the things that we find is that a lot of foreign-owned companies that are operating in the province of Ontario, when they consider various aspects, one being the capital tax, if they have to invest in the province of Ontario in the nature of capital, they have to pay a tax on it. If that investment is in the area of R&D, they look someplace else for it.
As far as partnership with universities is concerned, again, to the extent of the available tax credits, business appreciates what we have now, and more of it would cause more spending in industry.
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Mr Gary Carr (Oakville South): Thank you very much for your presentation. As usual, we appreciate the effort. I had a question regarding what you'd like to see the government do. You mentioned on page 8 that you're pleased that the Harris government is reducing government spending, and your quote is "to keep staying the course." But there are other things that need to be done. I'm thinking now of WCB reform, employer health tax, labour legislation, interprovincial trade barriers. If you could recommend the next step for the government to take -- and I throw four of these things out as an example. You talked a great deal about the taxation and put together some ideas there. If you could advise the government where it should focus its next effort, where would you suggest that we go while we continue this? As you know, the whole theory is to downsize the public sector while we upsize the private sector, and that's what the tax cuts are all about. In order to upsize it, the tax cuts are a part of it, but there are other things like the WCB reform. What next for this government would be your recommendation?
Mr Nykanen: I'll just make a few comments here. You focused on some of the priority issues that we see as far as investment here is concerned. When we are taking a look at something like the WCB reform, we must look at that in terms of the total picture. Our WCB rates are uncompetitive. We are very high compared to our sister provinces. So if we take a look at that itself, there are specific things that have to be done there to get the WCB viable and sustainable to ensure that injured workers will have continuing benefits.
But it's the whole picture itself. There was an earlier reference that was made to our OHIP being competitive. But let's take a look at the total payroll taxes. It doesn't matter what we call them, we are looking at CPP, we're looking at OHIP or the employer health tax, we're looking at the WCB rates. All of these are non-discretionary taxes that you have to pay. So the focus on reducing that overall tax rate is a very important consideration.
The other part of it, in terms of initiatives, is that certainly the investment climate is very much determined by what the total business environment is. We applaud the changes in the labour laws, which were a very restricting factor for the manufacturing community. We lost a lot of investment as a result of not being able, for instance, to use replacement workers. If you can't supply and you shut the plant down, there are no jobs.
I think that many of the issues that you've referred to there are really priority issues from our standpoint.
Mr Carr: Good. Thank you.
The Chair: Mr Ford, do you have a brief question?
Mr Douglas B. Ford (Etobicoke-Humber): Yes. Gentlemen, welcome this morning. From your point of view, your perspective, where do you see that the government can cut down in the budget? We're cutting in many areas. Maybe you see another area that could be a benefit to this province so that we could create more jobs, cutting down in certain areas. Maybe that's an unfair question, but I'm asking you.
Mr Nykanen: One area certainly is to avoid duplication in sales tax collection. We've got two regimes right now, one in Ottawa, one in Ontario. Both require a huge number of people. If that was harmonized, we'd have one administration. It would be simpler for business. There would be no requirement for dual filing. That initiative by itself would save the government a lot of money.
Mr Ford: Do you have any other areas where you might --
The Chair: Thank you very much. That brings to a conclusion our time. We appreciate the Canadian Manufacturers' Association appearing before us this morning.
CANADIAN UNION OF PUBLIC EMPLOYEES
The Chair: We now welcome the Canadian Union of Public Employees, Mr Ryan. Welcome. We look forward to your presentation. We have 30 minutes.
Mr Sid Ryan: I would like to thank the committee for this opportunity to discuss the economy on behalf of the 175,000 public sector workers represented by CUPE Ontario. Joining me today, to my left, is Mr Jim Woodward. Mr Woodward is the legislative director for CUPE Ontario. To my right is Cathy Remus, a researcher from the national office.
We have decided to limit our comments to an analysis of the economic impact of the government's policies. As Canada's largest public sector union, we'd like to focus our comments on the public sector contribution to Ontario's economy and on the economic impact of public sector restructuring.
Our submission draws on our union's experience with restructuring initiated by this government to demonstrate the economic impact in as clear a way as possible.
This government has bought into the myth that the public sector is ineffective and inefficient, while the private sector is responsive and efficient. At best, such an assertion is nothing more than a generalization. It's not difficult to prove that it's simply not true.
Studies of delivery of health care in Canada and the United States have shown how much more cheaply our public health care system operates. In Canada, health care costs 10% of the GDP and covers everyone; in the US, 14% of GDP goes to health care, while millions of low-income Americans have no coverage. Our members are constantly pointing to other examples of how they can do the job more effectively and efficiently than the private sector contractors.
The job creation strategy outlined in the Common Sense Revolution is based on the notion that private sector jobs are somehow preferable to public sector jobs. Inherent in this notion is the belief that the government's balance sheet is all that matters. Public sector and private sector jobs both make valuable contributions to the economy as a whole; we can't afford to dismiss either.
Job security in the public sector continues to be threatened by layoffs, reductions in hours, jobs lost through attrition, contracting out, use of volunteers, and mergers and amalgamations. Job security enables people to plan their lives, guard against financial insecurity and contribute to economic growth. Without job security, people are reluctant to demonstrate consumer confidence and make large purchases or investments. The effect is to slow down economic recovery.
Perhaps public sector workers would feel more secure if we believed that private sector growth was going to create employment opportunities for us. Instead, we know that private sector job creation will not equal the public sector job cuts, a fear confirmed by a senior economist at the Conference Board of Canada, quoted in the Report on Business, February 1996.
Services and programs that are provided by the public sector are ones that people need; for instance, health care, education, income support when unemployed, employment security etc. People still have to pay for service when it is privatized, along with the extra cost to cover the profit of the firm providing the new service.
In many areas of Ontario, the public sector is the major employer. These economies will be devastated by the spending cuts outlined in the CSR. In Peterborough, the major industry is education, and 400 hospital workers have been threatened with job loss. In Thunder Bay, government services is the main industry. Hospital restructuring there will take approximately $30 million out of the hospital spending in the area. Let's look at North Bay. Their top 10 employers are public sector: CFB North Bay, North Bay general hospital, Nipissing public school board, Nipissing Catholic school board, Ontario Northland Railway, North Bay Psychiatric Hospital, city of North Bay, Canadore College, the Transportation ministry and the Correctional Services ministry.
A study by NUPGE and OPSEU analysed the economic impact of the spending cuts on North Bay. It predicts that 421 private and 650 public sector jobs will be lost, and governments will lose $19.2 million in revenues -- $10.4 million at the federal level, $7.1 million at the provincial level and $1.7 million at the municipal level. Because this study was revised in September 1995, these numbers do not include the impact of the reductions at CFB North Bay, the $17-million impact of the Canada health and social transfer, the $2-million cut to social assistance and the 20% cut initiated by this government to the MUSH sector.
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The government's economic predictions rely heavily on growth and job creation in the private sector. The CSR talks about "removing barriers to growth." We believe that the attack on the public sector economy outlined in the CSR is going to have a severe impact on the very sector that the government is promoting as its "engine of growth."
Every cut in government spending is offset by what the government loses in terms of lost tax revenue and having to pay more for income support. It is also offset by the impact on the rest of the economy; for example, on private sector grocery stores, car dealerships, landlords, who in turn also pay less for taxes and also may cut back on their own spending.
The impact on the private sector has not been fully analysed in the government's economic plans. The following are some examples that CUPE has developed of how the spending cuts in the public sector will have a negative impact on the private sector.
Education cuts: The November economic statement announced a cut of $400 million to school boards. We now understand that the number represents cuts to December 1995 only. The cut for the 1996 school year is closer to $1 billion.
According to a leaked ministry document, the proposals include cutting $76 million from the custodial and maintenance budgets through a 10% cut to the salaries and benefits portion of the provincial grant. Two ways of implementing this cut would be across-the-board cuts to salaries and benefits, and layoffs and staff reductions.
If an across-the-board cut is chosen, we calculate that the average custodial worker will lose $3,621, not including cuts to benefits. This represents, for example, the cost of six months' worth of groceries or two years' worth of heating costs, or one quarter of the cost of a new car, or approximately three months' rent for a family. The wage cut would also mean lower tax revenues for the government from income and sales taxes.
Should all boards decide to reduce staff positions, we calculate that the $76-million cut would translate into 1,730 jobs lost across the province. That's 1,730 people who would be collecting UI, welfare or perhaps a pension and would likely lack the consumer confidence that the government is counting on to boost economic growth.
Several universities have developed economic impact studies that show how they contribute to local economies. The University of Windsor, like other Ontario universities, is preparing for a 15% transfer payment cut, the equivalent of $11.6 million. Staff have been told the cut will come out of salaries, either in the form of wage rollbacks or layoffs. This cut translates into $11.6 million less being spent by university staff. The University of Windsor is the fifth-largest employer in the city. It contributes more than $100 million per year, as well as industrial, business and community service resources.
During a recent study on university funding in the province, several groups representing business interests spoke about the positive economic impact of local universities. For example, members of the Peterborough business community pointed out that Trent, with 700 employees, is one of the largest employers and that its economic impact on the area is in excess of $155 million.
In the area of infrastructure and housing cuts, in July the government announced the reduction of $73 million in the Canada-Ontario infrastructure works program. This took $73 million out of the construction and trades industry for this year.
The construction industry will also feel the impact of the public housing cuts, with lower demand for public housing construction. One contractor in Toronto had to cancel plans to hire 1,000 construction worker jobs when public housing projects were cancelled in July, and that was only for six of the 385 cancelled projects. Unemployment among some of the construction union locals was at 50% to 60% at the time.
Social assistance recipients account for over 40% of the private sector market in Ontario. Landlords will likely feel the effect of the social assistance cuts, especially in areas with higher vacancy rates.
In the area of social assistance cuts, because lower-income people spend more of their money than higher-income people, consumption is enhanced when the incomes of lower-income households are increased. According to Metro Campaign 2000, the government's welfare cuts will cost a lone parent with two children under 12 on social assistance almost $3,000 per year. That's $3,000 less on necessities like food, clothing and rent.
There are over half a million people in Ontario on social assistance and the economic impact of this will be tremendous. As well, the housing cuts and welfare cuts will together force people to spend an even greater percentage of their income on rent. This leaves many more people with less money for other economic activity.
According to the Social Planning Council of Metropolitan Toronto, the welfare cuts will take approximately $250 million annually from the incomes of welfare recipients in Metropolitan Toronto. People on social assistance have to spend all the money they receive just to survive. So this will be a direct loss to landlords and local businesses, who will find their spending capacity reduced. There will be a drop of hundreds of millions of dollars spent throughout the city.
In the area of hospital closures, the hospital restructuring report prepared by the Metropolitan Toronto District Health Council is another example of the kind of restructuring being considered. It proposes closing 11 hospitals, eliminating approximately 3,000 jobs, and we believe indirectly 2,200 private sector jobs. Obviously, this will have a huge impact on the greater Toronto area, which will also be feeling the impact of the cuts on university and school board employees, social assistance recipients and the government's own workers.
In small towns across Ontario, hospital closures will also be felt in the local economy. For example, public pressure has kept Minden Hospital in the Haliburton region open through recent cost-cutting exercises. Now it is under more pressure than ever to close. If Minden closes, ambulance patients will have to be transported 18 miles to the Haliburton Hospital, at a greater cost in both financial and safety terms. But more important is the cost to the community. The local economy is largely seasonal, resort-based. Already unemployment rates are high. In many cases, hospital workers are their family's only breadwinner, and in many cases they're women.
Increasingly, public sector restructuring initiatives simply don't make economic sense, even aside from the negative impacts on the private sector described above. Policies such as these only make us more sceptical that the government's economic plan will achieve its stated objectives. The following are examples of restructuring initiatives that we consider economically unsound: child care cuts; interventions in community-based decision-making; the privatization of municipal services; shared services; and GTA restructuring.
CUPE agrees that average working Canadians are paying more than enough taxes and shouldn't have to pay more, unless of course they get more in terms of government services instead of less.
The problem is that others, wealthy individuals and profitable corporations, are not paying their fair share. The numbers speak for themselves. Tax loopholes help 98,000 wealthy Canadians with incomes over $100,000 pay no income tax. At least 20 Canadian millionaires pay less than $100 in taxes. Canada's top five banks got $2.8 billion in tax breaks during the 1980s but laid off 12,000 employees in the same period. The federal government is owed $40 billion in deferred taxes, and corporations are not even required to pay interest on this debt.
The government's proposed tax cut will benefit those very individuals who are already not paying their fair share. The proposed cut is totally regressive. As pointed out in the OFL submission to this committee, two thirds of the total value of the tax cut will go to the top 10% of tax filers. A low-income Ontarian in the $15,000 to $20,000 range will receive a $217 reduction, which is a paltry 1.2% of income, while a $125,000 earner will receive a tax cut of $5,087, which is 4.67% of their income.
We repeat the example provided by the Canadian Centre for Policy Alternatives to this committee: "A single millionaire will receive a tax cut of $63,745. This will eat up the entire savings the Harris government made by cutting the welfare benefits of 17 single parents (mothers with two children). In other words, 51 people were impoverished by this government to pay the 30% tax break for one rich business executive."
The tax cut will be expensive: at least $20.1 billion over the next five years. All of this money will have to be borrowed when deficit reduction is supposed to be a priority. Even government supporters are now questioning this proposal, as the impact on economic revenues would be huge. An early analysis published by the Toronto Star calculated that the combination of the expenditure reductions and the tax cut will actually cost low-income people more than $900 while increasing the income of the very wealthy by more than $25,000.
We believe that growth will not occur if the tax and spending cuts described in the CSR and the July and November economic statements are implemented. Furthermore, the government's balance sheet will also not be improved to the extent that it would if the government adopted a different approach. Furthermore, we would argue that there is no solid evidence that these provisions would work as planned. In other words, we're all engaged in a high-stakes economic experiment. Ontario is not Alberta. In Alberta, cuts were made at a time of rising oil prices and expansive growth. In Ontario, the cuts are starting at a time when we're slipping back into recession.
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The CSR cites New Zealand as a place where similar economic reforms have revitalized the economy. When the Premier uses words like "fiscal crisis," perhaps he's invoking New Zealand's near-fatal crash with the famed "debt wall." Not only was New Zealand never in danger of hitting the debt wall, but the numbers there speak to the results of that experiment. Reagan's America and Thatcher's England also fail to offer examples of the success of these policies, except for the very wealthy.
I want to go over the summary of the Informetrica analysis which was provided to you by the OFL submission. According to the CSR, restraint leads to economic growth. According to Informetrica, "Not now, and by itself, maybe never." With the tax cuts, the July and November economic statements will cost just under 100,000 jobs across the country. Without it, the CSR will cause the loss of more than 150,000 jobs by 1998. The province's growth will lose 0.5% in 1997, and more in 1998. This translates into 30,000 jobs in each of 1996 and 1997.
Excluding economic effects, the government policies will take $16 billion off Ontario's debt by 1999, far less than what the government is predicting. The current debt is approximately $80 billion. When economic effects are included, even the $16 billion is unachievable.
The strategy chosen is unlikely to be successful because it cannot produce major reductions in interest rates and it cannot really affect investor decisions.
Lower interest rates over the long term are key for economic recovery. CUPE agrees with the economic statement when it says that we have to get Ontario out from underneath the burden of rising interest costs. But we disagree with the government when it argues that the only way to stop the growth of interest rates is to stop overspending. The fact is that we are not going to solve our debt problem until the real rate of growth, after deducting the rate of inflation, exceeds real interest rates. The government's policies are not going to create growth and there is no reason to believe that interest rates will come down. Therefore, we will continue to have a debt problem.
We encourage the government to look at the alternative economic model proposed by the OFL in its submission to this committee. We believe these policies will promote growth while preserving public policies and a strong public sector economy.
We also support Informetrica's call for a report on performance implications of the government's actions, including full access to underlying information and assumptions. Such a report should be released concurrent with the provincial budget.
Fully informed public discussion of economic policy is key to ensuring successful strategies. Bill 26 takes us in the opposite direction, concentrating more power over important economic and restructuring decisions in the hands of the government. Excluding the public from these discussions will only increase the scepticism about the government's plan and continue to stifle consumer confidence.
Finally, we would like the government to either acknowledge and restore the role of the public sector in its plan for economic growth or to fully disclose the true economic impact of public sector downsizing on the economy as a whole.
I'd like to thank you for taking the time to listen to our submission.
Ms Lankin: Thank you for your presentation. I want to start off where you ended up, talking about supporting Informetrica's call for a report on performance implications of the government's actions and including full access to the underlying information and assumptions. We're here today in a pre-budget consultation hearing and I'm wondering if you can tell me, were you provided with any data or information from the government for these hearings that gave you any sense of medium- or long-term projections on revenue or expenses or deficit numbers, anything like that?
Ms Cathy Remus: We worked with the three public documents: the Common Sense Revolution document and the July and November economic statements, and nothing more than that.
Ms Lankin: Right. The point that I'm making is that in every other year when you've come forward to participate in pre-budget consultations, you've been provided with base documentation which allows members of the public to have some informed public input into this process, and members of the committee to engage in some informed discussion with people coming forward with advice. That has been totally cut out this year. There has been no information provided other than what is in the public documents that are out there, which is quite standard.
I was interested in your section on taxation. When I put it all together, when I look at the cuts to welfare, the freeze on minimum wages, the capping on pay equity, doing away with proxy pay equity for the lowest-paid women, the fact that with the introduction of user fees, low-income and middle-income people are probably going to be paying out more than they're going to be getting back in the tax cut, it seems to me that it's pretty clear that the effect, if not the intent, of this government's actions will be a major redistribution in wealth.
Do you see anything in that scenario that is in fact going to be stimulative for the economy and lead to the projected 725,000 new jobs being created that the CSR predicts?
Mr Ryan: No, we don't; actually, quite the opposite. It's very interesting. As of late, we began to get calls in CUPE from business people, particularly in York region. The small business community is getting very active working with the Coalition for Social Justice and the CUPE locals. Small businesses are calling in saying, "We can now understand what the unions and social assistance recipients were complaining about with these cuts. Our profits have dropped dramatically in York region in the last number of months as a result of the cuts to social welfare recipients." So that 21% cut, people are now beginning to see where it's affecting them in their own communities. That's not surprising.
Myself and our national president, Judy Darcy, are travelling all over Ontario, but in particular we've just come through a leg of northern Ontario, where we're hearing it left, right and centre from small business people that the economy on Main Street Ontario is really being adversely affected by all of the cuts, the layoffs, particularly public sector workers.
I just did a trip through North Bay. They've stopped spending. As I've indicated in our brief, a large percentage of the workforce in North Bay is in fact from the public sector. The talk of layoffs, the threats of downsizing, privatizing, contracting out have scared people. They've stopped spending right across the province. There's no stimulus being provided whatsoever, and if we ever do see the benefits of the Common Sense Revolution, it won't be in our time, I don't think.
Mr Wettlaufer: We heard last week from the economists with the Ministry of Finance that if we had not carried through on the tough positions that we had up to this point in the first eight months of our administration, we could be paying up to a quarter or a half per cent extra interest on our debt. That equates to $250 million or $500 million.
If government spending increases over the last 10 years have been so beneficial to the economy, why do we have this high unemployment level? We heard the previous government say that they were going to spend their way out of the recession. We saw the previous government to that increase spending at dramatic levels at a time that the economy was already doing very well, so much so that we found that when the recession began hitting in the late 1980s, the Bank of Canada was still fighting inflation with high interest rate policies.
Government spending, we know from the experience of the last five years, only promotes short-term jobs. You have attacked much of what we've done here in your submission, even to the point that you say, "Excluding the public from these discussions will only increase the scepticism about the government's plan and continue to stifle consumer confidence." My understanding of the purpose of public hearings is that we encourage the public to come in and give us their suggestions about what the government should do. I don't see any concrete proposals here. You have suggested we maintain much of what has been done over the last five years. Given that the people of Ontario don't want us to, what would you suggest we do, other than what you have here?
Mr Ryan: There are about four questions in there. The first one, we talked about, why have the policies over the last four, five, 10 years not worked in terms of reducing the debt? I would point you to the fact that Mulroney, since 1980, has embarked upon a program very similar to yours, slashing and burning and cutting. Mulroney has staked his reputation in the 1980s and through the 1990s on the very fact that they would cut the debt. So we've had 10 years or 12 years of cutting and we still haven't reduced the debt. In fact we've probably doubled the debt load since the Tories took over at the national level. It continues now with the Liberal government.
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You take a look at Reagan's policies, which were very similar to what you're following here in Ontario. He decided he was going to get into trickle-down economics and give a tax break to the wealthiest people in the United States, and he increased the unemployment rates over the period of time that he was in office and quadrupled the debt in the United States. Margaret Thatcher, I was just in England not so long ago taking a look at what she did to that country. She increased the unemployment rate by 2.5% over in Britain and she tripled the debt in the United Kingdom.
Why do you think that your Common Sense Revolution's going to be any different in Ontario? You're doing exactly the same thing. If you're serious about the debt, as you like to tell us you are, why the hell are we giving a 30% tax break to the richest people in the province? Why would you be giving back $4 billion when you're saying that revenue is a problem? Why would you be giving back $4 billion even when the Dominion Bond Rating Service is telling you it's ludicrous, it's crazy, it's off the wall? If the debt is such a major problem, why give back $4 billion, and in any event, why would you give it back to the richest people in the province? Surely, if you want to give $4 billion, if you have that to throw around, let's give it to the low-income people in this province who will spend the money, as we indicated in our brief, on Main Street in Ontario, and that's where you'll start creating some jobs. Give it to the people who spend it on a regular basis, on a daily basis to survive.
Mr Kwinter: I was interested in your comments and I'd like to get your reaction to some figures that I have. The government makes a big issue of what they call the 10 lost years and that government employment has gotten out of hand, government expenditures have gotten out of hand, when in fact if you take a look at 1984, the last year of the Conservative government, the number of employees working for the government was 81,008, with an economy that was half the size of what it is today. The figures given out by the government itself show that the staff strength as of March 1995 is 81,251, so virtually the same. In 1984, when we had an economy that was half the size, we had the same number of employees working for the government under a Conservative government than we have now with an economy that is twice the size. Interestingly enough, in 1984, the number of people working in the health sector was 12,263; the number working in the health sector right now is 11,192.
So we have a situation where the government is believing its own rhetoric, is out there making these noises when the facts do not match the reality, the facts that since 1968 to 1985, the government had continuous years of deficits. I'm sure you have looked at these figures, and do you have your analysis of them?
Mr Ryan: You're absolutely correct. Government is in fact about the same size as it was 10 or 15 years ago. I think what's probably even more interesting than the figures you're citing today is in Alberta. Given all of the slashing and the burning and the cutting back of the public sector out in Alberta, on a per capita basis they still have a higher percentage of public sector workers in Alberta than what they've got here in Ontario today, even after the revolution that Klein is supposed to have implemented on the public sector.
So in Ontario the public sector is not out of whack, by any stretch of the imagination, with the private sector, and for the level of services that we are providing, which by the way the public are demanding. This is not something that government just dreamed up itself. This came from pressure from the public over the last 10 or 15 years to implement programs and services, which we take great pride in up here in Canada. It's not the United States. We take great pride in the programs that we have.
We're proud of the figures that we've got. We don't think the numbers are completely out of whack. That's not to say that we don't believe, however, that we can't sit down and restructure the public sector. There's a way of doing it, and they have found a way out in British Columbia, looking at the health care sector in itself. So there's room for restructuring and rejigging the public sector, no question. Nobody's arguing that we have the status quo, but we do think it should be done in a much more humane way than it's being done and a way that doesn't impact adversely on the economy the way the Conservatives are impacting, plus the numbers, just to finish off what you indicated, we don't think are greatly out of whack today with what they were 10 years ago.
The Chair: Thank you very much. That concludes our time together. We thank CUPE for coming in and making your presentation to the committee this year.
TORONTO INTERNATIONAL FILM FESTIVAL GROUP
The Chair: The next group is the Toronto International Film Festival Group, which has been rescheduled from an unfortunate interruption on Wednesday afternoon. I'm very pleased that you've been able to come back and join us again this morning.
Mr Piers Handling: Delighted to be here. I think there are a couple of members who heard this last year, Mr Kwinter and Mr Carr. We're going to be going over much of the same material, but we have a very specific request at the end, so hopefully this won't be too boring for you as we go through the first 15 minutes of our presentation.
My name's Piers Handling. I'm the director of the Toronto International Film Festival Group, and to my left is Allison Bain, who is the director of public affairs.
I think everyone on the government these days is becoming increasingly aware of the importance of the arts, just in terms of our economic impact as well as what we add to the quality of life in this city and in this province. A recent Toronto Arts Council study estimated the economic impact of the arts to be $2 billion in the city alone. These are pretty impressive numbers. However, the numbers are so large that sometimes individual stories get lost and so today we would like this opportunity to tell you about our organization.
Ms Allison Bain: Although we're a cultural organization, what we wanted to talk about today is our economic impacts. The province is one of our major investors and we'd like to share some of the results of that investment. For an overview of our organization we distributed our marketing kits, which break down all three divisions of our organization.
The first division is the film festival, which runs for 10 days every September. Last year we celebrated our 20th anniversary, and in that time we've risen to become North America's premier film festival. Internationally we're perceived to rank only behind Cannes. We're the second-largest public film festival in the world, and more than a quarter of a million people attend our event.
Mr Handling: The second division of the organization is Cinematheque Ontario, the provincial cinematheque. It celebrated its fifth anniversary last year, having begun operations in 1990 at the request of the province. Accordingly, Cinematheque Ontario's operations are governed by a memorandum of understanding with the province to provide broad-based support to the film industry. Last year, Cinematheque Ontario screened over 550 films to the public, including nearly 100 Ontario works.
Ms Bain: The third division is the film reference library, which operates as a public trust and protects, preserves and makes accessible the province's own collection. This is an invaluable collection that you own and it's used extensively both locally and internationally by students, researchers and the media. As many collections across this province are closing or slashing their services, in many cases the province's collection is the only available resource.
Mr Handling: Together, these three divisions -- the festival, Cinematheque Ontario and the library -- form what we call the Toronto International Film Festival Group. The group operates on an annual budget of $6.3 million. We're supported by more than 100 corporate sponsors and thousands of members. Since 1990 we have very proudly doubled our private and earned revenues and now raise nearly $4 million from the private sector each year. We are the most self-sufficient organization of its kind in the world and I'll return at the end of my submission to how other events of our size are funded.
Ms Bain: We receive about 25% of our overall revenues from the provincial government. Last year the Cinematheque-library divisions received about $1 million; the festival received about $400,000. Just to put that in perspective, that is less than half of what the province of Quebec supplies its festival and cinematheque. The return on your $1.4-million investment is annually $30 million. We distributed copies of our economic impact study to you, which breaks down that impact, but we want to touch on a few highlights.
Each year we generate more than $7.5 million in tourism revenues, and each year we continue to build on that number by launching new tourism initiatives.
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Mr Handling: Tourism is obviously a spinoff benefit of what we do. At the same time the Festival Group operates at no direct cost to the government. Other programs are at no direct cost to the government; an example is our southern Ontario film circuit which tours films across the province. This allows people living in smaller towns the opportunity to see previously unavailable films including many Ontario productions. In fact, Ontario productions do very, very well on this circuit. In its inaugural year we will generate about $100,000, money that goes directly back into our Ontario film industry in this circuit. The bigger picture is that we're now servicing people across the province and building new audiences for Ontario film.
Ms Bain: One of our primary mandates is to support the film and television industry and our activities are essential to that industry now. We're a huge marketing machine and our activities directly result in the production and the sale of Ontario film. We're North America's premier film market and each year we bring about 2,500 film professionals into Toronto.
At the festival there are essentially two types of people: those selling films, usually Canadian, and those buying films, usually Americans, other international buyers. We give the Ontario film industry the opportunity to get access to the world's top buyers every year and sell their products.
Mr Handling: The Festival Group also sells this province through its annual media impact of $3.3 million, believe it or not. We generate huge marketing for Ontario as a world-class destination by hosting more than 600 journalists each year. To put that in perspective, the World Series when it was hosted here in Toronto accredited 400 journalists.
We generate a profile for Ontario unlike any other event. Coverage ranges from television, Siskel and Ebert, Entertainment Tonight, to key newspaper coverage in London, Paris and Tokyo newspapers. This coverage isn't just film-related. Once the festival brings in these journalists, we promote the rest of the province. They're toured through other facilities and arts organizations and each year we even bus contingents down to Niagara Falls for the day. This pays off in major travel articles ranging from features on Ontario's art galleries to travel articles on camping in Algonquin Park, which is what one journalist did after last year's festival.
Ms Bain: The province is aware of our impact. Last year when it hosted the Barsoum Smart 1995 conference it asked us to help market its registration. When the province was attempting to encourage Walt Disney to open a studio in Toronto it came to the festival because we were already hosting a large delegation of Walt Disney executives at our event. We helped aggressively market Walt Disney and aggressively market this province and we demonstrate that Ontario has a strong film infrastructure in place which attracts organizations like Disney.
Mr Handling: That infrastructure is obviously creating jobs. Our organization alone provides 462 person-years in employment. We are an important trainer and employer in the cultural sector, a sector that accounts for nearly 10% of all Metro jobs.
Ms Bain: Although we're very proud of our accomplishments, we wanted to take the last few minutes to tell you about our current situation. Unlike the government, our fiscal year began November 1st so we've had to maintain operations since November without any funding commitment from the province.
Mr Handling: We've had some leeway in terms of freezing expenses for the festival because the festival doesn't happen until September. As that funding is provided by the OFDC and their future is currently unknown, we have had no indication of the festival status.
Ms Bain: The Cinematheque and library divisions, however, are a year-round operation so we had to begin operations November 1. So for three months we've been incurring a monthly debt of about $150,000 to take care of the province's own collection, with no funding commitment. Our board agreed only to do this because we have a long history with the ministry. They've always been wonderfully supportive, been our true champions at times, and are always very professional.
Mr Handling: However, as we all know, the ministry is facing really tough times. Last week the ministry directed us to plan retroactively for a 10% cut in Cinematheque and library operating funding. Although that will be difficult, we know that times are difficult.
Ms Bain: However, a 10% cut is not the reality. Since the first year of Cinematheque-library operations, provincial operating funding has flowed from two sources: $800,000 comes directly from the ministry and the other $200,000 has flowed through the OFDC, and internally the ministry has referred to it as "survival funding." We've received that survival funding since our first full year of operations, so if you ignore the semantics, it is operating funding.
Mr Handling: Last week we were told that the $200,000 survival funding will probably be eliminated. On top of that, they asked us to plan for a further 10% cut on our $800,000 operating funding. What sounds manageable, a 10% cut in our operating, is in reality a huge blow. In comparison to last year, we are being advised that we will be losing $370,000 from the province. In hard dollars, that's a 37% cut for us.
Ms Bain: This comes at a time when the federal government is also cutting its programs. This year Ottawa completely eliminated its $200,000 operating grant to our organization. Now we've lost $570,000 from last year's budget, and that's before anybody has looked at the festival. How do you maintain your programs when you've lost a third of your revenue? Well, you don't. You're forced to cancel your programs, and that drastically decreases your ticket revenue and it drastically decreases your corporate sponsorship. If we lose a third of our programs, it will be impossible for us to maintain our $4 million in private fund-raising.
We understand the current fiscal realities the government is facing. All we're asking is that our 10% cut be made on the provincial appropriation of $1 million and not on an $800,000 figure. We're willing to take a hit, but it should be a fair hit.
Mr Handling: I think you can see that the results, both cultural and economic, of our work at the festival and the Cinematheque is beyond doubt. We have proven that we are one of the most fiscally responsible arts organizations in the province. In fact, we don't run a deficit and haven't for years. We feel that we give the people of Toronto a populist festival and a significant return on their investment. For every dollar and a half invested in us, we return $30. We're also essential to the marketing and promotion of Ontario-produced films.
We're one of the most important cultural organizations in Canada, with a reputation that goes around the globe. The other major film festivals in the world, Cannes, Berlin and Venice, for instance, are virtually entirely state-supported and their budgets are significantly higher than our own, ranging from $8 million to $12 million. We also add a great deal to the cultural life of this city and province.
As we're moving into the next century, telecommunications in the various industries that supply media materials, film and television are becoming increasingly important. We're a part of that industry and play an important role. It's my impression that Ontario wants to back those industries that will move us successfully into the next century.
Thank you very much for listening to our brief. We'd be happy to field questions on what we have talked about today and any other questions you might have of the organization, of the two of us.
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Mrs Margaret Marland (Mississauga South): Good morning and thank you for being here. Certainly the track record of our party in this province has been one of very strong support for your organization, including the Ontario Film Development Corp as well. I can certainly recall many years of fighting for the reinstatement of the grants to both organizations. We do understand fully the impact and the contribution you have made and we commend you for your work and the success you have achieved.
When you're looking at where we are today in terms of our economy and what you have achieved in the last five years in terms of your corporate sponsorship, do you see the possibility of expanding that corporate sponsorship because of the position the government has been placed in with the deficit and the accumulated debt?
Mr Handling: Yes, we do. Obviously, we're doing that increasingly, more and more. I think every year, when you look at our overall budget, the private sector is stepping to the plate in a way it hasn't in the past. At this point in time, unfortunately, it's just compensating for government cutbacks, so we're in a position where, as our private money increases, our government money is decreasing, so our overall operating budget is really going nowhere, it's flat.
We're also concerned that as we ask the corporate sector to step more and more to the plate there's obviously a max-out point there as well. There are only so many corporations that we can service within the organization. We lead the world in terms of corporate sponsorship. I go to festivals all around the world and there's no question that this film festival is a model for private involvement in an arts organization. We have over 100 corporate sponsors. Just trying to keep those people happy is a great problem. They're obviously going to be overwhelmed as well in the next year or two by other arts organizations going to them.
It's a challenge. We've met that challenge. We're certainly more than prepared to do it, but it is a partnership between the festival, government and private industry, so we're certainly looking for the government to be there. You have in the past, and we're hoping to maintain it to the best of your ability.
Mrs Marland: Have you learned from your corporate sponsors that there is a tremendous benefit for them in terms of how they're perceived as corporate citizens because they're fulfilling a role that is so badly needed, especially when government's ability is depleted by a $9-billion interest on the money that we owe already and the fact that we are headed into a worse deficit situation for the next five years, even in spite of all the cutbacks our government is making?
Mr Handling: Somewhat. They're not totally philanthropists, though. In fact, far from it. The money they give to us as an organization is business oriented. They're looking to get some kind of bang for their buck. There's no question about that at all. They're not just giving us money to be good corporate citizens. They're very demanding. I've sat in on those meetings with corporate sponsors. They're looking for profile and they're looking to reach an audience that they think the festival and Cinematheque can give them. Obviously, we do at that point in time. It's also a very competitive marketplace out there. We are up against some of the other major arts organizations in this province just in terms of going to corporate sponsors.
Ms Bain: It's also important to differentiate the festival and the Cinematheque library operations. The festival has proven that it's very attractive to corporate sponsors -- huge profile, it's sexy. On the other hand, corporate sponsors are not attracted to the Cinematheque library, and what leeway we've made in raising private funds for those operations has frankly been made on the back of the festival. Something like a provincial Cinematheque film and reference library is never going to be attractive to a corporate sponsor, and there's no like organization in the world that exists without government support.
Mr Bruce Crozier (Essex South): Good morning. I'd like to get some sense what led up to the financial position you're facing today. Ms Marland pointed out that their party was very supportive of you in the past. Let's go back to last spring, early last summer. What kind of indication did you get from the now government as to its support of you at that time, prior to the election?
Ms Bain: The only indication we've had formally has simply been, "Wait until the April budget," because the ministry has been put between a rock and a hard place.
Mr Crozier: No. I'd like to go back prior to last spring when as individual parties we were coming to you. What was the support of the Conservative Party prior to the election? What was their indication to you?
Ms Bain: We've had no formal indications ever. We've had a long history of all three parties recognizing the work we do and the importance of that. We were very honoured that Premier Harris opened the festival this year, but we've had and continue to have no hard indications of that support.
Mr Crozier: When the Premier opened the festival, I assume he gave some indication of how important the festival is and the part that it plays in Canadian and Ontario culture.
Ms Bain: His remarks were very kind.
Mr Crozier: Subsequent then to the government taking office, did you have any consultations with the minister? Did you have an opportunity to sit down with the minister responsible and discuss your concerns, your contributions, your future outlook?
Ms Bain: We met informally with the minister during the festival, because she too spoke. We had a meeting with the deputy minister, Naomi Alboim, and the assistant deputy minister, but at that time -- that was several months ago -- we didn't receive any hard indications. Last week, when we got directed to look at a 10% operating, which in hard dollars is a 37% cut, that was the first specific direction we had been given. That was last week and our fiscal year began November 1.
Mr Crozier: Unfortunately, you're not alone in this shell game that's being played. The government has told municipalities, for example, and has told the public that municipalities are only receiving a 2% cut in their funding, but that's the total funding they receive from all sources and which in many cases has resulted in excess of a 20% cut. So you're not alone in the fact that they're trying to convince you that it's only a 10% cut. I appreciate that you've made that quite clear, that this is substantially more than a 10% cut, and I agree that we should lay the cards on the table and say, really, how significant it is to you.
I come from rural Ontario and I'm pleased to see the kind of the outreach you have in Ontario. I would like to give you a minute or two of opportunity, if you could again emphasize the importance that it's not just, let's say, Metropolitan Toronto, where the festival is held, that benefits from your organization, that culturally all over Ontario we benefit from that. I'd just like you to emphasize that a bit.
Mr Handling: Yes, we're very aware of that. Thank you for bringing it to the attention of the rest of the committee. Obviously the festival is a Toronto-based organization, Toronto oriented. There are lots of questions as to what happens to the films that come to the festival and why they can't tour the province, so this initiative is designed specifically to do that, to go out to small communities that never get a chance to see these kinds of films. There are a number of them in northern Ontario; there are about 15 of them. We're starting a circuit here in southern Ontario which will link with the northern circuit. We have six cities up and running and we're signing up more cities as we speak.
The material that gets toured is essentially foreign film as well as Canadian film. Ironically, the Canadian films are at the top of the list in terms of moneys returned to distributors. They're the most popular films, which flies in the face of conventional wisdom, but we're really thrilled about that.
Essentially, we're involved in a circuit of about 20 cities outside of Toronto on a regular basis, and these are all community-oriented organizations. We don't go into those cities and start them at all. We're proactive, but the communities themselves run and control these organizations. We're just a facilitator, we help them in terms of booking films, and we act as an interface between the distributor and these communities, but they're completely locally drawn.
Ms Lankin: There are two areas I wanted to ask you some questions about. Firstly, to pick up on some of Mrs Marland's questions around private sector sponsorships, corporate sponsorships, you indicated that you suspect that in the near future those dollars are going to be more difficult to come by because of the competition from a number of cultural and arts organizations that have been asked this question by members opposite when they've come before us and that are out there trying to compete for that private sector dollar.
You also mentioned, Allison, that as you cut back on your programs, you know that you're going to lose some portion of that $4 million in corporate sponsorships you have now. Could you explain that to me and the relationship between the programming you do and the loss of operating dollars and your ability to attract private sector donations?
Ms Bain: Sure. Already, in the face of anticipated cuts, we've lost 30% of our screenings at the Cinematheque. Obviously we just lost 30% of our revenue and 30% of the corporate sponsors who have in the past paid to attach their names to those programs. We run such a lean organization that every time we take a cut, it directly affects the service. So last year, for example, we lost the small project fund, the Perspective Canada suite, at the festival because an industrial service we offer Ontario filmmakers was cancelled. There's always a direct relation to the moneys. Programs such as the southern Ontario film circuit, we operate those at absolutely no cost to the province and we didn't ask the province.
However, it's important to remember the only reason we can do programs like that is because we have the infrastructure in place. By supporting our operating, it gives us the leeway to generate an additional 10 programs that don't cost anybody anything. For example, in the southern Ontario film circuit, the $100,000 we project to make this year, we won't see that, it will go directly into the hands of the artists and the Ontario film distributors.
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Ms Lankin: The other area I wanted to touch on is the bottom-line economics of what you do. I had the opportunity, when I was in Economic Development and Trade, to really start to develop an appreciation for the economic return from projects like the festival, from cultural tourism in general and, through some of the sector strategies that were worked on and programs like OFIP and others out there, saw that to cut in those areas actually would create an economic loss to the government's revenues, let alone the impact out there in the private sector.
I'm wondering if your analysis has provided these numbers, or if you could for us, with the projected cuts of the 37% that you're facing. What will that mean in terms of lessening the economic return of the activities of the festival? What will it mean specifically to government revenues? If you don't have those numbers now, is that something perhaps you could work on to provide the committee?
Mr Handling: Yes, certainly. We don't have the numbers down. We have no idea what that will mean to the overall economic impact we have at this point in time. The cuts are on the Cinematheque side of the organization, the significant cuts, the 37% cut. Cinematheque has less of an economic impact in the festival, obviously. As a result, it requires more government funding to survive.
I think what we should also stress in front of the committee is the interconnectedness of the two organizations, or what we're talking about, the Cinematheque and the festival; the fact that the Cinematheque has allowed the festival to grow and become as successful as it has become. It allows us to expand our activities beyond the 10 days of the festival to year-round activities, which are obviously more attractive to corporate sponsors, gives us a presence in this city and in this province on a year-round basis as opposed to a 10-day event.
Ms Bain: We have so little leeway in terms of where we can cut. Obviously, you try to hold your core programs, which are the public screenings. What we're grappling with right now is if we have to take that huge a cut in our budget, we have to look at the industrial services. Those are the things that don't pay for themselves. When the 2,500 most important film buyers in the world come to your event, that costs you. So, unfortunately, it's probably going to be places like that where we'll have to look, those services that are directly responsible for the production and sale of Ontario film, which are generating huge dollars for the province.
Mr Handling: Maybe we should also underline the fact too that a cut to the Cinematheque is also a cut to the festival because of the interconnectedness of the two organizations. So losing 37% on the Cinematheque side is going to affect the festival in some way. We have to lose that money. We have a common budget, so we're looking to trim everywhere.
The Vice-Chair (Mr Tim Hudak): I'd like to thank Mr Handling and Ms Bain for your presentation.
SUN LIFE ASSURANCE CO OF CANADA
The Vice-Chair: The next delegation is Sun Life Canada, Don McIver, please.
Mr Don McIver: I have copies of a handout being made available to you. I don't intend to read that. What I intend to do is to touch on a few areas that are covered in the remarks that I put together, which is more or less an essay, I suppose, on Ontario's fiscal position and economic situation going into the budget.
What I would like to do, then, is to talk about a few never-befores and a few what-ifs. I submit that we really don't know the Ontario of today, it's not an Ontario that we've experienced before. There's a very major shift in what has happened in this province since everything that we've become familiar with during the post-Second World War era.
Never before have we seen a Canadian, and hence an Ontario, economy as dependent upon US developments as the Ontario economy of today. We've seen, during this expansion in the business cycle since the last recession, the failure of the interest-sensitive sectors of the Canadian economy and the Ontario economy to come back on stream. By that, I'm talking about such sectors as housing and autos. As we all know, housing starts have simply stagnated; in fact, they've done worse than stagnated, they've declined throughout the recession. Auto sales, which is one of the key sectors that normally comes raging out in a recovery period, have been extremely subdued, extremely stagnant.
What we have seen in the Canadian economy and in the Ontario economy is a supersensitivity to US trade, trade with the US. We've seen the country's merchandise exports surge, trade balances at record highs, but the sensitivity, I would submit, is demonstrated by the fact that last year in the first half of 1995 when the US economy was going through a period of relative slowing -- and they've done that a number of times during this expansion, that is, they've accelerated, slowed down -- when they started to slow in the first half of last year, we immediately saw the Ontario economy take the consequences. By a rule of thumb, if two successive quarters of negative GDP constitute a recession, then the Ontario economy in the first half of 1995 was in recession. Well, that's one never-before.
Another never-before is that we've never before seen Ontario lag the Canadian economy the way it has during this expansion. Attached at the back of this submission there is a chart that helps to demonstrate that fact. The point I'm trying to make is that the 1980s and the 1990s are very, very different. If you look at the chart for the 1980s, you see that the dark line, Ontario, consistently moved ahead of the Canadian economy. It was the leader of the Canadian economy. So far, and of course we've got relatively little data for the 1990s, we can see that during the first several years Ontario lagged behind the Canadian economy and is only now matching the same type of performance as the rest of the Canadian economy. That's another never-before.
Of course, we've never before seen the level of debt in this province as high as we see it now, approaching, as you all know, $100 billion, roughly 30% of provincial GDP. And, of course, never before have we known debt service charges to be as high as they are, roughly 20% of revenue. And never before have taxes been as high as they are now.
I think it's important to recognize that for Ontario to remain competitive, it is essential that we have a similar tax environment to that of our surrounding jurisdictions. Now I know a lot of people will say: "Look, in Europe there are much higher tax rates. There are many countries throughout the world where there seems to be a much greater involvement on the part of government in the activities of business and individuals. Why not here?"
The simple answer to that is that this country and this province does not share an international boundary with France and Germany and Sweden and Norway, it shares it with the United States. We live in a free trade environment in which if we're going to be competitive, if we're going to maintain individuals as well as investment dollars and corporations in this province, we're going to have to keep our taxes competitive with those in the United States, with those in Michigan, with those in New York state.
Certainly, never before have we experienced the type of retrenchment in government services, government personnel that we are experiencing in Ontario and in the rest of Canada at this time. And never before has our private sector undergone as massive a shift -- call it re-engineering, call it restructuring, what you will -- but never before have we seen such a major change in the way in which we conduct business in this country and in this province. What does that all mean?
All these never-befores mean that it is extremely difficult to speak with assurance about what is going to happen in this province over the next year, over the next several years; hence, my what-ifs. Just what if the US goes into recession? It's not likely perhaps, if you listen to economic forecasters. In fact, the consensus of US economic forecasters calls for a roughly 2.5% growth in the US economy this year.
Just picking up this morning's Wall Street Journal, I see there's a degree of optimism on the front page that suggests that, gosh, golly, the United States is an economy which is now truly the collective of a lot of regional economies, and sort of that sense of diversity that comes just as from an investment portfolio that is diverse. Now the US economy is diverse. It has these different regions, some of which may go into decline, as we saw California being a very slow state to recover after the last recession, some of which may rage ahead for periods of time. A nice sense of balance and a nice sense of, gosh, if things work together, the US is probably in for a period of protracted, modest, but sustainable expansion.
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But what if it doesn't? You've got to remember that the US economy is a late-cycle economy. It's fully mature. The pent up demand for consumer goods that normally occurs during recession has long been met in the United States. It was only a couple of years ago that we were hearing a lot of talk in the US about the fact that that economy was pushing into capacity constraints both in terms of plant capacity and in terms of labour, the sense that we were reaching full employment and concern about inflation.
The US economy in fact has demonstrated through this entire business cycle expansion quite a proclivity to move, to gyrate. At one time, those of you who follow the financial markets may have been familiar early in the 1990s with the expression the double-dip. It seemed as if the US economy was going to go into recession again. Then came the triple-dip. Well, you don't have a double- or triple-dip unless you've had a period of expansion or growth from which to dip back.
That's the US economy. There's a risk that the US goes into recession. There's a risk that the economists get it wrong. It's almost an embarrassment perhaps to the profession. Just let me read you this, something I put together a little while ago.
"We can't tell you when, but most economists will attach a high probability of a recession occurring between now and the year 2000 -- definitely true. Economists have a poor record of forecasting turning points. In November 1989" -- this is the Canadian economy -- "22 Canadian economists surveyed" -- this is November 1989; remember the recession of 1991 -- "and not one predicted a decline in 1990, not one, and we know of course that it did decline in 1990. Even 12 months later, in November 1990, we were in recession, when the economy was in recession for three quarters in fact, 14 out of 18 were forecasting GDP in 1991 to rise. It fell by 1.8%."
So what if the economists are wrong? What if the US doesn't go into recession, but what if the US grows at 1%? The answer to that is simple: Look back to 1995, because the first half of the year the US economy was growing at about 1%. What happened to Ontario? We were technically in recession, back-to-back quarters of decline.
Why does this matter? I think the message that I want to bring from this is, what happens if Ontario slides into recession before the substantial elimination of the deficit and the resulting pressures on existing income support systems or programs, coupled with the consequentially weaker revenues, would throw the fiscal plan off track? This is the big caution.
That would leave the government with the choice of one of three things: either further slashing spending, and that would of course serve to deepen the recession; or raising taxes, in direct contradiction to its plan, at the risk of deflecting investment; or allowing the fiscal plan to deviate from the path towards budgetary balance, and of course that would seriously undermine the confidence of financial markets, or could seriously do so, leading to even higher debt service charges.
What I want to emphasize is that all these choices risk deepening the recession, creating a vicious cycle whereby attempting to offset the fiscal consequences of economic decline lead to even poorer economic conditions, because you've had to engage in more stringent cuts. The poorer economic conditions trigger still worse fiscal results.
Note also that in this scenario -- and this is not a base case scenario, this is a risk scenario -- if that happens, the Ontario government will not be in a position to do anything about it. By that I mean it's not up to the Ontario government to decide whether the US is going to grow or not. If it happens, if Japan perhaps, an economy which has been struggling along the trough for some years now always at the risk of financial fracture -- if that were to happen, a Mexican crisis -- look back over the last several years and you can find trigger points, potential trigger points. If that happens, the Ontario economy would be extremely vulnerable.
Some recommendations out of all this: I think it is crucial for the government to stick to its course, because the opportunities to engage in fiscal reform later are going to be even more difficult than they are now.
Then comes the question of what to do about taxes, what to do about the tax cut. Here I would recommend, and this is not just with reference to the tax cut, but in general I would recommend that government engage in putting together a contingency plan -- I don't mean a contingency fund; every government has a contingency fund and sometimes they've abused them -- that says to the public, to the citizens, to the investment community, the financial markets, the international markets, what they would intend to do in the event that economic results look weaker than they appear to be at the time the budget is put together.
The advantage of this is twofold. First, it can help to build confidence and retain the confidence of the financial markets. Secondly, it can give the government an opportunity to bring in the tax cuts when they feel they can do so and maintain the integrity of the program for fiscal reform.
I style that in this way: If the government is assured and can be assured that notwithstanding today's less propitious economic environment, it can still meet or exceed its fiscal targets and yet deliver the fiscal tax relief, then all taxpayers, of course, will reap the benefit. If, however, the simultaneous achievement of planned deficit reduction and employment growth at any point appears in doubt, then fiscal reform must take pre-eminence.
Such a program could be built around the notion that and the purpose of this is that during the budget process, with the budget, the government makes it clear what it would do in the event of a weaker environment, either economic or just revenue environment. It could specifically indicate that the tax relief would be provided only in the event the GDP meets a certain target or that employment meets a certain variable. It could be indeed explicitly tied to the deficit. You could end up saying: "Okay. The tax cuts will be brought in effective perhaps January 1997, provided that the fiscal projections of the government are met." In the event that they are not being met, then the tax cuts could be reduced and made up at a future point.
I've also made a few comments in here on general government policy with respect to the sharing of federal and provincial responsibilities. I think it would be very, very foolish for us as a country to engage in a new round of federal-provincial arrangements which resulted in shared responsibilities such as we've seen dominating the Canadian scene.
It's important that several principles be observed: obviously the single taxpayer principle that everyone I think is familiar with; secondly, the notion that the level of government that provides the service should be given the opportunity, the resources to, but should be raising the revenues.
In this country, if it is necessary to have some type of equalization, a rebalancing of provincial incomes, I think it would be much preferable if that were done in an explicit manner so that we don't have so many of these programs which, as for example, the previous CAP payment, resulted in virtual equalization or another equalization program through the back door. Let's be explicit about it, and I would argue that the Ontario government should press in the appropriate forums to ensure that that transparency of equalization is there.
Let me stop there and leave it open if there are any questions.
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Mr Kwinter: Thank you, Mr McIver, for your presentation. I've sat on this committee for more years than I care to remember and I'm always sort of taken by the fact that usually we start off with at least a half a dozen economists from various banks and other organizations who come forward and put forward their idea of what is going to be happening to the economy. I remember one year when the numbers ranged from about 2% growth to about 5% growth and yet the government used as its projection a number even higher than the highest number that was put forward by the most optimistic economist. I find that that is one of the ways that budgets are structured. Come up with a number in the growth that will match what you need and throw it out as what you hope will happen.
I was somewhat taken by the Canadian Manufacturers' Association presentation this morning in which they advocate that governments budget on a zero growth economy and then whatever they get is a bonus and they can use that money to retire debts, to do whatever they have to do. Have you given any thought to something like that?
Mr McIver: I suppose the obvious answer is, why zero? As I indicated, there's reason to be cautious about economic projections, but if we have so little faith in the projections of economists, why zero? Why not -2 or -5 or +5?
I think it is important that government go through the exercise of putting together an economic forecast. It's important, after having done so, to look at the revenue implications, and I must say that that's another big leap of faith, because even if you get the economic numbers right, the sensitivity of revenues to those economic numbers can be very, very difficult to predict. So you can get them even working in a perverse manner. The economy's stronger than you projected, but the revenues are weaker than you expected.
I think it's important to sort of do a base-case accounting framework. Hence my suggestion that it might be prudent and provident, just as we as individuals would do if we're looking at our own income over the coming year, to say: "Hey, I expect to get so much money, but I realize that there's a risk. In the event that our household income declines because one or another member of the family doesn't see their income aspirations realized, I would expect to cut back in the following area." I might say, okay, I just won't be able to save anything this year if that happens. I might say, if that happens, here's a list of the things I intended to do that I won't do this year.
I guess I can't see any particular virtue in selecting zero other than that it imposes a greater degree of fiscal discipline on government than does a projection of 3%.
Mr Kwinter: The reason why I was somewhat fascinated with the zero number is that you're using historical data from the immediate previous fiscal period. You've lived through that and you say: "Here's what we've spent. Here's what our revenue is." It isn't as if you're an individual who may not have any debt and say, "Well, I'm anticipating a greater income and I think I'm going to be living a little better than I did last year."
We have a situation where we have a debt that is approaching $100 billion. We have a projected deficit of $9.6 billion. We know that those numbers are there and, best-case scenario, we have to deal with that. To my mind, one of the biggest problems that we have had in our fiscal reporting is that the number that has been put in to anticipate the growth has never matched reality. If you take a look at the Common Sense Revolution, it is based basically on projections of growth, and in its very first year it's almost half of what their projections are based on.
Mr McIver: There's some virtue in the proposal that you're talking about. I guess the thing that worries me a little about that is that it does limit flexibility.
Let's take the example of last year. Let's assume that there was no growth last year and what you're basically saying is: "I know what my revenues are because I collected them in 1995. I'll spend the appropriate amount in 1996 to reflect that." In fact, you don't know what your expenditures are going to be in 1996 because they are to quite an extent going to be determined by the economy of 1996. That is, all your income support programs are going to be tied to the way in which 1996 unwinds. If 1996 turns out to be a very much stronger year than 1995 and you said, "Gosh, last year was the pits, so I don't have any money to spend," in fact you would actually be overspending if you spent on that basis if you had in fact a collapse of your income support programs. You wouldn't have to meet those budgets, so you could actually end up spending more than could be justified.
It's a nice concept, and maybe the appropriate thing to do is to use as a baseline several years of recent experience, but government will always need because so much of the expenditure of government is entitlement spending, is not budgeted in terms of an explicit program so much as it is the consequence of how many people are unemployed. It would be quite difficult, I would think, to manage.
Mr Kwinter: Do I have --
The Chair: Thank you very much.
Mr Kwinter: I don't have.
The Chair: You're well over. Ms Lankin.
Ms Lankin: I appreciate your presentation. I think your suggestion around a contingency approach is a very practical one. I know my experience in the first two years of government and sort of every second month going into cabinet meetings and seeing the revenue projections on a decline like this, to the point when you were talking earlier about "never befores" -- we'd never before had a situation where revenues absolutely declined year over year for two years. It had never happened in the history of Ontario. So there's a whole lot that is being worked through with the restructuring of our economy and the fallout for that and government's response to it.
We don't have before us any revenue projections for the medium and long term. We don't have before us any expenditure projections for the medium and long term. I think in a way we are unfortunately only left with giving sort of macroadvice to the government, like, "Meet your deficit targets, and if you can't, then you should abandon the tax cut." And I don't disagree with your approach.
You've sort of said that we're in uncharted waters and we don't know a lot. There are some predictions out there with respect to economic growth and looking into 1997 and trying to assume what the US economy will do. Currently in the Minister of Finance's November statement, he's pegged 1997 growth to be at about 3.1%. He acknowledges that that's higher than the most optimistic private sector forecast at this point in time, which is at about 2.9%. The average runs at about 2.6%.
That decline or that gap in projections on economic growth, do you have any sense what that would mean to the government's projected revenues and their deficit target as is set out in the July and November statements? Surely it will put pressure on that number which will, if they proceed with the tax cut, have to be made up by more significant cuts in spending. I guess my secondary concern then is the increased drag on the economy as a result of that. You referred to perhaps more recessionary pressures.
Mr McIver: As I mentioned earlier, just getting the GDP results or forecasts correct is challenge enough. As I indicated, we don't do a very good job, especially when we're at or approaching a turning point. The second element of that is, even if you get the GDP numbers right, what happens to revenues? I sympathize with the people at Finance putting those numbers together. They are immensely difficult to predict, as you know, because you just described what happened in the earlier years when all the projections said they were going to grow, but what happened was they just fell right off. And it wasn't just because GDP was weak. Even the relationship between revenues and GDP was much more drastic than most people had predicted.
All I can say is that, looking back, as I did before I came over -- I looked back at a couple of numbers -- in 1992-93, Finance overestimated that GDP would grow in 1992 at 1.2%, but it overestimated revenues by $2.5 billion; so 1.2% GDP, $2.5 billion, it seems like a reasonable relationship. But then when you look at 1994-95, they underestimated growth, which turned out to be about 5.5% in 1994, by 2.2 points, but they underestimated revenues by less than $1 billion. The relationship: What can you say? Hence the contingency. That's why I think it's important.
I think it would be unwise to expect government forecasters to get it right. If we know they're going to get it wrong, then let's decide what we're going to do when they get it wrong.
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Ms Isabel Bassett (St Andrew-St Patrick): Thanks, Mr McIver, for a really well-thought-out presentation. The Minister of Finance wants to hear new ideas and certainly your presentation is filled with good and substantial ideas.
What I wanted to get to -- Frances Lankin has picked up on the contingency plan -- is could you just spell out, very briefly because I want to leave time for my colleague here, how you see that moving on? I know why you'd bring it in because you want to pursue our strong course on reducing the deficit, but failing a good economy in the rest of the world we might have to look at something else.
Mr McIver: What I would see would be something relatively simple, because I'm sure that already the people in the Ministry of Finance and the people in government, the members of the government, are already doing that. They're already asking themselves, "Well, what happens if the world doesn't pan out the way we expected?"
All I'm suggesting is that this be made part of a transparent and explicit exercise at the time of the budget. At the time of the budget you say: "Here is our projection for the deficit, $X billion," to use a very simple example. "If we find during the year, three months later, six months later, that our new projections look like it's $X+2 billion, then we will tell you now, if that's what we find, that we will abandon the tax cuts, or that we will expect to cut 10% across the board from every government department," whatever it is. That's part of the exercise I think is already going on. All I'm suggesting is that if you make it explicit there is an advantage.
Ms Bassett: What does it do for the public?
Mr McIver: What does it do for the public? First of all, I think it recognizes the accountability of government. The general public says, "I understand what the government's going to do." It makes them part of the process. More important, I think it has an important message to the investment community.
Mr Joseph Spina (Brampton North): It's nice to hear a modern-thinking economist, Mr McIver, instead of three union economists who trotted out Second World War economic theory.
Basically, we've been slammed as trotting out trickle-down economics à la Reagan, à la Thatcher. Is it not true that both the US and the UK experienced the largest revenue in the history of their countries when they introduced tax reductions to the consumer, and that the reality is that they spent it away, shall we say, with both Star Wars and perhaps the Falklands War? Is that a reasonable comment to make, and that we could maybe therefore expect an increase through the pent-up demand of spending in Ontario with tax reductions?
Mr McIver: I like the proposal; I like the notion of that. I would have to caution, however, that I would emphasize that the 1990s are simply not the 1980s, and the 1980s had a lot more going for it than government.
The Chair: Thank you very much. We appreciate your presentation to the standing committee this morning.
PAUL DUFFY
The Chair: We now welcome J and B Rose Consulting, Mr Paul Duffy, joining us.
Mr Paul Duffy: By way of introduction, my name is Paul Duffy. I'm a professional engineer. I have a business in Toronto and in Ottawa. I was introduced as being somehow tied to JBS Consulting. I'm not. I work independently as a professional engineer. We do a lot of work in the housing industry and it's on that subject that I come to talk to you today.
Basically, for the last three years, I have been working with the executive branches of the Ontario New Home Warranty Program, various industry groups like the Ontario Home Builders' Association and manufacturers and so on, to try to find a way to encourage innovation in housing in Ontario.
That process of working with this large group was a very difficult one at first because there were conflicting interests around the table. Basically, if you're talking about doing innovative things in any industry, the people who are going to benefit from the innovation aren't necessarily the people you have around the table today. They're the people who are going to be forward thinking and take advantage of the opportunities that are presented to them. They're small business people in many instances, or medium businesses that grow to meet the opportunity.
I think the committee is very much aware of the health of the housing industry. Housing industry projections for this year, based on what was happening last year, tend to be a little bit grim. Looked at another way, the fact that we haven't had very much housing production over the last few years can be termed an opportunity, that there's a lot of pent up demand. Basically, I am trying to speak to you on behalf of a vision for the housing industry that looks, not at this year or next year but looks at the long term -- five, 10, 15 years down the road -- and where this industry is going to be relative to the housing industry of the world.
The housing industry in Ontario has some inherent advantages. Basically, our severe climate and stringent regulations have created for us a housing product that's unlike any other product in the world. The industry comes knocking at our door. As someone who employs 20 people in the province of Ontario in two offices, one in Toronto and one in Ottawa, I see innovative people coming to my door, large and small manufacturers alike, interested in trying to do something innovative in Ontario because this is the place to be.
That being our market opportunity, if you will, the reality of where we sit is this: Heretofore Ontario housing has had very little consistent focus in terms of encouraging innovation. Basically, there have been some ad hoc programs that you may be aware of. The R-2000 program was intended as a five-year program because it was relatively successful in terms of encouraging innovation; it was continued on for a longer period of time. The advanced houses program is another example, and my firm and people like us have had involvements with those types of programs in the past. The difficulty is that those are like passing ships. Once the program has come and gone, the rules all change and there's no consistent focus there.
What I'm hearing from manufacturers and from people who have a vested interest in growing their business in Ontario, is that we need a consistent focus to allow innovation to proceed in the province. I'm not asking you for big dollars. The construction industry, as you're well aware, probably represents in any given year anywhere from 5% to 15% of GDP. However, in terms of what we would be asking for, we're not asking for anything that even comes on the map in terms of funding for this idea of encouraging innovation.
I'd like to explain to you the barriers that currently exist. Currently, most of the government ministries that are involved with housing are regulatory ministries and as such they see their roles as defining standards for various aspects of construction, be that energy efficiency or accessibility or structural strength. Those things are very rigid rules that get implemented in terms of the regulations we see.
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What we find is that if you're going to come up with an innovative solution to make housing more affordable, you have to have integrated systems to approach some of those regulations, and that's where the regulations fall down. Basically, if regulatory agencies haven't seen a concept before, it becomes very difficult for them to approve it to go ahead. Effectively what we have when we have those kinds of regulations are automatic disincentives to innovation. I'm not arguing for removing the building code, I'm not arguing for lessening the standards of the building code, believe it or not, but what I'm arguing for is a pathway to bring innovative ideas into the marketplace.
What we need in our industry, and this is a plea as much as a statement, is a policy commitment on behalf of the government that it is committed to innovation and innovative ideas and that it is prepared to provide a focus for those innovative ideas to proceed. The focus these days in terms of research and technical innovation doesn't have to be much. With Internet and other innovations, if we had a staff resource and a place where innovators could be brought together with patent lawyers, for example, engineers like myself, researchers from universities and other institutions, if we had a focus like that, then this industry would be in much better shape to meet the challenges that exist.
I think on an ongoing basis we've got to commit ourselves to building one or perhaps two innovative housing projects, and I'm talking about houses here. We're talking about a few hundred thousand dollars worth of construction. I'm quite convinced that the industry can come forward with that money. I know many manufacturers who are my clients who would be willing to do that, but they're not sure that Ontario, in terms of the regulations and the vision for this industry, is necessarily the place where they want to do research.
We need a regulatory framework that encourages innovation. At present, we have the building code. In addition to the building code, we have a special one-time approval that's provided for in the Building Code Act that provides a review by a committee of the Ministry of Housing that will allow a particular innovation to proceed. You can imagine how that group would treat my coming to the table with 15 innovations at once in the same demonstration building. This would blow the complexity out of anything this group has ever seen.
Similarly, we have an agency that's called for in the Building Code Act called the Building Materials Evaluation Commission. The original commission I was talking about was the Building Code Commission, and that is the group that will give you a one-time approval. The Building Materials Evaluation Commission is willing to look at innovative ideas, but they basically have two modes of operation: You will either not get approval to take your system forward or you'll get complete approval to take your system forward in all houses all over Ontario. Effectively what happens is, if I'm a manufacturer, I do my innovation in another jurisdiction -- the US -- I bring results to the table and try to get approval to do it in Ontario, to use that system in Ontario. I don't come to Ontario first.
What we want is a vision for the housing industry in Ontario that basically, in not so many words, says Ontario is going to be the world leader in housing and that we are going to free up the regulation to allow that to happen, that we are going to put support in place to allow innovators to come together and proceed, and once they've done innovative work in the field, take that innovation and transplant that to streamlined approvals to get more widespread application in the bulk of Ontario housing approved under the building code.
Basically we're talking about four things:
-- One is a policy commitment, and that takes action on behalf of the government, the elected members of the Legislature.
-- We're talking about a coordinating focus. That takes relatively modest commitment of staff resources, one or two person-years, so that if an innovator comes to the branch, the Ministry of Housing, there will be a place to go -- to the housing innovation centre.
-- We need a regulatory framework that allows innovation to take place. The regulatory framework basically directs innovators to work with research institutions and others to help solve problems, address issues related to the technical merits of the innovation.
-- And beyond that, the work coming out of the innovation and demonstration of new technology, new ideas, has to be used to streamline approvals throughout the bulk of housing in Ontario. If you do that, you say: "Yes, we're open for business. Yes, we're willing to commit to manufacturers and innovators."
The difficulty is that in terms of doing something of this nature, the people who will benefit from innovation are the people who aren't necessarily able to come to the table right now. I come to you representing a task group that was struck with very senior-level executives in key organizations in the housing industry. The gentleman who set up this meeting with you was a gentleman by the name of Barry Rose. He's the past president of the Ontario New Home Warranty Program. We have manufacturers and others around the table in our task group who have worked on this issue thus far. Basically, they realize that Ontario has some inherent advantages in terms of making housing world-class. It is absolutely scary how little effort is needed to take what we've got and capitalize on it and open up Ontario for business, for innovation and for growth.
The people who will benefit from this are people who are working on ideas in their basement, they're working on ideas in the back rooms of small to medium manufacturing concerns, and they need you people around the table, folks like ourselves who are technically knowledgeable, to back them up. They need a commitment that shows them, yes, Ontario's the place to do business, because there is a vision here that Ontario wants to be the world leader in housing on into the next century.
That's my presentation.
Ms Lankin: I really like what you had to say. I had an opportunity in the last couple of years trying to bring together a construction sector strategy project which would have looked at commercial, industrial and residential. I certainly heard from that group the message around regulations, but I have to admit that the approach that had been taken at that point in time was much more, "Just get rid of the building code" -- the standard stuff -- "the market will drive safe conditions." I think the approach your task force has come up with is one that would be a lot more acceptable to government of any political stripe in terms of understanding the need and balance between consumer protection, safety and environmental protection and the need for creating an atmosphere for encouraging innovation.
I had the opportunity at one point in time to visit companies, manufacturers such as Royal Plastics, and to see the kind of housing they've developed, which they're marketing around the world but not here in Ontario.
I don't have a specific question except I want to tell you that your approach is very positive. It's one that governments should adopt. There is room for innovation and research to bring us to developing that world house, and that is exportable as well as for our domestic markets. I applaud what you've brought forward.
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Mr Duffy: You cited the example of Royal Plastics. Royal Plastics is a major manufacturer in our industry. They have the resources to do what I'm talking about. They didn't have to wait for government to get out of the way and for government to be helpful and for government to do all those things. They could take their large industrial facility and build a demonstration house on their own facility. They've had countless research agencies and the general public through this house to prove that, yes, the technology does exist, it does work. In many cases, that's what we're talking about: giving people a comfort level that the innovative ideas we have actually make sense.
You can imagine the difficulty I have as someone advocating an innovative idea going into a jurisdiction like the US, hoping to export some of my ideas to benefit from free trade, and they ask me, "Do they use this technology in Ontario?" and I have to answer, "No." "Oh, why is that?" "Well...." Exactly.
Heretofore, a lot of the innovative concepts for housing and for the construction industry, to be brutally honest, have been extremely grandiose in scale. There was an initiative a few years back called the BIS board, Building Industry Strategy. Honestly, if we only had the money that was spent on the reports the BIS board created. That's all we need.
The R-2000 program: A very noble program, accomplished great things in terms of innovation and training, still is doing some innovative things now. But it's starting to wane because there isn't the vision there as to what the next step is with the R-2000 program to the extent that there should be. Here we could take some lessons and see that money that was spent on grants to get labelled houses built -- if that was just spent on encouraging innovation and getting the regulation out of the way and getting the problems solved on behalf of people who have innovative ideas, it would be very, very helpful.
Mr Tim Hudak (Niagara South): Thank you, sir, for your presentation. It was good to hear the word "vision" and look at the long-term policies as well.
The presenter just before you, Mr McIver, talked about never-before scenarios, how we've never before had such high levels of taxation, such high levels of debt, and I would add to that such high levels of regulation. In your opinion, is there some sort of frustration effect with the level of regulation in the economy and the high level of taxation on entrepreneurs and innovators? Many projects don't get started that could get started otherwise?
Mr Duffy: Regulation without a purpose serves no one, so in many instances in our industry we are the bastion of free enterprise. The small businessman who has little more than a hammer and a pickup truck can start in our business. At the other end of the scale, no other industry is regulated by as many codes and standards and other provisions. It's absolutely incredible that these two visions are the same industry, but they are.
Mr Hudak: Does Ontario face a high degree of competition for entrepreneurs and innovators, let's say, with a high level of regulation and high personal income taxes? Is there a great deal of incentive for individuals such as yourself to leave the province or leave the country?
Mr Duffy: The climate for innovation is created by background legislation that accepts that product standards have to be high. I call your attention to the automobile industry. Stripping the Ontario building code down to minimum levels and stripping out energy efficiency requirements and other requirements leaves you with something that's analogous to taking emission controls and seatbelts out of cars. I don't think any of the automobile manufacturers have come to this table asking this committee or this government to do that. What they've probably asked you to do is to increase standards yet make sure that when those standards are applied, they're done in such a way that a minimum of other unnecessary regulation takes place, and that includes taxes.
The housing industry at this point is frustrated by a number of taxes that add to the selling price of a new house. Those taxes include lot levies, they include the GST, they include various land transfer taxes. All of those things are of a scale that they dwarf the innovative additional pricetag that's added for things like energy efficiency.
If, for example, we talk about the 1990 and 1993 changes to the building code and say, in large terms, that that added $5,000 to the selling price of a new house, compare that to $25,000 worth of GST, $15,000 worth of lot levies and other hidden taxes that don't produce a tangible benefit in the end product. The stringent standards in the building code give you tangible changes in the product. I can go out and say, "Mr and Mrs Consumer, you have a fully insulated basement; you have a basement with a drainage layer on the outside which is going to be warm and dry." That is something that I, as a builder, can and should be able to sell. Those who can't, frankly, you're going to lose some people in our industry who cannot compete.
Mr Kwinter: I was very interested in what you had to say. I'm just a little confused when you talk about innovation. Are you talking about innovation of hardware, innovation of product or innovation of process?
Mr Duffy: Possibly all three. For the most part, the Building Code Act and the building code regulate technical innovation, so it's primarily hardware-oriented. But there's nothing to say that we're not talking about manufacturing of modular components that are shipped around the world. So in that respect, we're talking about process as well. We're talking about Ontario being the place where innovators come, do business and export to the world. So I think a vision in all three areas is highly appropriate.
Mr Kwinter: I have firsthand experience in this particular area in that I was successful in taking Canadian technology and transshipping it to Mexico, where it was accepted, and we actually have built houses there. But the main impetus for that is that the Mexican government held a competition. It was a competition that was different than that you got an end contract; it was a competition to bring innovation to the housing industry. People brought forward their ideas, and you got a prize at the end. You didn't necessarily get an order, but you got a prize. That allowed you to possibly have bragging rights that, "Here, I won this competition with my innovative products and my innovative housing." Is that something that you think might help, if we did something like that in the province of Ontario?
Mr Duffy: Indeed, that's one aspect of it. I can see that to call attention to the actions of the innovation centre there's need for marketing support. Engineers are notoriously poor at marketing. I don't claim to be an expert in those areas. Fundamentally, though, the vision that I and others like me have could perhaps see an innovation centre on the grounds of the CNE in downtown Toronto. Once a year, when the CNE opens, can you imagine the tours of people who are coming through this year's new innovative ideas in the innovative house or two that has been built to be open to the public this year? That's the kind of marketing that could be brought around someone's ideas.
Mr Kwinter: Could I just ask you one more question, because I think I'm going to run out of time. One of the other situations that I've noticed that really drives us when you talk about innovative products is that usually the code is set to almost the lowest common denominator as opposed to the highest common denominator; that there are manufacturers who would not be able to meet the new criteria, and as a result they lobby to make sure that they are still included; otherwise a whole sector, a whole industry, will be wiped out. What kind of reaction do you have to that?
Mr Duffy: There's a real danger in having codes leapfrog the capability of the manufacturing sector to deliver product. But I would suggest to you that once a code change has been implemented, look very carefully before you draw standards backwards. Simply put, the industry adapts to the regulatory change and delivers new products to meet that change. Henceforward, you have to be very critical about where you're going, and it should be done in the context of this vision that I was talking about. But it's very important that you have something working at the front end of the innovation cycle and codes and standards working at the back end to bring up the laggards who wouldn't adapt any other way. That's really the role of codes. To the extent that our codes would be more stringent than other jurisdictions, the manufacturers realize that this is the future, this is the place you should be, figuring out these product ideas before you take them to the world.
The Chair: Mr Duffy, we appreciate your presentation. Thank you very much.
That concludes our morning's agenda. I would remind the group that we have a brief subcommittee meeting, which will take place in this room, I believe, immediately following recess. We're recessing for lunch until 1:30.
The committee recessed from 1201 to 1332.
RETAIL COUNCIL OF CANADA
The Chair: I'd like to welcome everyone back from lunch. We are welcoming the Retail Council of Canada.
Mr Peter Woolford: My name is Peter Woolford. I'm with the Retail Council of Canada. I'm their senior vice-president of policy. With me this afternoon is Leonard Eisen, who is treasurer of the Oshawa Group and also the chair of our tax committee. Mr Eisen has had a number of other fairly high-profile positions over the years within the tax community and the auditing community, including a session, I believe, as chair of the Canadian Tax Foundation, so he comes very highly qualified to speak to the issues we want to talk to this afternoon.
I believe the clerk has circulated our submission to the committee and I commend it to you. I'd like to make some opening remarks based around that and then, as you suggested, Mr Chair, we'd be glad to take questions.
We're particularly pleased to have the opportunity to present the views of our members this afternoon. What I will do is outline the outlook we expect for 1996 and then address some of the key policy concerns that are on the minds of Ontario retailers.
First, of course, being in the retail business, we feel we should give you a quick commercial. Retail Council has some 7,000 members across Canada, close to 3,000 of whom are located in Ontario. Among them they account for about two thirds of all retail store sales in the country. I should note that while we often have an image of being a large store association, almost 90% of our members are independent retailers with one or two or just a few stores, so we have a very strong representation from the independent business community. Affiliated with us is the Canadian Council of Grocery Distributors, which represents all of the major food distributors in Canada. They also have worked with us in developing this submission.
I'd like to turn now to our sense of the past year and to what we expect in 1996. Looking backwards is not, once again, a very pleasant experience for the retail trade. We saw a continuation of poor markets in 1995 right through the Christmas season. Our members had hoped we would see some pickup at the important Christmas selling period, but in fact that didn't occur. As a result, the whole of 1995 really was rather disappointing for the trade, nor are our members very optimistic for 1996.
The reasons for that are essentially the same problems that we have seen influencing consumer behaviour, consumer confidence, for the last four or five years: lack of growth in personal disposable income, continuing high unemployment and individuals' fears about losing their jobs, continuing high levels of indebtedness and fears for the future of the country. All of these cause consumers to be more cautious, more careful with their dollars and visit retail stores less often and spend less money there.
Our members are also feeling a great deal of pressure as a result of some the structural changes that are blowing through the industry. This is showing up in the form of significant shifts in market share between store types and among individual retailers. All these developments are combining to push down margins and increase competitive pressures within the industry. In fact, what's happening here is that the trade is moving to a new standard of competitiveness in which retail margins will be substantially lower than they have been in the past, and this will require all retailers to continue their hunt to reduce costs and improve their operating efficiencies.
That's very good news for the consumer, of course, because it means that they're going to get excellent value for their hard-earned dollars, but it's a very, very difficult process for the industry. The difficulty of making this transformation is showing up in weak financial performance for many companies and a number of firms through restructuring, downsizing, going out of business or even going bankrupt.
One of the other aspects that this committee may be interested to know is that we expect that, as a result of that, the trade will probably generate fewer new jobs than it has in the past during economic upturns. The cost of labour is a significant element in retailing, and wherever merchants are under pressure to reduce their costs, that will mean that they will have to look very hard at the number of people they employ.
I'd like to turn now to the policy issues that we would like to present to the committee, first of all in the area generally of fiscal policy. We would like to say that our members are delighted at the government's steps to correct the province's fiscal situation. In our view, that's long overdue. Nonetheless, as an industry serving the domestic market, our members are very, very aware that reductions in government expenditures will mean some Ontarians will lose their jobs and some Ontarians will experience a real loss in income. That is without question painful and harmful to the welfare of those individuals and we certainly recognize the seriousness of that.
But at the same time we also recognize that in effect the province has no choice in this matter. If the cuts were to be delayed further, Ontarians would pay the price only that much more down the road when the changes had to be made. Nor should anyone be under the impression that the steps the government has taken to date are sufficient. We think, unfortunately, that further reductions in spending will be necessary to achieve a balanced budget and to begin reducing the provincial debt. In this area we are somewhat reluctant to offer specific proposals because we're not experts in public finance.
The one thing we are prepared to offer up is all forms of subsidy and assistance to business. We think that's something we can speak about because we are a business representative group. We feel that all subsidies to business should be eliminated as they're not helpful to economic growth and serve only to distort market signals. In fact, the best way to create jobs and create a climate for growth is to do just that, to focus on the climate and establish a legislative, regulatory and fiscal regime that is competitive with other regimes with which Ontario is competitive and is facilitative of growth.
We've expressed concerns before this committee in past years about the impact of job-killing payroll taxes. We are pleased to see that this government has taken an initial step in this area with its measures to reduce the burden of the employer health tax. We have a continuing concern that the federal government has indicated for some years that it does not view payroll and capital taxes as deductible against corporate income tax, and every step that this province can make to vacate those fields would make us feel better that firms will not be faced at some point in the future with confiscatory taxation.
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I'd like to talk a little bit now about our views on harmonization of the provincial sales tax and the goods and services tax. Our trade association has been a leader of a very large industry coalition numbering some 50 trade associations supporting the efforts of the federal government to integrate the GST with provincial sales taxes. In our view, harmonization is essential to improving the efficiency of the consumption tax system in Canada, and we also believe that a value added regime is the only one that makes economic sense. It alone promises to lower the cost and burden of administering this type of tax, both for the government and for taxpayers.
The second point I think in favour of harmonization is that because the retail sales tax is levied on many business inputs, it harms the competitiveness of Ontario's exporting and import-competing industries, thereby costing Ontario jobs, investment and business. The Minister of Finance has decried the loss of revenue that a shift to a value added model would entail, but in a highly competitive world we cannot afford to handicap our industries in this way.
The minister and the Premier have also expressed concern about the perceived shift in taxes from business to consumers which supposedly results from a transition to a value added system. We believe that most, if not all, of the burden of sales tax paid by firms is passed on to consumers anyway in their prices, and thus we end up with the result that the current retail sales tax system hurts customers relatively more because it imposes double taxation and cascading taxes on them but in a way they can't see. In fact, as companies in the distribution chain base their margins on the cost of the product they're distributing, the burden may well grow as that margin is calculated on the tax-included price.
Another argument in favour of harmonization compared to the value added model is that a retail sales tax works best when levied on goods. When it's extended to services it becomes increasingly difficult to distinguish between services provided to businesses and those provided to individuals and that thereby exacerbates the problem of double taxation and tax cascading.
I would note as well that for the retail trade in particular a retail sales tax which is levied on different bases and at different rates across Canada means that there's a greater opportunity for customers to shop rationally and do some cross-border shopping between provinces, and that's a difficulty that our members have seen in a number of border areas between provinces in Canada.
The final point I wanted to raise dealt with retailers' compliance with retail sales tax. We appeared, I think it was just a couple of weeks ago, before the standing committee on public accounts during its hearings into compliance with the retail sales tax, and we have appended to our submission our presentation to that committee for your reading. I'd like to just summarize some of the key points for your information as well.
Our submission recommends that any intensification of audit efforts should be very carefully targeted to ensure that they do focus on organizations where there appears to be a high likelihood of tax evasion. We strongly oppose random targeting of small retailers in the belief that there are compliance problems with this category of firm. In fact we feel that the real purpose of auditing of smaller firms should be primarily educational, to help these firms understand what the requirements of the system are and to guide them through what is a fairly complex system.
I would note just in passing that that's another one of the benefits of harmonization that would mean that small businesses in Ontario, rather than having to learn the intricacies of two consumption tax systems, could learn one and at least then would have less complexity in their lives and fewer rules to try and follow.
I should add that we oppose any tighter or more extreme scrutiny of larger firms which might be rationalized on the ground that by going after relatively small technical infractions or differences in interpretation the auditors can generate large amounts of revenue for the province. We feel that's the wrong way to go. Retailers are partners of the provincial government in the tax collection scheme and such harassment goes against that relationship and would signal to us that the government viewed all retailers essentially as worthy of suspicion.
Again, the experience of recent history I think is helpful here. The real solution to tax compliance is to get overall tax levels down and the tax burden itself down. The best example we can think of is the experience of this province with respect to tobacco taxation in recent years, where at some point ordinary citizens perceived that that level of taxation was too high and embarked on a massive program of non-compliance. It was virtually a huge act of civil disobedience on the part of a large number of private citizens and led to serious problems both for legitimate retailers and the public purse.
In conclusion, we expect Ontario and the retail trade to experience a difficult year in 1996 and unfortunately again in 1997. Despite this, we believe the government has no option but to continue its efforts to get the deficit down and ultimately to attack the accumulated debt.
We acknowledge the continued public unpopularity of harmonizing the retail sales tax with the GST. It just happens to be the right thing to do. We would also produce a system that in fact is fairer and more apparent to the consumer in terms of the burden they're bearing.
In conclusion, we would urge the government to harmonize the GST with the PST. Those are my opening remarks. Both Mr Eisen and I would be glad to take comments from you now.
Mr Hudak: Thank you for your presentation. We've heard in this committee earlier today and last week that governments do indeed create jobs. CUPE, OPSEU, OFL, for example, all propose that the government keep current spending levels, if not increase spending levels. Do you agree with their proposal that government spending does create jobs, especially in terms of long-term job creation?
Mr Woolford: I think in the short term you could argue it creates jobs and that people continue to be paid to carry out certain functions. In the long term, Ontario has to earn its living in the world, and the organizations that earn a living from the province are those in the private sector. In a sense, I guess, technically they're right; as long as you're paying somebody to do something you're creating a job. But if you want to create jobs that are sustainable, that add to the value added in the province, that produce an economy that is more capable of growing and flourishing, then those jobs must be created by the private sector in the private sector.
Mr Hudak: If I understand your presentation correctly then, in terms of adding to the provincial economy, the GPP, and for long-term job creation, the idea of reducing the level of taxes in conjunction with balancing the budget is the essential way of creating long-term jobs.
Mr Woolford: That is absolutely essential. At some point this province simply has to make itself economically more competitive with other jurisdictions. We have to do that by getting our tax burdens down, and the only way to do that effectively is by reducing expenditures.
Mr Jim Brown (Scarborough West): What more can we do for you in terms of regulations or whatever to further increase jobs? And what does the regulatory framework do to the normal retail?
Mr Woolford: As I said in my submission, the number one thing you could do for us is to harmonize the two consumption taxes. That's job one. Everything else pales into insignificance beside that. That's a very substantial economic burden on the province, on the public sector in the province and on the job-creating companies. So that's job one. There are a number of other measures that this government has already taken steps to move on, such as workers' comp reform, but I have to reiterate, especially to this committee, harmonization of those two taxes is job one without question.
Mr Jim Brown: We have a Red-Tape Review Commission and we would welcome any ideas that you have to reduce regulatory overburden, really.
Mr Woolford: We'd be delighted to appear.
Ms Bassett: Just very quickly, I'd like to add, as the parliamentary assistant to the Minister of Finance, I want you to know we are working with the federal government to harmonize the two taxes and we cannot get them to propose anything that won't add a lot of money to Ontario's citizens right now. We are working in that direction and we want to cooperate, but not at the expense of the Ontario taxpayer.
Mr Woolford: As I said in our submission, where we differ from Ontario is in the belief that your minister has that the burden of the provincial sales tax currently levied on firms will be shifted to consumers. That's just not true. Consumers are paying that today, but because of the way the retail sales tax is set up it appears as though it's the merchant who is levying that extra cost on the consumer, and it's not. It's the public sector. That money should be clearly shown as a tax at the point of sale, and not hidden in the price. That's our view.
Ms Bassett: We'll pass that on, but there are many factors, as you know.
Mr Woolford: We do.
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Mr Spina: Thank you, gentlemen, for a great presentation. With regard to the retail sales taxes, you indicated there's a perception on the part of the public that you are levying the taxes, as opposed to the government, because it's very visible. Would there be any benefit to shifting some of those taxes to be absorbed, shall we say, within the retail price of products, as opposed to having it added on at the end on the cash register receipt?
Mr Woolford: I know Leonard will want to say a couple of things on that. As an association, we have not taken a position on whether the tax should be exposed or included in the price. In fact, when we talk even to any one of our members, we get arguments on both sides. Many retailers are really torn. They believe when the public sector collects money, that should be visible. On the other hand, they know that it's very unpopular. So many of our members have arguments on both sides.
Mr Leonard Eisen: One of the difficulties of dealing with the price included is the competitive disadvantage one may feel if one firm has a tax-included price and another firm advertises tax as extra. Therefore, unless you can bring a level playing field to bear, firms will obviously advertise in a manner which gives them at least a competitive equalization and not a disadvantage. Unless there's a way that that can be legislated, it becomes very difficult.
Mr Kwinter: As always I enjoyed your presentation and am very, very sympathetic to the plight that the retail industry has found itself in. It's interesting that when I talk to representatives of the industry, notwithstanding that they keep reading in the paper that things are getting better, it hasn't seemed to have gotten through to the retail trade that things are better.
I do have some question with one statement that you make. One of the only strong recommendations you make is that financial assistance to business be completely eliminated, and while I agree with that in principle, I think there are some very dramatic and specific indications that without government assistance there would be some very long-term, very, very good jobs that would not be available.
For example, the government assistance to attract the Ford van plant and the paint plant, I can tell you, without that assistance it would have gone to St Louis, Missouri. When you take a look at Honda, when you take a look at Toyota, when you take a look at Camry, when you take a look at what's happening up in Algoma, notwithstanding that there are lots of problems there, you can't discount the fact that by the government intervention Algoma is operating and Sault Ste Marie has a major employer who is a major user of retail sales.
Now there have been some bad ones as well. I admit that. But you have to certainly be able to take a look at very specific cases where government intervention is a benefit to everybody and to the economy. Do you have a reaction to that?
Mr Woolford: I guess our reaction is that, the success stories notwithstanding, the government should not be in the business of trying to skew investment decisions. We say that knowing full well that there are a number of good examples of where public money has either retained jobs in the province or attracted them.
Our view is that the economy is strong enough and is well enough integrated internationally that if Ontario is an attractive place to do business, we'll get our share of investment. Chasing after individual instances is a very, very slippery slope, and once a government puts itself into that circumstance, it becomes very hard to know when to say no or even to say no at all. So our preference would be for the government simply to stop providing those contributions.
When you look at them in fact, they tend to all flow to either resource processing or manufacturing industries. Both of those industries in terms of employment creation are going nowhere. All of the jobs are in the service sector, yet almost no money is provided for growth or new investments in the service industry.
This is not a plea for money for retailing by any means. In fact, retailing probably will not be a job creation industry in the future either. But the new job creation industries are in tertiary industry and the government puts none of its financial support or subsidies into that area. In our view, this is just not an appropriate allocation of money.
Ms Annamarie Castrilli (Downsview): Thank you very much, gentlemen. I wonder if I might just continue on the theme of jobs for a moment. Your industry has been very hard-hit in the last couple of years by your own submission, and you don't foresee a very good prognosis for the coming year.
The government has stated that it will create 725,000 jobs or create the environment for that: that somehow, at the end of its term, we will have 725,000 new jobs. As I look at what you've presented here, and bearing in mind that small and medium businesses are the generators of jobs in this country -- I agree with you on that score -- the government says that 72,000 jobs were to be created in 1995, some 81,000 in 1996 and the remainder would be somewhere in excess of 100,000-plus, 180,000, in the remaining years.
Looking at your industry -- I don't have numbers but I just have your indication that employment is going to be difficult again this year for you -- I wonder how you foresee the growth in your industry over the remainder of the next three or four years. Do you foresee that you'll be part of that 725,000 jobs?
Mr Woolford: I would doubt it. If there are jobs created, I would think they would be marginal in number. Leonard, you may have a better sense of that.
Mr Eisen: I think what you're going to find is that the quality of job has changed. Where people could count on full-time employment, the ability to offer that type of incentive in that type of environment is diminishing rapidly. The need to be able to provide service to the consumer at the time the consumer needs it is such that firms can no longer staff their premises for the full time they're open. So you will see more part-time jobs for focused attention and therefore not the quality of job that many people have grown up with.
Mr Woolford: If I could just add to that, one of the other conundrums you always face is that, in a period of significant economic change such as we're in now, it's easy to see where the jobs are being lost or will be lost. It's much harder to identify what the new jobs are. They tend to come in new companies, new activities which nobody has thought of before. So it's not surprising that industries and activities like retailing which have been around for a long time have a hard time seeing where they fit in that new scheme of things.
If we went back to even let's say the Dirty Thirties, it was very hard to see where anybody would find employment coming out of those years, yet 10 years later, in 1950, all those people who couldn't find employment in rural Canada were working in urban Canada in manufacturing activities. Similarly, there has been a shift from manufacturing into service. What comes after that, I don't know, to be quite honest, but I think there is reason to hope that new jobs, new activities, will emerge as the process of restructuring and change in the economy goes forward.
Ms Castrilli: But not necessarily in yours.
Mr Woolford: Our sense is that in retailing, you will not see a lot of job creation.
Mr Tony Silipo (Dovercourt): If I can follow up on that, the issue of jobs is one area I wanted to pursue with you. I appreciate the presentation even though we have some basic points of disagreement, but on the fundamental issue of creating jobs, however they may be created -- I obviously take the view that government has a role to play in that and I appreciate the fact that you believe the opposite -- but shouldn't government at least have some understanding of where the potential for job growth may be so that that also becomes part and parcel of what fiscal policies the government of the day develops?
I guess what I have trouble with in what you're proposing to us is that you recognize that the cuts are going to cause some pain, are going to add to the lack of consumer confidence that you talked about at the beginning of your presentation, and yet you're arguing, I think, fairly strongly for that action to be taken. I suppose if I take from what you're saying correctly -- and please correct me if I'm wrong -- as a result of all of that, down line the jobs will come.
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I have a kind of a fundamental question, which is, where are the jobs going to come from? If we don't have any idea, as government or as members of this society, then isn't that what we should be turning our main attention to, as opposed to just sort of hoping that they will happen and then discovering that we've put all of this pain and agony and we've cut all of these services, we've changed dramatically the way in which the province and our society function, and maybe the jobs are going to be there, maybe not?
Mr Woolford: Our first answer is not to do these very painful things and something good will ultimately happen. Our first point is that these cuts that the government has made and will be making in the future simply have to be made. We really don't have any choice. The government simply cannot go on going ever deeper and deeper into debt. At some point, that has to stop.
We're already seeing the level of debt service in this province up, pushing close now to 20%. That means a fifth of all of the public revenues that could be used to the benefit of Ontarians in fact goes to bond holders, some of whom at least are offshore. That's a terrible waste of Ontario's resources, to simply pour that money out. The classic example of that is the federal government, which has now over a third of its revenues being paid out to holders of Canadian bonds. That kind of draining of the fiscal vitality of a government is a very dangerous situation for a public authority to find itself in.
It's not just that if you do this now, something good will happen down the road. It's that if you don't do this now, you're going to be in deep, deep trouble down the road, just as the feds are today.
Mr Silipo: But why does it make sense from your perspective to have the government, in effect, borrow money that it doesn't have to give people a tax cut? Is it because you believe that will spur spending? If that's the case, I'm puzzled as to why you wouldn't be advocating, for example, that if the government is going to do a tax cut, it do a tax cut on sales tax, which presumably would generate more direct spending into the economy than would an income tax cut.
Mr Woolford: We in fact didn't say anything about the tax cut in our submission.
Mr Silipo: I kept looking through it to see, but in answering the question you didn't comment on it.
Mr Eisen: The one comment I would make is that while we did not talk specifically about the tax cut, you have to look at the nature of the cut and how it will be ultimately implemented. At this time, we don't have sufficient detail to really give a comprehensive answer, but I would say there are a number of ways in which the tax cut could be used within the economy to generate expenditure and ultimately the jobs.
Mr Silipo: We don't have that information either. We're trying to get it, but nobody wants to give it to us.
The Chair: Thank you very much. I appreciate the Retail Council of Canada -- Mr Eisen and Mr Woolford -- coming in and making this presentation to us today.
COUNCIL OF ONTARIO UNIVERSITIES
The Chair: We now have the Council of Ontario Universities joining us. Mrs Patterson, welcome. Introduce the people who are with you for Hansard and please begin.
Ms Bonnie Patterson: We have myself, Bonnie Patterson, president of the Council of Ontario Universities, and Jim McAllister, the senior policy analyst for the Council of Ontario Universities. Sitting behind me is Pat Adams, director of external relations for the Council of Ontario Universities.
It's a pleasure to have this opportunity and I thank the group for seeing us today. Let me begin my remarks by saying that the Common Sense Revolution contained three proposals which have had major and will have major implications for the universities in this province. Those three areas, if I could briefly reference them, are going to be important to you and to us as we see this next year or two evolve.
The first was a commitment that has in fact been played through in the Finance minister's statement of November 29, and that is that annual operating grants for colleges and universities would be reduced by $400 million. That proposal, as you know, will be implemented for the 1996-97 year, as it was announced by the Minister of Finance in his 1995 fiscal and economic statement.
The CSR also proposed "to partially deregulate tuition over a two-year period, enabling schools to charge appropriately for their services." As you know, this has begun with a commitment to the deregulation of international visa students in our system but is not complete.
The third element that was contained in that document was a proposal to improve the student aid system by implementing a new income-contingent loan program similar to others that are being introduced around the world. That, as you may well know, is under discussion and indeed is very much in the preliminary stages of thinking.
Higher education in Canada: The system itself has indeed responded, I think very positively, over the last number of years. Enrolment in Canadian universities, as we've indicated in our brief, has reached a level of somewhere in the order of 10 times what it was at the end of the Second World War. In Ontario today there are some 260,000 participants in university education programs. I think we can all say that rapid expansion in our situation today is really one of the success stories in terms of making higher education accessible, despite some of the challenges we face in the fiscal environment.
Despite that growth, however, I would point out that more and more Canadian students are choosing to study outside this country. Just as one example, we quote in our brief the 22,750 Canadian students enrolled in American universities during the previous year, 1994-95, enough Canadians to indeed fill one of Ontario's largest universities. Those enrolments tend to be most likely in the faculties of education and in one of the health sciences fields in the United States. In other words, there still is plenty of unmet student demand for university education.
From an economic point of view, it's very clear that there are benefits to the public and benefits that are private to those individuals who are participating. Therefore, we've stated that it isn't difficult to discover why Canadians are so enthusiastic about experiencing the benefits of higher education. In addition to the intellectual stimulation and advancement of knowledge that students experience while they are engaged in their studies, once they graduate, they very clearly receive the economic benefits as individuals from a university education. University graduates, as you know, are more likely to participate in the labour force. In fact, the rate of employment of average university graduates in Ontario is significantly more than those who have not participated, and we've given you some statistics in that regard in the brief. At the same time, in participating they earn higher levels of remuneration for their contribution to the economic evolution of the province.
As a result, university graduates are less likely to be collecting social assistance or unemployment insurance -- or employment insurance, as we're now referring to this -- and they're likely to be paying more in personal income taxes and other forms of taxation, therefore making a contribution to the economic advancement and renewal of the province.
More dramatic yet are some of the effects of the evolving economic trends and the evolving economy in the 1990s. As Ontario moves into a very different sort of economy that is knowledge-based and knowledge-intensive, then one is drawing on those advanced levels of education and training, and an educated populace has then become more obvious as a need.
The 1990s are becoming an increasingly difficult period for people who do not have an advanced level of education and training. They herald an era when the investment in human capital is becoming more and more important, both for the individual worker and the economy as a whole.
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As we look at the funding of Ontario's universities, government grants for each student, once inflation is taken into account, are about 37% less than they were in the late 1970s. This underfunding of universities has occurred while, at least until the advent of the Common Sense Revolution, Ontario's schools, hospitals, municipalities and social assistance programs have been among the most generously funded in Canada. In other words, if you look at national comparative indicators, you will see the universities in a very different position than any other publicly supported or assisted institutions. These disparities will be worsened by the impact of the CSR because Ontario will have the greatest decrease in government grants to universities of any province in Canada. In other words, there is little victory in being funded 10 out of 10 across the country.
Turning to the specific recommendations as we've put them in our brief to the standing committee on finance and economic affairs, we would ask that you recommend that operating grants to Ontario universities be reduced no further than the level announced for the 1996-97 fiscal year. We obviously understand the financial position of the province and we know that we, like others, have had to make contributions. We believe we have.
Our second recommendation is that, beginning with the 1997-98 fiscal year, the provincial grants to universities in Ontario indeed be increased to reflect the needs of the province, that the province renew its commitment to higher education and that the universities begin the process of rebuilding the province's intellectual infrastructure, which can contribute to economic renewal.
Thirdly, the committee should recommend that institutions be allowed to increase both the standard or, in some people's language, the formula fees and the discretionary amount of tuition fees for the 1997-98 school year.
Fourthly, partial deregulation should be interpreted very broadly, not just in the context of tuition deregulation but in many other areas where restrictions are currently imposed on universities. We would hope that you would speak to the elimination of these.
The fifth recommendation that we would make would be that you inform the Minister of Finance that the province's universities will willingly set aside for student aid 10% of any additional revenue received from increases in tuition fees. There is no doubt that universities perceive the primary stumbling block being an appropriate student aid program in the province.
The sixth recommendation would be that Ontario immediately move to implement an income-contingent repayment program of student aid, as identified as one of the three fundamental proposals that affect universities in the CSR.
The final recommendation that we bring to you today would be that the Ontario government develop a research strategy for the province which will encourage a greater use of university facilities with new moneys made available to bolster Ontario's research capacity. In the brief you'll find that we've included some comparative indicators, both nationally and internationally, that would help you see where we stand both as a country and as a province in this regard.
I would offer those comments on behalf of the 260,000 clients of the university system who are enjoying their studies at this point, both from a public point of view and a private point of view, and on behalf of the 18 universities that Ontario has.
Ms Castrilli: Thank you very much for coming and presenting a very thoughtful brief. I'm impressed particularly by the economic material that's included in your brief. Some of us have argued for a long time that the central building block of any economic recovery must be our post-secondary educational sector. My biases are relatively well known on that score.
I'd like to ask a couple of questions and I'll start with the last one. You talked about developing a research strategy. You've obviously indicated in your presentation what funding means for that particular sector and how it impacts on the economy as a whole and on government revenues. What would a first-class research strategy look like?
Ms Patterson: To begin with, one has to not just look at the provincial situation when one looks at a broad strategy but rather at the relationship between both federal and provincial funding of research and where it's done in this particular province, the levels this province is able to secure as a share and what the expectations might be for growth.
I think the second element is that from a provincial point of view there is support that is given particularly in some innovative areas. I think you're all familiar with the Ontario Network of Centres of Excellence program. That has been I think one of the most successful, broad-based, strategic investments that the province has made over a number of years now. To see that scale of primary fundamental research capability being supported and support for an entire continuum of research to a very applied commercialization end of the research continuum would be very important. In other words, a strategy wouldn't simply focus on one end or the other but would build a set of expectations, capabilities and support for a broad range of research such that sufficient, basic research is being done to allow the long-term sustainability of the economy in the province and that support for the commercialization end be in place also because the applied becomes very important to current activity.
A third element really speaks to the structure of both government and the disciplines that exist within academic institutions. Currently, there are bits and pieces of research across a wide spectrum of disciplines and ministries that indeed university researchers and other researchers enjoy the benefit from. I think that support could be perhaps targeted strategically. It would take cross-ministry discussions to look at what the strategic priorities would be, but I think that would be a necessary element of a broad-based strategy as well. There are probably many others that I haven't thought of, off the top.
Ms Castrilli: Thank you. That's terrific. Let me ask a question with respect to another item in your presentation, where you talk about the effect on quality of education, and there are going to be about $400 million in cuts which will have to be absorbed over the coming year. You've argued you could absorb that but that beyond that might be very difficult. I'm wondering if you might speak to that point. At what point do we threaten the quality of the educational system so badly that there may be some very serious consequences?
Ms Patterson: I guess I would argue we're there now. I hope I didn't leave the committee with the sense that we are able to easily absorb the cuts in operating grants that have been transferred to the university system without an impact on quality. There will be. I can give you some examples around the province where, if you look at the fundamental structure of the investment strategy universities use with their budget, 80% to 85% of that budget is invested in people.
Intellectual infrastructure is what higher education is about, so the primary impact is in the strategies that must be taken by universities which exhibit themselves in a way that is not unlike other private sector recipients or indeed the government itself, and that is through early exit and early retirement packages that entice people to leave to be able to reduce the overall salary and benefits bill of institutions. The quality of those more senior academics participating both in the teaching and research environment that goes on in the universities will clearly be drained significantly in this particular cut.
The impact may well be absorbed from the point of view of the restructuring that will take place in order to absorb those shifts in personnel, both administrative and academic, but at the end of the day we will be in a position potentially not to be as competitive in the short and medium term to get at other resources that help support, for example, research infrastructure, research development in the province. Because of the curve of knowledge that exists in institutions as your more experienced and advanced academics leave, there is clearly a gap and a brain drain that leaves with that group of people. So how competitive we will be in the short and medium term in for example competing for Natural Science and Engineering Research Council grants or the Social Sciences and Humanities Research Council grants is yet to be seen. That plays itself through virtually every discipline that exists in institutions in the province.
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The other quality impact is clearly on the level of service and support that we can provide to students. Whether it's the mainstream administrative support areas to ensure that students are able to get into the system, get the courses they're interested in and then pursue their studies in various means, with the exodus of administrative and clerical support that is going out of the system we're very concerned about the level of service and support that will be left for students when indeed they're picking up a greater share of the cost of paying for that same education.
I use those examples, and there are many others that are much more micro-levelled, such as the number of options available to students as you both lose expertise and look for economies of scale, the lack of resources to invest in information technology that might help you deliver to a broader array of students in new, innovative ways. All of that is at peril.
Your question was, "At what point?" I would argue we are a system at risk now, given where we are in funding on a per-student basis.
Ms Lankin: I appreciate those comments. I worry about a number of things as they converge. I think about this particular student population, which is sort of our future's best and brightest. Certainly, the contribution that we hope they will make to the rebuilding of our economy is threatened by the scenario that you have just set out, their ability to participate in that economy and our economy's competitiveness depending on having skilled, educated workers and professionals to contribute. All of that is very much tied into the work, the product of the secondary and post-secondary education systems. It's a very key part of our competitiveness in this province, so I take caution at the words you have spoken.
I wanted to ask you specifically about the state of affairs with respect to deregulation or a partial deregulation of tuition, and the impact on access. In the last couple of years we've had expansion of OSAP to try to be in lockstep with increasing tuitions. There has been, for a couple of years, discussion of moving to the income-contingent repayment system. We're not there yet. The Friends of Universities were before us last week and said, "Whatever you do, do it at the same time, because the barriers to access are critical issues that we can't lose sight of, and the effect on a generation coming into university age now will be profound if we don't move on these policies lockstep."
Do you have any sense of the timing of where these discussions are at, what the barriers are to getting the income-contingent loan repayment program in place and where this government is at with respect to the implementation of that?
Ms Patterson: Our sense is that ICRP in particular is very much at a preliminary set of discussions. We have spent some time and are continuing to invest some time, within the Council of Ontario Universities, in testing an ICRP simulation model that has been developed collaboratively I guess by Stats Canada through some directive of HRDC. That is a very preliminary model that still has quite a number of bugs in it, but it allows you to do some scenario building and begin the exploration of the ICRP model. So my sense is that their thinking from a federal positioning was that we were a couple of years away, although from very recent discussions my sense is that they have upped the ante a little bit in terms of time frame and they would like to be able to move forward earlier rather than later than their original two-year forecast. We have begun some discussions that will bring together some Ontario representatives from within MET and HRDC to see whether a collaborative working group can't get at some of the issues a little more quickly and try to expedite that.
At the same time it's my understanding, when one looks at the Canada student loans program and then the Ontario student assistance program, that as early as this fall there will be a convergence of criteria that are being used to make the assessments of needs. That's a very beginning step towards, I guess, a complete amalgamation or synergy of the two programs. How quickly after this fall those two programs may come together in a different way, a little more closely aligned, is yet to be seen, but my sense is that it's perceived as a priority within MET, that indeed they are putting some work behind looking at how the Canada student loans program and OSAP could merge in a better way and that they have acknowledged the importance of this.
Will a joint working group help move this more quickly forward? At the end of the day I would say that the fundamental element will be to what degree the finance department can in fact leverage and push federal participation towards a new, designed, revived, better, more equitable system.
So I think we have to be proactive as a province in moving that forward. The universities are very clearly anxious to be at the table to participate and facilitate that, and indeed the 10% tuition increases that have been demanded of the institutions didn't come as a surprise at all. In fact, the universities put that forward, not with that precise figure.
Ms Lankin: It was a bit higher, as I recall.
Ms Patterson: It was higher. We put that forward as a willingness and acknowledgement that it is a fundamental, critical need. So we're working on the amalgamation of that as well very closely with the province in looking at how you get at unmet needs and the use of that 10% to meet those unmet needs.
Ms Lankin: I have a --
The Chair: Thank you. Is it very short?
Ms Lankin: I think to be fair, in terms of the time that has been shared between the two parties, I've only asked one question.
The Chair: I know. It was a long question and a long answer.
Ms Lankin: I don't think, if you check the record, that it was.
The Chair: We had six minutes and it's just coming up to six minutes now. Is it a very short question?
Ms Lankin: I'll turn it over to Mr Silipo.
Mr Silipo: I just wanted to follow up on the question of accessibility that Ms Lankin was also asking about and perhaps just ask it briefly this way: Do you have, on the basis of the experience of the last few years, any way of giving us any useful insight into what the increases in tuition fees that will come now might do to the question of accessibility?
Ms Patterson: We don't. The province has the details behind uptake, application rates. One of the pieces of knowledge that we are just beginning to get from the Ontario system itself is information around the breakout of default rates, for example, which we are told are higher than they have been in the past. It is our sense, from very preliminary data that we have, that the situation vis-à-vis universities is not as high as, for example, other participants in post-secondary, including the private institutions that have access to student assistance. So from the universities' point of view we don't have all of the detailed data that would make it easier for us to participate in the kind of discussion you'd like to have.
What do we anticipate? We anticipate that there will be students at a certain level of socioeconomic background who will have greater needs as tuition rises. Do we have the stats? No, the government has the stats right now, and we're just beginning to get at that set of data in order to be able to look at how we move forward.
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Mr Wettlaufer: You mention in your brief here that 22,750 Canadian students enrolled in American universities last year. This would be approximately 5% or 6% of the total Canadian university population?
Ms Patterson: Canadian, yes.
Mr Wettlaufer: What would you think would be the average tuition fee in the United States that these students would have to pay?
Ms Patterson: Again, it depends on the breakdown between public institutions in the US or private institutions. On page 4 of the brief, table 1, we have outlined some comparators. You have to be cautious to look at public versus private institutions in the US when you're looking at comparisons, but what's clear is that tuition levels in the public side of the US system range from 42% to 210% higher than that which exists here in the province of Ontario.
Mr Wettlaufer: And in spite of that, they are not having a decrease in the number of students attending their universities.
Ms Patterson: That's our understanding -- not significant. There is an element of demographics that you have to take into consideration right now. There is much that has extremely recently been in the press around a decrease in applications, for example, in the Ontario system of something like 1.4%. That seemed to cause a furore in last Friday's Globe. At the end of the day, that is absolutely anticipated. Why? Because there is a 1% decrease in the population in the secondary school cohort of age between 18 and 20 of 1%. That accounts for the 1%.
Then if we look at the other percentage decrease -- this is in applications, not in those who actually enrol -- a study that we did a year ago suggested that there was an increased amount of self-selection taking place among students whose grades were in the lower end of the spectrum. It is costly to apply to university from the point of view of the student's own contribution. There's a $75 fee to apply. So our sense from the study we did of those who didn't apply would suggest that self-selection based on the cost and their expectation as to whether they would be admitted was one element.
A second element is a positive element related to the post-secondary system as a whole in that students are able, depending upon the discipline, to go to the college system first, which is a cheaper alternative, and then find their way, if they still wish to pursue university-level education, into the university system to pursue their actual degree. So there's some selection of students who go the college route because it is, quite crudely, a cheaper alternative up front; and then thirdly, others entering to pursue the workplace, which is an ongoing issue.
Mr Wettlaufer: You mentioned the issues facing Ontario universities, and there are a number of them here. I don't know if you're aware but the Ministry of Education is releasing a discussion paper by the end of the month and it will address issues such as student and provincial shares of post-secondary funding. At that time, a four- to six-month consultation process will begin.
I'd like to follow up on what we were talking about before, that the American university attendance is not decreasing, where there has been some suspicion that there would be a reduction here. There was speculation in the media a week or so ago that this was directly as a result of reduced research and development that would be done at the Canadian universities, particularly Ontario, as a result of the reduction in funding.
I asked a member of the Canadian Manufacturers' Association who was here this morning what we could do to encourage the CMA to embark on a partnership program with the universities to have its research and development done by the universities. One of the comments he made was that we are already giving them sufficient incentive but that more would be welcome. Is there anything else that you could think of?
Ms Patterson: In the context of the manufacturing industry, I would say that there's a very classic way one could pursue this where the province could actually benefit from the previous investment that has been made, and that relates to the Ontario centres of excellence. MRCO, which is the Manufacturing Research Corp of Ontario, has developed a significant capability to bring together university researchers and people from industry and particularly focused on tech transfer, moving the research that is taking place in the research laboratory on to the plant floor, if I can use an industrial kind of analogy. I think the continuance of investment in such centres related to that sector, and there are many other examples: laser technology, telecommunications technology -- to continue that program is one of the ways the province can demonstrate the ability to bring partners to a table and all invest in the advancement and development that can take place and draw on university research capability that is already being supported by the province.
The Chair: Thank you very much, and we appreciate the Council of Ontario Universities joining us today.
ONTARIO TRUCKING ASSOCIATION
The Chair: We now have the Ontario Trucking Association. Mr Bradley welcome.
Mr David Bradley: Thank you very much, Chairman, members of the committee. I am joined today by Steve Laskowski who's going to make sure the technology doesn't break down on me during the presentation. Unfortunately, I couldn't pry any truckers away from the desk today to come. They're quite literally trying to keep the wolves from the door.
If you'll bear with me for a few moments, the trucking industry has received a lot of attention over the course of the last year or so and I would like to just provide some information that I think will be helpful in terms of understanding the industry but also in terms of the backdrop for this year's budget. I don't think it's any real surprise to anyone around this table to know that the economy we face now and the challenges we face now are quite different than in previous decades. Interprovincial and international boundaries and borders are becoming increasingly irrelevant in terms of where investment's flowing and where production facilities are being located and, finally, which way traffic is flowing as well. The trucking industry's really on the vanguard of the changing structure of trade that we're seeing, North America and worldwide.
On top of that then, which presents some unique challenges in and of itself, we have a continuing sluggish economic pace of growth in Ontario and a continuing soft forecast at best: Unemployment remains high, the consumer is still on vacation, and we have the enormous budget deficit to tackle.
Trucking has a role to play. We're tied so uniquely into the mid-continent manufacturing sector. As a result, we are the dominant mode of freight transportation in the province, hauling 70% of the province's land freight. The reason why we are the dominant choice among the manufacturers, retailers and other shippers of the province really has to do with the package of price and service that we provide. It's a competitive price service, but more than that it's a flexible and timely service which allows us to serve the just-in-time inventory systems that are so important to manufacturing today.
We move the highest share of consumer goods, about 90% in the province, and make a significant contribution, as you can see from the charts, to GDP. We also, interestingly enough, have a significant spinoff or multiplier effect, I think somewhat higher than most other service industries, and for every dollar of value added in trucking we generate about 71 cents in GDP elsewhere in the economy. Part of that is because trucking isn't focused in just one area of the province. Anywhere that's serviceable by road in the province you will find truck terminals and probably find trucking companies actually located in those jurisdictions.
All of that makes us a significant employer. If you look broadly at the industry, including all people involved in the service or the use of trucks, we would approach 200,000 people or just less than 5% of the provincial labour force. But if you look at the typical trucking operations -- what are called the for-hire carriers, those who haul goods for compensation, or private carriers, those who haul their own freight -- we employee about 90,000 people in the province. That, as you can see from the chart here from StatsCan, compares quite favourably with some of the other key industries in the province.
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Obviously, trade is a key to Ontario's economic potential. One quarter of the province's GDP is exported, three quarters of that going to the United States. The major markets in the Northeast and the Midwest are one day's truck drive from Ontario, which places Ontario in an ideal situation. You'll see by value of trade the trucks haul 75% of Ontario's trade with the United States, and that's been growing over the last decade or so and we expect it to. That not only is an indication of the service that trucks provide, but it's also an indication of the type of freight, the high value added manufactured goods which are key, again, to our economic outlook.
You'll see, and I think this is a reflection of the economy overall, while the domestic economy has remained somewhat in the doldrums, the bottom chart will show you that border crossings between Ontario and the US by trucks have continued to escalate over the course of the last number of years, and that's a reflection of free trade and the shift of freight from east to west to north-south and the fact that the correction in the value of the Canadian dollar, essentially, has had a major boost for Ontario exports to the US.
You would think, with that kind of growth across the border and tackling the US marketplace, that the trucking industry would be in wonderful financial shape. Well, it's not. The first chart there is a tracking of the operating ratio, which we use in the industry to measure profitability; that's exports over revenues, not including interest or income taxes. You'll see we've been hovering in a very narrow margin around 95. That means that before income and taxes, the margin is about 5%, which leaves maybe 1% or 2% at the end of the day. So we've really, as an industry, had to become very efficient and very productive and go out and try to find the bottom line, and we've started to do that.
Beginning in 1992, prospects did improve in the industry; 1994 was an excellent year. We started to repair our balance sheets. We started to see bankruptcies in the industry coming down. However, and I think this is important, because trucking is a leading indicator of economic activity, long before the folks at Stats Canada realized it, by April of last year our industry was showing a significant downturn again, particularly on domestic routes. I can tell you that this continues till today. December was extremely soft, and people are becoming increasingly worried about where the economy is going.
The outlook for 1996: We're hoping by summer that the lower interest rate regime will help to spur investment and some consumer confidence. But one has to keep in mind that with inflation hovering at very low levels, between 0% and 2%, real interest rates are near their all-time highs, and we have a long way to go in that regard.
As I say, we've had to repair our balance sheets. We've had to become more efficient, more productive. Unfortunately, the casualties in that have been our employees. We're an employment-strong industry, as opposed to a capital-intensive industry. You'll see that since 1989, when we entered into deregulation and the new free trade environment, where we've had to change the way we do business, we've seen a steady and gradual decrease in employment in the industry that's just begun to flatten out over the course of the last year. Similarly, wages have had to correct, and over the last few years we've only seen very modest improvement. In fact, over the course of the last year, again, we've seen the line start to trend down.
Of course, budgets always deal with tax issues. I'm not sure that we're going to see, and I'm hoping we're not going to see, very much in terms of new tax increases or new taxes in the next Ontario budget. But just in case, I think it's still important to place trucking, because I think we're often misunderstood, in the context of where we sit in the global, industrial base of Ontario. You'll see from the numbers on the top chart that in terms of the percentage of revenues, about 8% of our revenues are taxed and that is significantly higher than some of the other major and some profitable industries in this province.
That's significant because our margins are extremely razor-thin, but I think probably more important to people around this table is the impact of transportation taxes on our international and industrial competitiveness. The bottom bar chart shows a number of Ontario industries and the impact that taxes on transportation contribute to their overall competitiveness. You'll see that it's quite substantial.
The typical tractor-trailer, what you would call the 18-wheeler in Ontario, if you add the driver in, pays a minimum of about $39,000 a year in taxes to the province of Ontario, and we've itemized each of them as to what it comes to. I think that's a significant amount when you consider there are about 200,000 of those units domiciled in Ontario and operating on the highways every day.
A key issue for us, much like some of the arguments I heard from the retail sector, is tax fairness and tax equity as it relates to taxation of business inputs. Although we're so tied into the manufacturing sector in the province, and in fact the manufacturing sector would stop if there wasn't the service trucking has provided, we don't have the same benefit or tax incentives in terms of taxation of our business inputs. We're taxed on our tractors. We're taxed on our labour and repairs. We're taxed on the insurance premiums, on the tires, on warranty repairs etc.
The Ontario Fair Tax Commission may not be the best source of support for some of the things we're looking to do, but I thought its arguments with respect to the sales tax were quite persuasive. They certainly recognized that when you tax business inputs you simply make those products therefore more expensive and less competitive, and ultimately that contributes to a slackening of economic growth and job potential.
The Tory government recognized this back in 1983 and for a time we had an exemption on sales tax of new tractors and trailers, which helped the industry at that time emerge from the recession and ensure it had the most efficient, most productive and safest equipment possible.
We're not suggesting a tax exemption at this point. We don't think there's much currency to be gained in that. But we do think the best approach to that would be a harmonization of the GST and the PST. We're somewhat disappointed in what we're hearing on that front at this point in time, but we're hoping that can be resurrected.
For us, it's also a key economic competitiveness issue. Again, we're an industry that crosses border and our competition comes from Arkansas, Missouri, places like that. When you look at the United States, you'll see that almost half the states have an exemption on sales tax for tractors and trailers on their interstate commerce. I can point to instances where a state has introduced a sales tax and had to rescind it because everybody just went next door to buy their equipment there.
Similarly, for repairs and labour, virtually all of the states are exempt from that, and Ontario's one of the few jurisdictions anywhere that imposes a tax on repairs and labour. Similarly, the tax on warranty repairs is really double taxation because that's already considered in the price of the vehicle when you buy it and the price of the warranty. We'd like to see that eliminated. The sales tax on insurance premiums is a tax on safety, not very well-thought-out, and really singled out our industry over most others.
On fuel taxation, I think the story is pretty clear there. We've seen an escalation in the tax on fuel since the mid-1980s. We held steady at the high level of 14.3 cents a litre over the last number of years. It's a fallacy to consider fuel tax as a sin tax. They are not. Trucking is an essential service, and it's rather regressive to be taxing distance and hurts the smaller communities furthest from the major markets the most.
In terms of where we rank in our fuel taxes, you'll see that Ontario is a little higher than average across Canada. Two years ago we would have been the highest save and except for Newfoundland, but I guess some of the other provinces got some ideas from Ontario and started to raise theirs. Compared to the US, which is extremely important, you'll see that the neighbouring states, New York, Pennsylvania, Illinois, Indiana, Ohio, all have significantly lower fuel taxes than faced by the domestic industry here. I don't anticipate fuel tax increases in the next Ontario budget, but one never knows. The federal finance committee is talking about it and I'll have something to say about that later.
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If we want to talk about something that government can do for industry and for itself in terms of ensuring that everybody's paying their fair share of the fuel tax and to ensure that they're keeping their compliance costs down, the government audit costs down, we would like to see Ontario finally join the international fuel tax agreement. This is something the former government agreed to. Unfortunately, the ministry itself couldn't get its act together and missed the January 1, 1996, deadline that it had set.
As you can see from the charts now, Ontario is the only jurisdiction in Canada that has been unable to do that. Up until recently we thought we were in the select company of Newfoundland, but even Newfoundland has found a way now to get into the agreement. We still are waiting. We were told January 1, 1997. However, once bitten -- whatever the expression is. Similarly, we're being charged a decal tax that was imposed solely for the startup costs of IFTA. We're still paying that and not getting the service. If you look again to the US, there are very few states that aren't ready to meet the January 1 deadline.
There are benefits of this program both to industry and to government. I'll focus just on the government. This is a one-stop shopping scenario. As opposed to having to fill out forms and send them to 60 North American jurisdictions four times a year, carriers deal solely with their base jurisdiction. The number of fuel tax accounts the government has to deal with is reduced. They have better audit coverage. They audit only their own carriers. There's a better exchange of information between governments and that leads to a much more effective and efficient management of the fuel tax system. We would really urge the government of Ontario to commit to 1997 firmly and to look at what it's going to do with the startup fees once it's actually in the program.
One area of investment and capital spending that we think it's important for government to keep in mind as it looks at all the balls it's juggling with respect to education and health etc, is that if you're really serious about economic renewal and creating jobs, one of the best ways is through investment in infrastructure. The top chart shows the decline, except for a pickup during the early part of the 1990s, in funding for the Ministry of Transportation. At the same time, the bottom chart shows that for highway users, revenues of course have gone up quite significantly to government.
The next chart is something consultants would create, but simply investment in the infrastructure and capital investments spurs technological innovation, spurs economic growth, spurs job creation. I don't think there's an economist of any political stripe in the last several years who hasn't told governments that they have to invest in infrastructure.
One of the areas where we need investment is in the national highway system in Ontario, which are our rivers and corridors of trade, and unfortunately the federal government, while it likes to move into Ontario's taxing jurisdiction there -- it now takes $2 billion a year from Ontario motorists -- it puts virtually nothing back into the national highway system. That compares quite dismally with national governments in most other jurisdictions, and you can see the numbers for yourselves. I would urge Ontario to continue to press the federal government to work with Ontario to invest in the trans-Canada system as we see it in Ontario.
Quickly, then, our budget recommendations: One is to harmonize the PST and the GST, and there are ways to ensure that the burden doesn't fall entirely on the consumer or on to the poor. There are means through tax credits, exemptions etc that can be employed, and really when you look at everything that's already being taxed in Ontario, we would argue that the tax base doesn't leave much at this point and that what would be left would be discretionary for the average consumer. Secondly, in the interim period we believe the government should move to eliminate the sales tax on automotive insurance and warranty repairs, which again is a tax on safety. Don't increase fuel taxes, and finally, keep the commitment to get us into IFTA.
In terms of redressing the fiscal imbalance, we agree and urge the government to continue its deficit-cutting plan. It ain't easy and it's going to make a lot of people unhappy, but it has to be done. However, there are some times when we also believe that the consumer of government services should be consulted on some of these cuts so that we can perhaps provide some information on where you will get the biggest bang for the buck. There's a lot of useless legislation in the transportation domain that right now just supports an administrative bureaucracy. It should be gotten rid of. Nobody would miss it.
There are ways to enhance safety and at the same time improve the efficiency of the enforcement effort currently under way at the Ministry of Transportation. One of the things we're talking about that you may have heard of in the media is a carrier safety rating system. The inspection stations are really a thing of the past. We have to rationalize those and look at new surveillance technology. There are opportunities for self-regulation, where the industry itself -- for instance, on the air-brake adjustment training and the wheel installation training programs, which have been recommended in some of the recent coroners' juries and by the Minister of Transportation himself -- where that's something industry could do under the appropriate legislation and pay for that without a penny going from the government.
In terms of infrastructure, I can't come here on the one hand and tell you to cut the deficit and still spend money on roads, but I would urge you to maintain it as a priority and near the top of the agenda, if we're serious about economic renewal. Highway 407 is going to be paid for by the users. Let's make sure we build the whole thing and not create bottlenecks in the east and the west, and let's keep the pressure on Ottawa.
I know I haven't left a lot of time for questions, but thank you very much. I'm pleased to field them.
Mr Silipo: Thank you for a fairly detailed presentation. I wish we had the time to actually go into more detail, but there's much in here that certainly we would support and I hope the government party supports.
Particularly on IFTA, has the delay in that been just more of an administrative question then? I haven't heard anything from the government saying it's opposed to that.
Mr Bradley: Yes, it appears to be purely and simply an administrative issue, which we can't quite understand. We believe that Ontario and its bureaucracy have the resources. We've not received an acceptable answer on that yet. It's quite concerning. Our carriers will be the only ones virtually in North America that have to fill out over 250 fuel tax reports this year. It's a heck of an administrative burden.
Mr Silipo: The infrastructure question: We heard a similar position to yours last week from the Ontario Road Builders' Association that pointed out to us the need to maintain a high level of government investment in that area. I just want to sort of make that link, although I'm sure you're quite aware of that. The question I need to ask you on that -- you flagged it yourself -- is how do we reconcile that with the position you're also supporting, which says, "Keep cutting government"?
Mr Bradley: It is a question of priority. I would argue that the money is there now if we're willing to look at the allocations that are made or at least a substantial part of the allocations made by the road user to ensure that goes back into the road system. Right now, as you know, all revenues go into a consolidated fund and are divvied up from there.
What we'd like to see is more of the money that's taken away in terms of licence fees, taxes, fuel taxes etc -- that we ensure it goes to the road system. As the auditor said, if we don't start making that investment now, it's going to cost one heck of a lot in the future. It's causing no end of trouble now in terms of safety, in terms of wear and tear on vehicles. It's costing the province a lot of money. Some investment now would go a long way in the future.
I'm not one of those people who believes that there is great short-term job creation to come from those kinds of infrastructure programs. There are some construction jobs. The real benefit is down the road in terms of productivity and efficiency of movement of people and goods.
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Mr Ford: Mr Bradley, thanks for coming today. The question I have for you is, are you still getting severe regulation? I know a couple years back you got all kinds of regulations from the American states as you were trucking various products stateside. If you're still having those problems, is there anything we can do as a government to try to assist you with those?
Mr Bradley: Yes, quite definitely. I'll be meeting with the Minister of Economic Development and Trade next week.
The Americans are very good negotiators. Unfortunately, their federal government has very little control over the states and we are being nickelled and dimed to death. Presently, for instance, we've got the state of New York in court over something called the franchise tax, which taxes the entire revenues earned by an Ontario-based trucking company, even when it's just transitting through the state. It's hard to go anywhere south unless you're going through Michigan or New York. Pennsylvania is coming up with a similar tax; Ohio. Michigan had one; I have no doubt they'll revisit it.
There is a lot of harassment of Ontario-based business when we operate into and out of the United States and certainly we could use the help of government in terms of using your offices to talk to the governor of New York and others to try to come up with a more balanced situation. We don't want retaliation. We'll pay for that too and we won't win that in the long run. But I think the Ontario government could stand up for Ontario business in this regard and be heard.
Ms Lankin: Mr Chair.
The Chair: Do we have a point of order?
Ms Lankin: It was just a quick interjection. I just wanted to know if Mr Bradley's pronouncement of the word "harassment" of Ontario was on purpose or not. Sorry.
Mr Bradley: Shall I answer that one?
The Chair: No. That was a non-question.
Mr Ford: What I would like to know is, have you made presentations to the Ontario government on these facts and also the Canadian federal government?
Mr Bradley: Yes, we have, and as I say, I'll be meeting again next week with the Minister of Economic Development and Trade to try to work out a game plan.
Mr Ford: Good. Thank you very much.
Mr Crozier: We can't do a lot to affect the budget, I think, but I did want to just have your comments on the two areas that you talk about legislation which no longer serves a purpose, because I think we all agree that this should be done away with, and how that relates too to carrier safety.
There's a perception by the public, and there's been a lot in the news, and I think for good cause, about concern about truck safety. Can you assure us somehow that anything of a self-regulatory basis could be relied upon in view of the fact that the public feels that your trucks should be safe now?
Mr Bradley: I could be flippant and say that one could look at the government enforcement effort over the last several years and might argue that it's been a dismal failure and that we couldn't do any worse, but I won't do that. I think there will always be a role for government enforcement. I think what we're talking about is repealing useless economic-based regulation and allocating those funds to businesses that the Ministry of Transportation should be in, which is enforcement.
Having said that, I think that because our industry is so big -- I mean, there are 75,000 CVOR holders out there and 20,000 registered domestic trucking companies in the province -- what they have to do is focus their efforts on the problem carriers and the real safety problems, and not try to enforce everything, as they're doing now, because they're touching such a small tip of the iceberg.
By allowing self-regulation for those who earn it and deserve it, the safe carriers, is the only way to go. I'm certainly not talking about holus-bolus self-regulation. Some people, as well, just have to simply be put out of business in this province and it would make no difference whatsoever to competition; the freight would still move. However, we're not seeing that kind of support coming out of the Licence Suspension Appeal Board.
The Chair: Thank you very much, Mr Bradley, for a very complete presentation.
CITIZENS FOR PUBLIC JUSTICE
The Chair: The next group is the Citizens for Public Justice, Mr Vandezande. Welcome to the committee.
Mr Gerald Vandezande: Thank you, Mr Chair. I've given the clerk copies of my notes for remark as well as a chart developed by the Canadian Council on Social Development illustrating a couple of the points that I want to make in my presentation when we come to the specific recommendations that Citizens for Public Justice wants to make with respect to next year's budget as well as the budget of future years.
Thank you for allowing us to appear here. We've appeared before a number of standing committees dealing with future budgets and made submissions ever since 1988. One of the key themes that we have argued for as Citizens for Public Justice is the need for the integration of economic and social policies. To that end, we have consistently advocated, and at one point the standing committee endorsed our recommendation, that there be a provincial round table on social policy and the economy that would provide for the integration of social and economic policies.
This standing committee, at least in its previous makeup, wholeheartedly endorsed that recommendation and urged the government of the day to proceed. We think, particularly now that Ontario's going through a serious economic crisis as well as a serious fiscal and social crisis, that the integration of economic, fiscal and social policies is absolutely called for and is an essential requirement if the government is to come to the Legislature with a budget that makes common sense to the common people who are affected by it.
So our key recommendation is that there be such a round table and that you, as a standing committee, recommend that to the government and that the standing committee itself engage in some cross-ministry cost-benefit analysis as to what previous and current budgets are doing to the people either in terms of the tax burden or the tax benefit that they receive as well as the specific budget allocation that the Treasurer makes with respect to certain items that directly affect particularly the most marginalized and vulnerable people in our society.
On page 2, at the bottom, we make our first recommendation: CPJ urges the Ontario government, in active consultation and close cooperation with the municipalities and the non-government sector, firstly, to make the elimination of homelessness, hunger, material poverty and unemployment the number one priority of public policy; and secondly, that this government strongly urge other provincial governments during first ministers' conferences and on other occasions, and especially the federal government, to establish the same public policy priority.
We think there needs to be a coordinated attack on the reality that we have widespread homelessness, hunger and material poverty as well as chronic unemployment, not only in Ontario but throughout Canada. We believe that all levels of government should exercise leadership and work together to take policy initiatives that would work and contribute towards the elimination of those two major issues.
We think that poverty, like national unity, is a non-partisan issue and that particularly this standing committee could do the people of Ontario a real service if it demonstrated by forgetting about its political priorities -- that is, partisan priorities -- and said to the Treasurer and to other ministers responsible for the wellbeing of Ontario citizens that the elimination of material poverty and homelessness and related questions be made a policy priority.
So we urge you to recommend that the government help provide, together with the non-government sector, adequate employment opportunities, adequate affordable housing, adequate health care, adequate income security and adequate human support services such as accessible child care. Both the round table and this committee could engage in consultations around those major social, economic and fiscal issues.
Our third recommendation is that the 1996 budget attack the province's serious economic ills and grave social injustices and give clear preference to the elimination of unemployment, homelessness, hunger and material poverty. A recommendation that is coupled to it is that the government's 1996 and future budgets should not contain any income tax cuts until the causes of poverty and unemployment are dealt with effectively and until the province's debt and deficit are paid down.
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At this point I want to make a comment in connection with a major interview that the Premier did on CBC Morningside with Peter Gzowski. Throughout that interview, the Premier insisted that the $4-billion tax cut would be self-financing -- that is, it would have no negative impact on the budget in terms of the final deficit that would come out of it; secondly, that it would finance the creation of 725,000 jobs.
My request and the request of the organization and the people we seek to serve, particularly those who are vulnerable is, where are the studies, where is the impact analysis that demonstrates that Mr Harris's contention that a $4-billion tax cut as proposed in the Common Sense Revolution, a tax cut that would be given to people across the board and the benefit of which would go mostly to higher-income people, would produce 725,000 jobs, would be revenue-neutral, would have no negative impact on this year's -- 1996 -- deficit and future debts?
I think we need that kind of impact analysis that shows us very concretely and very clearly and very specifically that these indeed will be the benefit of a major move of that kind; otherwise, I don't think anyone in the Legislature can in good faith vote for a budget the basis of which lacks the kind of concrete evidence that is needed in order to persuade the Ontario taxpayers that the tax cut is warranted.
I've given the clerk two copies of the chart and I would like you to take a look at that. The first one is entitled, "How Much Will Your Household Get From A 30% Tax Cut?" It clearly shows that people in the higher income tax brackets will receive the largest portion of the tax cut and that people below the Stats Canada poverty line receive next to nothing or very little. I think it's important to take note of that, Mr Chair and members of the committee, and I would urge, before you make your recommendations, that the committee insist that the treasury and other people in the government be required to table studies that show that the 30% tax cut, as outlined in the Common Sense Revolution, will indeed have the benefits that Mr Harris claims it will. Frankly, I would like to see statistics that contradict this. If this is contradicted, I'll be glad to withdraw it.
The second one shows who will benefit from a 30% tax cut, and those tables are very clear as well: 51% of the tax cut will go to households in Ontario with incomes above $75,000 a year. I think that figure in itself illustrates that the tax cut in no way is guaranteed to have the job creation impact that the Premier asserted it would have when he answered the questions put to him by Mr Gzowski and the assertions that are made in the Common Sense Revolution.
So who benefits, who pays, what impact will it have on revenues, what impact will it have on current deficit and future deficit and debt, and what will be the net effect for job creation both in the short term and long term are essential studies that are needed in order to make a responsible decision with respect to the 1996 and future budgets.
Furthermore, on behalf of our organization I would like to make the point that should the government, as it has repeatedly said, insist that the 30% tax cut must be implemented as promised to the Ontario taxpayers during the election campaign and as defined in the Common Sense Revolution, then the government establish for itself two priorities. First, the overriding priority is that the tax cut be designated in such a way that it contributes to the elimination of homelessness, hunger, material poverty and unemployment, and that it does so by eliminating the 21.6% cut which in effect is a tax that was recently imposed on vulnerable social assistance recipients.
The first people who should benefit from a tax cut should be those who, without the consent of the Legislature, were suddenly faced by way of regulation with a new tax of 21.6%. There was no consultation, there was no debate in the Legislature, there was no committee that heard people who were directly affected by that 21.6% tax. So we're submitting that if the government insists on proceeding with the 30% tax cut, the first thing it should do is allocate some of the money to eliminate the 21.6% tax imposed on vulnerable social assistance recipients.
The second category of people who should get the benefit of the $4-billion tax cut are those whose income is below the Statistics Canada poverty line. We say that in the context that it has been proven that poverty reduction policies by and large produce many more jobs than wealth-creation measures. We have no guarantee that when someone in the $95,000 bracket gets a refund of $3,715, that person will spend it in Ontario on products and services that will be guaranteed to create the jobs that Mr Harris and the government have been talking about in the Common Sense Revolution.
We propose therefore that this tax cut be implemented through the elimination of income tax now being paid by people below the poverty line and by substantial reforms to the sales tax credits so that these people who must, in order to survive, spend all their money on housing, food, clothing and other daily necessities, expenditures which have an immediate beneficial impact on job creation, be the first beneficiaries, next to those who have been subjected to a 21.6% tax, and that thus the $4 billion, if the government insists on spending it, goes to those people who are the most defenceless, the most powerless, the most marginalized in our society.
Those are the common people, those are the ordinary people, those are the people who now hang on for dear life, not knowing what the next day will bring. If we are to provide some hope in their desperate situation, then the government, together with the non-government sector, must do everything possible to eliminate the despair, the homelessness, the unemployment, the desperation that is widespread and that caused the death of some people this winter due to the cold weather and the inadequate funding of shelters for people who are homeless.
So we call for integrated policies, for a round table that deals with the integration of those policies, for your committee to conduct hearings to make sure that these ministry decisions don't go forward separately but that there is a cross-ministry analysis, and that studies be tabled to demonstrate how the $4 billion could best be spent, if the government insists on spending it, in the interests of people who are now desperate.
Thank you. I'd be glad to answer any questions that you may have.
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Mr Wettlaufer: I am like you; I have a great concern for the truly impoverished, and I want to stress "truly impoverished." I received a letter from a Catholic priest on Friday, and he said basically what I feel. I want to comment that this man was a teacher for 31 years in a Catholic high school and he's now in his third year as a parish associate.
He said he supports paying a nominal fee for prescriptions, even for welfare people, that "if many can afford to smoke, they can afford this." He says: "Show me a poor welfare family. I know some poor low-income families.... I am sure you do not want to neglect the truly poor. Please keep your eyes open to their real needs.... You might need more social workers to teach some of these people to spend their money more wisely; to be able to separate `needs' from `wants.'"
I will agree with you that there are many people on welfare who need our support, who need our help, and who are hurting as a result of the cuts, and I can assure you that many of the people in our government want to do something about them, but there are many others out there who are not the truly impoverished, and those are the ones we are trying to address.
Mr Vandezande: Thank you, Mr Wettlaufer, for making that comment. I don't know whom you're quoting.
Mr Wettlaufer: I will be happy to tell you. It's Father Ray Reitzel, CR.
Mr Vandezande: The point we're making is that when need is demonstrated, as the statistics of the government demonstrate and as Stats Canada demonstrates and as the statistics that I've tabled today demonstrate, then we need to address those needs. We're not saying that the government must accept total responsibility for every act that every citizen of Ontario engages in, whether it's for good or for bad, but the government does have a fundamental public justice responsibility to see to it that the material needs, the housing needs, the income security needs, the child care needs -- we have about half a million children living in poverty -- are met as best the government can. It cannot meet those desperate needs best when it unilaterally, without hearing those people, imposes drastic cuts to the tune of 22% on those very vulnerable people whom you and the Catholic priest and I and all of us are concerned about.
There's no question about it, there are people both outside of government and within government who waste money, and it's our citizenship responsibility and our personal duty to talk to people about such waste. I'm here to remind you, as a citizen, that you as a government have the public responsibility to see to it that as far as you're concerned, no one is going to be homeless, live in poverty in this province, and that the basic provisions are supplied by both the government and the non-government sector to ensure that people can live out their dignity in this province.
Ms Castrilli: Mr Vandezande, let me compliment you on the clarity and the passion with which you speak. I, like you, am someone who thinks there is a role for government to play in a society that prides itself on justice and fairness for all.
You spoke about the tax rate reduction, and I think that is a good point for us to address here. The government is committed at this point to the tax rate reduction. They view that as their job creation strategy and they're pledged to create 725,000 jobs. With any luck at all, they'll do it and they will be able to affect those individuals who are now suffering.
I'm wondering if you could focus for a moment on a statement that you made that deals with the difference between poverty reduction measures and wealth creation measures, because I think that's the critical point. If the government goes to all this trouble and in the end there is no net benefit to our society, there aren't the jobs that improve the quality of life for all of us, then one has to ask oneself, why do it? Could you comment on that?
Mr Vandezande: If you would pick up this chart for a moment and look at the people who live below the poverty line -- and the poverty line, of course, varies depending on the size of the family. Let's assume that we have a four-person family. In the city of Toronto the poverty line is about $31,000 or $32,000. That family needs every single cent in order to survive: on housing, on clothing, on food, on medicine; you name it. So it would spend all of its tax cut locally because it can't go anywhere. It needs that money in order to buy the groceries, pay the rent, the utilities etc. So that money is spent at local suppliers in the local community.
Let's go to the bottom of the chart. The person who earns $95,000, who has already been able to look after all of his or her living expenses and then gets a bonus of $3,715, is not forced to spend that money in the local community in order to survive. He or she may say, "I'm going to put it in an RRSP and get a further federal tax credit as well as an Ontario portion of the tax credit," or, "We're going to make a trip to Haiti, some nice resort, or we're going to go to Hawaii, or we're going to go to Europe on a ski trip." None of that money, potentially, could be spent in Ontario. It might all be spent abroad, or it may be simply used to reduce indebtedness.
The most likely result with giving money to people below the Stats Canada poverty line is that they will spend it locally because they have no choice in the matter; they can't leave the city. That will create employment opportunities for those who are engaged in those industries on which these people are dependent for their supplies and groceries.
They should do an impact analysis or a comparative analysis to see how moneys are being spent by people in those different categories. There are some available, and I think the government may want to look at them before implementing its commitment in the CSR.
Ms Castrilli: I think your point about impact studies is well taken. We've been trying to get some basic financial information from the government just to be able to give the government some advice with respect to the budget, and that's not been forthcoming. It is something of some concern to us here on the other side of the government benches.
Mr Vandezande: The other thing, if I may add to it, is I think with all our concern about deficit reduction and debt reduction, I cannot imagine a political party or a government that has made that a top priority in its election campaign not producing statistics demonstrating what a $4-billion cut in revenue will do to the long-term debt situation and how it proposes to cope with that. You can't have the cake and eat it too. You have to make up your mind what your priority must be. I think it's essential that therefore you have an integrated approach to public policy. There is a potential benefit from a tax measure of that kind, but you have to ask who benefits. What does it do to the economy, what does it do to the debt, what does it do in the long term to the economic and social infrastructure that we talked about previously?
Ms Lankin: You may know that in previous years there's been an attempt by the Ministry of Finance and the then Minister of Finance to open up the whole process of budget consultations and budget-setting exercises, and this year we've just seen the door slammed closed. We've not been provided with any information, economic data in terms of medium- or long-term projections on revenues or expenditures. Given the government's promise for a 30% tax cut, we have asked for some of the documentation that you've just referred to. We specifically asked the minister, who said there were a number of options of how that could be implemented, to provide us with some examples of those options and with some of the costs to loss revenue so that we could give him some advice on that.
I think, quite frankly, the government have got themselves boxed in a corner on this promise. I think the Treasurer recognizes that. He has on a number of occasions attempted to give himself some room to talk about, "Well, perhaps it wouldn't be 30% across the board," I think for the very reason that you have articulated. Finance officials have told him about all of the consumption studies that show that high-income, high-wage earners will take that money and either reduce indebtedness or will invest in savings or offshore luxury items, and it's not the same assimilative value as if you loaded that up down at the low end of the income scale, where that money becomes disposable income and immediately is recirculated in the economy. I think he's hearing that, and I think he's tried to soften it, but every time he does, the Premier pulls him in line and says: "No, it's 30% across the board. It'll be half in year one." There's no give there.
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In your travels, you've had a petition out there which I think is very important, because it says, "Don't do the tax cut until you deal with the issues of poverty and unemployment and until you deal with the deficit." What kind of response are you getting from Ontarians to that message?
Mr Vandezande: Interestingly enough, the initial response was very good. The support for that petition, which argues that there should be no tax cuts until the debt and the deficit can be reduced and until poverty and unemployment have been addressed, which is circulating province-wide, stepped up when Bill 26 was introduced, because then suddenly many people realized that all these amendments that proved to be essential in order to have some legislation passed -- and we still don't know what the final impact of that legislation will be -- that the government's credibility is really on the line. Many people increasingly doubt the government's credibility with respect to this 30% tax cut across the board without distinguishing between who really needs it and who doesn't. The support for the province-wide petition campaign is growing rapidly. I think that's also shown by the polls. People say, "We are prepared to trust the government if it puts all its cards on the table, if it tells us exactly what this legislation is all about."
I think we have another potential omnibus confrontation coming when the budget documents beforehand, and the time that the budget is tabled, do not really show in detail the radical impact that the government's measures will have on poor and vulnerable people. No one is advocating that the so-called lazy bums in our society be given a golden handshake, but we are talking about human beings who are desperate in their situation and who need help and deserve help because they are our neighbours.
The support for the petition is growing: Catholic, mainline, evangelical, all kinds of faith communities, including the Jewish, Buddhist and Islamic communities. There is going to be substantial public support that is being registered with the Premier. It was communicated to him when he met with the bishops the other day that the religious community will not take lying down a further violation of the humanity of the most vulnerable people in Ontario.
I'm not talking about violence; I'm talking about the kind of deep, religious concern that many people have that for the first time in the modern history of Ontario since the Second World War a government dares to ignore the thousands of families and the hundreds of thousands of children that live in desperate poverty. The religious community will rally. The polls will demonstrate, and so will the mail to the Premier, that this stance of being uncompassionate, of being merciless in the face of such stark social misery is totally unacceptable if we talk about the common good and giving common people some common hope.
The Vice-Chair: Mr Vandezande, on behalf of the committee, thank you for your presentation today.
GLAXO WELLCOME INC
The Vice-Chair: The next delegation is Glaxo Wellcome, Mr Bill Laidlaw, please.
Mr Bill Laidlaw: Thank you, Mr Chairman and members of the standing committee, for giving me the opportunity to appear before you today to participate in your pre-budget consultation process. My name is Bill Laidlaw. I think many of you may know me. I'm the director of government relations for Glaxo Wellcome Inc. I'm pleased to be here today to offer the comments of Glaxo Wellcome Inc on the budget process and our views on the economic factors facing the province, our company and the brand-name pharmaceutical industry in Ontario.
First, I would like to provide you with some background on our company. Glaxo Wellcome Inc is one of Canada's largest research-based pharmaceutical companies, generating sales of approximately $380 million annually.
Glaxo Wellcome operates two facilities in Ontario, a head office in Mississauga and a manufacturing plant and development laboratories in Etobicoke. In total, Glaxo Wellcome employs more than 1,100 people in Canada. In the past seven years, Glaxo Canada, now Glaxo Wellcome, has more than tripled its workforce, with 80% of its employees located in Ontario.
Glaxo Wellcome specializes in and is a leader in many therapeutic areas, including asthma, migraine, gastroenterology, oncology, epilepsy and anti-infectives. We invest more than $50 million in research and development, including $10 million in basic research in Canada annually, through partnerships with companies, academic institutions and support of independent researchers, 54% of which is invested in Ontario. We support fellowships at several universities, including the PharmD course at the University of Toronto.
The economic climate in Ontario: As the cornerstone of the government's economic policy, the provincial budget has a direct impact on the ability of companies such as Glaxo Wellcome to compete in the global marketplace. In recent years, the brand-name pharmaceutical industry in Ontario has been negatively affected by economic and labour policies that have discouraged investment and increased the costs of doing business in the province. Glaxo Wellcome supports the direction of the government to improve the economic climate in the province.
I am here today to present our views, as a major brand-name company in the pharmaceutical industry, on the critical components necessary to improve the economic climate in Ontario, create jobs and increase economic growth. These components include balancing the budget, reducing government spending, eliminating regulatory and legislative barriers to job creation and reducing the tax burden. I would like to speak briefly to each item as it relates to Glaxo Wellcome.
(1) The balanced budget: The Ontario government currently pays nearly $9 billion annually in interest on the provincial debt, which is approximately $100 billion. This staggering amount is crippling the ability of the government to deliver core services effectively to people across the province. While governments of all stripes over the past 15 years -- Tory, Liberal and NDP -- must assume a share of the responsibility for contributing to the size of the provincial debt, this government must make a commitment to address the size of the debt and work towards balancing the budget. For Glaxo Wellcome, working towards balancing the budget and getting the province's finances under control are vital to fostering new growth and job creation.
Balancing the budget must be a primary goal of the Ontario government. We support the government's commitment prior to its election eight months ago, in the Common Sense Revolution and in its Fiscal and Economic Statement released in November of last year, to balancing the budget by the year 2000-01. We believe that adopting this goal and taking tough measures to achieve it is crucial to restoring private sector confidence in the provincial economy and attracting new investment.
This is particularly important to Glaxo Wellcome Canada, as we compete with other Glaxo Wellcome companies worldwide for investment and product manufacturing mandates in addition to competing with other brand-name companies in the pharmaceutical industry sector. Balancing the budget is an important component to demonstrate to our parent company in Great Britain that Ontario is a good place to do business.
(2) Curb government spending: Cutting government spending is an important part of achieving a balanced budget and improving the provincial economic climate. The government has stated clearly that it plans to substantially reduce government spending in areas that are not its core responsibility but will maintain health care spending at $17.4 billion. While we support the government's decision to maintain funding in the health care sector, we believe there are substantial administrative savings that can be made within the Ministry of Health and can be reinvested in other areas where they are most needed.
For example, Glaxo Wellcome believes that there are ways to reduce the administrative costs of the Ministry of Health, particularly in the Ontario drug benefit plan, and spend smarter. Some of these areas include -- and, Frances, you probably have heard them before.
Ms Lankin: A couple of times.
Mr Laidlaw: Yes, but I'll give them again.
Eliminating silo budgeting: We support the elimination of silo budgeting to enable cost savings to be carried over from one division of the ministry to another. This would allow savings from reduced hospitalizations and physician visits from new medications covered by the formulary to be realized. Companies are required to submit pharmacoeconomic data when applying for reimbursement on the ODB formulary. However, the current budget structure within the ministry does not allow the Ministry of Health to recognize cost savings from new medications in other areas of the health care system. Glaxo Wellcome, along with the Pharmaceutical Manufacturers Association of Canada, is interested in working with the ministry to address this issue.
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Secondly, eliminate interprovincial duplication and increase harmonization: The current approval process for obtaining coverage for drugs under the Ontario drug benefit program involves a significant amount of unnecessary and costly regulatory and administrative duplication with the federal health protection branch. Reducing the regulatory duplication would result in improved access for patients to new medications, enable companies to bring products to market quicker and could reduce administrative costs for the government.
Thirdly, the need for greater transparency in the submission approval process: Glaxo Wellcome believes that making the review process more transparent has advantages for industry, the Ministry of Health and the drug programs branch. Making the review process more accessible will result in fewer requests for information, phone calls or meetings from the industry to branch officials on product-specific questions. An improved, open process will result in a faster review of submissions, facilitate more efficient decision-making and reduce the time patients have to wait for new, important medications. In fact, the ODB approval process could be eliminated if the health protection branch were to conduct the detailed product review and the Ontario drug benefit program was left to conduct a pharmacoeconomic review and determine reimbursement.
Bill 26 gives the Minister of Health the ability to make funding decisions that will lead to increased savings in the health care sector. We made a presentation to the committee reviewing Bill 26, commenting on the changes to the Ontario Drug Benefit Act and the Prescription Drug Cost Regulation Act.
(3) Eliminating regulatory and legislative barriers to job creation: The third element that we believe is important for the provincial government to pursue is to eliminate the regulatory and legislative barriers that currently exist to job creation. We support the government's repeal of Bill 40 and the reform initiatives it has undertaken on the workers' compensation system in Ontario through Bill 15, the Workers' Compensation and Occupational Health and Safety Amendment Act and the long-term review under way by the Minister without Portfolio, Cam Jackson.
We are also encouraged by the announcement of the Red-Tape Review Commission to review regulations affecting businesses in Ontario and the review of agencies, boards and commissions. We look forward to the opportunity to participate in both of these reviews.
Reducing the tax burden: Ontario's tax burden is among the heaviest in North America. In addition to balancing the budget, controlling spending and eliminating regulatory and legislative barriers to business, the government must provide some tax relief to Ontario businesses and the public. The excessive burden has driven away investment and limited the private sector in its ability to create jobs and foster economic prosperity.
For example, the provincial corporate tax rate in Quebec is up to 6.6% more favourable than it is in Ontario. In other countries in which our overseas affiliates operate, the corporate tax rates are substantially lower than even the best rate in Canada.
Glaxo Wellcome recognizes the government's commitment to reducing the personal income tax by 30% in three years. However, we suggest a cautious approach to lowering taxes, which includes examining all taxes, including payroll taxes, corporate income taxes, and working with the federal government to harmonize provincial sales tax with the GST or its replacement. Through this approach, the government can provide the economic climate conducive to job creation and investment while at the same time meet its deficit reduction targets.
In conclusion, the 1995-96 Ontario budget provides the government with an opportunity to demonstrate that it is committed to improving the investment climate in the province by remaining committed to balancing the budget, curbing government spending, eliminating regulatory and legislative barriers to job creation and reducing the tax burden for people across the province.
The government does not have to attempt this alone. Private sector companies such as Glaxo Wellcome have expertise in a variety of areas, such as restructuring, and can assist in delivering programs more effectively and efficiently, which would be beneficial to government. We would be happy to work with the government to meet your objectives.
Thank you. I'll be pleased to respond to any questions you have at this time.
Mr Kwinter: For those members who are new to the Legislature and new to the committee, you should know that Bill Laidlaw is one of the most conscientious, if not the most conscientious, representative of an industry. I can tell you, you will see lots of lots of him, and I don't say that in any negative way. I just want to congratulate him for his diligence in doing his job.
Mrs Marland: You and I were both at the official opening of the new office.
Mr Kwinter: That's right.
Ms Lankin: There was more than just the two of you there.
Mrs Marland: I'm sorry. And the minister.
Ms Lankin: Thank you.
Mr Kwinter: You can have the comments in someone else's time.
First of all, I want to tell you that I support the idea of getting rid of the duplication. It makes no sense to me why the findings of the federal agency that regulates drugs as to the efficacy of the drug and the safety of it should not be applicable to all Canadians. We have that group doing it and then every province doing the same thing. It just doesn't make any sense and. As I say, I have no problem with that.
But I do have a question for you, and I don't to put you on the spot.
Mr Laidlaw: It's all right.
Mr Kwinter: You said, "The excessive burden has driven away investment and limited the private sector in its ability to create new jobs and foster economic prosperity," and you used an example that Quebec is up to 6.6% more favourable than Ontario. Given all of that, how do you account for Glaxo's mammoth investment in Ontario over the last three or four years?
Ms Lankin: It was their excellent relationship with the previous government.
Mr Carr: The member from Mississauga.
Mr Laidlaw: That's right.
The interesting thing is that a lot of these investment decisions were made a long time ago. We made that investment decision, to put in over $200 million into Mississauga, about 10 years ago. At that point in time, as you recall, the investment climate was quite different. As time has progressed, and it's not only in Ontario but the rest of the economies internationally, things have changed somewhat. But we were dedicated. We had faith that things would get better. We worked with your government under Mr Peterson. You were at the opening, Monte, with the Premier. The same with Mr Rae. Both of you were in England talking to our international chairman about how things would get better, and that's the reason why we're continuing to invest in Ontario.
We're hoping that this government and future governments will create a regulatory environment that's conducive for investment, because you want more multinationals like Glaxo Wellcome locating in Ontario. The spinoff is unbelievable in terms of jobs and prosperity for people of all classes. All three governments have tried to work with us on that. This most recent government is perhaps working a little harder in terms of its debt and deficit reduction and creating a more conducive regulatory environment for brand-name pharmaceutical investment.
Mr Kwinter: I acknowledge that if you have a more favourable tax regime, it's going to be a plus, but I also feel very strongly that that's only one component of the decision. Regardless, if you had to make the decision today, you probably still would come to Ontario, because Ontario is the largest buyer, through the ODB, of pharmaceuticals in Canada. It has got the largest market; it certainly makes no sense to be somewhere other than where your largest market is.
Mr Laidlaw: If I may answer that, Quebec does have a very favourable environment, as you know. They have a couple of things. You get access to formularies for R&D investment, you have a tax-free holiday for graduates in science for two years, you have capital write-offs that are second to none. As well, you have the tax regime. They have the pharmaceutical industry as a focus, one of the four industries they focus on. They bend over backwards to make you locate in Quebec.
We didn't. We had Burroughs Wellcome, which we took over last year. We decided we were going to be selling the Burroughs Wellcome plant and consolidating everything in Ontario. It's in part due to the fact that governments like yours and Frances's and this new government have worked with us. We'd still like to encourage this government to continue to work with us to make those regulatory changes, which are the most important ones.
Ms Castrilli: Mr Laidlaw, I'm struck by the comments you make on page 6 with respect to advice that you give to the government about taking a cautious approach to lowering taxes. You say you recognize the commitment to reduce personal income tax by a 30% rate. I'm not sure whether you're saying in that paragraph that the government should move away from that. You do say there's a need to look at a whole series of taxes and tax reductions. Do I understand you correctly?
Mr Laidlaw: I'm also vice-president of the Ontario Chamber of Commerce. Many of you people have heard, "Sustainable government, competitive taxes, competitive regulations." I want to encourage the government to keep up with its commitment to have that 30% tax cut, but there are other things it should factor in, and I've pointed those out in the brief. It's not as simple as that. There are other things that make Ontario maybe less attractive for other sectors than for ours, and they would include payroll taxes, corporate income tax, the GST, PST and other things. I want this government to hold fast to what it said and to make that commitment and live up to it.
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Ms Castrilli: Are you saying that the 30%, though, should also include these taxes, or is this in addition to --
Mr Laidlaw: These are other things that they should factor in, yes.
Ms Lankin: Bill, you know that there's a whole lot that you presented around silo budgeting that I agree with you on. I'm not going to touch any of that. Let me follow up on some of these issues around taxation. I guess, in a sense, you just introduced your second hat, your role in the Ontario Chamber of Commerce. Are you saying that you want them to proceed with this 30% tax cut even if that means they don't make their deficit targets?
Mr Laidlaw: We believe and I believe, having been in this game for a long time, that no matter what government's in power, it has to reduce the debt and the deficit. This government believes that if it makes that 30% tax cut, it will allow the economy to be stimulated to such an extent that job growth will occur. I'm saying here that we'd like them to factor in other things that they should consider, which I just pointed out.
Ms Lankin: Okay. But Bill, you know me well enough; I'm going to try and push you, as you have me for many years, to get an answer. If their deficit reduction target is in jeopardy, like many of us believe it is, given the fiscal numbers right now, do you believe they should proceed with the 30% income tax cut if it puts off the day of reckoning in terms of the debt and deficit?
Mr Laidlaw: We think they should, yes.
Ms Lankin: That's interesting. Is that the position of the Ontario Chamber of Commerce as well?
Mr Laidlaw: I'm speaking just for Glaxo Wellcome. I'm but the vice-president, policy, for the Ontario chamber; I only give them advice.
Ms Lankin: I find that interesting, and let me tell you, I disagree with you absolutely. I think the majority of the business community is saying to this government: "We want you to stick to your promises, but if it is jeopardizing the deficit or the debt reduction project, if it's going to push it off past the year 2001 before we get to a balanced budget, particularly in light of the potential of another recessionary cycle, don't do it. Don't be foolish." The Dominion Bond Rating agency, all sorts of other businesses that I'm hearing from are saying that, so I'm surprised at that position.
Mr Laidlaw: I think they can do both. I think it's possible. I think too, if they made a commitment in their Common Sense Revolution, they should live up to it.
Ms Lankin: That's true; that I would agree with you on. I think they should have made realistic commitments to begin with, and I would disagree with your, with all due respect, Pollyanna-ish assessment of what they can accomplish.
Mr Laidlaw: We have faith.
Ms Lankin: Good; I'm glad.
Let me ask you about your comment around tax competitiveness. I want to read a couple of things into the agenda, because again, I'm sorry, I think too many people come forward and just say, "We are not competitive; our corporate taxes are not competitive." All the data that we are provided with from the Ministry of Finance says we are. When I look at international comparisons in terms of the G-7 countries, they show Canada and Ontario favourably compared. In fact, we have more generous research and development tax incentives in Ontario compared to G-7 countries.
If we look at corporate tax burden for manufacturers, we are generally competitive with the US. Our combined corporate income tax rate for Ontario manufacturers is 35%, compared with the average rate of 40% in the US, and we can look at tax depreciation rates on equipment being very much in line with the US. If you look at payroll taxes, which you mentioned, and employer-paid health benefits for new employees, we're 27% lower than Quebec, 49% lower than the average in the US. You mentioned a specific comparison on corporate income tax for manufacturing with the province of Quebec, and you're right: In terms of interprovincial comparisons, Quebec is in fact the third-lowest; Ontario is the fifth-lowest. There are five provinces that are higher than us. While they are lower in Quebec than us, when you combine capital taxes and payroll taxes, our capital taxes and payroll taxes are lower.
I just want to challenge this assumption that we are totally uncompetitive in our tax. It would be nice to lower them overall, but let's not blow it out of proportion in terms of the differences between jurisdictions.
Mr Laidlaw: As you know, and you were Minister of Economic Development, I am very involved with the chamber. We had the Queen's Park liaison. I also belong to the business research network, which consists of about 35 companies -- Tayce Wakefield at GM, Norm Stewart at Ford, Laurie Harley at IBM -- and we've done some really interesting work in presenting balanced policy alternatives to your government and to others. We did do a comparison of different jurisdictions. We did it to your deputy and all your managers and directors. The figures we presented were different than the ones that the government has. They didn't agree with our figures, and of course we didn't agree with theirs, but ours demonstrated that Ontario as a jurisdiction could improve in certain categories.
Ms Lankin: I'm sure that's true.
Mr Laidlaw: We just arrived at our figures, perhaps differently than you did. We did offer to work together with your officials, but that never happened. The government fell; I think that was the case. We want to work with Mr Saunderson's ministry as well.
Ms Lankin: Bill, could I just tell you that in fact these aren't figures that were produced during the time of our government. In fact, these are figures that were produced in September 1995 under the current Conservative government; I just wanted to clarify that.
Mr Laidlaw: Well, we're willing as a company, and I know many of my colleagues in the industry are, to work with this government and work with opposition to demonstrate where we're not competitive and to work towards making those corrections to make it more competitive, so you can get more Glaxo Wellcomes here.
Ms Lankin: That would be helpful.
Mrs Marland: Mr Laidlaw, it's always an opportunity when you appear, or a representative of Glaxo appeared in the past, to congratulate the company on its being a contributing and model corporate citizen in terms of its participation in communities throughout Ontario, and I don't miss that opportunity to do that again. We've always been very proud to have Glaxo in Mississauga and now doubly proud to have Wellcome as well.
I would like to ask you if the provisions and the changes that were made in Bill 26 will, in your opinion, help in the long-term provision of drugs. Obviously, when we're looking at our budget, as we are with this committee hearing, we are concerned about major levers that drive the cost of any of the programs that government in Ontario provides, and the provision of drugs is right up there with that challenge that faces government. Knowing that we also want our Ontario residents to benefit from the development of new drugs, do you now see that the changes our government has made so far will help in the long term with the access to drugs for the people of this province at the lowest possible price while the drug manufacturing companies can still spend the money to develop new relief for illness and disease?
Mr Laidlaw: As you know, Margaret, we work with the Liberals and the NDP in advising them and keeping them posted as to the newest developments at Glaxo Wellcome and in our industry. It seems pretty clear that the problem is utilization. Many people say, "Oh, it's the high cost of your drugs," but I think Minister Wilson, who by the way seems to have a very good understanding of his ministry, recognizes that that is the problem.
Many of the steps he's taken in Bill 26, which we commented on earlier, are ways in which they can control utilization -- the overutilization of medications on the part of seniors and welfare recipients. I think the NDP government brought in the Trillium plan. You have section 8s. You have a number of ways in which you can get at helping people who need these newest medicines. The user fee: The response that we've been given and we would concur with is that that's going to be an effort to control utilization. It's a small amount, but it's going to cause patients, doctors, pharmacists to realize that there is a cost element to this whole piece. By looking at those savings, that's going to allow the government to have more money to put into putting some of the newest medicines on the Ontario Drug Benefit Formulary, and we've seen examples of that with products like 3TC. We are the makers of 3TC and AZT.
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Mrs Marland: Does it help the industry to develop the new medicines at the lowest cost?
Mr Laidlaw: Yes, it does, and I think the message your government is sending to our particular company is that you're working to improve the regulatory environment in Ontario so that we can spend more money on R and D and add more jobs in this province.
Mr Ford: Mr Laidlaw, Bill, I'm impressed today. You remind me of the Jolly Green Giant from this side of the House when you say that -- and I know you're a very intelligent person and you're in favour of the reduction in government spending and cutting the deficit. Not only that, you say that your company's invested $200 million in new plant and equipment, which I am very impressed with, because that shows intelligence.
People complain about the cost of drugs, which I consider rather high, but now I've seen both sides of the story. I went into a plant and had an extensive tour, watching their research, a huge lab, and watching them make drugs in Ontario. I went through all that and I was quite impressed, and looking out, they had the landscape there on which they've already built a couple of plants and they are building another huge addition, similar to your type of situation. So it impressed me again.
What I would like to say to you is that after seeing these people in operation, I asked them what was the potential of hiring more people. They said, "Right now we have opportunities for 50 graduates," right here in this one plant, that they can't seem to find the qualified people for, and you're probably running into the same thing. So I say, if these people have that much confidence in Ontario and they're talking about reducing the deficit, then that's the way this government should go.
I'm pleased to have you here today, Bill, because on their export dock, which is probably similar to yours, I could see the jobs there. When I say I could see the jobs there, I looked at all the various countries they were exporting drugs to, over 100 different countries that these drugs were going to, manufactured right here in Ontario. These are the things where I say we're in a positive step, positive attitude, and we have to keep this up.
Mr Wettlaufer: Bill, you mentioned here that while governments of all stripes over the past 15 years must assume a share of the responsibility for contributing to the size of the provincial debt, this government must make a commitment to address the size of the debt. I want to emphasize that while we take a hit all the time from the opposition party and the third party for being the same party that did that 15 to 20 years ago, we don't forgive it, we don't condone it. We are trying to rectify it, but part of the rectification is in restructuring. You talk here about eliminating silo budgeting, and I wonder if you could explain that a little bit, please.
Mr Laidlaw: I've been around here, by the way, since the late 1960s, so that's probably longer than even some of you people have been here. In looking at silo budgeting, I think it's an example in the Ministry of Health in the drug programs branch that could apply to others. I'll take for example Imitrex, which is a medicine for migraine. It's still not on the formulary. We've been trying to get it on for over five years. We can see savings in other budgets -- home care, hospital care -- but because there's no saving immediately in the ODB, they're not going to factor those in. The same thing could be said for some antibiotics we have, for some chemotherapy drugs.
Minister Wilson has recognized that it's a problem and he's looking at it, but when you look at drug therapy today -- for example, many of you will have ulcers, if you haven't got them already. No one does any surgery now for ulcers; you take medicine. It could be Losec or Zantac. That's going to be the case for the future. We can save health care dollars. No submission into the ODB now can go in unless it has a health economics component demonstrating where it's going to save money, and that's a positive thing. I think this government should focus more and more on that.
Mr Wettlaufer: So this would tie in with our restructuring efforts.
Mr Laidlaw: I believe it would. Someone said to me today, "Good government policy." I don't want to defend the Tory government, but they introduced the patent bill which is coming up for review next year, and they said to our industry -- we said to them, "Let's work together." They created a pricing forum, the Patented Medicine Prices Review Board, which demonstrated that we cannot exceed a price on our drugs over the CPI every year; as well, they regulated what the introductory price would be. They also said that 10% of your sales would go into R and D. That's good government policy. We took it a hit to that, but Ontario was the beneficiary of that policy.
The Chair: I'd like to thank Glaxo Wellcome and Bill Laidlaw for your presentation today.
ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION HOUSES
The Chair: The next presenter is the Ontario Association of Interval and Transition Houses, Ms Morrow. Welcome to the committee. We have 30 minutes.
Ms Victoria Roth: Good afternoon. My name is Victoria Roth. I am the president of the Ontario Association of Interval and Transition Houses. I'd like to thank the committee for allowing us to speak this afternoon.
Ms Eileen Morrow: My name is Eileen Morrow. I work for the association. I'm the lobby coordinator of OAITH.
Ms Roth: We've brought with us a brief which I hope you all have a copy of. This outlines our concerns and recommendations for this committee. Attached to the brief you will find a document. We are not going to read the entire brief to you but we will highlight certain sections that we feel are particularly important and we hope to leave some time for your questions.
Ms Morrow: I will read some of it, because we tried to write it in a concise way so we wouldn't go over our time, hopefully.
The Ontario Association of Interval and Transition Houses is a 70-member coalition of services working with women who experience violence, and with their children who witness it. The majority of OAITH members are first-level emergency shelters for abused women and their children.
For many years now, OAITH members have provided a range of services to abused women and children all over Ontario. Those include 24-hour safe shelter and security; 24-hour crisis intervention by phone, within the shelter or in visits; emergency transportation; one-to-one crisis counselling and supportive group counselling for both women and children. We provide referral to other community supports for women; supportive liaison on behalf of women and children to other community systems they need; housing search support for women who are attempting to escape violence; support and assistance for women who need to negotiate the legal system; community coordination and cooperation to end violence; community education and prevention work, including the education of professionals, students, media, a whole range; consultation for public policy development, program creation, academic research, media, community response, education and so on. These are provided usually within each and every shelter in Ontario to some extent.
OAITH itself, through the volunteer labour of women throughout the membership and from all regions of Ontario, also provides many services.
As you may already know, the province of Ontario has eliminated 100% of the funding for our group, so I don't think I'll take up the time listing all of the things we do, but they are there for you to look at.
The many hours of volunteer work provided to the community by OAITH members, both within the services themselves and within OAITH, have come from an intense and very sincere desire to eliminate violence against women and children across Ontario. Many women and children in Ontario today live free of violence because of the significant contribution of their work. However, we have a long way to go.
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Last year, almost 30 women in Ontario were shot, beaten, burned, strangled or stabbed to death by husbands, common-law partners or boyfriends. In many cases, children and other family members or friends were also murdered. Over the last five years, over 165 women that we know of have been killed by their partners, and these are just women who were reported in the public press. While many women are murdered, many, many more survive in situations of terror and despair. Their children are often born into a crèche of violence and they grow up learning its power and its price.
The costs of violence fan out from the abuser not only to his victims but to his children, family and the community. They take their toll not only in the present but into our future. Individual women and children of course pay the highest price, sometimes with their lives. They also pay with the quality of their lives, the loss of their liberty, their identity and their right to pursue happiness and self-determination. The community itself feels the loss of their contribution to it: their ideas, work, knowledge and all of the positive efforts they might have been able to make if they were free to access their right to participate in Ontario.
Violence costs financially as well, both to women and children and to the community economy. The London, Ontario, Centre for Research on Violence Against Women and Children has determined that the partial estimated financial costs of violence against women total over $4 billion a year in Canada, over 87% of it from state funds. The authors of the London study state: "There is no lack of financial justification for why funding for violence against women programs and initiatives should continue...reductions to intervention and prevention funding may not provide meaningful savings to provincial and federal governments. Instead, reductions to services and programs could have enormous economic `ripple' effects, leading to increased costs in other services and programs." In other words, the costs of intervention rather than prevention are high. The financial cost to government and communities will be even higher, however, if funding is reduced.
The London study is one of what must now be thousands of studies and surveys on violence, including violence against women by their partners. We have studied causes, consequences, and impacts on women, children and abusers themselves. We have studied violence in specific communities of women in different parts of the world. We have studied responses to violence in every imaginable system and program. We have even studied the funding of services for addressing violence in Ontario. Some of that material has ended up on the desks of this committee in past years. The accumulated material on the subject, if brought into this room, would fill it to overflowing.
We have studied that strategy for stopping violence since the Progressive Conservatives last held office in Ontario, and we have funded and we have provided countless hours of consultation. I have listed here some of the major consultations and work that's been done in the province of Ontario under all three political parties that have sat in the House. I won't read them. Throughout those processes, OAITH has been a participant, from the very first social development policy report under the Progressive Conservative government in 1982 right up to the last committee that was sitting at the Ministry of Community and Social Services, the accountability framework reference group. Those meetings have been discontinued under the present government.
From time to time OAITH has made presentations to the standing committee on finance and economic affairs. In 1991, we outlined our alternative vision for funding, including a recommendation we had proposed to implement legislated 100% block funding for shelters and for other services for abused women and their children by 1990. At that time we outlined our definition of core services to this committee, a definition which had been created as a result of extensive consultation within our membership with front-line women's advocates and with abused women themselves. We specifically explained the needs being identified by abused women and their children in shelters and we provided that report to this committee at that time, as we have done to you today. While that document is now out of date, it is so only in so far as it reflects inadequately the list of services we now know are needed to end violence against women and children.
After the public pre-budget consultations of 1991, the standing committee on finance and economic affairs recommended that the funding formula for shelters be reviewed, with a view to implementing block funding of shelters by 1991 or 1992.
When women today look at Ontario's response to the violence they experience in their homes, what do they see and feel? Do they see a committed government leadership, acting with integrity and purpose for their safety and freedom? No, they do not. Do they feel supported and protected as valuable members of their community and province? No, they do not.
What they do see in a new Ontario is just like the old Ontario. They see:
Elimination of all funding to second-stage programs in Ontario, leaving hundreds of women and children now stranded without the support they need to leave violence;
Reductions of already dismally inadequate funding for first-stage emergency shelters;
Elimination of funding for education and prevention, the cornerstones of the elimination of violence;
Dangerous reductions in social supports needed by abused women in order to leave violent partners and to protect themselves and their children;
Reductions to local governments that could seriously endanger women's human rights and safety if passed on to those services that address violence;
Reductions in funding to legal aid, user fees for legal aid applications and changes to legal aid policies that limit women's access to needed legal support and advice during times of high safety risk;
Reductions or elimination of supports for women who face compounded discrimination and violence based on race, language, sexual orientation and disability;
Elimination of funding for advocacy groups that have historically provided the valuable expertise, challenge and critical analysis needed to identify and implement effective measures to end violence;
Introduction of mechanisms to allow increasing user fees in health, social and legal services that abused women and their children have a human right to access, regardless of their financial resources;
Proposals to reinforce federal plans for block funding transfers with provincial block funding transfers that will further compound discrepancies in funding and service across Ontario.
The impact of these cuts on abused women and their children is devastating. Already, shelters across Ontario are reporting increasing crisis telephone calls, while at the same time women are staying with abusers or leaving the shelters to return to violence.
Women are asking for help in the shelters in deciding whether to pay the rent or feed their children, whether to buy medicine they need for themselves or pay for clothing for their kids. They are wondering how they can leave abusive situations when there is little safe housing to go to. They are at a loss to know how they will become self-sufficient and independent of abusive partners when they cannot access child care services, education or employment opportunities in Ontario. They ask how they can hold accountable abusive partners when legal aid policies are restricting their access to both family and criminal courts, while child support collection programs may be reviewed and restricted and while criminal courts are being downsized in Ontario. Women are reporting increasing depression and thoughts of suicide. It is now not uncommon for women to call shelter crisis lines and speak directly about their fears about the future and their survival under the Mike Harris government. This is not acceptable.
Shelters are also reporting increasing anxiety and depression within shelter staffs themselves as they struggle to find hope for the women and children who reach out to them. Staff cutbacks are resulting in diminishing services and increasingly unmanageable workloads for counsellors. Some programs in first-stage shelters have been ended as shelters attempt to provide basic safety and crisis intervention for women. Shelters fear that their services will become nothing more than a way for women and children to briefly delay the inescapable harm, or even perhaps death, they will suffer at the hands of violent partners. This is not acceptable.
Prevention and education work, the work that might provide an end to the violence and escalating costs incurred through it, has also been devastated now that government has refused to bear any share of the cost. This is not acceptable.
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Because emergency shelter services have been so notoriously underfunded since their inception, if municipalities pass on to local services like shelters the two-year, 47% reduction in cuts of their funding that was outlined in the economic statement in November, we will not be surprised to see some first-stage shelters in Ontario close their doors within the next two years. This is not acceptable. This is not acceptable to us and it should not be acceptable to the province of Ontario. It is not the way to go.
When a particular political party takes office, it does not receive an unrestricted mandate to do whatever it likes. There are provincial, national and even international laws and agreements under which public bodies must operate. I've just listed a few of them here:
The Canadian Bills of Rights, section 1(a), section 1(b): These rights guarantee to all Canadians the right to life, liberty, security of the person and the right not to be deprived of those. It has sections that guarantee the right of all individuals to equality. The Charter of Rights and Freedoms guarantees the same rights, and guarantees the same rights to all citizens.
These guarantees are not part of a wish list. They are the law in this country. Contravention of them, in our opinion, constitutes breaking the law. We believe that regardless of the recent legal decision disfranchising low-income women and children from a minimum level of support for basis needs, women and children whose lives are at risk as a result of public policy decisions, and even backtracking on publicly given promises of support, will fare better in the courts, should they decide to invoke the laws of this land in their defence.
Canada, in addition to having its own legislation, is part of international agreements in all of these human rights for women and children. Some of them include the Universal Declaration of Human Rights, the Convention on the Elimination of All Forms of Discrimination Against Women, the Declaration on the Elimination of Violence Against Women, the International Covenant on Economic, Social and Cultural Rights, the International Covenant on Civil and Political Rights and the Convention Against Torture and other Cruel, Inhuman and Degrading Treatment or Punishment. These are agreements and instruments that we agree with, not only just to support morally, but we are directed to provide the services specifically and the laws and supports specifically to ensure that they occur.
It should not be difficult to conclude that the current policies of cutting back services affecting all women and children who are experiencing violence in Ontario contravene these responsibilities as well as those of the Canadian Bill of Rights and the Canadian Charter of Rights and Freedoms, and constitute ample grounds, we believe, for legal challenges against this government on behalf of abused women and their children.
If the government of Ontario is unwilling to honour its legal obligations to prevent violence, or to protect and provide intervention for women in the province, or is unmindful of the costly legal challenges that may result, we would think that it would at least be prepared to follow the mandate outlined by the Progressive Conservative Party during the election -- the job description, so to speak, of the premier and his partners in cabinet.
Documents of the Common Sense Revolution, including New Directions, Volume Three: A Blueprint for Justice and Community Safety in Ontario and others, described the approach this government was planning to take before the election to address violence against women and their children. While the approach indicated in these documents fell far short of addressing the needs identified by abused women and their children in Ontario, it made promises and provided some details for their implementation that were intended to appeal to people living in Ontario and presumably to persuade them to vote for a Progressive Conservative government.
Among the Common Sense Revolution promises designed to solve the problem of violence was a promise to increase shelter services in Ontario. The documents of the Common Sense Revolution also promised to bring in a Victims' Bill of Rights that would ensure "social services, health and medical treatment, legal and counselling assistance" that was "responsive to the needs" of victims. The documents spoke of the desperate need to stop studying violence and take action. It promised to listen to victims and the Ontario public's increasing desire to have government address violence against women and children. The list of budget and program cuts outlined at the beginning of this brief is proof enough that the Progressive Conservative government of Ontario has betrayed its own commitment to women, children and the people of this province.
Instead of increases in shelter services, we have seen decreases. Instead of bringing in a Victims' Bill of Rights ensuring "social services, health and medical treatment, legal and counselling assistance...responsive" to victims, we have seen cuts to social services most used by abused women and their children, cuts to health care and legal services and layoffs of counsellors and advocates across the province. The future promises only more cuts, unless this government decides to respect the human rights of women and children, to enforce the legal and moral commitments that are enshrined in our laws and to honour the contract the Progressive Conservative Party itself made with the people of Ontario before it was elected.
Ms Roth: At this point in the presentation it is customary to make some suggestions for addressing the issues laid out before its members. At the same time, it is problematic for us to make recommendations today when those made in the past, from a genuine expertise and experience in the issue, have not been implemented or indeed even advanced to an adequate extent. Our commitment to the women and children who call and visit shelters and to women who die before they have that chance, however, compels us to continue trying to influence the actions of every public institution affecting the daily lives of women experiencing violence.
Our recommendations for this committee therefore are:
That the current committee members unanimously endorse the recommendation of the 1991 standing committee on finance and economic affairs to review the shelter funding formula with a view to implementing 100% block funding for all services identified by all abused women and their children as responsive to their needs;
Failing that, that this committee recommend to the Premier and the cabinet that all funding reduced or eliminated from second-stage shelters, first-stage emergency shelters, counselling programs for abused women and their children, education and prevention programs, training programs for justice system personnel, social assistance and housing subsidy, child care subsidy, legal aid, health and all other programs and services affecting the ability of abused women and their children to address or escape from violence be restored immediately and that a moratorium be placed on all further cuts that would negatively affect women's ability to leave violence;
That in keeping with requirements in the UN Declaration on the Elimination of Violence Against Women, funding for women's advocacy groups such as OAITH, as well as others who work to end social, political and economic inequality, be immediately restored in order to facilitate cooperation between them and public policymakers in the development of policy and programs to effectively address and to eliminate violence against women and their children in Ontario.
We would like to thank the members of this committee for the opportunity to make this presentation and we really hope that you will seriously look at it. Thank you.
Ms Marilyn Churley (Riverdale): It's quite clear to me and to many people now that the Harris government is putting abused women and children at risk for the sake of a 30% tax cut which is mainly going to benefit the wealthy in our province.
Having said that, I want to make a quick point about violence against women and children. There are some who say, "Why is it different from other kinds of violence?" It's really, really important that we understand that violence against women and children in their very own homes is so insidious and so profoundly sad because it is the one place, in the bosom of our families, where we should feel safe. God knows, if we can't feel safe there, where can we feel safe? I just wanted to make that fact, because I have heard some government members at times say, "Why is it different from other kinds?" and that's why.
I want to ask you a quick question. There has been the suggestion, and I know I've written a letter suggesting the Attorney General designate some moneys from the victims' surcharge fund to second-stage housing and/or shelters. Have you heard back?
Ms Morrow: No, actually. We haven't heard any information about the victims' assistance fund. We have a meeting scheduled with the Attorney General, and that will be one of the things we will speak about on the agenda when we meet with him because he read the bill. But we haven't received any word on any moves that are being made in that regard.
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Ms Bassett: Thanks for your presentation, and we do care. I know it appears we don't and I know we come from different points of view politically, but let's try and work together. The Minister of Finance wants to get ideas. I would like to say, and I don't mean it to sound harsh, if you had to cut back your area -- we pay $50 million into women's shelters and whatever now in the violence against women programs -- should we take from somewhere else? It doesn't have to be from women. I'm not saying take it from there. Where would you take it?
Could you help us out? We were elected on a mandate to cut back spending and so we feel that's the direction we're going to go. We could take from somewhere else and make sure you get it. Where would you suggest taking it? And within your organization, is there a way you could restructure and deliver anything, even with our help, more efficiently?
Ms Morrow: Gee, that's a big question. We have already, for instance, suggested that the victims' surcharge fund might be used in a more effective way to shore up the services that are being cut and that there has to be some recognition that certain kinds of services, specifically ones that address the human rights of women, men and children in Ontario, need to be protected. Those things need to be identified as human rights issues, and once they are protected, then if you need to look at things you can look at things after those protections are in place. That regrettably has not happened.
It's difficult for us, and I'm not even sure that it's our role to tell the government where to find the money. We have made the suggestion that the victims' assistance fund needs to be reinvested back into the situations, particularly the second stages right now that have lost their funding. If something isn't done about them right away, they're going to be gone.
That has already been suggested. We haven't seen any movement on that, and to be really honest with you, we would like to see some show of good faith. We would like to see some movement on the suggestion we did make. I'm not sure it's useful to make more suggestions when the one we did make has not been acted upon, even though the minister responsible for Community and Social Services, when we met with him, indicated that he was prepared to reinvest. But we haven't seen any action, and action, as you know as well, is very crucial.
Mr Kwinter: Thank you very much for your presentation, which really outlines the major problem the group you represent is facing. One of the big problems, of course, is that everybody has a problem with the idea that we've got to do with less and all of these things. It would seem to me that the one area where government could really make an impact is in prevention and education.
You could say that different levels of government, municipalities, regions, should take some share in the problem in their particular area. It would seem that governments traditionally have taken a look at the educational aspects to try to prevent these abuses, and I totally agree with you it's unacceptable that this isn't being done. It would also seem that there are lots of people who are tolerating abuses they shouldn't be because they don't know that there is help for them. In your education and prevention program, what is going to be the impact if you can't do that?
Ms Morrow: You may have read in the Star today the article that talked about homicides and domestics in North America being reduced as a result of services, education and protocols within systems being put in place. I haven't seen that study, needless to say, but if it turns out to be true, that that's in fact what those kinds of numbers are showing, then we have proven and continue to prove that education and prevention programs like shelters and protocols are working to reduce the violence and the cost of violence.
When we're talking about reducing, we're nowhere near stopping violence, but we were on the way and if we begin to reduce those supports, and particularly if we begin to reduce education and prevention, then we're simply ending up responding to the problem after it's finished, after it's over, and this is not what we want. What we will then begin to do is to reinforce ongoing, intergenerational violence; in other words, where the younger generation learns the same violence and continues to enact that violence on others.
Education is one of the cornerstones and we all know that's true. You can't change unless you know that change is necessary and you know that change is possible.
The Chair: Thank you very much for your presentation to the committee today.
CANADIAN AUTOMOBILE ASSOCIATION ONTARIO
The Chair: The next group we have is the Canadian Automobile Association. It's a pleasure to welcome you to the standing committee.
Ms Pauline Mitchell: This is Mr Nick Ferris with me. Mr Ferris is the manager of public and government affairs for CAA Central, which is here in Toronto. I'm with CAA South-Central, which is in Hamilton, formally known as the Hamilton Automobile Club. Mr Ferris and I are both members of the CAA Ontario public and government affairs committee.
CAA Ontario is the federation of 10 not-for-profit automobile clubs in Ontario representing the motoring and travelling interests of over 1.6 million members and their families.
On behalf of those members, we request that the Ontario government recognize that mobility is the cornerstone of modern society and that the private automobile is the principal means of mobility for Ontarians, in fact most Canadians.
Our presentation today is a plea that the upcoming provincial budget allocate the necessary funds to protect the road safety of Ontarians as motorists, passengers and tourists, and that motorists not be regressively taxed for the purpose of generating general revenue.
We urge the government to set an example to other levels of government by drafting a budget that protects the automobility of Ontarians through positive economic measures. CAA Ontario believes an opportunity exists for this government to dramatically influence the prosperity of our province and the safety of our citizens with the forthcoming budget. Whether that influence is positive or not will depend, in part, on the economic instruments introduced that directly affect Ontario's nearly seven million drivers.
On the subject of gasoline taxes we have two recommendations. The first recommendation is: no further gasoline tax increase. Ontarians already pay an excessive amount of tax on fuel. Ontario collects nearly 15 cents per every litre of fuel sold in this province. That's 14.7 cents for each of nearly 12.5 billion litres of gasoline sold in Ontario. This is in addition to the fuel tax plus GST collected by the federal government. More than half of the pump price of gasoline is taxes collected by the Ontario and federal governments. Fuel tax is a regressive means of generating revenue. Some experts suggest that gas taxes are in fact a form of job tax. If getting to work costs too much, low-paying jobs may not seem worthwhile. This is a direct contradiction of the Ontario government policy to encourage people to work.
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Make no mistake: There is a direct relationship between employment and cars. A Transport Canada study shows that many people would find it hard to earn a living with no automobile: 75% of commuters rely on their automobiles to get to work, and 57% have no other option. Some say they could not work at all without an automobile, including some who have to haul heavy equipment with them from job site to job site, or those who spend much of their workday on the road. With violence against women on the rise, many women choose to travel by private auto, rather than public transit or walking, for the security it offers.
With funding cutbacks expected to impact on both the cost and the level of service of transit, reliance on the private automobile will not diminish. Fuel taxes discriminate against motorists because they burden a single activity, and funds much needed for road repair are diverted elsewhere. Fuel taxes should not be used to reduce deficits or to obtain revenue for general expenditures.
CAA Ontario's second recommendation regarding fuel tax concerns the revenue already being collected. The government does not need more gasoline tax revenue; it needs to spend the revenue already being collected on our crumbling roads. Our second recommendation, then, concerning fuel tax is that a trust fund be established dedicating fuel taxes to reinvestment in our roads.
There is no argument that our roads need an infusion of revenue. The Provincial Auditor identified 60% of Ontario's roads as substandard in his last report. Substandard roads lead to a number of problems, including greater congestion, more accidents, less efficiency for people and goods moving by road, and increased vehicle operating costs. Roads must become a higher funding priority for all levels of government. Right now, our road systems are crumbling from neglect. Many of our roads are at the end of their 15- to 20-year design lifespan and are not being properly cared for due to funding cutbacks.
While CAA Ontario stresses the urgency of fixing roads, CAA members do not want more taxes. They are very supportive, though, of dedicating the taxes they already pay to reinvestment in our road systems. In a survey of CAA members, 93% agreed with a highway trust fund as an option for upgrading our roads. The national highway policy study showed that road users are paying far more in taxes than governments spend on roads. From 1983 to 1987, federal and provincial road-related revenues exceeded expenditures by nearly $8.9 billion. Trust funds could put that money to use upgrading roads for greater mobility. Investing in our roads would create jobs, spur economic activity and reduce traffic fatalities and injuries, which in turn would lessen the demand on our health services.
It should be acknowledged that Ontario is not the only level of government collecting fuel taxes. At the present time, two federal committees are recommending increases in federal excise taxes on gasoline be introduced in the next federal budget. That raises the possibility that Ontario motorists will face additional motoring costs imposed by the federal government. Federal fuel taxes have increased by 566% in the last 10 years, and motoring costs are escalating much faster than the rate of inflation. We urge the provincial and federal governments to recognize that they are each regressively collecting from the same taxpayer. CAA Ontario urges the provincial government to negotiate with the federal government a way to reinvest federal fuel tax revenue back into the national highway system.
Not only do fuel taxes impact on Ontario motorists, they also impact on tourism, our second-largest industry. Gasoline prices are frequently cited as an aggravation by tourists as they make their way to Ontario destinations. Increasing fuel costs for tourists will discourage travel to and within the province, and may lead more Ontario motorists across the border for their gasoline purchases.
In 1994 Ontario introduced a 5% tax on automobile insurance, this at a time when premiums were skyrocketing with double-digit increases due to the impact of Bill 164. New legislation on automobile insurance is expected to stabilize the rate of increase in the cost of premiums, but no one has suggested the new legislation will lower rates motorists are now paying. Ontario continues to collect the 5% tax on every premium. Without attempting to discuss the merits or detractions of the proposed legislation at this time, CAA Ontario urges the government to remove the 5% tax on mandatory automobile insurance for Ontario's approximately seven million motorists.
While automobility is affected by the affordability of operating a vehicle, it is also impacted by other factors including road safety. CAA members have identified impaired driving as one of their greatest road safety concerns. In a recent CAA public policy survey, when asked to name the two issues most important for CAA among a list, 30% of members selected drunk driving as the most important issue and another 20% selected it as the second-most-important issue.
Last fall Ontario introduced its road safety program and promised new measures to deal with impaired drivers, including introduction of administrative licence suspension legislation. This is a very positive step; however, the problem of impaired drivers will not be solved simply by legislation. Sober driving programs like RIDE are an essential element in the effort to remove impaired drivers from our roads. Cuts in transfer payments to municipalities have increased the possibility that RIDE programs will be scaled back or eliminated. CAA Ontario recommends that sufficient provincial funds be allocated in the budget to police services throughout the province, specifically for the continuation of RIDE programs.
Another road safety concern is unsafe trucks. In October a coroner's inquest made 31 recommendations to overhaul trucking operations to improve the safety level on our highways. CAA Ontario recommends that the inquest recommendations be given priority in the budget and that the funds required to implement the inquest recommendations be made available.
CAA Ontario appreciates the opportunity to speak with you today. To summarize our recommendations quickly: no fuel tax increases; fuel taxes already being collected be dedicated to a trust fund for reinvestment in our roads; removal of the 5% tax on mandatory automobile insurance; specific allocation of funds to police services for RIDE programs; allocation of funds to implement the coroner's inquest recommendations regarding truck safety. Thank you very much.
Mr Jim Brown: Last Saturday night while coming back from a kids' hockey game near London, a driver was wavering all over the road on the eastbound 401. It was just awful, frightening. I followed him for about seven miles before the OPP got him. I think it was one of the most horrific things to watch everybody dodging him and at the same time feel totally helpless.
I know in the city of Toronto some of the people who are behind the Santa Claus parade have come up with a program for corporate sponsorship of RIDE programs. I think it's $1,000 a night. That's a very commendable thing, and I think you people could help out in that regard. But I'm wondering what else we can do. Can we confiscate the car of the impaired driver if he's convicted, sell it and put the money back into the RIDE program? What else can we do to cut down on impaired driving?
Ms Mitchell: It's an immense problem. In a survey of our members we find that the public is not terribly sympathetic at all to the plight of the impaired driver. In fact an overwhelming percentage are prepared to even waive the idea that people should be presumed innocent. The idea is that the public generally supports moves like administrative licence suspension. The public is tremendously concerned about the number of people who continue to drive with a licence suspension, and I think in that case the public again is not necessarily opposed to measures like impounding vehicles.
But it's a complex, complex issue and although we support the idea of partnerships on programs such as RIDE, and I know that many CAA clubs are involved in just such partnerships, we do believe that more money needs to go into the enforcement, there must be more visible police presence on our roads, and programs like RIDE should be visible at more times of the year than just Christmas.
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Mr Hudak: I notice in your presentation you recommend no new taxes on fuel and I know CAA is a very broad-based membership. In your surveys or your own information, do you think the members of CAA -- let me phrase this differently. The Ontario federation of women's teachers last week recommended a tax hike as a way of balancing the budget. Do you know if the members of CAA in general support -- I know they're against a tax hike on fuel, but do they support tax hikes in general?
Ms Mitchell: To be quite honest with you, we've surveyed them more about their feelings on fuel taxes. That's what we would have information about.
Mr Hudak: Fair enough. Just thought I'd ask the question. Earlier today we heard from Don McIver, an economist, who talked about the very low levels of expenditures on automobiles and houses and those long-term consumer investments, and he related that to high levels of taxation in the economy and high levels of deficit spending. Would you anticipate that a lower level of taxation in the economy and balancing the budget may reverse that trend? We may see more automobile purchases and maybe more members for the CAA?
Ms Mitchell: I think you're likely to see an economic boom with less taxation. There are a number of people now who say, "I could afford a new car but I couldn't afford the insurance on it." There are a number of considerations, and the high cost of operating an automobile does keep on increasing. I believe in 1995 the increase for operating a new vehicle was up by about 5%, which is again above the inflation rate. The year before that it was an even higher gap between inflation rate and the cost of operating a vehicle. So it's had a negative impact, I think.
Mr Hudak: I guess the converse would be that with the auto insurance reform this government has embarked upon and a lower level of taxation, the economy would probably replace an aging fleet of vehicles and do well for the auto industry.
Ms Mitchell: And newer vehicles will be better for the environment as well.
Mr Hudak: Thank you. That's all from me, Mr Chair,
Mr Spina: As a CAA Plus member for over 20 years, I applaud a lot of the moves that the CAA has made over the years, particularly in the unsuccessful lobby to stop the 90-foot limit for trucks. However, regarding road safety, currently the limit in Ontario, the GVW, is 130,000 pounds, and that's the highest in any North American jurisdiction. Do you think considering reducing the gross vehicle weight on a lot of these transports could do two things: (a) make it safer and reduce some of the destruction on the roads and (b) make the trucks safer? Do you think that would be a valid consideration?
Ms Mitchell: I don't recall the exact figures on it, but I know that the estimated damage to the roads is considerably higher from trucks than from cars. I certainly think that you need only follow some of the very heavy trucks on the highway to witness for yourself some of the destruction to the pavement.
Mr Crozier: Just to add to one of the comments that was recently made about reduced taxes, I look at a chart here today that if you earn more than $95,000 a year you're going to get about $3,700 a year back. I don't know whether that person would be buying any more new cars or not. On the other hand, if you're in the neighbourhood of $45,000 a year, you're only going to get $700 a year back, and I doubt very much if that would encourage anybody to buy a new car.
But I do share your report in that it was concise. I think you've made your position known very clearly. With regard to the 5% tax on automobile insurance, many people feel that automobile insurance is a legislated necessity; in other words, it's illegal to drive without it in the province of Ontario. Therefore, it isn't fair, nor is it perhaps equitable, that you have to pay the 5% tax.
It was our suggestion some six or eight months ago that removing the 5% tax on automobiles, which I think would be in the area of about $260 million a year, would relieve in some small way the cost of driving for every automobile owner in the province of Ontario, and that would mean whether you earned $95,000 a year or whether you earned $15,000 a year. Had you thought about that in the line that in fact it does spread a cost reduction evenly over many consumers in the province?
Ms Mitchell: Yes. We think the 5% tax is particularly inappropriate right now. When so many changes in recent years regarding automobile insurance have led to such skyrocketing prices for premiums, it's totally inappropriate to have that 5% tax added. You're correct that removal of it would have a widespread general benefit.
Ms Castrilli: I'm interested in the questionnaire, the survey that you did, particularly around the issue of a trust fund. I must confess that I probably wasn't one of those assiduous members of yours that answered it, so that's probably why I don't recall the discussion.
But we had a presentation earlier last week from the Good Roads Association and they indicated that the cost of maintaining or repairing a road was in the neighbourhood of $85,000 per kilometre and that the price of rebuilding it outright was in the order of a quarter of a million dollars per kilometre. I found those figures staggering. I had no idea it was that high. I wonder if you've thought about that and whether the trust fund, as you envision it, would cover the lower figure or the higher figure.
Ms Mitchell: Certainly when you consider the sheer amount of tax that is being collected now, if you do the calculations on how much is being collected in Ontario alone, both by the provincial government and the federal government in Ontario, the figures comes close to $4 billion. That's going to repair an awful lot of roads and with some to spare. It will build some new ones, but I think right now with 60% of our roads having been identified as substandard, some serious remedial work needs to be done right away.
Mr Silipo: Thank you very much for the presentation. I want to start with the comments towards the end of your presentation around the RIDE program as one of the ones that you see in some jeopardy. One of the things that I certainly have heard from a number of government members is that the cuts to municipalities, they feel, won't affect cuts to police services, including this particular important one.
I obviously believe, as I think you do if I take from your presentation, that some of these programs are really in jeopardy. Are you getting any sense as you're keeping an eye on things across the province about where particularly there may be problems more than in other communities in terms of where these kinds of initiatives are under danger of being eliminated?
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Ms Mitchell: I can't name a specific community, but there has been sort of general talk that as police budgets are reduced, there's just less money. I know that in my own community there are far fewer police officers doing traffic duty than there were five and six years ago, that generally speaking there is a move towards more community-based policing, and those things are fine, but it then becomes problematic to come up with the manpower to stage RIDE programs in some cases.
Mr Silipo: The question of no more fuel tax increases: I certainly, for one, would support that. It may surprise you to hear that, but I would, and I hope that's something the government does look at, as indeed the question of the reduction or the removal of the 5% tax on mandatory automobile insurance. But I guess my question to you there is, given what the government is looking at, where they are in fact looking at cutting in a number of areas, do you have a sense that that's a realistic request they are prepared to make in terms of -- I think as one of our colleagues pointed out, it does cost or would mean about $260 million more the government would have to decide to find from somewhere else?
Ms Mitchell: We're very concerned at the regressive nature of fuel taxes and also that 5% on the insurance policies as well, but we've entered an era where "user-pay" seems to fall off everyone's lips quite easily, and I guess we're just trying to make the point that we feel motorists for many, many years have been paying and paying and paying, and user-pay may be fine, but not user-pay and pay and pay and pay and pay. Because there are so many motorists, I think people sort of zero in and say, "There's a bunch of people we can collect some money from," without understanding or taking into account how unfair that is to a great many people.
The Chair: Thank you very much, Ms Mitchell and Mr Ferris, for coming in today and making your presentation. We thank the Canadian Automobile Association.
That brings us to the end of the presenters today. I understand that we have some housekeeping business to take care of.
Ms Bassett: I have two motions that I want to put forward. I've already talked to the members opposite about it.
The Chair: You'll do one at a time?
Ms Bassett: Motion 1: I've spoken to the subcommittee members opposite about the issue of the advertising re auto insurance hearings and, as such, I move that the deadline for submissions to the auto insurance hearings in Thunder Bay, Sault Ste Marie and Ottawa be extended to February 20 and that one newspaper ad run in each of the above locations as soon as possible to indicate the time extension.
The Chair: We have the motion. Is there discussion? Would you like to make a short statement?
Ms Bassett: I think it's self-explanatory.
Mr Crozier: I wasn't sure whether you needed a seconder. If so, I would, and if you don't, that's just fine.
The Chair: No, we don't need a seconder apparently.
Ms Bassett: Thanks anyway.
The Chair: All in favour of that motion? Carried.
Ms Bassett: The second motion is, given that there are 86 people or groups who wish to appear on auto insurance in Toronto and only 81 spaces, I move that the committee agree to extend the time in Toronto to accommodate the extra five witnesses or presenters, and it's already agreed by the subcommittee members that the submissions be limited to 20 minutes each to accommodate the large number of presenters.
The Chair: Any discussion?
Mr Crozier: Common sense.
The Chair: All in favour? Carried.
Ms Bassett: Thank you.
The Chair: To clarify, that was the same ad that we ran previously?
Ms Bassett: Yes, it is, with the exception you're changing the dates.
The Chair: Thank you. We will do that.
Mrs Marland: I just have a question, Mr Chair. Looking at the schedule for this week ahead, the question I want to raise is the fact that Thursday morning, February 15, those of you who have your agendas in front of you will notice that all that morning we have the banks, including the bankers' association, before the committee. Based on previous experience, I think it would have been more desirable to have had the variance of opinions integrated throughout the whole week and I'm wondering if there was a reason that the banks were all put together on Thursday morning by the clerk's office.
The Chair: It was my comment as well that I would have liked to have had those people up front, at the very first of the presentations, so we would have the benefit of where they saw the economy going. However, this came about because of their own request. We asked them to attend and they indicated that they could attend given this time frame.
Mrs Marland: Are you saying that the Royal Bank of Canada, the Bank of Nova Scotia, the Canadian Bankers Association and Canada Trust all made a request to the clerk's office to attend one after the other on one specific morning?
The Chair: No, that was the particular day that they wished to attend.
Mrs Marland: Then why were they all scheduled one after the other rather than integrated with other opinions and viewpoints?
The Chair: They wanted to go as early as possible on that day.
Mrs Marland: On the last day of the hearing?
The Chair: I don't know if it had anything to do with the last day of the hearing or not.
Mrs Marland: Could the clerk answer, please?
Clerk of the Committee (Mr Franco Carrozza): The individuals you have listed there, Ms Marland, requested the last day and we obliged them, with the exception of Canada Trust, which was a later addition.
Mrs Marland: Okay. So the Royal Bank, the Bank of Nova Scotia and the Canadian Bankers Association all asked to be here for the last day of the hearing?
Clerk of the Committee: That's correct.
Mrs Marland: That was their request. I still have to ask why they were put one after the other and why Canada Trust, if it was added -- it made it even worse because they put them at the end of the morning. I'm asking the clerk, Mr Chair, to answer that question.
Clerk of the Committee: As I stated, they requested those times. When we spoke to them, we discussed the time, if they wished to change. They were quite happy receiving those times.
Mrs Marland: Did they know that they were all speaking one after the other?
The Chair: Not to our knowledge.
Clerk of the Committee: No.
The Chair: Is there a problem with them being --
Mrs Marland: There is a problem because we benefit from that kind of advice in pre-budget hearings of the finance and economic committee to be integrated among other opinions. The value, Mr Chair, I would suggest respectfully, based on my experience on this committee and in public accounts, is that if you hear from them spread over a number of days, it gives other groups an opportunity to respond to them, either positively or negatively or constructively. It's just a better flow of information.
These committee hearings are about getting information and I feel personally it's wrong to schedule them all together in a block, especially on the last day. I think we would have benefited from hearing from them earlier and other groups would have benefited by being able to respond to their contribution to our deliberations. I would suggest in the future that it not happen again because I'm quite sure the banks don't know that the other three of them are all appearing that morning. Well, the clerk's just confirmed that they don't know that they're all together.
The Chair: We don't know that, but we don't know that they don't know that.
Mrs Marland: He just said they didn't know. They just offered them the time. Is that correct?
Clerk of the Committee: You are correct.
The Chair: Your concerns will be so noted.
Mrs Marland: No, I'm just asking if it's correct.
The Chair: Is it correct?
Mrs Marland: It's correct that they don't necessarily know that they're all scheduled for the block on Thursday morning.
Clerk of the Committee: That's correct
Mrs Marland: Thank you.
Mr Kwinter: If I can be of some help, I would agree with Mrs Marland about the fact that they're appearing at the end, and that is probably a bit of a disadvantage, but on the other hand I would like to challenge one of the comments she made.
Traditionally what has happened is that we have invited the banks and other institutions -- in the past I remember Nomura, the Conference Board of Canada -- to send their economists to give us an idea of where they think the economy is going. It's on that basis that you get a chance to receive the other presentations in the context of where you think the economy is going, and it's quite dramatic, because you'll hear one bank say, "We think the economy is going to grow by 2%," and the next one comes in and says, "We think it's going to grow by 4%." Traditionally we have had that up front.
These are not banks making a pitch on behalf of the banks. They're their economists giving us their perception and their overview of where they think the economy is going, and it's helpful, I think, to the committee, and it has been the procedure in the past, that after the Treasurer or the Minister of Finance makes his presentation, we hear from the various chief economists of those people in Ontario who are in the best position to estimate where they think the economy is going. For this committee it is very helpful because everything that you hear thereafter you can in fact interpret in the context of where you think the economy is going. To have it at the very end is useful, but not as useful as if we had it at the very beginning.
I just wanted to dispel any feeling that there's some cabal out there and suddenly all of the bankers are ganging up. That is not the case and as I say, they don't even know, and it doesn't matter, because what they say has got nothing to do with what the others say and every bank and every financial institution that is on this list publish, on a regular basis, their projections of where they think the economy is going. What they're going to do when they come here is tell us what they think, they will distribute the material that's available to everybody else and we have a chance to question them on it.
So I don't you should read anything nefarious into the fact that, "My God, all the banks are coming together and I wonder what their agenda is." It's unfortunate and there must have been a valid reason why they weren't available at the beginning of our deliberations and they're coming at the end, but aside from that, I think that's the only thing you should really be concerned about.
Mrs Marland: I appreciate Mr Kwinter's comments and I would like to confirm that I wasn't reading anything nefarious into them coming together. That's why I wanted to confirm that they don't know they're all booked together. I'm just putting on the record my concern that the scheduling wasn't to the advantage of the committee, in my opinion, which would have been to have had them earlier and divvied out through a few days. Thank you for allowing me to raise my concern.
The Chair: Thank you very much. There being no further business to bring before the committee, we stand adjourned until 9:30 tomorrow morning.
The committee adjourned at 1713.