Assemblée législative de l'Ontario

PRE-BUDGET CONSULTATIONS
RETAIL COUNCIL OF CANADA

ONTARIO TEACHERS' FEDERATION

INSURANCE BUREAU OF CANADA

ONTARIO PHARMACISTS' ASSOCIATION

SUBCOMMITTEE REPORT

CANADIAN VEHICLE MANUFACTURERS' ASSOCIATION

ONTARIO HOTEL AND MOTEL ASSOCIATION

AUTOMOTIVE PARTS MANUFACTURERS' ASSOCIATION

ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION HOUSES

CHAMBER OF COMMERCE OF KITCHENER AND WATERLOO

CONTENTS

Thursday 27 February 1997

Pre-budget consultations

Retail Council of Canada

Mr Peter Woolford

Miss Elizabeth Mills

Ontario Teachers' Federation

Mr Bill Martin

Susan Langley

Ruth Baumann

Insurance Bureau of Canada

Mr Stan Griffin

Mr George Cooke

Ontario Pharmacists' Association

Mr David Malian

Mr David Windross

Mr David Hodgson

Ms Barbara Stuart

Subcommittee report

Canadian Vehicle Manufacturers' Association

Mr Mark Nantais

Mr David Adams

Ontario Hotel and Motel Association

Mr Rod Seiling

Automotive Parts Maufacturers' Association

Mr Ken MacDonald

Ontario Association of Interval and Transition Houses

Ms Eileen Morrow

Chamber of Commerce of Kitchener and Waterloo

Mr Ed Lemont

Rose Mailloux

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

Chair / Président: Mr TedChudleigh (Halton North / -Nord PC)

Vice-Chair / Vice-Président: Mr TimHudak (Niagara South / -Sud PC)

Ms IsabelBassett (St Andrew-St Patrick PC)

Mr JimBrown (Scarborough West / -Ouest PC)

Mr TedChudleigh (Halton North / -Nord PC)

Mr JosephCordiano (Lawrence L)

Mr Douglas B. Ford (Etobicoke-Humber PC)

Mr TimHudak (Niagara South / -Sud PC)

Mr MonteKwinter (Wilson Heights L)

Mr TonyMartin (Sault Ste Marie ND)

Mr GerryMartiniuk (Cambridge PC)

Mr GerryPhillips (Scarborough-Agincourt L)

Mr GillesPouliot (Lake Nipigon / Lac-Nipigon ND)

Mr E.J. DouglasRollins (Quinte PC)

Mr JosephSpina (Brampton North / -Nord PC)

Mr WayneWettlaufer (Kitchener PC)

Substitutions /Membres remplaçants:

Mr John R. O'Toole (Durham East / -Est PC)

Mrs LillianRoss (Hamilton West / -Ouest PC)

Clerk / Greffier: Mr Franco Carrozza

Staff / Personnel: Ms Alison Drummond, research officer, Legislative Research Service

The committee met at 1003 in committee room 1.

PRE-BUDGET CONSULTATIONS
RETAIL COUNCIL OF CANADA

The Chair (Mr Ted Chudleigh): Thank you all for being prompt.

We welcome the Retail Council of Canada, Elizabeth Mills and Peter Woolford. We're pleased you could join us today. If you'd like to make a presentation, we will fill any remaining time we have in the half-hour with questions.

Mr Peter Woolford: It's a pleasure to be here before the committee again. I would like to note especially that Elizabeth has joined me this year. She is the author of our submission, and quite remarkably, for Retail Council, it actually has some solid data and numbers in it for the first time this year. We've been building a research capacity in the trade association for the first time so that instead of just coming and telling a story, I actually have a few facts to back up my arguments, which is always a nice feeling for a lobbyist.

It is a pleasure to be here and report that for the first time in about six or seven years I have a slightly more positive story to tell you about the retail trade this year. As everybody knows, retailing has gone through a very, very tough period in the first part of the 1990s. Just how tough started to become clear as we gathered our data for this year.

The economic review starts on page 2 of our submission. I draw your attention to it. What is interesting is that in addition to retailing in Canada having gone through a period of slow growth, restructuring, downsizing, job losses, tough competition and all those things, Ontario did worse than the national average, and this is a measure of five or six lost years in Ontario.

If you look at the paragraph at the bottom of page 2, we note that Canadian retail sales grew by just a little over 17% in the period of 1990-91 through to 1996, whereas Ontario's grew by only 14.2%. It's important to remember in this that Ontario comprises nearly 40% of the national average, so that is a measure of just how much Ontario fell behind the rest of Canada over this period of time. It's partly a measure of the restructuring the Ontario economy itself was going through, but in our view it also reflected an economy that was essentially very unattractive, was going through some very difficult times and was not a place where consumers felt confident, where incomes were not being seen as being at all secure and where people did not have a lot of confidence for the future.

Our sense is now that those very tough times are moving behind us. That is not to say that the retail trade is going to boom ahead, by any means, but we are slightly more optimistic about 1997 and beyond. Our sense is that this year we will see a continuation of the modest but positive growth we saw just over the Christmas period of 1996, and we are hopeful that will perhaps even strengthen over the course of the year.

The key to this, as Elizabeth will explain, is in getting job creation back up and in getting that sense of confidence back in the consumer. We feel there are tentative signs of that now in the housing market and in some of the other aspects of the economy that are final domestic-demand driven. That suggests to us that there is some hope for this year. Again, I would stress that it is not going to be a period of strong growth but at least a period of fairly solid, stable, non-inflationary growth, which is good news.

I have just a couple of quick remarks in terms of policy advice, and then I'll turn it over to Elizabeth for some slightly more detailed comments.

We do not have any specific policy items this year. We have been working very closely with the government on a number of its major initiatives and feel that our views have been very adequately expressed there on things like the health and safety area, workers' compensation and the restructuring of many of the spending programs in the province, and so we feel that this is not a place to reiterate all of that.

We believe this administration has embarked on a long-term changing of direction of the role of government in Ontario. We believe it is right for the long-term health of the province. Our principal advice is: Stay the course.

We recognize that in doing that, there are substantial human costs involved, and our members see those costs. They see those in the cautiousness with which many citizens are spending in their stores. They see it in the care with which people are still shopping. We are very sensitive to the effect of fiscal drag, to the effects of the uncertainty that public servants at all levels feel through a period of painful and profound restructuring of the way governments do their job in Canada. But it is a necessary, long-term change in the way the province operates, and we feel that the government should continue to pursue those directions. It is necessary for the long-term health of Ontario.

I'd like to turn it over to Elizabeth now for some more comments.

Miss Elizabeth Mills: We've actually had an opportunity to put together a picture, which I'm just going to briefly highlight for you and touch on some of the economic indicators that we've been monitoring for about a year now. That will give you a sense that fills in some of the detail that Peter in his story-line has presented to you this morning. I'll quickly walk through the submission.

Ontario retail sales, as Peter has mentioned, represent about 36.2% of the total retail sales for the nation. In Ontario last year that meant the size of the Ontario retail trade was $78.4 billion. I think the important point here is that this kind of growth and the measure of the Ontario retail economy is still continuing to lag behind Canada's performance.

Canadian retailers employed 1.3 million people in 1996, and that was a 3.4% increase. This is good news. Ontario retail employment, by comparison, was stagnant. In fact, we only grew by 0.04% over the previous four-year period.

1010

Ontario employs 37.7% of the total Canadian retail employment base, and in 1996 Ontario retailers provided 519,000 jobs in Ontario. This is a decline of 1.7%, which translates into 9,000 fewer jobs in this industry. Total average weekly payroll in retail, however, grew by 6.2% in Ontario last year and 1.9% in Canada. Average weekly earnings for Ontario retail employees grew by 2.9% in 1996.

We know that our costs are up and growth is down in Ontario, and the Retail Council recognizes that slow growth means lower employment. In 1996, as we've noted above, Ontario's retail weekly payroll increased and growth in employment was lower than in Canada. We have to ask the following question: Did higher minimum wages affect employment patterns in Ontario during the past four years?

The Canadian consumer continues to feel shell-shocked from the early 1990s, and "cautious optimism" are still the watchwords for the industry. The consumer continues to be influenced by major factors such as job insecurity and increasing consumer debt load. This increased sense of uncertainty makes them hold off on purchase decisions.

Lower interest rates used to virtually guarantee an instantaneous increase in consumer spending. This is no longer the case. More likely, our boomers are moving their freed-up capital into their mortgages and their RRSPs. The aging population in Canada is also starting to spend more on services than goods. This marked fundamental shift from discretionary purchases to debt reduction and retirement savings is a developing trend that the retailers have noticed for the past four years. In 1997, replacement spending will substitute purely discretionary spending growth, and therefore we expect relatively low rates of retail growth again this year.

The still soft domestic Canadian economy, low inflation and the ongoing success of government in fighting deficits also means that little is expected to change in interest rates this year. Essentially, depressed consumer purchasing power has suppressed retailers' ability to raise prices. Indeed, consumer prices increased only 2% in 1996, a fourth consecutive year of minimal growth and change, and we expect only modest fluctuations in inflationary pressures in 1997.

In 1996, we also had an opportunity to conduct an independent merchant survey of members across the country and in Ontario, and I'd like to report on some of those findings.

In 1996, retail sales volumes were characterized by very small increases up until the fall. The 1996 Christmas season was positive, with a 4.5% growth in total sales over 1995 for the same season period.

Our survey results provide some additional positive feedback: 68.3% of the independent retailers, the small merchants, in Ontario who responded to our survey indicated that their sales were the same or better than in 1995. The average increase in sales reported by respondents in Ontario was 5.6%, almost directly related to the expectations that they had indicated in our pre-Christmas survey.

Notably, 49% of the Retail Council's respondents to the survey indicated they had to plan major promotions for December to achieve those sales, however. These unplanned sales promotions were required to drive the sales results. The results of these promotions were obviously successful but represent the extra efforts retailers are needing to achieve.

Respondents to the same survey also provided the following thoughts on Boxing Day, the new legislation that was introduced this past year just in time. Independent retailers found, on the whole, that they were choosing not to open for business or finding that it was going to have no impact at all. Canada's large retail chains, however, were open for business on Boxing Day and enjoyed tremendous sales results.

The Retail Council has endorsed the commitment this government has made to competitive regulation, taxation and sustainable government. You have done so through many of your restructuring initiatives, and we hope that you will continue to move along these lines.

In terms of your fiscal performance, we are pleased that you have been able to more than achieve your targets set out in last year's budget, and yet our deficit will still remain a significant 2.5% of GDP in 1996-97. Six other provinces, however, are expected to be in a surplus position this year.

The Retail Council of Canada, as Peter has noted, recommends that you stay this course, continuing to focus on eliminating the deficit by 2000-01, and continue your own restructuring plans for the province and those for municipal governments.

Retailers are aware of the impact this fiscal drag will have on the already underperforming economy, and we are deeply conscious that reductions in government expenditures will result in job losses and less income for some consumers, but we also note that you have limited choice in the matter.

We share your concerns about job creation and Ontario's relatively weak performance in this regard in 1996. Ontario needs new jobs created, but we need them created by private sector companies that provide goods and services.

Your revenues are also projected to decline this year by 3.5%, reflecting ongoing reductions to federal transfers and the impact of the personal income tax rate cuts. Some of the impact of these cuts in Ontario's personal income tax rates has already been offset partially by the federal government's recent changes to CPP. As a result, the Ontario government should continue its prudent and conservative estimates of revenues and make appropriate contingency plans should these not emerge.

The Retail Council also appreciates the regulatory examination that was undertaken by the Red Tape Review Commission, and we simply encourage you to continue to implement those recommendations on privatization and otherwise.

The Retail Council has been an advocate of harmonization of provincial sales tax with the GST, and we continue to believe that this would mark a major step forward in building a more competitive and economically rational tax system in Canada. Our work in preparing for harmonization in the Atlantic provinces has reconfirmed that this does bring meaningful benefits to businesses. We once again urge this government to harmonize the provincial sales tax with the GST.

One portion of the Atlantic harmonization agreement causes us great concern, however, and it is the requirement that retailers include the new tax in the price of goods. We strongly advise that this requirement not be part of any deal this government might proceed with with the federal government, unless there is a single tax base, rate and administration throughout Canada. The legislated tax-in pricing in a system where the tax rate or base varies among the provinces essentially balkanizes the country into a number of smaller markets, which means we are all operating at higher costs. These extra costs greatly outweigh any savings that could be gained from harmonization.

In conclusion -- and we then welcome your questions -- this government has begun to remedy the causes that led Ontario to be seriously out of competitive position in the 1990s. Given their closeness to the consumer, no industry is more aware of the pain that these conditions are causing the citizens of this province than retailing. None the less, RCC believes the government has no option but to continue its efforts to get the provincial deficit down and, ultimately, to attack the accumulated debt.

Mr Monte Kwinter (Wilson Heights): Thanks for your report. As you say, this year you've added some meat to the bones; that's welcome.

I want to pursue a couple of things with you. One of the things that happened was that there was a report out, commissioned by Ernst and Young, done by Angus Reid, that says that optimism is waning and that only 27% of Canadians said they were optimistic about their financial outlook for the year. This is down 8% since the release of a previous study in April 1996. They go on to say that there was some clear evidence of consumers being happier and spending in the fall and Christmas season but now some people are starting to feel the economy may have topped out.

Have you found that in your studies? I have friends who are very involved in the retail sector, and they're saying that Christmas was pretty good, relative to what it has been. It wasn't great, but compared to what it has been, it wasn't too bad. Do you feel that there is a topping out?

Miss Mills: In our commentary, it's certainly not a question of a view of the topping out. In fact, what we feel that reflects is perhaps the restructuring that is about to occur at the municipal level. Those are larger, labour-intensive employers, who are also going to have to lay off people and change the way the economy in that portion of the public sector works. Those people are concerned about their jobs and concerned about what they'll be able to spend this year. If there's a dampening effect in Ontario, it's certainly related to the anticipated restructuring that's going to occur in that portion. Ontario's public sector went through that in 1996, and the economic drag that we felt was created by that is now declining, but we do anticipate that drag will continue for the other portion of the public sector for this year. That's probably a reflection of that.

1020

Mr Kwinter: I noticed in the paper today an article saying that the government has realized in excess of $1 billion in gambling profits. Have you done any studies as to the taking out of the economy of those gambling dollars that are going to the government as tax revenues effectively, what that has done to the retail sector?

Miss Mills: We have not, no.

Mr Kwinter: Do you not think it's going to impact on the retail sector? This is discretionary income that is being used for gambling. It's money that could have been spent in retail stores and is going, in effect, to a tax.

Mr Woolford: What we recognize is that the consumer always has a pocketful of money or some money in their pocket. They have to make choices. Gambling has been around in Ontario now for quite some time. Consumers have that option as a place to spend their money. We have noted in our submission that there has been this very long-run shift from consumption of goods over to the consumption of services, and gambling is in effect a service industry. So in that sense, we're not surprised at it. We would prefer, as retailers, that customers buy goods in retail stores rather than consume different services, but it is the consumer's choice, and in that sense we would not necessarily advocate that consumers be prevented from spending their money where they want to.

The governments of Ontario in the past have decided that Ontarians should be given the opportunity to gamble, and that is a much larger public policy choice than one we would feel comfortable making a set of advice or opinions on. In a sense, it's part of the environment that I think our members just have to live within, and I don't think we would feel comfortable saying you should do this or you shouldn't do it.

Mr Kwinter: Just so there's no misunderstanding, I'm not in any way questioning the ability of the government to have gambling. That's a decision that they've made, and that's fine. What I am saying is that if I were in your business and I have to appeal for the discretionary dollar of the consumer and I have a competitor out there -- and when you say that they always have money in their pocket and it's a service industry, it's not much of a service, really. It's a service to provide entertainment, but there's a huge amount of money that has not come out of the economy before. The major casinos which are drawing this money -- the new Rama one, Niagara Falls and the two in Windsor -- are the ones that are taking this billion dollars out of the economy, and it's only happened in the last couple of years.

All I'm saying is that if I was in the retail business and I knew that my potential customer was diverting that much money, I as an industry would start looking at it. Again, I'm not talking about the morality of it; that isn't the issue. It doesn't matter what consumer competition is out there. I'm saying this is a competitor for your customers, who will have less discretionary income to spend in your stores. I'm just concerned about that.

Miss Mills: That's an interesting observation, certainly. I think one of the other points we'd make, though, is that most of the discretionary spending is on replacements. They're not going out to sort of go gambling or buy the new fridge. It's if I have a little bit of money left over -- they have been going for small luxury items this year and last year. They are buying chocolates and flowers. They're not buying new cars yet. They're not buying durable goods in a large magnitude right now. If they have any discretionary spending money, it is going to the smaller luxury items.

Mr Woolford: If I could add something to that, Mr Kwinter, actually, you are on to a theme that we're seeing very strongly in retailing today. Many of the very forward-looking retailers realize that today they are in the entertainment business, that you need to entertain your customer even to draw them into the store. As a result, we have seen, for example, many of the large developers going back and re-examining the mix between entertainment facilities and straight retail in many of the malls, not because they're trying to sort of push retailing out, but they recognize that that entertainment capacity may now be what draws people into the malls.

That's the way the shopper seems to be moving, and it's very much a forward-looking reality, to coin a phrase if I can, that our members feel they're going to have to deal with. They are going to have to find ways of amusing and entertaining and titillating the customers to draw them into the store and to get them to make those purchases. So in a sense retailers are in the entertainment business today as well, just as gambling is entertainment. The whole market really is shifting on us, and we're not sure where it's taking us, to be quite honest.

Mr Tony Martin (Sault Ste Marie): Thank you for coming in today. You've certainly raised some very interesting issues.

I, in my own community, after Christmas usually do a little scout around to see how people did because it's usually an indication of some things for me. Certainly the Christmas of 1995 was desperate. When I went around after 1995, people were in bad shape. A lot of people were actually making decisions about whether they were going to stay in business or not. In 1996 it was a little better. A number of the people I talked to said they did better but still not what they'd like it to be, and there are still some people who are considering whether they should stay in the retail business or not at this particular point in time.

I would suggest to you that the reason 1995 was really bad in my community, and I think that was reflected across the province, was the uncertainty that was out there because of some of what they saw coming at them so quickly re some of the initiatives of the government.

I know in my community, just by way of the 22% reduction in the amount of money being paid to people on welfare, that had a dampening effect of about $2 million a month, which is about $24 million a year, directly out of the retail economy of my community, because that money's spent almost immediately. It doesn't last any more than half a day in the pocket of anybody. It's spent.

The other piece was we did some analysis of the number of jobs that were lost because of the downsizing in government. We figured at that point that we were probably down about $35 million by November 1995 because of the social workers and people in health care and education that had lost their jobs because of the downsizing, and that had a very definite dampening effect.

Then I tried to figure out, well, that's continuing, because we did a study in the Sault that suggested we would, by the time this government's agenda was done, be down a net of between 1,700 and 1,800 jobs. The reason that the retail sector business was up a bit in 1996 had more to do with interest rates and what that did for people and the money they had than anything else.

You're coming today telling the government that they should continue in the direction they're going, which for me, and I'm not an economist, is one of tax breaks and government expenditure reduction. So what you're doing, if I can put it this way, is you're taking money out of the pockets of those who live in communities and who spend it readily -- teachers, social workers, nurses -- and turning it over to a group of people by way of the tax break -- this is a portion of the money -- who don't necessarily live in your community and don't necessarily spend it on the kinds of goods that are sold through the retail sector of our community.

At the end of the day, I don't see how that in itself is going to be helpful or positive for the retail sector, and I don't see how, given that that's where we're going, you come here this morning with the kind of optimism that you obviously are exuding and showing in the report that you've made.

Mr Woolford: Certainly I agree with you there is no question that this government has had to make some brutally difficult decisions, and your mention of the decision to reduce welfare rates has to be the standard against which everything else must be measured. That was an enormously difficult decision.

Mr Tony Martin: A brutal decision.

Mr Woolford: A brutally difficult decision. I didn't say "brutal"; I said "brutally difficult."

Mr Tony Martin: Well, it was brutal.

Mr Woolford: It's very difficult for any government to take money away from those who are the weakest economically in our economy, and so in a sense almost any other decision that comes after that has to be viewed in that light. The unfortunate reality is that Ontario was living grotesquely beyond its means and we simply had to do something to get that back under control. That means those very brutal decisions have to be made, and like you, I'm sure like the government, we don't particularly like making them, but they are necessary.

What we really feel is necessary here as well is a very long-term shift of resources from the public sector to the private sector, that we do need to reduce the absolute size of government activity and move some of those productive resources into private sector activities. That again is a painful, wrenching adjustment, and we don't minimize that at all, but unfortunately it is necessary.

1030

Mr Tim Hudak (Niagara South): It's good to see you again. We did some work together I think on Boxing Day, and that was part of my question.

We heard earlier in these hearings from Patti Croft, who talked about the renaissance of consumer spending, that initially the tax cut was used, in her opinion, to pay down part of consumers' debts, but this year, 1997, she expects it to be injected back into the economy. Finally we're giving consumers a break on their personal disposable income. I'm going to ask you about your expectations in light of what Ms Croft said about 1997 spending and also, since the government moved to allow openings on Boxing Day, maybe there's some long-term adjustment in people's expectations or understanding that stores can be opened on Boxing Day now. How will that affect your sales in the future? Additionally, are there any other holidays that you think should be open for shopping, or are we okay now with Boxing Day?

Miss Mills: You've raised a number of points. I think the return to a Boxing Day status that was here in the province up until 1975 simply reintroduces and reinforces that Christmas continues to be one of the most important seasons for retailing. That never changed. But what you have created now is both a level playing field and a fair playing field that says that if you wish to be open, you can choose to do so, and you can do that legally and not be at a disadvantage competitively from the person who was perhaps opening illegally in the previous years next door.

Our survey results also told a really telling story. A lot of independent operators who chose that they didn't want to be open on Christmas, it was a family day, continue to exercise that. So on balance, the creation of the Boxing Day legislation has provided the right kind of protection to employees and operators themselves.

Economically, we expect that Boxing Day reinforces the Christmas season as being the most economically viable portion of the season for any retailer. Will that continue in the following years? Yes, we do expect so.

With the tax cuts and how people are spending it, we had some commentary provided back to us about how consumers are going to be spending what in some cases is really a modest weekly amount, and for some people they may not even have really seen it so far. If they do have an opportunity to take any of that money, I'm sure they're going to be taking a look at reducing their consumer debt load. It's $485 billion in this country, and that's a lot of money to owe.

But at the same time, I think what you get from that is an attitudinal shift that perhaps can go to sort of bolster and add some optimism back into the economy. My paycheque does not necessarily now look like half of my income is going somewhere else. I get a little bit back and I'm going to get a little bit more back next year apparently, and that's good news too.

So even if there's a sense of reintroducing a sense of optimism about how people view their paycheques, that's going to be a positive impact too. We can't at this point gauge how they're going to be exactly spending that money. Certainly the CPP changes have perhaps modified some of those expectations for 1997, but on the whole, if you continue the course to get through to 30% there will be a marked change we think in consumer spending.

Ms Isabel Bassett (St Andrew-St Patrick): Thanks for your presentation. Ontario retail sales are up 7% over last year, you say. I wonder if they'd be up more if home computers and home renovation sales were factored in. I understand they're not in the retail sales counts, yet those are the areas -- as a parent, I go out and get electronic stuff or a computer. Those are the presents you get these days rather than a few years ago. I wonder if you're looking at factoring those in.

Miss Mills: You mean you want to know what's in the retail sales figures?

Ms Bassett: It seems to me they're not particularly accurate if you don't use those two major figures of retail sales.

Miss Mills: Computers are a part of the retail sales.

Ms Bassett: Oh, they are?

Miss Mills: Yes. In fact, if anything, as you've noted, it's a huge strength market in retailing if you're selling TVs, computers and stereos.

Ms Bassett: Then that's my mistake. Is there anything major that is not included because of free trade then?

Miss Mills: No. In fact, the $216-billion figure for the nation actually also includes auto sales. If you take out the auto sales, it's about $78 billion less. So if you wanted to get a less-auto-sales accurate picture, it's still a large industry.

Ms Bassett: And home renovations supplies and hardware are included?

Miss Mills: All included.

Ms Bassett: Okay.

Mr Woolford: I should note that home renovation services would not be in retail sales. When a customer goes to the store and buys something for home renovation, or when a small contractor goes to a store and buys goods for a home renovation, that would be included, but the cost of labour of that individual is not included in retail sales. We can only track the actual sale of merchandise. We don't cover the service side. Or presumably if you get let's say a mid-sized contractor who deals with a wholesaler, some of those sales would not be captured through retail sales. If you've got a somewhat larger renovation company that purchases through a large distribution arm and buys in bulk themselves and then sells to the customer, that would not be captured in retail sales. So there is a little bit of leakage there of merchandise which does end up in the customer's hands but doesn't show up as a retail store sale.

The Chair: Thank you very much. We appreciate the Retail Council coming in and making a presentation to us this year.

ONTARIO TEACHERS' FEDERATION

The Chair: Our next deputant is the Ontario Teachers' Federation, represented by Bill Martin, president; Ruth Baumann, executive assistant; Susan Langley, secretary-treasurer. I hope I have the names and titles correct.

Mr Bill Martin: Perfect.

The Chair: We have good information. We have 30 minutes to spend together if you would like to make a presentation. We could fill any remaining time with questions.

Mr Bill Martin: The Ontario Teachers' Federation is pleased to have the opportunity to present its views and concerns to the pre-budget consultation process. The federation represents 126,000 teachers. It's a statutory body established by the government of Ontario in 1944.

If we look at the current climate, the rapidity of change and growing sense of instability in the education system are having a real impact on the ability of schools and teachers to do their jobs well. I think it's important to look at some of the symptoms that are out there.

Since 1993, the number of teachers in Ontario's schools has declined by 4%, while the student enrolment has increased by 6%. We used the ministry's figure on the increase in enrolment at 1.5% per year.

Between 1991-92 and 1995-96, per pupil expenditure in Ontario dropped by 5%. This does not include the last fiscal year; it does not include those reductions.

The next two I would call warning signals of concern to the federation.

Teacher retirements in June 1996, for example, were 57% above the projections of the Ontario teachers' pension plan board. What we are finding in education now is that as soon as a teacher reaches their 90 points, they are going into full retirement. In the past they were willing to spend extra years within the profession. However, that is not the case any more.

At the other end, where we're looking for students coming in, if you look at the faculty enrolments, they have dropped dramatically, from approximately 10,000 in 1996 to about 6,500 in 1997, a decrease of 34%.

Ontario's ranking based on per pupil expenditures against the Canadian provinces and territories and the United States is probably most alarming. We have fallen from 37th of 63 positions in 1994-95 to 46th of 63 positions in 1995-96. These are detailed in appendix 1 of our report.

There's also a great influx of new Canadians into Ontario, probably greater than any other province in Canada. These students' needs must also be met, and the expense of educating these students when they first enter Canada is quite costly. There is a book called Quality Counts prepared by Education Week, and when you look at that, Ontario would receive a mark of C for its per pupil expenditures adjusted to US dollars.

We were pleased when the Minister of Education and Training made the statement that general legislative grants to school boards would be maintained at their 1996 level for 1997, and we were also pleased that no further cuts would be made and that capital funding for schools would be restored.

However, I think it's important, when we look at this, that the annualized cost of the 1996 cuts to education was $693 million. When the capital moratorium of 1996 is included as well, the 1996 cuts represented an effective loss of over $800 million to the system. We are also distressed by the fact that the restoration of the capital funding did not include building junior kindergarten classrooms and in-school child care centres were removed. JK programs are in jeopardy in this province. I do not believe that boards of education will be able to continue to finance them with the funding that is currently being provided by the board, and it's a shame, because it's a proven fact that early intervention greatly reduces the costs of students down the road.

1040

The teachers' federations have a significant stake in ensuring that changes to Ontario's school programs are workable, understandable, pedagogically sound and ultimately meet the needs of today's and tomorrow's students.

We are all disappointed with the results of the national school achievement indicators program in science for the 13- and 16-year-olds, but I think we have to look at what the reasons were for that. We have outdated science curriculum. The successful provinces all had major focuses on science over the past number of years. For our grades 7 to 9 students, the previous science curriculum was replaced by the common curriculum, which specified only general learning outcomes for the end of grade 9 in an integrated cluster of mathematics, science and technology. Integration of curriculum becomes problematic when tied to the simplistic, data-based style of summative testing found in the SAIP and other national tests.

We also have to look at what is actually happening to our curriculum departments at the Ministry of Education. Dr Patrick Fleck, a former director of curriculum for the Ministry of Education, observed and talked about the reduction of staff, which has played a significant role in that curriculum now is falling behind in Ontario. We simply don't have the human resources to get the job done right.

In 1983, the core of expertise and the continuity of ongoing curriculum review and development was provided by full-time ministry staff. By 1995, only two of six senior executives in the ministry had ever taught in school and the number of experienced educators on staff had declined by over 55%. Without a strong core curriculum, schools cannot consistently deliver a quality program. Without research or a respected knowledge of the best practice, the current initiatives will be ignored by teachers.

A relatively recent phenomenon in the world of education politics has also been the manipulation and distortion of education finance data by the government itself in order to further its wider political agenda.

In June 1994, the Ministry of Education and Training established an education finance work group which came up with a costing framework which consisted of three major categories of spending: the core classroom program, classroom instructional support program and central administration and governance. Everybody in that work group agreed with that framework.

Unfortunately the definitions of the work group didn't meet Minister Snobelen's and the Harris government's objectives, because these were to define "the classroom" much more narrowly to enable further cuts to education spending without breaking the Common Sense Revolution promise not to touch the classroom. It was also to create a public perception that administrative costs are out of control in order to build support for the government's agenda on the amalgamation of school boards and provincial control of education finance. Therefore, the Ministry of Education and Training was instructed to redefine the categories in such a way as to increase the apparent cost of administration of schools and decrease the costs directly attributed to the classroom.

If we examine the possible consequences of the manipulation, if taken to a logical conclusion that only direct classroom expenditures are worthy, we would see classrooms with teachers and computers but they wouldn't have any heat or electricity. Teachers would have no time to prepare lessons or meet with other professional colleagues. Schools would have no libraries and no trained teacher-librarians. There would be no custodial services and no principal to evaluate the staff or to deal with parental concerns. If one assumes that the classroom includes the category defined as "classroom support," there would be heat, light, cleaning, libraries, guidance and other professional services, but even at that point in time principals and vice-principals would not be part of that grouping.

A recent Environics-Focus Ontario poll asked several questions about the impact of the 1996 cuts on education and related matters. We find these findings to be quite positive. In response to the question, "Should we be spending more, less or about the same as now on primary and secondary education?" 88% of those interviewed answered "More," which was 44%, or "The same," 44%; 75% of respondents indicated a willingness to give up the government's income tax reduction; 75% of respondents believed that education funding in Ontario cannot be cut further without affecting the quality of education; 81% of respondents agreed that education spending should be maintained even if it takes longer to balance the actual budget.

The government's perseverance on its pursuit of a 30% income tax cut appears to fly in the face of public desire, because we do believe that these numbers are accurate, as outlined in our appendix 2. An independent economic study conducted most recently in conjunction with the December 1996 pension arbitration revealed that in the absence of future budget cuts and the January 1, 1997, tax cut, the Ontario budget still will be balanced by the year 2000-01.

Business has learned that the ultimate question is not how cheaply we can operate but how well we can operate. Is the province of Ontario willing to sacrifice its "top-grade education system," as cited by Premier Mike Harris, on the altar of the almighty tax cut? I think that's what we're looking at. For the sake of Ontario's next seven generations of children, we ask you to reconsider the direction you are currently taking.

Mr Tony Martin: Thank you very much for coming before us and presenting what I think is an excellent brief and what should be an interesting challenge to the members of the government as we move forward with some of the changes that we're expecting and that are happening to the education system.

It seems to me that the government is trying to make Ontario a more competitive place, and rightfully so, a place that's going to attract industry to come and invest and by that generate jobs and provide some wealth so that we can continue to provide education and health care. But sometimes we get the horse before the cart. Ontario has, over a number of years, proven itself to be competitive with anybody anywhere. One of the reasons for that is that it has got a first-class education system, and over the years it has evolved and attempted to keep up with the best of education process that's out there.

In my mind, any money that's spent in education is an investment in the youth of today and an investment in our future. What I hear you saying is that what's happening now is going to significantly deteriorate the ability of the education system to participate in that way and to be part of that future we all want for our children and for ourselves. Is that correct?

Mr Bill Martin: I think that's a very fair statement. I'm a principal on a leave of absence from the Etobicoke Board of Education, and I know the Etobicoke Board of Education is recognized across this country as being one of the most innovative and productive boards. They have produced curriculum documents that have been used in the evaluation of teachers and studies etc.

1050

With the current amalgamation that is being looked at, the Etobicoke Board of Education is going to be swallowed up in this Metro board of education with 300,000 students, 19,000 teachers and 500-and-some-odd schools. Metropolitan Toronto is extremely unique, but the areas of Metropolitan Toronto have their own character and their own uniqueness. The direction we're moving in, as far as amalgamation of school boards -- I'm not opposed to the total amalgamation; I think some boards could be amalgamated. But I think we are going to lose greatly if everything goes through as it currently exists.

I don't know if any of my colleagues would like to add anything else.

Susan Langley: I'd like to add that not only has Premier Mike Harris talked about the top-rate education system, but in 1991 there was a very extensive study done by an American, not a Canadian, who talked about the fact that the Ontario education system was the best in the world -- or in North America; I'd better be careful here.

The reason for that is that we had a very well-placed and well-positioned system that allowed top-down policy, top-down curriculum, but also bottom-up quality work that was done at the school board level, so that it had both the top and the bottom and it worked exceptionally well. The outcome of that was excellent coverage on American television channels to talk about the Ontario school system as being the best system in the world, and they did refer to us as being the best in the world.

My concern and the concern of the Ontario Teachers' Federation is that this is simply not going to happen any longer with the kinds of cuts and the impact of the initiatives of the government.

Mrs Lillian Ross (Hamilton West): You touched on retirement, teachers retiring at factor 90. The teachers' pension fund at the end of 1995 was at $42 billion. It's estimated to be at $45 billion at the end of 1996. When you said, "Teachers reach 90 and then we find they're going into full retirement," I wasn't sure if you thought that was a good thing or a bad thing. I wanted to ask you what your feelings would be to looking at that factor and perhaps reducing it to 85 and what the impact of that would be.

Mr Bill Martin: In the negotiations of pensions, which recently were concluded, the 85 factor certainly was looked at by both the government and the teachers' groups. However, the expense of putting the 85 factor into place was just too much. There would be a massive increased cost to the teachers, as well as to the government, to be able to put that in place, and as a result it was not pursued.

One of the factors that did change, however, was the reduction factor of 5% penalties to 2.5%. We believe that a lot of teachers may, once they get their 90 factor, now take the 2.5% penalty and leave the profession as a result. I think they're leaving the profession because of the frustrations they are experiencing within the classroom.

In my school, with a staff of 40, I spent most of my time going around and reassuring the classroom teachers that they were doing an excellent job. They read the demoralizing statements in the paper that our education system is broke and in crisis etc. That is totally not true. It's my job as a principal to go around and try to maintain that high morale. It's a very difficult and challenging job with everything that's being thrown in our face over the past couple of years.

Ruth Baumann: I'd just like to comment a bit further on the retirement figures. The retirement figures for 1996 were 57% higher than anticipated, based on traditional patterns of retirement in terms of when people were eligible. It's our view that that's a stress symptom of the system; that for that number to jump 57% in one year is an indicator of what the people out there working in the system are feeling.

Mrs Ross: I've talked with lots of young people who've had their certificate for some five to seven years, teaching, filling in when they can, trying to get into the teaching profession and unable to do so. My point in asking this was, first of all, don't you feel it opens the doors for many of our young people who are dearly wanting to get into that profession?

Mr Bill Martin: There is no question that it's opening the door for the young teacher, and I'm pleased that is happening as well. I think we also have to have experience in our schools. I don't think we can just end up with a number of young students without having the guidance of those senior people.

Our predictions now are that those people will be getting jobs, but the number of students entering the faculty will not make up for the number of teachers who will be retiring in the next few years. It's our belief that the students are not entering the profession because of the instability of the profession at this point in time.

Mrs Ross: I'm sorry. What was that last comment?

Mr Bill Martin: I believe the younger teachers are not going to the faculties of education because of the instability of the educational system as it currently exists. They don't see it as being the type of profession it was when I entered the profession back in 1969.

Ruth Baumann: There's been a 35% drop in the applications to faculties of education for September. While teaching jobs have been tough to get for several years, enrolments remained fairly high and applications remained fairly high. But the current crop of applications, according to the university application centre in Guelph, is down 35% over last year. What Bill is saying is that this, we believe, is another indictor of the stress in the system. It's not just a question of whether people think there are jobs there, because that has not changed radically; they've been tight for the last several years. People are not viewing it as a desirable profession right now.

Mrs Ross: I certainly don't see that. I see a totally different perspective on that from the young people, that they do view it as a profession they want to get into. But I'm going to pass over to Mr Hudak.

The Chair: If it's very brief.

Mr Hudak: You know me, Chair. I'll make it as brief as possible. I'm just looking at the per pupil expenditure ranking, and I'm not sure what kind of conclusions you want us to draw from that. Surely throwing more money at the system doesn't necessarily work. We don't want our schools to look like New Jersey or New York, which lead us in per pupil spending by about $4,000. In fact, it's the quality that's going to count, and the minister has talked much about improving the curriculum in the schools.

Instead of looking at the issue of throwing more money at education and ending up with more bureaucracy, like New York, and more good teachers taken out of the classroom and the bureaucracy of the unions, like in New Jersey, the deterioration of the schools, how can we improve the quality of education in Ontario? How do we develop this curriculum? What are your suggestions to us?

Mr Bill Martin: For one thing, to develop a system of curriculum, you're going to have to have people in the ministry office to be able to write the curriculum. You're going to have to be able to set a course that is going to be completed. We were supposed to be receiving curriculum documents back in September for grades 1 through 12. We are now at the end of February. We still have not seen any of those documents that were supposed to have been produced.

Mr Hudak: So a stronger role for the ministry.

Mr Bill Martin: If the ministry wants to take on curriculum responsibilities, then they're going to have to have more people there to be able to do the job.

Mr Hudak: So you support a stronger role for the ministry in making the curriculum instead of having each board --

Ruth Baumann: The ministry has always had a strong role. What the ministry has lost is its capacity to fulfil that role over the last 10 years. They do not have the resources to do the task.

Mr Bill Martin: The boards of education are the ones who are developing the curriculum, and they do an excellent job of developing the curriculum. It's another reason, maybe, for maintaining more boards than what is being suggested in the Fewer School Boards Act.

1100

Mr Kwinter: Thanks for your presentation. I try not to get terribly political, but I have noticed some anomalies that I'd like to get your reaction to.

We've heard from you today that Ontario has been considered one of the best educational environments in North America, if not the best. We had a situation where the Minister of Education stood up to pronounce that the Durham board had received international recognition for its quality, and the next day -- I say that figuratively -- he's saying the system is broken, that we've got to do something about it.

The city of Toronto has been recognized by major international organizations as the best city in the world as far as quality of life. Consistently, if you read Business Week, if you read Forbes, if you read Fortune, if you read the Economist, they list major cities in the world and their costs to do business for businesses: Ontario, and Toronto in particular, is usually ranked at the very bottom as one of the least expensive major cities in the world in which to do business. Notwithstanding that it has this recognition, the perception by the government is that it's broke and we've got to fix it. Do you have any comments on that?

Mr Bill Martin: I think it's extremely important to remember that when the Minister of Education and Training took office, there was nothing wrong with our educational system, and he's on video stating that he had to create a crisis to make sure the system looked like there was something wrong with it. He's the one who says the system is broken. He's the one who went on video to create the crisis that the system is broken. I would suggest that if the public went to our school system and went into the classrooms, they would realize that our system is not broken. I think it's a direction this ministry has taken, that the whole government has taken in order to reduce costs in the province, and the ones who are suffering the most as a result of this are going to be our children.

Mr Kwinter: I'd like to get back to an issue that I think is very critical. I had a meeting in my riding last Thursday night in which we had a panel represented by all parties, represented by all stakeholders, talking about what is happening to education. I think one of the major concerns is the perception that there isn't enough money getting into the classroom. We heard figures as high as 70% of the expenditures being out-of-classroom expenditures.

We've also heard, when we talk about the three categories of the working group's costing framework, the core classroom program, the classroom instructional support and the central administration and governance, and it was really quite interesting because the definitions -- you've alluded to them and I just want you to elaborate on that. Really I think this is the problem, in that the government is using one set of figures. They think the only money that goes into the classroom that has any validity is the money that's spent on the teachers themselves and that light, heat, library, guidance counselling, employment counselling, all the things that are part of a child's education are things we should look at and maybe eliminate. Any comments on that?

Mr Bill Martin: I would concur with you. They have to take a narrow view so they can sell to the public that we're spending too much money outside of the classroom. As a principal of a school, I believe that my library resource teacher is probably one of the most important teachers in that school. They do work with small groups of children having difficulties. I believe my guidance counsellor is just as important. He speaks with parents on a regular basis; he works with children in small groups and takes on a social aspect. There are paraprofessionals and psychologists and we have students out there who require those types of supports, and custodial maintenance. Those to me, and secretarial staff, are part of a classroom. It's part of a student's education.

However, this ministry has decided that those are frills, that those are supports that are not recognized as being directly related to the classroom and therefore are not put out to the public as being truth. Then to move the principal and the vice-principal totally out of even that into the third category to me is just unbelievable. A principal is a curriculum leader. A principal is in charge of discipline in the school. The principal is in charge of parental contact. For the government to state that person is in the bottom list and should not be part of the costing for a school baffles my mind.

The Chair: We thank you very much for your presentation to the committee today and for coming in and expressing your views.

INSURANCE BUREAU OF CANADA

The Chair: We now welcome the Insurance Bureau of Canada, with Mr Griffin and Mr Cooke. Welcome to the committee.

Mr Stan Griffin: Good morning. My name is Stan Griffin. I'm vice-president, Ontario, at the Insurance Bureau of Canada. With me is George Cooke, the president of Dominion of Canada General Insurance Co and a director of the Insurance Bureau of Canada. It's a pleasure to be here this morning.

We have a brief that we are circulating around. I'm not going to read through that brief. What I'd like to do is introduce ourselves and touch on some of the highlights of that brief.

In the meantime I was looking at my calendar and I noted that it was almost exactly a year ago today that this committee was reviewing a much less controversial issue, auto insurance, and we were pleased to be here at that time. We're glad to be back to provide some input into your pre-budget consultations.

The Chair: There are even some familiar faces around.

Mr Griffin: I think there are still some familiar faces.

The Insurance Bureau of Canada is described at the back of the brief. We are the major national trade association representing general or property and casualty insurance companies which play a very important role in the Canadian economy and the Ontario economy.

Three figures I'd like to highlight and share with you: In terms of employment, the general insurance industry provides 94,000 jobs in Canada, of which 42,000 are in Ontario. In terms of investment, the industry invests $31.6 billion in Canada and $12.8 billion in Ontario. The industry is one of the most heavily taxed in Canada. We pay a total of $2.7 billion in taxes across Canada, of which $1.1 billion go to the Ontario government.

Our submission focuses on four areas we believe are important components to an economic renewal in the province: The first is continued fiscal responsibility; the second is removal of barriers to private sector job creation; the third is greater privatization of publicly funded services; and the fourth is reducing the tax burden for all consumers. I'd like to touch on each of those four in the next few minutes.

In terms of continued fiscal responsibility, we would note that during the first 18 months the government has taken very strong action to reduce spending and balance the province's budget. We support the government's approach to fiscal management and we encourage you to take the necessary steps to stimulate economic growth and private sector job creation.

We would specifically recommend introducing balanced budget legislation to guarantee the province will no longer run budget deficits after the fiscal year 2000-01. Our message on fiscal responsibility is pretty simple: Continue to meet the deficit reduction targets and balanced budget objectives.

The second area that we think is important is effective regulation. Here our simple message is that we think there should be elimination of unnecessary regulatory complexity and cost to business. We approve the principle of one financial institution's commission. We understand the Ministry of Finance is considering the combination or amalgamation of the Ontario Insurance Commission, the deposit-taking institution's section of the Ministry of Finance and the pension commission, and we certainly support that. We would like, however, to maintain in that combination that there is insurance expertise that remains within the new commission. We would also like to make sure that the savings as a result of this amalgamation would be passed along to those being regulated.

The third area we touch on in our brief is privatization, and here our message again is a pretty simple one: Move forward with privatization efforts. We refer in our brief to four key findings of a study conducted in the OECD countries on privatization. We note with interest four observations that I would highlight: First, the comparative market conditions are key to realizing significant benefits from privatization; second, the partial privatization, such as outsourcing or private-public partnerships, may well be a desirable objective in some cases; third, creating longer-term, sustainable employment should also be an important goal; and fourth, the ultimate goal of privatization initiatives is not for government to retain uneconomic activities, but rather it should be to create a more flexible, dynamic and responsive public sector.

One item we have specifically looked at and would urge the government to consider is privatizing the motor vehicle accident claims fund. The motor vehicle accident claims fund, or MVAC, is the payor of last resort where an individual is injured as a result of a motor vehicle accident and there is not a direct policy to collect from.

This privatization of the motor vehicle accident claims fund would be transparent to the public. Last year the fund lost nearly $10 million for the government. Removing the fund from the OIC and having it moved into the operations of the industry-wide Facility Association we think would reduce duplication and would allow existing structures and human resources to meet the needs of those claiming against the fund.

At this point I'm going to ask my colleague Mr Cooke to elaborate on our recommendations regarding taxes.

1110

Mr George Cooke: On the question of taxes, I think it's important for you to understand that we fully understand that the government has set out in its Common Sense Revolution, and indicated through its various fiscal statements, its intent to proceed with the major change in taxation, being that of the personal income tax, as opposed to reducing other forms of taxes on goods and services, until such time at least as the fiscal house is in order and further tax reductions might be contemplated. We understand that and we support that approach to taxation generally.

That having been said, as a place holder perhaps we would like to reflect on the fact that we do pay a great deal of tax. On page 4 of the document that has been provided to you there's a table that sets out where those particular dollars go or which taxes generate the over $1 billion that was referred to earlier.

Specifically with respect to premium taxes, I think it's important to note, and we want to try to ensure some institutional memory here, that many of these premium taxes were originally designed to pay for the cost of regulation. We're all aware that the regulatory costs are now paid for through separate full and total assessment of those costs on the industry in other ways.

The point we're making here is that given that these other funds are there, and we fully understand that dedicated tax funding is likely not something this government is going to adopt, on the other hand there are a number of programs along the line of road safety and measures to combat fraud etc which are very much in the public interest that the government does undertake. We would very much encourage you to review the use of the taxes derived from these premium taxes, and to the extent it's possible, at least ensure some matching of expenditure in those consumer areas like road safety and fraud prevention and the like with those dollars.

As well I think there's a revenue-neutral opportunity here for the government to harmonize and provide better disclosure of some of the sales tax. Currently we pay a premium tax, and it's taxed on the companies at the rate of 3% of premium. Our customers pay a sales tax, generally at the rate of 5%, at the point of sale, and for some reason it's 8% on snowmobiles. It would make a great deal of sense to have those taxes combined or harmonized, let's say an 8% tax or 8.1% tax, whatever it is, to effect the same amount of revenue for the government, have that tax burden transferred to the company but disclosed on the insurance sales transaction so the consumer is aware of what tax is being paid.

The effect of that would be to seriously decrease the administrative burdens for the companies and the very many insurance brokers and agents who currently have to do double remissions. Also it would reduce the need in the ministry of revenue for a lot of very small and really not material auditing activity that has to go on. So with one very easy combination, the government would lose no revenue, but we would receive a reduction in administrative costs, as would the ministry of revenue. We recommend that particular harmonization to you.

In conclusion, there are five points we might just repeat. It's important you understand that we support the government's fiscal initiatives, particularly those that are aimed at fostering economic renewal, growth and private sector job creation. We are of the view that without fiscal constraint and a balanced budget approach, those ends we're all seeking will not be possible.

We believe that the elimination of unnecessary regulatory complexity will also improve government efficiency and reduce costs to business. We're strongly supportive of privatization efforts and we believe that outsourcing, where practical, should move forward. We would ask you to bear in mind that when you're in the position to consider future tax reforms, they should reflect the fact that the general insurance industry is one of the most heavily taxed in the province and that any further tax increases would only add to the cost of insurance to customers. The taxes are a direct pass-through to those purchasing our products.

I might as well, on a related matter, note our support for the efforts Mr Palladini has been engaged in recently around the area of truck safety. Although some of it may be described by the media as controversial, it's very necessary intervention, and we are strongly in support of the activity he's engaged in.

Mr Wayne Wettlaufer (Kitchener): Stan and George, good to see you again. It's been a long time. I have a few questions, one particularly. A couple of years ago many of the foreign insurers were considering leaving the province. In fact a couple of them put their operations up for sale and the Dominion of Canada General Insurance Co bought one of those companies. I was just wondering, in light of the changes that have taken place through our government over the course of the past 18 months, specifically with the automobile insurance product, number one, and number two, with the improvement in personal income tax rates, do you see any renewed interest in investment by foreign corporations?

Mr Cooke: We are seeing now that the Ontario market, particularly the automobile market, which is the largest market in Canada among those markets served by the general insurance industry, is clearly the one that is attracting the most attention of all those that are competing. There is renewed interest in competitive vigour and investment associated with it. Whether that just stems from the changes in personal income tax as much as it does from the introduction of a product that people actually want to sell and believe they can sell at a profit, I think we can all have our views; I'm not sure the jury can come in with a conclusive verdict. But clearly as a result of the changes to the auto product and the regulatory environment, this is a marketplace that people want to be in. You're seeing the competitive reality now through continued rate reductions against that product, even in the three-month period since its introduction. It's a much healthier environment.

Mr Wettlaufer: The ideas you've brought forward are very constructive. In many submissions we don't receive as many constructive ideas. One has really struck me, and that is the privatization of the motor vehicle accident claims fund. I wonder if you could go into more detail, explaining how you envision it.

Mr Cooke: I will try. I should tell you there are some preliminary discussions between our industry and the government on this point. We handle the equivalent of the MVAC as an industry for other provinces in Canada. For whatever reason, and I don't know the history here, MVAC has been carried on by the government. It's to deal with the situation where there is an uninsured motorist. We believe we could likely acquire the obligation to provide this service, roll it in with the Facility Association, which is essentially our insurer of last resort -- it's a creation of what we call the Compulsory Automobile Insurance Act here in Ontario -- and provide that service in a very efficient way.

The problem is that the MVAC fund historically was funded out of a portion of the charge that goes against drivers' licences and the renewal fees. Over the course of the last several years that funding was cut to one tenth of what it had been before. Not only did the fund lose some $10 million last year, it likely is underfunded at this point in time by a substantial order of magnitude. I'm going to throw a number out, but I could be wrong by as much as $20 million: in the order of $80 million. The actual fund that has been set up by the government to continue to provide money into this is running out. This is part of what I would call the fiscal inheritance that has passed from one government to the next, because these funding changes were introduced I believe in 1994.

We're in a situation now that few are aware of, where some action has to be taken on MVAC. Either additional revenue has to be made available from within government, or an additional tax has to be imposed on consumers which I would argue is highly undesirable, or there has to be some restructuring of this activity such that it is delivered in the private sector, and delivered more efficiently, along with whatever corresponding financial arrangements could be negotiated between our sector and the government. But something needs to happen within the next six months.

1120

Mr Kwinter: I'd like to pursue the MVAC issue as well. I haven't quite figured out your rationale for taking MVAC and putting it into Facility. You're saying that in 1995 you had a $10-million shortfall. Is that a result of administration? Is it a result of claims exceeding financing provided by the government or provided by people who get their drivers' licences? What has created that shortfall?

Mr Cooke: As I understand it, it's likely caused by several things. Notionally, there was a fund set up in government, the income against which was used to fund MVAC. Basically that transfer of funding, 90% of it, was redirected to other parts of the government and 10% of it was left for MVAC, which is clearly inadequate, so there's clearly inadequate funding.

Second, I suspect, although I can't assert this to be true, that the reserving practices of MVAC are somewhat less than desirable, or put differently it's not attested to actuarially with the same responsibility that would be imposed on us as private sector parties, for example. As such, I suspect the balance sheet at best is misleading, although I'm sure people won't like me to say that.

I suspect the third part of this is that the claims handling practices associated with MVAC are not as desirable as they might be. I say that with some understanding. Since we actually contracted for some of the claims handling on an outsourcing basis up until about 1992, we have some understanding of the way that was conducted.

So for a variety of reasons, this fund is in a very difficult situation and it needs the discipline that's brought to bear, frankly, of a private sector discipline for everything from collection of outstanding accounts receivables to claims handling to having to force both parties to clearly disclose what's funding it and what's not so there's no more of this shell game that's been going on.

Mr Kwinter: My concern is that if you transfer it to Facility and they have a similar problem, they're going to have to recoup that shortfall and spread it over the people who are in Facility, who are already getting hammered as it is. Is that just going to exacerbate the problem where people who are in Facility are going to get to the point where it is going to be absolutely impossible for them to drive a car?

Mr Cooke: There would be no intent to spread it over that small group. The point of transferring it to the Facility is that there's infrastructure in place in terms of buildings, administration, telephones, technology and the like, where you can bear only the incremental cost of MVAC as opposed to the total full cost of creating it from scratch. Obviously, to the extent there's a shortfall, we have to be spread across the entire industry once some form of transfer relationship is negotiated.

Mr Kwinter: So Facility would just be an administrative component.

Mr Cooke: Absolutely. It's a very convenient place to house something that would come out that has an impact for all the industry. It would not necessarily be the FA. It could be anything.

Mr Griffin: It just happens that legislation requires that all insurance companies licensed in the province belong to Facility, so it's a convenience administratively.

Mr Cooke: We do that for other provincial jurisdictions, so the infrastructure is in place.

Mr Kwinter: I just wanted to make sure that was the intent --

Mr Cooke: Absolutely.

Mr Kwinter: -- that it wasn't going to shift the financial burden to Facility.

Mr Cooke: No.

Mr Tony Martin: I have two questions. One is, looking at what's happening out there and the result of some of the initiatives of the government in its short year and a half and the impact it might have on your industry and on the economy in general, there's no question that because of the low interest rates there has been an improvement in the economy in some sectors, yet we still see high unemployment and we see bankruptcy happening at a record rate at this point in time. How do both of those impact on your industry?

Mr Cooke: Let me take a shot. Low interest rates, generally speaking, have had two impacts on our industry. Many of our investments are held in fixed-income securities, and to the extent that there is a rollover of those securities, interest rates being lower, there's less investment income generally available to us. At the same time, low interest rates on the investment side tend to drive higher equity prices, and we have benefited from capital gains associated with stock prices.

Mr Tony Martin: What I was interested in was the impact of continued relatively high unemployment and a record high bankruptcy rate in the province on your industry.

Mr Cooke: Let me try to finish the first part and I'll get to it. The other counterpiece to that is as the opportunity for investment income declines, the need for us to break even on the underwriting side increases and so there has been a more stringent underwriting practice that we've engaged in, so that's what's happening there.

To the extent that we're insuring industries or companies that are going bankrupt, that of course is imposing a burden on us, as it does on anyone else. It's highly undesirable. From an unemployment point of view, I think the employment levels in our industry are generally flat. There's clearly a change inside the industry from low-end jobs or low-skilled jobs to much more highly skilled jobs as we implement new technology. Most of the gain of that is being experienced through improved customer service. The high unemployment rate is actually allowing us to hire skilled people at lower salaries than otherwise would be the case, and those savings are translated into lower premium costs for insurance.

I guess the point you're trying to get at is that high unemployment and high bankruptcy rates are not desirable. I would agree with you completely. Clearly, we would support any reasonable set of initiatives, as I think we have today, that are aimed at changing that particular circumstance, but specifically the phenomena you've described manifest themselves in our industry the way I've set out.

1130

Mr Tony Martin: My second question is with regard to your comment and the initiative of Minister Palladini with the trucking industry. I find it somewhat strange that this government and anybody representing industry would be as supportive as obviously you are of more controls and regulation where it affects a business, which is trucking, which has a direct impact on our ability to get goods to market.

Our read of what's happening, to be frank with you, is the deterioration of roads and our infrastructure system, and I think that can be backed up by some of the presentations we've had before the committee here. Yesterday, I believe we had the Good Roads people before us, who were talking about a concern they have about the deterioration of the road system we have. I also reference the doing away with photo-radar, which was slowing people down and creating safer roads out there, and perhaps would have had a more proactive, preventive effect on the question of wheels flying off trucks than coming in with the very onerous, highly regulated regime we're seeing now in a part of the industrial infrastructure of Ontario.

Mr Cooke: Regulation that is sort of focused and effective and firm is something we have always supported. The regulation we don't support is the kind that is frivolous and not productive. Every time a wheel falls off a truck and hits a car, quite apart from the human carnage that seems to inevitably ensue in recent months, our claims costs rise substantially because we pay directly the costs associated with whatever mess otherwise ensues, so we see the initiatives of Mr Palladini in two lights:

(1) Clearly more stringent regulation and higher fines will force the responsibility for adequate safety measures and practices back on to those who have the most opportunity to control them.

(2) The awareness around this issue that has ensued because of the debate, and it's a legitimate debate, I think has also helped many in related areas realize that if you don't take action for yourself, somebody is going to impose it.

It's for those kinds of reasons that we make the statements we do.

Photo-radar was an interesting revenue-generating concept for the government. We're not going to ever know the answer to this, but as much as it may have slowed some down, my personal view is the frustration level for the bad drivers simply went up and there was reasonable evidence of in and out and tailgating and the like, which I think over time may well have seen a reduction in speed and an increase in accident frequency and possibly even severity because of it. I don't think photo-radar by any means was the nirvana for which I think it was very well intended.

The Chair: Thank you very much. I know you had three questions, Mr Martin, and I apologize but we're trying to stay on time, as we'll end today probably with division bells in the House.

I thank the Insurance Bureau of Canada for their attendance and your presentations today, and in helping us in our deliberations.

ONTARIO PHARMACISTS' ASSOCIATION

The Chair: We now welcome the Ontario Pharmacists' Association. We have 30 minutes to spend together. As I mentioned, we will very likely have a division bell in the House today, which will end our time together. If you'd like to proceed, we'll try to fill any remaining time with questions.

Mr David Malian: Good morning. My name is David Malian, chairman of the board of the Ontario Pharmacists' Association. With me today is Barbara Stuart, our CEO; David Hodgson, our public affairs coordinator; and David Windross, chair of our public affairs committee.

The Ontario Pharmacists' Association represents 4,500 pharmacists from across Ontario, and from across our profession: community, hospital, government and industry. We are the gatekeepers of the Ontario drug benefit program and we are worried about its future.

Last year we provided this committee and the Ministry of Health and every member of the Legislature with a document entitled, Strategies to Reduce Health Care Costs Through Pharmaceutical Care and Medication Management. In this document, we set out cost-saving strategies that could reduce ODB expenditures by between $200 million and $400 million annually. These strategies focused on ways to reduce inappropriate use, non-compliance and drug wastage.

These strategies, if implemented, would not only reduce ODB expenditures, but would also have far-reaching downstream benefits in reducing other health care costs. The strategies were real, the results were achievable, but nothing happened. Yet every year health care costs due to inappropriate drug use and non-compliance are estimated at $7 billion to $9 billion across Canada. Obviously, these numbers are unacceptable, not just because of the costs of the health care system but because of the huge toll in lives and suffering. The good news is we can do something about them. But there must be leadership, cooperation and innovation to make a meaningful difference.

We are here today to offer once again our support for measures to contain and control drug plan expenditures. These cost-control measures must be focused on the real reasons for escalating drug plan costs, the costs of drugs and their inappropriate use, and not on the professional fees of pharmacists or copayments from patients. Pharmacists are struggling to cope with the impact of copayments and the downward pressure on professional fees in a highly competitive market.

A recent Globe and Mail article stated that an analysis by Dun and Bradstreet Canada has found declining profits and returns throughout the 1990s, especially since 1993. According to Dun and Bradstreet, after-tax return on sales has fallen by 40% since 1992. Return on equity has also fallen 40%.

Pharmacy cannot take another hit like copayments and maintain the level of pharmaceutical care necessary to meet the professional standards of our college or the health care needs of today's seniors and other patients covered by ODB. Another major reduction in revenue will seriously jeopardize the future of many pharmacies across the province.

Similarly, we do not believe that ODB recipients can cope with an increase in copayment levels. Other provinces may have higher co-pays, but is the quality of health care the same as Ontario's? We understand and we support government efforts to control expenditures; however, there are more cost-effective ways to reduce costs than reducing pharmacists' income or raising copayments.

Last year we talked about the pharmacists' role in medication management. We talked about how pharmacists can save costs and improve health. I want to give you an example of how effective we can be.

Omeprazole, brand name Losec, and Ranitidine are gastrointestinal drugs used to suppress acid and treat ulcers. They were the top two ODB drugs in the fiscal year 1995-96 in terms of dollars paid out. Together they accounted for 1.4 million claims and $76 million dollars in expenditures. But it didn't have to be this way. The top two drugs were second-line treatment drugs, meaning they should only be used if other less costly therapies fail to get results. Pharmacists and physicians, working together, may have been able to recommend more cost-effective approaches utilizing less costly drugs and alternative interventions.

There are opportunities for real savings. In fact the Ministry of Health outlines various, less expensive alternatives in the Ontario Drug Benefit Formulary. Pharmacists and physicians, working together, could have potentially saved $25 million dollars from these two drugs alone.

The strategies we proposed last year could reduce ODB expenditures by tens of millions of dollars annually. All we need is the will and a call to action. Pharmacists are key players in the primary health care system. We can make a difference and the OPA is going ahead with initiatives on its own. For example, the Ontario Pharmacists' Association has launched the managed medication use program, MMUP, across Ontario. Through MMUP, we are working with municipalities, agencies, boards and commissions, and other public and private sector employers to reduce drug plan costs in ways that will also improve employee health.

We are implementing initiatives like trial prescription programs to reduce drug wastage and non-compliance. Under a trial prescription program, patients are given only the first seven days' supply of a 30-day prescription. The pharmacist calls the patient on day six to see whether or not the patient is tolerating the drug to determine whether the treatment should continue. If all is in order, the balance of the prescription is dispensed. If not, another course of action is discussed with the patient and his or her physician.

By implementing this program, millions of dollars of medications will be saved and not wasted. More importantly, the health of the patients involved in the program will be protected. We are working on the details of such a program with the Ministry of Health for ODB. We hope this committee would recommend that the government get on with its implementation. This is just one example of how community pharmacists can make a difference.

Many other suggestions are contained in our strategies book, including recommendations for the government to initiate discussions with the private sector on the privatization of the ODB program. OPA has begun discussions with the industry and we will bring these players to the table.

Our goal is simple and straightforward: We want to be part of the solution, not the problem. We want to work with government to improve the health and quality of life of Ontario citizens in ways that maximize the use of pharmacists' expertise and cognitive services and create a sustainable future for the Ontario drug benefit program and community pharmacy. Enough has been said and written. The time has come for action. We hope this government will make it a priority to work with OPA, OMA and other health care professionals, seniors and other stakeholders to develop and implement programs to control drug-related health care costs and improve the health of Ontarians through quality drug therapy programs. We believe a task force should be struck with a short, 6- to 12-month mandate with clear direction to make things happen.

1140

We have discussed this proposal with the Honourable Cam Jackson, minister responsible for seniors. During our discussions with him, and in previous discussions with the Honourable Jim Wilson, Minister of Health, it became quite clear that pharmacy and government share the same goals. We both want to provide the public with the best quality service in the most cost-efficient system. We want to provide the best product and professional service at the best price.

I am a community pharmacist from Windsor. There are thousands of community pharmacists like me across Ontario. We employ tens of thousands of Ontario taxpayers. We are an important part of the tax base of Ontario municipalities. We support local economies, and we support community activities from minor hockey, baseball and soccer to seniors' activities and special charities.

But more importantly, we are a part of the very heart of many communities. People rely on us to protect their health. Many of our patients are seniors who have dealt with their community pharmacist for years and have built up a relationship of trust. Our patients come from a wide range of cultural backgrounds. Some require specialized language services to ensure their health. But most of our patients are just ordinary folks who need the professional services of a pharmacist and the medications we manage to make them well.

Pharmacists are essential to the health and wellbeing of Ontario citizens and to the fabric of communities across Ontario. We are key primary health care providers with the knowledge and expertise to make a positive difference in health care outcomes and costs. We are on the same side. Let's tackle this problem together.

Mr Kwinter: Thank you, Mr Malian. I'd just like to get a little clarification on the example you used on the Losec and Ranitidine. Are they unpatented and are there generics available for them, or are they still under patent?

Mr Malian: For the Ranitidine, there are generics available; for Losec, the trade name, there is not a generic equivalent available yet. It's still under patent.

Mr Kwinter: When you say there are less costly therapies available and you have to work with your pharmacist and your physician, you've let out the drug companies. Aren't they part of that equation? Obviously the detail salesmen are selling the doctors on the efficacy of using, for example, Losec, and that's why they're prescribing it.

Mr Malian: Yes, but Losec is a good drug. I don't want you to misunderstand me. Losec is very effective. However, the most cost-effective therapy or first-line treatment doesn't necessarily have to be Losec. There needs to be a communication between pharmacists and physicians. We need to foster that relationship so that we can pass information on to each other to make sure the patient is receiving the most cost-effective therapy. If a patient can respond with a generic equivalent of a first-line drug like Cimetidine, then why would they need to be on Losec? It's important that this relationship be fostered.

Losec, by the way, is a drug that is considered a limited-use drug, meaning that there are four criteria patients should receive those medications for. Even though there are four criteria, it's still the number one drug prescribed and dispensed in the Ontario drug benefit program. Obviously the systems that are in place presently are not doing the job.

Mr Kwinter: But it would seem to me that the point of decision is the doctors. You're in fact saying you're second-guessing what the doctor is doing, and I'm not questioning that, because you're really on the front line when it comes to the consumer-patient. But surely if you want to address that issue, it has to be addressed with the medical profession. That should be their guiding principle in everything they do: the most cost-effective at the least price for any treatment they prescribe.

Mr Malian: That's why one of the recommendations in our strategy is prescribing guidelines and, with those guidelines, input given to pharmacists to work with physicians making sure the most appropriate drug is being prescribed and dispensed.

Mr David Windross: Just a follow-up to that in terms of the enforcement of prescribing guidelines, if you use that term, we in Ontario have been very proactive, government and medicine and pharmacy working together to develop prescribing guidelines for antibiotics, for hypertension, for congestive heart failure. They are basically on a voluntary basis right now in terms of being available to physicians and pharmacists across the province; excellent documents, well-refereed and we have all the information in front of us.

We also have another fabulous system in this province called the Ontario drug benefit network, which the government spent millions of dollars in developing, pharmacists spent thousands and thousands of dollars in implementing in their pharmacies, and we have a whole network which links all pharmacies and all drug benefit patients in this province as well as linking pharmacists as well as physicians to who is prescribing and who is dispensing these products.

We have the tools in order to implement prescribing guidelines through the drug benefit network. This is what we're talking about in our proposals, saying that we've got to sit down now and work it out, because clearly the system cannot afford the costs that it's going through right now. There are solutions to doing that. As a government, you've already implemented networks and prescribing guidelines. We're partway down this road. We've got to go a bit further to get this thing implemented. That is where we are coming from in these types of recommendations we presented to you last year.

Mr Kwinter: Can I just go to another area? You indicate that particularly the independent pharmacists are under incredible financial pressure because of copayments and because of some of the other regulations. I don't know what the exact time line is, but it's probably been a year or whatever it is, since removal of tobacco sales. What impact has that had on your members, and have you seen any dramatic fallout as a result of that?

Mr David Hodgson: In terms of tobacco sales, that's not what we're here to talk about. We don't have statistics about that on a pharmacy-by-pharmacy basis. What we're here to talk about is the other things, the cost-saving measures we can put in place to help the government and help the people of Ontario, particularly senior citizens, maintain this incredible benefit for the future.

One of the things you were talking about before, about drug manufacturers being part of the solution, they definitely are. I guess the equation is, drugs have to be prescribed appropriately, have to be dispensed appropriately and have to be consumed appropriately. There's a role, obviously, for the physician and for the pharmacist and for the patient. Education for all three is critical.

In this document our chairman has shown to you, Strategies, first and foremost is education of all three parties and empowering the patient to make some meaningful decisions about their drug therapy. They should be encouraged to ask questions of their doctors as to, "Why am I getting this drug; is there a cheaper alternative?" It's a $1.2-billion benefit, and in order to maintain and protect that benefit, they have to take some ownership for that, as do the other players in the system.

Mr Kwinter: What percentage of your members how have prescription management on computers?

Mr Malian: As part of the health network, the Ontario drug benefit program? It's 100%.

Mr Kwinter: So you can do your follow-ups on that and you can actually know what kind of dispensing has gone on and what has happened. Does that not resolve some of your problems?

Mr Malian: There's some limitation to that, though. As a matter of fact, there's a great deal of limitation. As David said, yes, we have the network in place, but we need to take one step further. When I fill a prescription for a patient, I know that he may have received a prescription similar somewhere else in this province within the last seven days. I have to try to figure out from the patient if they understand what medications they're taking, what it was. I have to figure out who the prescriber was, who was involved in this therapy, why it was done and try to bring all those stakeholders together. It's a lot easier if we can identify that right on the network. That's just one example. We can identify certain interactions on the network that we couldn't have before.

1150

Mr Tony Martin: You make some very valuable recommendations here today, and I want to follow up on one or two of them. One of them is the continuing down the road of government working with you and with doctors to make sure the system works for people, so they have access to the therapies you're speaking of here, and that it be delivered in a cost-effective and accessible way, both for the consumer and also for the government, which pays a big chunk of the cost of this. Would you see it as valuable to everybody concerned to have a program in Ontario of drug coverage for everybody, as we do with OHIP?

Mr Malian: That's something we need to sit down and discuss. You're right. If the federal government is going to be looking at something like that, I think we need to do that here in Ontario.

Mr Windross: Also, in answer to that question, a considerable amount of time was spent by previous governments looking at that, particularly under the drug reform secretariat: Who should be covered, and how can we get to Ontarians who do not have any drug benefit coverage, are not on social assistance and do not have a private drug plan? How do we look after them when they get into drug costs for their prescriptions or, worse, catastrophic drug costs, people who get into very serious illnesses with very high-cost drugs? That's what the drug reform secretariat looked at.

The Lowy inquiry of 1990 also touched on that a little bit. As you can see, we've been coming along over the years with various examples of how to do this. That is a very important one that has to be looked at, as to having universal coverage, because provinces like Manitoba and Saskatchewan do have a universal coverage plan and it does have its flaws. But in terms of this committee and looking at the budget and in terms of how you manage the cost, is that a solution? I couldn't tell you right now.

Mr Tony Martin: Although you do feel very strongly that, working together, you can find ways to make significant savings in the system and thereby hopefully make accessibility more reasonable for some folks.

Mr Windross: Right. As health care professionals, as pharmacists, in the health care professions you always work as a team: doctors, nurses, pharmacists. That's what we're talking about. The solutions we are putting forward here, we can't do totally as pharmacists. We need physician input. We may need nurses' input if they happen to be working in remote areas of northern Ontario. We need those types of inputs to come up with a solution and say that we can implement prescribing guidelines, we can do whatever and these will accrue savings.

Mr Tony Martin: You also mention in here, though, a discussion you want to have with the government about the whole question of privatization. I'm wondering how that would fit in, given that I know from talking to folks in my own community and being a critic for our party in economic development and for small business, there's lots of activity out there right now, corporations buying up independent pharmacists and all this kind of thing. How does that fit together?

Mr Malian: What are we doing? Where is the program going? The program looks like we're losing money constantly. If privatization is an answer -- and we don't know -- let's look at it. That's where we're coming from. Let's look at it, because right now, for the last 10 years, we've been seeing the increase in the cost to the program. I don't know if privatization will be the answer, but I think we should look at it.

Mr Hodgson: It could be that it's just privatization of the administration. There are opportunities there, and privatization of government programs like industry self-management and things of that nature seem to be a way of government and the private sector working in partnership to streamline the administration and yet government keeps control of the program requirements to ensure that the people are protected.

But getting back to your earlier question, if I may, just some numbers to think about: 25% of Ontario people are covered by ODB and roughly 50% are covered by employee-type programs, but you've got 25% of the population -- the farmers, the just-over-the-brink-of-low-income type people -- who aren't covered for anything.

I think that's the opportunity and the challenge we need to work on with government and our colleagues in the health care professions to see what we can do for those people, because drug therapy will increasingly become a first choice in terms of health care. It's less invasive, it's quicker, it's faster and probably more cost-effective.

Mr Windross: I also think, from the standpoint of our position, let's not preclude organizations like us from looking at the privatization of the drug benefit program. If you look at what happens in Ontario hospitals today, the management of drugs in the hospital, both from a therapeutic point of view and a cost point of view, is done through the pharmacy and therapeutics committee, which is chaired usually by a physician and the secretary of that committee is a pharmacist. Therefore, the policies and procedures and budgets often go through those committees.

Here we have a situation where pharmacists could manage the costs of the these particular committees. Just recently the Ontario Pharmacists' Association has taken over the drug information centre for the entire province of Ontario, which will be a drug information and research centre which is totally funded by pharmacists in this province through their fees. It receives no benefit from government in terms of taxation breaks, grants or whatever. It all comes out of fees from pharmacists and has been in existence for more than 10 years and provides that type of quality drug information service to the people of Ontario. That could be implemented into a drug benefit program, as an example.

Mr Gerry Martiniuk (Cambridge): Thank you for a very excellent report. I'd like some education about what is going on at the present time, especially with physicians' awareness of drugs, and that is your expertise. I know that historically, detailed persons acting on behalf of large pharmaceutical firms educate physicians as to their drugs. What input does your association have either directly on physicians or through the OMA? Is there a liaison group, and is it working at the present time?

Ms Barbara Stuart: I'm going to answer that one. The Ontario Medical Association and the Ontario Pharmacists' Association have several cross-links between the two organizations. The most senior are conjoint executive committee meetings, at which we talk about many of the issues we've been talking about this morning and then delegate some of that responsibility from decisions made there to committees which pharmacists and physicians sit on together to talk about drugs and therapy. The motions and the decisions made at those committee levels then get transferred on and either indicated and directed into programs such as this or we have dialogue back and forth or we continue with ongoing discussions that we have, both of us, with the Ministry of Health and make those recommendations through that avenue.

There is an excellent rapport between OMA and OPA. Certainly they are fully aware of our strategy document and have been very supportive in the introduction of our trial prescription program with Metro Toronto, which many of you I'm sure are familiar with, and certainly have offered their support in the implementation of the trial prescription program through the Ministry of Health, which we have now started some discussions with.

Ms Bassett: To follow up on that and what everyone else has said, you say in your outline, and I heard it last year, you could save $200 million to $400 million from the ODB. Why can't we get some movement on this? I know you're meeting. Is it the bureaucracy? Is it the government? Is it the ministry? Is it you? Is it doctors? As long as we're just sitting here, we might be here next year and you might be saying the same thing. We, as a government, want to save that money. You want to save it. I presume the ministry wants to save it. Why aren't we seeing any action?

Mr Malian: It's all of the above and all of the groups that are involved. That's why we're asking you today to set up a task force, put a mandate on it and say: "You've got six months. You've got 12 months. Correct the problem now." Get all the players together, bring in industry, bring in pharmacists, bring in physicians, bring in the bureaucrats, bring in the manufacturers, bring everybody to the table and say: "You've got a problem. You fix it now. You've got six months to do it." They'll look at our strategies. We cannot implement these strategies without the other stakeholders.

You're absolutely right: We can sit here and keep talking about it all day long. If 25% to 40% of hospital admissions are due to inappropriate drug use, if we could cut that by 10% --

Ms Bassett: Could you just repeat that? How many?

Mr Malian: Some 25% to 40% of hospital admissions can be attributed to inappropriate drug use. I'm sure you've heard that figure many times. We've stated it, OMA stated it, everybody else stated it. If we can just touch a little bit of a $1.2-billion program, think of what savings we could make.

Mr Windross: It's also important to note, as I indicated earlier, the province has invested in a drug benefit network, we've invested in prescribing guidelines. We are moving along. That's not an issue; it's how you bring it all together and how you implement it so you actually get the raw cost savings.

My earlier example of hospitals: We have a mirror image of what we want to do in every hospital in this province, because you as a government will give a basket of money to a hospital administrator and say, "This is what you have to work with." Well, you've got a drug budget to manage. In managing the drug budget, you also have to manage therapeutics. Obviously you don't want Ontarians being deprived of certain medications because it's not in the drug budget. You have to manage that. So you go back to the theory or the assumption that we don't mind paying for the cost of therapy provided it is appropriate, is being prescribed appropriately by in some cases the appropriate physician, is being dispensed, controlled and monitored.

In the past, we've gone to a cost-saving mechanism of, for example, saying, "For all medications now it's a 250-day supply." You and I will take a 250-day supply of a medication. It will cost perhaps $600, as an example, which is not unreasonable for that much medication. You send home an 81-year-old with that much medication, and they're supposed to look after this for 250 days. All of a sudden they don't comply, because maybe they don't understand or they can't see the label properly or whatever it might be, and now this statistic comes us. You end up at the doors of North York General being admitted because you're not complying with your medication and you have to be re-established etc.

We know what the solution is. We know what's causing the problem. But how do we hone it down to get to where we are? In the document we presented last year we feel there are some concrete examples to do that.

Mr John O'Toole (Durham East): I read a report last year by Professor Coambs of the University of Toronto talking about non-compliance and misuse. I haven't got the statistics, but reference 19 in your report talks about that study. Apparently it represents some $7 billion to $8 billion of waste: not using them, not using them correctly, not filling them. Clearly, we need to have a better method of spending in not just health care broadly but specifically in drug use. Do you believe that your plan here, the integrated model, is something we need to move forward with effectively?

Mr Hodgson: Definitely. If I can just give an example.

Mr O'Toole: Professor Coambs's report is very good.

Mr Hodgson: It's an excellent report, and that's where we gleaned a lot of our information from. This little booklet that's in your kit describes our managed medication use program.

Metro Toronto is a microcosm of Ontario. They had a problem: Their drug benefit program was going through the roof. We went there and worked with them on a program to educate their employees about the benefits and the appropriate use of drugs. Pharmacists are now working with physicians in the city of Toronto and Metro to talk about appropriate prescribing and how they can talk about their patients.

We instituted a trial prescription program. We're instituting wellness programs, where we will encourage employees to learn about their health conditions so they don't just go and get a drug, so they can ask those questions, they're empowered to do things. It's the same thing we want to do; we just want to expand it to the province.

Mr O'Toole: Excellent.

The Chair: We appreciate the Ontario Pharmacists' Association for attending today and for sharing your views with us. Thank you very much for coming in.

SUBCOMMITTEE REPORT

The Chair: For the attention of the committee, the minutes of the subcommittee meeting we had yesterday have been distributed to you. If there are no changes, if someone would move it.

Ms Bassett: I have a change.

The Chair: Moved first. Mr Kwinter would move it. Ms Bassett, a proposed change?

Ms Bassett: The proposed change is, given the fact that many of our members go home on Friday, they go home Thursday night, I request that the clerk deliver the report on Thursday at the latest, preferably as soon as possible, so the person could go home and study the report over the weekend.

The Chair: In number 1 you would like the date changed from Friday to Thursday?

Ms Bassett: Yes, or as soon as possible.

The Chair: The clerk tells me that although that will put her under extreme pressure, she will make every effort to have that done.

Ms Bassett: All right, thank you. I'm sorry about the pressure, but it's better than our people not reading it.

The Chair: Is there a mover for the change?

Ms Bassett: I move the change.

The Chair: You move the amendment? All in favour? Carried.

For the motion, as amended, all in favour? Opposed? Carried.

There being no further business to bring before the committee, we stand in recess until 3:30 this afternoon.

The committee recessed from 1205 to 1530.

CANADIAN VEHICLE MANUFACTURERS' ASSOCIATION

The Acting Chair (Mr Gerry Martiniuk): Our first presenters today, who have given us a written presentation, which has been distributed, are from the Motor Vehicle Manufacturers' Association: Mark Nantais, president, and David Adams, director. Welcome, gentlemen.

Mr Mark Nantais: Perhaps the first order of business should be to clarify some confusion out there respecting our name. We were the Motor Vehicle Manufacturers' Association until January 15 this year. In some of the information we placed before you, you will notice we've had a slight name change. It's now the Canadian Vehicle Manufacturers' Association. However, all our members remain the same, and for the record, that membership includes Chrysler Canada, Ford Motor Co of Canada, General Motors of Canada, Freightliner of Canada, Navistar International Corp, Western Star Trucks, as well as Volvo Canada.

Just by way of background to give you some additional overview, our member companies produced approximately 2.1 million out of the 2.4 million vehicles produced in Canada in 1996 and are distinguished from Honda and Toyota by virtue of their commitments under the 1965 auto products trade agreement, an agreement otherwise known as the auto pact. The Big Three alone have committed to high levels of Canadian content in their vehicles and exceed auto pact requirements by building as many as three vehicles here for every one sold in Canada.

We are the sixth-largest industry in the world in terms of motor vehicles. Our Canadian vehicle shipments totalled $50 billion in 1995, and in 1996 it was actually a little bit higher than that, with parts shipments totalling some $21 billion in 1995 and $22.7 billion in 1996.

The Ontario transportation equipment manufacturing sector, which is comprised primarily of vehicle and parts manufacturers, represents $70.2 billion, or 34% of all Ontario's manufactured shipments. Vehicles and parts accounted for 42.2% of the total value of Ontario's merchandise exports in 1995.

The auto sector contributes about 20% to total provincial manufacturing GDP, and one in six jobs is directly or indirectly related to the automotive industry in Ontario. The industry accounts for 4% of all wages and salaries, with an annual payroll of about $15 billion.

Over the past decade more than $18 billion has been invested in this province, with the Big Three investing more than $10 billion over the last five years alone. No other companies within this sector have come remotely close to such levels of investment in this province.

The auto industry is the key driver of the Ontario and Canadian economies. The multiplier associated with the automotive industry is more than three, meaning that $1 of automotive output will generate actually over $3 in the total economy.

Growth in the automotive industry means growth in the economy in general. It was the export-oriented automotive industry that softened the impact of the recession in the early 1990s and pulled the Canadian economy out of that recession.

Just switching gears slightly here, I'll give you brief overview of vehicle sales.

While production has grown, again primarily due to the strong US economy and demand for our product, domestic sales markets have languished. Vehicle sales were up nationally about 3% over 1995 levels, but 1995 sales were the weakest in 12 years, and sales have declined, actually, in five of the last seven years. There's a table, or a bar graph, which shows you sales within Ontario and Canada overall, 1992 through 1996.

The Ontario market was up only 1.4% in 1996 over 1995 levels, and national and Ontario sales were well below the 1988 record levels of 1.56 million and 641,666 respectively. The difference between record sales and current sales in Ontario alone is equivalent to the annual production from one assembly plant.

While recent polls indicate that consumer confidence is strengthening and economic indicators are encouraging, the fact remains that many Canadians continue to be concerned about job security and have limited disposable income, which does not augur well for significant domestic sales growth in 1997.

In fact, 1997 commenced on a positive note, with January sales increasing almost 8.5% nationally year or year, yet Ontario sales only increased 1.8%.

Vehicle sales are an important source of tax revenue for the Ontario government, with the 459,789 vehicles sold in Ontario in 1996. That is 40% of Canadian new vehicle sales, which generated almost $920 million in sales tax revenue, if one takes about a $25,000 average cost per vehicle.

A few brief words about production: The real benefit for Ontario and Canada over the last several decades has been the increased allocation of vehicle production in Canada. Ontario produces about 16% of the vehicles produced in NAFTA countries, while Canadian sales represent only 8% of the NAFTA total. Canada produces twice as many vehicles as it sells, with some of our members producing, as I said, almost three times as many vehicles as they sell here. Production was actually down by less than half of one per cent in 1996 despite the 21-day strike at General Motors.

Therefore, policies that are conducive to consumers replacing their older vehicles for newer vehicles will assist both the government and the industry. In this regard, we appreciate the action taken by the government to increase disposable income through the initial reduction in personal income taxes payable. However, we believe that there is still room to manoeuvre and room to do more.

The Ontario government has moved aggressively to contain government spending, to decrease the deficit and to re-engineer the way provincial government works. The CVMA supports these efforts and encourages the government to stay the course.

Initiatives such as the establishment of the Red Tape Review Commission are on the right track. Red tape and bureaucracy can be millstones around the neck of business. This is especially true for our members in the area of government certificates of approval where they have sought to upgrade and retool their facilities in recent years. Historically, the approvals process has often caused unnecessary delays and added excessively to the costs, for very little valued added.

We support the recommendations of the commission to establish a regulatory watchdog, to implement a permanent less paper, more jobs test for new regulations and to introduce the notion of spring cleaning bills and sunset clauses to ensure that the regulatory burden does not increase. The CVMA has been actively involved with Industry Canada and the Treasury Board federally in assessing the cost of regulatory compliance in a number of areas. The commission also identified the harmonization of the GST and the PST as a key issue of concern to Ontario business. We concur.

The CVMA has been a long-standing advocate of a harmonized sales tax regime for Canada. It remains our belief that there are significant benefits to be achieved for consumers, governments and industry through sales tax harmonization.

The CVMA understands the government's concern about the transfer of the estimated $3 billion of RST paid by businesses on business inputs to consumers, but consumers are already paying the cost in the price of the products they purchase. Presumably, if the RST was to be harmonized with the GST, prices to consumers would go down by the amount of RST imbedded in the product, much like the average vehicle reduced in cost by about $600 when the GST replaced the old manufacturers' sales tax.

While the broader base of a harmonized tax and any regressive impact of the tax on the poor and underprivileged may also be of concern, they could be addressed through a system of credits and transfers, much like the GST.

Further, the Red Tape Commission in its report, Cutting the Red Tape Barriers to Jobs and Better Government, recommended that: "Where all the provinces are unable to come to a national agreement on getting rid of specific instances of regulatory overlap and duplication, Ontario should negotiate bilateral agreements with the federal government to achieve harmonization and remove overlap."

We would encourage the government to adopt this recommendation with respect to sales tax harmonization. The principles of harmonization, a common sales tax base, a common rate and a single administration may be somewhat Utopian, but it remains our belief that Ontario has a pivotal role to play in any further sales tax harmonization efforts and that Ontario, and indeed Canada, would benefit by Ontario's taking a leadership role to negotiate harmonization terms it can live with and move forward.

Harmonization of the sales tax regimes would assist the automotive industry with respect to the tax on warranty repairs that imposes an unfair burden on the auto industry.

Historically, and if you go back as far as May 1993, the budget extended the application of retail sales tax to warranty repairs without any consultation with industry. The application of the RST was also made retroactive to products sold with warranties prior to May 20, 1993. Extended service contracts were also taxed, which actually resulted in double taxation.

We have several concerns with this. First off, the tax is a direct attack on the auto industry, as we have the most comprehensive warranties of any consumer product; in fact $63 million of the $100 million the tax generates comes directly from the auto industry.

The tax is the only one of its kind in North America levied in this manner, and it sets a dangerous precedent for other provinces. Perhaps most important, this tax is an example of a poor tax policy in that it represents double taxation, as the cost for the warranty is already built into the price of the vehicle, which is taxed when sold. Now the warranty repairs will be taxed once again.

In terms of recommendations, we would like to recommend the following: The taxing of business inputs and the tax cascading that is inherent in this tax are indicative of poor tax policy; for these reasons alone we seek repeal of this tax. Harmonization of the RST with the GST would remove this tax from business input costs, thereby improving the competitive position of Ontario in Ontario's automotive industry, which bears the brunt of this tax nominally.

That concludes our comments. We're here to address your questions.

1540

Mr Gilles Pouliot (Lake Nipigon): Gentlemen, thank you for your presentation and the opportunity to learn more about your industry. I would have imagined that with the clout, the contribution you make through your members, you would come here with six or seven pages of recommendations. I'm certainly pleased to notice that when you talked about broadening the tax base through the process of harmonization, it's a natural flow, you also mentioned an opportunity for the government to benefit and to recognize that some are less fortunate and more vulnerable to harmonization than to the broadening of the RST. That point certainly is well taken.

I was unaware that you produce twice the number of vehicles that are sold in --

Mr Nantais: There's a range, and we have one company that actually produces three times the vehicles it sells here. That's a tribute, of course, to the auto pact itself and the entrenchment of those principles in NAFTA and the fact that over about 88% of all the vehicles we produce here go Stateside.

Mr Pouliot: We have a little more than seven million Ontarians with drivers' licences in good standing. We readily acquiesce to your good office in terms of safety measures such as the graduated driver's licence process, where we had -- you're in the business of selling vehicles. We were nevertheless cautiously optimistic, and I certainly wish to thank you for your contribution, and your good office, that of the previous administration.

Do you feel that the supplementary tax on luxury vehicles or any tax is a deterrent? Whom do you compete with? You see, I'm a consumer; the car will last regardless. Let's say I'm in the market for a car. If I don't buy the car here, where do I go, or do I just delay buying a car?

Mr Nantais: I think it's the question of delaying the purchase. One thing we know for certain is that the decision to purchase a new vehicle is a deferrable decision. We are now in a situation where the whole question of vehicle affordability is becoming a great concern. When you look at the price of cars today versus 10 years ago, yes, the cost has gone up dramatically, and that cost is attributed to a number of different things, such as emission control systems, the addition of new safety equipment, for instance. All these things add to the costs. Any time you add tax on to the vehicle, whatever form, it raises the issue of affordability, it raises the issue of access by vehicle purchasers in terms of buying that vehicle. There are a lot of attendant issues that are with that, obviously. You lose revenue if you're not in a position to buy those vehicles.

In addition to that, there are also some environmental issues, for instance. The vehicles we are now selling have reduced emissions by 98%, compared to the pre-control period. If we are to achieve some of the environmental goals that we want to achieve, then the idea is to turn the fleet over as quickly as you can, get the cleaner vehicles out there as quickly as you can. Any deterrent to purchasing a vehicle because of price is a deterrent to achieving, in some cases, your environmental objectives.

Mr Pouliot: But you're generous. You also make mention of the tax cut, which obviously puts more money into the consumer's pocket, so there's a bit of a balance. When we talked about the implication it has -- I read the odd financial pages because I've got to keep up with my distinguished and learned colleagues of the other two parties. It doesn't mean that I do so with reluctance. When I read about the contribution you make and I look at your financial arms, like GMAC -- because it's not all people on our side who can ill afford to pay tax. We see it as necessary not so much as an investment, but we need a vehicle to get around and a chance maybe to be like the others. We don't drive the same product, but that's neither here nor there.

Do you have a concern? When I look at the banks and their attempt to get into the financing business and so on, they make a lot of money; it's quite lucrative to assure the financing. When you sell the product, to have your financial arm rake in the profits, I would expect that this would be the major or certainly a major concern, but you're here only to tell us about the production end of automaking?

Mr Nantais: I'm going to turn this over to Dave in a minute here, but we're not here just to talk about that. Obviously it's certainly to provide you with the information in terms of what our industry means to Ontario's economy and some of the key issues in terms of making sure we're able to maintain the levels of production here.

I want to be absolutely clear that we are in no uncertain terms opposed to banks entering the direct retail leasing market, for a number of different reasons. That was an issue we've been dealing with the federal government on in terms of the financial services sector and the amendments to the legislation that govern that sector. The affiliated financial arms, for instance, of the Big Three provide many more services than simply a bank entering into that market. A great deal of money from those companies is actually reinvested in Canada. I'll turn that over to Dave just to give you a little more in-depth view of that.

Mr David Adams: Yes, we could certainly provide you with some figures on that if you are interested in that regard. As Mark says, both our finance companies and the finance companies that are affiliated with the import manufacturers are foursquare against the banks entering into the vehicle leasing market. I guess some of the reasons for that are as Mark has already alluded to. A finance company does provide more services to the dealer body, more services to the manufacturer than just leasing vehicles. They are into areas of financing at the dealership level that the banks have retracted from simply because there's no margin in it for them. So the finance company moves in to support the dealer body, to support the manufacturer when the bank won't, essentially.

Another reason that we have a concern about banks entering the vehicle leasing is the whole notion of residuals at the end of the lease. It's our view that the manufacturers and finance companies are in the best position to determine how those residuals should be set. If you take a look in the United States in terms of what happened down there when the banks got into vehicle leasing -- granted, the structure is substantially different in that they have no national banks; they have a lot more state-run banks, that kind of thing -- a lot of banks entered the vehicle leasing business and ended up getting burned on the back end of the leases because they set the residual values on those leases too high. They were bringing the vehicles back off a two- or three-year lease and not able to sell them for the amount they were bringing them back for.

In a nutshell, those are some of the concerns.

1550

Mr Joseph Spina (Brampton North): Gentlemen, thank you for coming. Good to see you again. I know we've sat across the dinner table because your industry is in my ministry as a sector.

A couple of things: Thank you first of all for bringing attention to the double taxation on the warranty issue. I know you've brought that forward not just to our government but in the past, from the beginning of its imposition. I think it's an extremely valid comment. What we didn't see here was the financial impact of that double taxation, the amount of money that would impact on government coffers, frankly, but what savings you might realize by the elimination of that double taxation on the warranty.

Thank you for bringing up the tax break that we introduced. There's no question that we feel the consumer can use that as a down payment or whatever.

I want to go to the 1995 sales volume. Does that include the new and used or is it strictly new car sales? This would be your industry overview sales figure, the bar graph that puts the 1995 figure at somewhere just below 460,000 units for 1995.

Mr Nantais: These would be strictly new car sales.

Mr Spina: We briefly touched on it earlier before we organized the committee, but there were a lot of incentives in the automotive industry to turn over new car units. What can we do as a government over and above what we've already talked about regarding the taxes and the personal income tax break that could stimulate this? What's the reason for the softness, shall we say, in the market?

Mr Nantais: I think it's a continued lack of consumer confidence in the economy. In spite of some renewed confidence, we still see a problem there. A lot of people are still very concerned about their jobs, about consistent income in order to pay for such a large purchase. That is one aspect of it. Clearly you're on the right track by reducing personal income taxes. The question of whether you do it in one year or over the next two years, it may be worth considering doing it over the next year so that we can stimulate and capitalize on some of that growth in consumer confidence.

Mr Spina: Speed it up, as it were?

Mr Nantais: Yes.

Mr Adams: The other thing we have to realize is that any money that's put back in the consumer's pocket can be used for a variety of different things, and because our members and all manufacturers in general tend to be building their vehicles a little bit better, they tend to hang on to their vehicles a little bit longer and they would rather opt for home renovations or replacing the dishwasher as opposed to looking at getting themselves into a new vehicle. So there's that consideration as well. You just have to be cognizant of that.

Mr E.J. Douglas Rollins (Quinte): Thank you, gentlemen, for bringing your industry to Ontario. Keep expanding here, because there's no question about it: The more you do here, the better off we all are as Ontarians, regardless of whether we're on this side of the table or on that side.

One of the other things I find fairly interesting -- I know you want to harmonize the tax, but do you realize that when you do harmonize it, it may help your industry in some things but there are some consumers out there who may not be benefited? Ottawa, if we just straight harmonize, would pick up an extra $3 billion or $4 billion out of the taxpayers of Ontario. That's probably one of the reasons our finance people are not awfully enthused about doing that.

Another question I'd like you to answer: I know we all see lots of cars and trucks on the roads, carrying cars and trucks and that thing. Do you have any record of how much you ship by rail and how much you ship by road? Every day, with the wheels coming off and all the rest of the things, we hear all that kind of talk about the heavy load of 401. Does your industry do something to -- I know you ship some rail, but how much?

Mr Adams: We could probably get you some fair figures on that, Mr Rollins. One of the things you have to realize and you probably already know is that over the course of the last, say, 10 to 15 years even, the whole industry has moved much more to a just-in-time type of manufacturing process. That really necessitates the use of trucks more so than rail, because you can get that part right to the line right at the time it's required for that vehicle to be built. So I could see that, yes, if you looked at it over the course of the last 10 to 15 years you probably would see at least a bit of a switch from rail to the truck mode of transportation.

Somebody mentioned it to me the other day, but another issue could be just the infrastructure we have in place here if we aren't repairing the roads. Some of it has to do definitely with the state of repair of the vehicles, the trucks, but perhaps some of it has to do with the state of repair of our roads in Ontario as well. If there are potholes, then maybe there's a reason why the bolts are coming off and that kind of thing as well. I take your point, and we can determine those figures for you.

Mr Kwinter: I'd just like to get a handle on the market. You say that you produce twice as many cars as you sell in Ontario, or in Canada, I guess, which means about 85% or 90% of the cars are exported to the United States and there's a relatively small number of models that are actually made in Canada. What I'm trying to figure out is this: The twice as many cars that are produced, or the half the number of cars that are sold here, there must be an awful lot of those that are imported cars. When I say "imports" I don't necessarily mean offshore Japanese or German; I'm talking about General Motors, Ford, Chrysler, because a lot of those models aren't made in Canada and they've been bringing them in from the United States or wherever.

How does that relate to the numbers? You get the impression when you read this that the major manufacturers you represent produce X number of cars, of which half are sold in Ontario, but those half are not really sold in Ontario; 90% of them are exported, and the rest of them come in from somewhere else, representing those companies, but they're not made here. Is that correct?

Mr Nantais: Sort of. Generally speaking, because of the auto pact you see a free flow basically between Canada and the US, primarily of vehicles that the Big Three produce. I mean, Volvo -- we have auto pact players, obviously. Clearly the percentage of vehicles, if you're suggesting, that might come from offshore in terms of the Big Three's products are very few. There are generally those which have been produced in North America that move freely across the border.

The transplant companies that are here, of course, the preponderance of those vehicles are from offshore still, which has always been our claim as to why we've always suggested they should be auto pact players and should meet the same requirements as we do in order to create more employment, create more sourcing in Ontario and continue to expand the industry in Ontario. But clearly the number of vehicles that come from offshore in terms of what the Big Three are offering is very small.

Mr Adams: To extend on that a little bit too, Ontario, Canada, does have certain world mandates for vehicles. For instance, the Ford plant in Oakville with the Windstar has a world mandate to produce that vehicle. Chrysler up in Joe's riding just has the world mandate now to produce the new Intrepid/Concord line. So there are certain world mandates that Canada is fortunate in having the production for.

If you look back to pre-1965, pre-auto pact, you would have found in the factories around Ontario, Canada, where exactly that situation was going on where they were trying to produce the full range of vehicles for the Canadian market. That was inefficient. We didn't have the economies of scale there, and that's what prompted the auto pact which would say, "Let's set up specific plants on either side of the border to make specific models and then there would be the free flow of those models across the border under the terms and conditions of the auto pact."

Mr Kwinter: I'm hoping one of the recommendations that comes out of this committee will be one that will address the double taxation on the warranties. That's something I've advocated for a long time. It was part of our platform in the last election. I agree with you, it's double taxation. It's the only jurisdiction in North America that does that, and it makes no sense other than as a tax grab. As I say, I hope that is something that will come out of this, that we can all have some unanimity about, to have that happen.

Mr Nantais: We would certainly welcome that recommendation.

Mr Adams: In some cases there's actually triple taxation, as you may be aware, through the insurance that is often backing up the extended warranty plans that people buy. There's tax on the insurance policy as well. So there's tax on the insurance, there's tax on the extended warranty repairs and there's tax on the warranty that's built into the vehicle. It does become a bit of a tax waterfall.

Mr Kwinter: I'd like to also, in the remaining time I have, talk about the harmonization. To date I think -- I may be wrong because I missed one session yesterday morning. But to my knowledge there's only one sector -- as I say, there may be one or two more -- that's advocating not harmonizing the GST and the PST. The Canadian manufacturers' and exporters' association are supportive of it. The agricultural sector is supportive of it. The Retail Council was here today and is supportive of it. The pharmacists are here and supportive of it. The auto manufacturers are supportive of it.

So you certainly have the bulk of the economic sector -- and having said that, I can just spot out of the corner of my eye Mr Seiling here in the hospitality area, and he probably has a different view. We'll hear from him shortly. But it would seem to me that with that sort of preponderance of players in our economy who see this as a benefit, you'd wonder why this isn't being done.

I understand, as the retailers were saying, they want to have a level playing field; they don't want to have it harmonized and have one jurisdiction with maybe an 11% sales tax, another one with 0%, like Alberta, so that you have these discrepancies and you have people who are tax shopping depending on the jurisdiction. Can you just elaborate on how you see it and how it would benefit you?

Mr Adams: Briefly, we're a country of 30 million people and it makes absolutely no sense why we should have 10 or 11 different sales tax jurisdictions for this country. In terms of advertising campaigns, it would save everybody a lot of money to be able to do national advertising campaigns for products. I'm sure you've heard some of these same issues raised before, Mr Kwinter. We can elaborate on that for you if you'd like.

Mr Nantais: There's also the cost of administrating those different tax regimes, which is just phenomenal.

The Acting Chair: Gentlemen, thank you very much for your presentation and assisting the committee here today.

1600

ONTARIO HOTEL AND MOTEL ASSOCIATION

The Acting Chair: Our next presentation is the Ontario Hotel and Motel Association, Mr Rod Seiling, president. Welcome back, Mr Seiling.

Mr Rod Seiling: Thank you for the opportunity to appear before you today. You know my name's Rod Seiling. I'm president of the Ontario Hotel and Motel Association and the Hotel Association of Metropolitan Toronto.

Before beginning, I want to take this opportunity to thank this committee and this government for the positive response to our presentation last year. It was certainly gratifying to our members all across the province to know that through this consultation process they can affect public policy in a positive way as it impacts on them and their businesses.

We understand and support the government's need to get its fiscal affairs in order. This is something that our members have had to do and expect that government should not be isolated from those same economic and fiscal realities. We also appreciate the initiatives taken to date to restore a favourable business climate in the province. The positive results are starting to appear, but as was the case going into the recession, it appears our industry is lagging behind in the recovery as well.

Our members are part of the tourism industry. Tourism is the world's fastest-growing industry. Not surprisingly, other countries and other provinces, our competitors, have recognized the many benefits tourism can bring to their respective economies. The World Travel and Tourism Council predicts that by the year 2005, tourism is expected to more than double its current gross domestic output to $7.9 trillion, generate 90% more jobs, almost triple its capital investment to $41.7 trillion, and attract more than double the current level of consumer spending to $4.6 trillion annually.

Last year we asked this committee to become involved as it relates to support for tourism. The decision to move tourism back into economic development was a good start. Tourism is economic development; most everyone recognizes this. However, just having it in the right ministry will not bring about the positive results tourism can provide to the economy as it relates to job creation and new tax revenues.

Ontario's support for tourism has shown a drastic decline over the past number of years. The province at one time not too long ago had a tourism marketing budget of approximately $27 million annually. Successive governments have cut this number down to where it is reportedly around $7.8 million and rumoured to go even lower in the forthcoming budget. It is interesting to note the difference in the level of support for agriculture versus tourism, with agriculture representing 3% of the province's jobs and tourism 6%. This comment is not made to denigrate agriculture but to point out the difference in support.

The state of New Jersey was about to begin this same cost-cutting exercise. Fortunately for the industry, but even more fortunate for the state and its citizens, the governor, Christine Whitman, requested that a study be done to examine the overall impacts. To her and her officials' surprise, the study, which was conducted by Blackwoods, an Ontario company, revealed that for every dollar New Jersey invested in tourism marketing, it received $4.40 back in direct tax revenues. Not surprisingly, the decision was made not to cut the funding. Also not surprising, New Jersey has increased its commitment to tourism by 60%, just as other competing jurisdictions are doing likewise. A study for Hawaii has reported the same kind of information, with the return there being $8 per dollar of investment. Conversely, in Colorado, a cut in their budget has resulted in a 40% decrease in their tax receipts from the industry.

Fortunately, the federal government has recognised the job-creating benefits of tourism. The Canadian Tourism Commission, CTC, established initially with a $50-million budget and just increased by another $15 million, has helped make up for some of the lost funding. That is the good news. The bad news is that the program is on a matching-funds basis, and with Ontario's cutbacks, our competing provinces are gaining at our expense with our own tax dollars. The president of the CTC, Doug Fyfe, has called Ontario a black hole as it relates to tourism marketing.

Unfortunately, many officials don't appreciate or understand the industry and take a laissez-faire attitude towards it. Tourism is not just on their road map, and that is truly unfortunate: unfortunate for the industry, unfortunate for the thousands of unemployed people all across the province, and unfortunate for government, which is forgoing new sources of tax revenues.

That attitude is one of the major reasons why our share of tourism receipts continues to decline in a growth market, as the accompanying chart 1 shows you. Just as disturbing, we are losing market share within our own province, as chart 2 shows. The major reason for this decline is a lack of awareness, as chart 3 demonstrates. While we have experienced a growth in actual dollars, it is very troubling to our members that they see these lost opportunities go to other destinations when it is universally recognized we have the product.

We are not suggesting that Ontario needs to be the number one destination. What we are suggesting is that the province be allowed to compete fairly in this market. On that basis we are confident that the industry will grow and prosper and in the process create new jobs. This will require business investment by the province in the area of marketing and the further provision of a level playing field.

We would not be so presumptuous as to expect the government to invest without an expectation of a return. Chart 4, which I think is the most important chart here today, shows that there is room for a return; that is, there is a reasonable expectation to grow the business. Private industry is prepared to come to the table as well. Destination marketing is a vital component to the success of the industry. There exists general agreement on this from all concerned. The difference of opinion exists on how and who should be funding this fundamental tenet. Over the coming year the industry expects to be able to provide you with a proven business case as to the returns government can expect from investing in our industry. As in any business, we would hope and anticipate that the expected attractive investment opportunity will be well received. You should also note that the industry is not looking for a handout. As I said earlier, it is prepared to become a partner with government in this critical function.

I should also add that this is a problem that is going to become critical in the very near future in Toronto. A major portion of funding for the province's major convention and tourism destination is being withdrawn. That will put in jeopardy about 40% of the province's tourism business and the 100,000 jobs it represents in this market.

As was mentioned previously, the industry also needs to have a level playing field if it is to reach its full potential. In that regard, there are a number of areas the government can act in to provide more fairness.

One of those areas is access to credit. Last year's budget provided incentives for the major banking institutions to lend to small business. Those provisions may be meeting the objectives in other sectors, but I can assure you that for the tourism business that is not the case. Reports from our members indicate the general policy of the financial community of not lending to the industry still is the rule. I have been told by operators who state they have a good credit rating that they need to pledge their first-born and then are not assured of receiving a positive response if they want to get a loan. Loans for as little as $5,000 which would be repaid in the same year out of receipts are turned down, we have been told.

These horror stories are not just related to small mom-and-pop operations. They also include the so-called big operators located in major centres. Our stock of businesses is surely being taken over by purchasers who are located out of Canada. They are taking advantage of what they see as good value in our businesses and buying them up at approximately half of replacement cost. They have access to capital and are taking advantage of it to the detriment of our local investors and entrepreneurs.

Ontario business owners in our industry will continue to disappear if they are not able to secure financing on a reasonable basis. Those businesses are caught in a proverbial catch-22. They know they need to upgrade and improve to remain competitive, but they cannot get the funding to make it happen.

There are a number of areas in tax policy where the government could and should, we suggest, make changes to provide a level playing field for the industry. Currently accommodation providers with four rooms or less are exempt from collecting the provincial sales tax, PST, and are assessed for property tax purposes as residential. These exemptions are patently unfair and are proving to be a major negative impact on economic viability, particularly in smaller communities.

These operators are finding that these exemptions are making it very difficult to remain competitive. To remain in business, they are cutting staff and refraining from making needed improvements just to try and stay alive. They realize this reaction is counterproductive, but without a short-term future they recognize there is no need to be concerned about the long term. This is a real problem for these owners. In many of these communities, these exempted operators, small bed and breakfasts for the most part, outnumber the traditional roofed accommodation providers.

We ask you to remove these exemptions. There may have been a need at one time to stimulate this segment of the industry, but we suggest that was not meant to penalize the rest of the industry, and clearly it does. The tax system should apply fairly to all. It should not favour any group within a sector over the other.

1610

An issue has also developed relating to the own-use payment of PST on promotional items. For example, if an owner purchases a sweatshirt and gives it away to someone with an expectation of it generating future business, PST must be paid despite the fact no money has changed hands. Federally, the GST is not collected on that basis, because no money has changed hands.

We suggest this issue could also be looked at from the perspective of lessening red tape. Perhaps the province could adopt the same position as the federal government. This could also take the form of bringing the province to the same position as Ottawa or providing an exemption for promotional material; we suggest up to a value of 5% of an operation's gross sales. It would provide owners with more opportunities to promote their respective businesses.

The industry continues to suffer from a totally unfair system of taxation on beverage alcohol, as noted by the government's own Red Tape Review Commission. This form of double taxation is not only a major reason for the ongoing non-performance of the hospitality industry; it also continues to promote the perception to our out-of-province visitors that Ontario is a high-tax, high-cost destination.

Hospitality operators are taxed twice on beverage alcohol, a flat 12% tax plus an additional 10% PST; in essence a tax on a tax. Manufacturers are also subject to high taxes on their products. For example, distillers pay a tax of 83%. Brewers and wineries all pay similar taxes. In addition to these taxes, the industry is also subjected to other levies and fees.

The net result is a product that costs too much and one which we suggest has reached the proverbial tax wall. Proof of this statement is the high incidence of illegal product that continues to flood the province. This influx of illegal product is costing jobs and tax revenues for the province. We suggest the province look at introducing a fairer system of taxation, one that is fairer to the hospitality industry and still meets the government's social objectives in this area. The government has previously been provided studies which show that it can increase jobs and its own revenues by providing for a fair system of taxation in this area. We urge you to accept the red tape review panel's suggestion as it relates to this area.

The hospitality industry in Ontario is perhaps one of the only industries where there is not a wholesale price for its product. We also ask the government to assist the industry to help us bring this about. In doing so, we are not suggesting that it can only come about through privatization. We believe there are other ways and means for this to happen and we'd be pleased to discuss this with the appropriate people. Wholesale pricing must come to the industry if it's to regain its former vitality. Product costs cannot remain nearly double to that of our major competing jurisdictions.

The red tape panel also recommended that the industry be provided with the ability to purchase alcohol products on commercial credit terms. We applaud the panel for this recommendation as it provides the industry with the same treatment as the general public. We ask that this committee assist in moving this matter forward as soon as possible. It is something we have been waiting for for some time. This is simply a matter of fairness. Surely the government intends to provide the same terms of purchase to its licensees as it does to the general public.

Other provinces have allowed licensed owners the ability to have off-premise sales. This has worked very well for all concerned. It has provided the public with better service, it has enabled the government to be more efficient in the respective operations and has given licensees a much-needed source of revenue. This provision has been particularly beneficial in rural areas.

Licensees are already trained in matters related to the sale of beverage alcohol. This is done through an industry self-regulated training and certification program. Off-premise sales have not caused problems in other provinces, and with the proven capabilities of the industry here we suggest this to be a win-win scenario for all the stakeholders concerned.

Northern Ontario has been slower than the rest of the province to see the positive signs of a recovery in our industry. One of the reasons appears to be the high cost of gasoline. Gas costs in the north are about 15 cents a litre higher than they are in the rest of the province and visitors appear to be speaking out by their absence. We would ask this committee to look into these inordinately high costs, as they are having a dramatic negative impact. The vast majority of our northern tourists arrive by car. Further, the majority of activities, snowmobiling, boating etc, require gasoline. Hence the price of this product can be a major consideration in the choice factor.

Infrastructure is important to our industry as well. In particular, roads are our industry's lifeline, and with the demise of the railroads as a means of moving goods, so too for the rest of the economy. Just-in-time delivery is a fact of life today and for it to work, it is essential that Ontario have a good highway network. Last year, 1996, almost five million automobiles came into Ontario from the United States, the majority of them we believe for tourism purposes. As an aside, that figure is down 4.5% from the previous year.

If we expect them to continue to return, let alone to tell their friends what a great place Ontario is to visit, it is imperative that we have a road system that is in a state of good repair and safe. Unfortunately, Ontario's highway system is starting to see the results of years of neglect. We appreciate the commitment of the Minister of Transportation, Al Palladini, to increase the budget for resurfacing and maintenance. It is a good start, but it must continue. We urge you to ensure that this initiative remains a high priority.

The government has introduced Bill 106, which will bring fairness to the property tax system once it is passed. The key to having the government's objectives met is the setting of the variable tax rates. It would be truly unfortunate if the benefits of property tax reform were to be negated by rates which allowed respective municipalities to thwart the government on this issue. We suggest this aspect of property tax reform is as important as the passage of the legislation itself.

In conclusion, the initiatives the government has introduced are helping to bring about a better business climate for our industry. However, it has still not recovered, but the measures we have suggested will go a long way to restoring the economic health of our industry. It is an industry which provides point-of-entry jobs to our youth and to those who are looking to re-enter the job market. It is also an industry which provides government with substantial tax revenues. Best of all, it is an industry which responds immediately to an increase in demand by hiring more people.

We ask that you view our suggestions as providing our industry with a level playing field on the one hand and a prudent business investment on the other.

Thank you very much.

Perhaps as an aside to Mr Kwinter: Note the GST harmonization.

Mr Jim Brown (Scarborough West): Welcome, Mr Seiling. On page 3, I noticed that you talk about one of my pet peeves, which is the financial community. I suspect we're talking about the chartered banks, but I'm not quite certain about that.

The Canadian Federation of Independent Business was in and said that 30% of their members had a problem with acquiring capital for modernization or expansion. They represent the companies already in existence, certainly not new companies, and I think the statistics on new companies would be even higher than 30%, probably about 80%. As we all know, small and medium-sized enterprises create 85% to 90% of all new jobs.

I'm wondering what we could do to increase the amount of competition to the existing narrow lenders, ie, the chartered banks. We've talked about expanding the role of credit unions, but there's only been one new credit union in the past 15 years because of red tape. We've talked about expanding the role of trust companies; they can't loan to small business unless they've been around for five years. The labour-sponsored investment funds are sitting on $800 million worth of investment and they're not going to give it to the little guy, and their average deal size anyway when they do make a deal is around $2 million. What can we do to help the little guy and the not-so-little guy in the tourism business?

Mr Seiling: There are a number of things. First of all, you're right, the banks have not changed their attitude one iota towards this industry. Funding is not available, period. For the most part, any funding is offshore, as I said, unless you've got the resources to pledge. It's not a joke that people are out there saying, "If I pledge my first-born, I might get through the door, but I'm not even assured of a loan." That's not my quote; that's people from the industry saying that to me.

Part of the problem is that there is not an understanding of the industry within the banking community, and second because especially the small and mid-sized operators are not sophisticated enough to come in with a fancy-dan business plan which has all the bells and whistles and more than likely with a consultant sitting beside them. While large businesses, by and large, are able to do that and have the wherewithal internally to do those things, there's a reluctance.

Of course, in fairness, we mustn't forget that during the recession it was this industry that was just decimated, so there were a lot of losses in the industry. Conversely, it's one of the areas that has the largest opportunity for growth. The world has discovered tourism. Unfortunately, our bankers haven't discovered the possible returns for it. As I said earlier, our competitors around the world are investing, they're building, whether it be attractions, accommodations, whatever. Tourism is going to be the number one business in the world in the not-too-distant future. Either we're going to get on board and grab some of that or we're going to miss the opportunity.

Mr Wettlaufer: Rod, I went out west last summer. The Germans and the Japanese I saw in Alberta fascinated me because I saw so many of them compared to what I was seeing in Ontario, and your numbers reflect that. One of the things I heard was: "We've been to Ontario. We've seen Ontario." Then, in further elaboration, they mention that they've seen Niagara Falls; to them, that was Ontario. What specific suggestions would you have to encourage more awareness with those tourists?

1620

Mr Seiling: It's simply marketing. The cutbacks in marketing have been so dramatic and --

Mr Wettlaufer: Specifically, though.

Mr Seiling: You need programs. We know we have the product here. People come back here an average of seven times. They wouldn't come back that many times if they didn't like it. We know we have the product. What's happened, if you look at chart 3, is that the awareness level is decreasing simply because we're not in the market any more.

What's even more frustrating to us in the business is that the federal government has put this wonderful program in for matching dollars and there simply isn't the ability to match it. Tax dollars that Ontarians are paying to the federal government are now being used to compete against us, to siphon off that market into other provinces. We are still getting a share in our market; in actual numbers it's growing slightly, but we're not near reaching our abilities.

Open skies is going to help. What's happened and what has to happen is what we call a spoke-and-hub. Toronto is the major gateway for this province, for this country. Working with operators in conjunction also with good marketing programs can take people out of this hub here and spoke them out to the rest of the province. It's a strategy that's being worked on.

As I referenced earlier, there is some work going on with the ministry right now. We believe we can make a business case to the government to show there's a reason to invest. Unfortunately, the industry has no one to blame but itself. It's allowed these cutbacks to happen and not said anything over the past five or six years, to its detriment. It hasn't made the business case.

Quite frankly, tourism hasn't been on any government's agenda for so long, everyone's missed the boat. Yet it's the best industry around, I would suggest, for hiring young people, for getting people back into the workforce, whether they be new Canadians or people out of a job. There are excellent careers in it, but it's that transition of getting people to learn how to work, to get them to get back on the path, whether they've lost a job or they're making a career change or whatever. There are great opportunities. I like to call it a port of entry or point of entry. It is that jumping-off point to get back into a job, get back into the workforce and to get your life back in order.

Mr Kwinter: You make a good point about the cutback in funding for tourism per se. One of the major problems, and I'd like to get your comment, is that we at one time had offices around the world. Contrary to what a lot of people thought -- they didn't quite understand the role of those offices. It wasn't just trade offices; there were also agricultural sectors but primarily tourism reps.

Tourists, regardless of whether they're from Germany or Japan, have lots of alternatives. They have money in their pocket and they can go anywhere they want to go. Unless there's somebody there showing them why they should come to Ontario and they can have that one-on-one discussion, you're going to lose a lot of that tourism dollar. Do you agree with that?

Mr Seiling: Quite so. There's so much competition in the marketplace and every country has jumped on the tourism bandwagon. If you're not in the marketplace, they're going someplace else. It's clearly a case that you're either in the business or not in the business, and in terms of tourism, for whatever reason, Ontario got out of the business. Yet it's a great opportunity to create jobs and give government tax revenue. On point of return, we have to be one of the more heavily taxed industries in that for every incremental dollar you bring in, close to 30 cents goes back into direct tax revenue, not even indirect.

Mr Kwinter: Over the last couple of years when you've appeared before this committee, you've chronicled the woes of the industry in the way that occupancy rates were down, room taxes were high, the costs of operating were excessively high. There virtually wasn't a hotel that wasn't in financial trouble.

I track this industry fairly carefully, and I've noticed in the last few months that there has been a total turnaround, not necessarily in the industry but in the ownership. At one time there was a standard joke about hotels and AIDS: You've got a hope of maybe getting rid of AIDS, but you'll never get rid of a hotel. That has changed very dramatically. I notice that hotels are changing hands, with foreign investors, American investors coming in. There aren't a lot of Canadian investors, and that's the point you make in your presentation. What is the attraction for these foreign investors that is not being equalled by Canadian investors or people who actually own the properties at the present time?

Mr Seiling: There are a couple of things. First, what we're seeing is lending institutions finally getting rid of properties, but they're still getting rid of them at fire-sale prices, approximately half replacement cost. You're quite right, especially here in Toronto, which was decimated by a very inequitable property tax system, which Bill 106 is going to address positively. We're very much awaiting its passage.

But the average full-service hotel replacement cost today is about $160,000 to build per room. For example, the Delta Chelsea just sold for $80,000 per room, and everyone said, "See, the industry's great. Everything's fine; everything's wonderful." I don't equate selling something for half its cost as being a sign of good times. It's gotten better. Occupancies are starting to turn around, but average daily room rates are just barely passing the mark they were at back in 1988. I don't know of any other product that you can buy in 1997 for the same price as in 1988; we've absorbed all the cost in between. But you're right.

The third part to your question goes back to Mr Brown's question. Off-shore companies and US companies see Ontario as good value and they're going to invest here over the long term. It's a safe place to park money and they're looking for the long-term return. There's no Canadian money available, so these institutions are selling off to whoever's got the dollars, and these other people that have the dollars are going to buy, and they are buying.

Mr Kwinter: Every once in awhile you get a Mrs Lai who goes into Niagara-on-the-Lake and pays over $200,000 a room.

Mr Seiling: That's right, and she owns every property in Niagara-on-the-Lake now.

Mr Pouliot: I marvel at your choice of words. I must admit it's the first time, by way of analogy, that you would pledge or mortgage or use the first-born as collateral. I'm not so sure this would improve -- what about the first-born seen by the lender as a liability? It certainly would not enhance your potential. Mr Brown, perennial and residual -- with respect, you can always rely on my distinguished colleague. He's not very compatible with bankers; he doesn't like bankers. Some of us to the left of Mr Brown suspect that he has two problems: one is collateral, and the other one is cash flow. Some others would go as far as to say that Mr Brown is a capitalist without capital.

You hit us with the prospect of a New Jersey, a dossier followed very closely by the regime du jour, the present administration. Tourism is forgotten. It seems that when things go well it's the last budget to be increased and when things go badly, it seems in the minds of many to be expendable. Almost inevitably, when the formation of a cabinet is made, the Premier and one or two advisers, the ministry of tourism and recreation is -- you know, health is the big thing. If you can have finance, you're okay, but it's fair to say that tourism and recreation is not given the importance it deserves. Yet when you bring forth the multiplier, it's very good.

1630

In order to compete, we know we don't have the weather. We're not the Floridas and Barbadoses of this world, and there are so many beautiful and exciting places. We're also aware, given that our neighbours are 266 million to 270 million people, of the impact of the difference in currency.

I have a question. You haven't mentioned the minimum wage. I've been listening to presentations and laments for 12 years here and I'm losing my feel for it because some of the briefs were so predictable. You mentioned the tax on booze, the double taxation left and right. Compared to other jurisdictions -- when we travel we look at state tax, we look at entertainment tax, we look at the tax that's hidden in a cup of coffee which is the cost. If we go to Europe, this place is a bargain, really.

If you had to focus on the one tax you would like to see reduced -- I mean, not me; I have as much clout as Mickey Mouse, but the people here who have the majority -- which one tax? Would it be the tax on rooms? Would it be the sales tax? Would it be the GST? Would it be the tax on spirits? Which one would it be?

Mr Seiling: I don't know whether you can point to one tax. I represent a broad industry. Those in the hospitality sector would certainly view the unfair taxation system on alcohol as being their prime; some others would view indirect taxes as another problem.

You mentioned the minimum wage earlier. Certainly we're very pleased the government has frozen it, because it is a real detriment. What we've seen is that every time the minimum wage was increased, we just hired fewer people.

Mr Pouliot: A hundred and twenty bucks a week is a lot of money to live on. You ought to try living on it.

Mr Seiling: If you're a student, $120 is better than not having any job. If you price that job out for what the return is, it's simply not filled. The net losers are the students and young people who are trying to enter the workforce. It's been proven time and time again. I know you have a different opinion, but the facts and figures would disprove you on that.

The Chair: Thank you, Mr Seiling, for coming in and presenting your case before us. I was interested to see the third party defending banks and the government asking questions about them. Things go round and round in this committee. Thank you for your presentation.

AUTOMOTIVE PARTS MANUFACTURERS' ASSOCIATION

The Chair: We now welcome the Automotive Parts Manufacturers' Association. Mr MacDonald, welcome to the committee.

Mr Ken MacDonald: We're very glad to have this opportunity to speak to you today. The association represents Canadian producers of parts, materials, equipment, services and suppliers of same to the worldwide automotive industry. Together, these producers generated about $22.5 billion worth of GDP in 1996, mainly in Ontario, and they employ collectively about 92,000 people, Canadians.

We are pleased with the general direction the government is taking. We have not come to second-guess their decisions, but only to offer, for two areas of particular concern, the benefit of our experience as managers in an extremely competitive and, may I add, strategic industry. For this consultation, several of our members gave their views. Those two areas are technical education and the public health care system.

By far the greatest concern facing our industry is the shortage of young people with suitable technical training. The automobile parts manufacturing industry has become one of the most technologically sophisticated industries in the world. Increasingly, parts makers are assuming more and more responsibility for the design of the parts they make, and those parts themselves are becoming far more sophisticated than in the past. I'm sure you'll know from reading advertisements of the advent of computerized brakes and ceramic parts as two examples.

There has never been a greater need for engineers, tool and die makers, quality control technicians and other technical people. Secondary and post-secondary institutions are not keeping up with this rising demand, in part, we think, because the cost of providing technical training per student is significantly higher than for other programs. Operating grants neither reflect this cost nor the importance of technical training for Ontario's future growth. At the post-secondary level, affordability becomes an additional concern, that is, affordability for students, a concern about access.

Employers cannot take over from the schools and colleges the full responsibility for technical education. Our industry already has its hands full with keeping pace with the rapidly changing needs of our workplaces through on-the-job training. It is imperative that school, college and university programs that teach technical skills not be limited or curtailed and that access not be hindered by a hefty tuition fee or an underfunded student assistance program.

Turning to specifics, the provisions in the provincial grant regulations under the Education Act relating to technical education costs and grants do not go far enough to assist school boards. Take, for example, the cost of instructional computers and tools to be used in teaching industrial arts courses. For instruction in CAD, computer-assisted design, the necessary server and 10 linked terminals cost together about $35,000. Assistance through the legislative grant is limited to roughly $20 per student per year, or for a secondary school with average enrolment, about $17,730. I'll just add parenthetically that the regulation sets out a more involved, more complicated formula, but speaking to the manager of capital programs in the ministry, that's roughly how it breaks down.

Clearly that limit needs to be raised considerably. Even the $10-million technology incentive partnership program -- I call it TIPP -- in which the province matches corporate donations for technical education, doesn't close the gap because it is limited to programs in grades 1 to 3.

We recommend that the legislative grant limits be increased and that TIPP be expanded to include purchases of equipment for programs in grades 9 and up and that its budget be doubled accordingly.

The repeated and deep cuts to university and college operating grants and the resulting increases in tuition we have witnessed in the past few years must stop. The cuts in 1996-97 alone were 16% and 15% respectively and came on top of the cuts of several previous years. Ontario's operating grants for universities and colleges per capita are now only 68% of the average of the other nine provinces and, per full-time equivalent student, 75% of the average. The share of costs borne by students has risen since 1986-87, from 10.5% for colleges and 18.2% for universities up to 24% and 33% respectively. Average tuition is almost $3,000.

Shifting this cost burden and the resulting hefty tuition fees reduce accessibility to post-secondary education and thus reduce the availability of people suitably trained for our industry. High tuition would force many students, particularly those with siblings or students of modest means, to choose shorter programs of study or choose college versus university programs. This situation is not only inequitable but, from our point of view, very importantly would aggravate the shortage of engineers and other technical people.

Think too of this. Employers in cities without a wide range of college and university program offerings are uniquely disadvantaged with hefty tuition fees to pay as well as the burden of room and board. Local students would be that much less likely to enroll in programs outside of commuting distance. It would thus be harder for the local employers to recruit for positions requiring education not available locally.

1640

The Ministry of Education and Training discussion paper, Future Directions for Post-secondary Education, suggests that if it is the students who derive the greatest benefit from their education, they should pay the largest part. We believe that the beneficiaries of education include students but also business and the community; that it is inherently impossible to measure the exact proportion of benefit enjoyed by each; and that therefore proportion of benefit is no basis for determining the students' share of the costs.

An increase in the size of loans available through OSAP or assistance from the universities and colleges themselves would not satisfactorily address the impact of high tuition. Students are going to be reluctant to incur substantial debts, especially if they want buy a home or start a family within a few years of starting their careers. We therefore urge the government not to cut post-secondary operating grants further and to consider increasing them to the 1993-94 levels.

The recently enacted tax credit for employers' expenditures on cooperative education is a step in the right direction. The creation of more cooperative education work placements will stimulate the growth of cooperative education. That in turn will help ensure that secondary and post-secondary students obtain skill sets that reflect the job market. Note parenthetically that the creation of more placements is essential if the Ministry of Education's proposed mandatory cooperative education for secondary students is to be viable.

Unfortunately, the credit now is limited to 10% of the wages or benefits costs, to a maximum of $1,000 per placement. Breaking that down to perhaps a typical placement, four months in duration with $10 per hour the wage paid, the credit amounts to only $680 before you take into account the admin burden of claiming that credit. We suggest therefore that the credit be increased to 25% and that the cap be eliminated. That increase would benefit students as well as employers, and in the long run would benefit the whole of Ontario by attracting high-skill, high-wage industry to this province.

The second concern of our industry is the preservation of the public health care system in Ontario. That system gives Ontario manufacturers a significant cost advantage over their competitors south of the border. In 1995 KPMG did a comparison of business costs, taking into account labour, industrial land and construction, electricity, and transportation in seven different industries in a variety of American and Canadian cities. By far the largest component of Canada's overall cost advantage is the cost of hospital, surgical, medical and major medical insurance premiums. On average, those costs constitute 8.2% of gross pay in the US but only 1% percent in Canada. We therefore oppose any reduction in the range of medical services financed presently through OHIP.

My last point: We applaud the government's attack on waste in government spending and overall reduction in the size of government. However, we would like to see more pressure on managers and deputies to do more with less. The experience of our industry is that that indeed is possible. Your managers' performance, and not their seniority or the size of their departments, should govern their rewards.

Those are the major points. They are summarized at the top of the submission distributed. I'd be glad to take any questions to be of further assistance.

Mr Kwinter: Thank you very much for your presentation. There's something that just jumps out at me, and I would just like you to explain it to me. It may be right, but it just doesn't seem right to me. When you talk about the $10-million technological incentive partnership program which is matched by corporate donations and is limited to grades 1 to 3, what kind of technological incentive partnership program is there in grades 1 to 3? I don't understand how that works.

Mr MacDonald: That question crossed my mind too when I spoke to Carol Lawson, who is the manager of that part of the budget. If you look at the expenditure estimates for last year, there's a line for "Education programs -- Other," which includes TIPP. She's evidently in charge; I spoke to her directly. She informs that it is a program limited to program offerings in grades 1 to 3. It must be a very basic introduction to technology. I am concerned that that's not the most important time to be presenting students with leading-edge technology.

Mr Kwinter: With all due respect, in grades 1 to 3 they don't have any mathematical skills, they don't have any reading skills, they don't have any writing skills. How can you possibly have a program dealing with technology that's aimed at grades 1 to 3? It makes no sense. With all due respect, I think there's got to be a mistake. I can't imagine anybody buying into a technological program aimed at kids in grades 1 to 3. It just doesn't make any sense. I am not saying that the issue is with you. I'm just saying that I would love to pursue that because it doesn't make any sense to me.

Mr MacDonald: It has to be a very, very basic introduction, no question. The information I've relayed to you is what's given to me from the ministry. The person I spoke to is the person who has responsibility for that area.

Mr Kwinter: Are you familiar with the program for training tool and die makers in Midland?

Mr MacDonald: Is it a particular college program you're referring to?

Mr Kwinter: No, it's an industry program. The industry got together and set up an institute to train tool and die makers up in Midland because they saw that there was a real need and a lack of that availability in Ontario.

Mr MacDonald: I've heard of a program of some sort in Midland, without knowing the details. I'll note in that connection, though, that the very occupation you mentioned, tool and die makers, is the one occupation for which the shortage is most keenly felt.

Mr Kwinter: The reason I mention it is that it is an example of where the industry tried to resolve the problem. We've had others do the same thing. I'm sure you know that at one time, Magna, which was certainly the largest auto parts manufacturer in North America at the time, had their own training program. The problem they had is that they were training people supposedly for their needs and these people were getting trained and going somewhere else. They decided that without government support, they were not in the position to subsidize training of workers for everybody, not only in the province but virtually in the world. That was a problem.

I take your point. We heard just recently that there is a shortage of 20,000 technologically trained people in Ottawa-Nepean, the sort of Silicon Valley area, that companies were going to the Maritimes because there were people who were trained there. I absolutely support the need to have people who have the training.

Mr MacDonald: To build on that briefly, I am glad you mentioned what you did. Our industry is one that serves the automobile assembling industry. I don't think it's hard to imagine how tempting it is for the assembler to look to the leading lights in their supplier company workforces as inexpensively trained potential recruits, particularly given that many of the rates of pay at the assembler level are very attractive.

Of course, as I've noted, while some companies have over time looked at spending money of their own on training -- we have a Minister of Education and we have a college, university and school system. We ask that it be reformed, if you will, to best meet present job market needs.

1650

Mr Pouliot: Thank you very much. I'm most appreciative of your presentation. I see on your page 6 you say, "Your managers' and deputies' performance, and not their seniority or the size of their department, should govern their remuneration." Mr Frank Stronach at Magna must read this every day, for he is an extremely capable performer.

The present government has started to do some, but it's a lot more complex when the money is from the public purse to piecemeal -- and I don't wish to vulgarize the term at all; I recognize what is being done and can find some agreement to it -- whereas at the civil service, we don't run the same line. Opportunities are quite different. You don't make money with health. It's not a generator of money. People don't show a profit.

Health and education: I'm happily impressed and, candidly, just a little surprised that you choose, on behalf of the Automotive Parts Manufacturers' Association, to focus on education and to caution about health care. I too believe that the answer to, not everything, but the answer to most things is education, education and again education, to give people the tools to defend themselves and to integrate in society.

You're saying, "What about the die makers? There's a shortage," and yet we're faced with what seems to be a core unemployment rate. We know if you can ever get it down below 9% it would be almost hailed as a victory. It's been stuck at above 9% for some time now. Yet you're saying that people are concerned about the lack of skills and you feel there should be more emphasis placed -- I know Mr Stronach does place a high emphasis, knows the importance and doesn't miss many opportunities, because he has a large audience, to remind people of the importance of education, and yet your universities are taking a hit, not blaming any stripes here -- we're past that, I hope -- but the style nowadays is you will see tuition fees take a big-time hit.

Hospitals and care, no matter how much you save, it always seems to cost more. There's just no end to it. I remember when we were the government, I talked to Ruth Grier -- she was the Minister of Health for some time, and we had done a lot of cuts -- and I asked Ruth, "As we end the fiscal year, how are you doing?" She said: "I'm happy, Gilles. Our budget will only increase by 2%." We had been debating for months and implemented some cuts. It's quite difficult.

I have no real question. I'm just so happy you focused on the demands of your industry, which are indeed the demands of society, and caution about true human dimensions, about the health care system, which places us at an advantage, in fact. Thank you, sir.

Mr Spina: Mr MacDonald, thank you for coming with your presentation. I'm really kind of puzzled. I anticipated perhaps a more constructive presentation with direct relevance to your industry. Certainly your point on the human resource need to me was very relevant to your industry. I'm surprised you got into the other issues. It sounded more like a student union presentation.

In any case, let me get back to the relevant point. Mr Kwinter talked about the 20,000 jobs in Ottawa, and that's valid. In my travels with industry here in Ontario, it's been very clearly articulated that part of the need is to come from education. You talk about this government ought to be saving money in its administration, which we are attempting to do. I think you can agree with some of the things we've begun to do in that regard so that we can reinvest where it is needed.

I guess what I'm hearing is what I would classify as an old-style expectation: "I'm industry. You're government. You put the money into the education system so that I can reap the benefit." What I would rather hear, and what I am currently in the process of encouraging -- and I spoke with the Canadian Advanced Technology Association in Ottawa, a number of the players, as well as with them in a general meeting. They grumbled about the lack of resources coming out of the education system, and I put the challenge to them.

In your phrase you say the system should be reformed to meet industry's needs. I agree with you, the system ought to be reformed to meet industry's needs. You made that statement this afternoon. But, you see, we need industry to play a participatory role in that. So my question to you is -- I feel that perhaps you should consider -- shouldn't you consider that the industry could put some investment into the educational field in order to cultivate those graduates that it needs?

Your comments on the tax credit, recommendations on the tax credit for co-op education, those are very good recommendations, and I thank you for those. It's those kinds of recommendations that I would encourage you to expand upon and tell us some other things that we could do. I would also challenge your industry. Is it a viable consideration on your part to put an investment into the education system to better help develop apprenticeship programs, whether it's high technology, computer, CAD-CAM design -- and those can be considered apprenticeship programs in the modern sense as opposed to the older style that we traditionally perceive as apprenticeship programs -- to be able to better develop that graduate base for your industry?

Mr MacDonald: First off, you characterized part of the presentation as though it belonged to a student union presentation, without first having asked perhaps for elucidation of what I intended. I gather you're referring to the tuition. I gather that --

Mr Spina: Specifically --

Mr MacDonald: -- and I had clearly indicated there is a relationship between the amount of tuition a student is asked to pay and the likelihood or the possibility of that student being able to attend those programs. That links, I would think clearly, back to whether or not you have a supply of students with the training we're speaking of coming out the other end, graduating and being available for service in the industry. So tuition can hardly be exclusively a student union issue. Clearly, it's an issue that impacts a great many more constituents than they.

Mr Spina: I respect that, but just to dwell on that point then for a moment, I was asked by students who say, "Look, you know, when I graduate, I'm going to owe $30,000," and your point is well taken. People who come out of post-secondary education want to get on with life and be able to buy a home and have a good job and so on and not be burdened by a debt of that size. I would put to you that I know a young man who finished university in 1973 who owed $8,000, and the starting salary was $8,000. Today, if the student owes $30,000, to me it's proportional, because that graduate will have a $30,000 income to be able to begin. So to me it's proportional.

The question is whether or not they have jobs, and I respect that very much. That's where I would want the industry to put the onus on us together to work to create that job environment so that these graduates will be marketable.

The Chair: Do you have a closing comment, Mr MacDonald, please?

Mr MacDonald: Yes. I was going to say that I hear your comparison of 1997 to 1973, but I'm not sure that I can extrapolate much beyond the instance that you cited of a single person in 1973, first off.

Second is that, as you've heard alluded to already around the room, there is investment from the employer end. You've heard it from me, you've heard it from Mr Phillips, you've perhaps read it in the newspapers and you heard about Magna, for example, so it's not that there is no investment going on.

There are two points. First, there is already a post-secondary and secondary structure in existence in Ontario. You don't simply let that atrophy on the vine. Presumably, you don't go back to the early part of the century when education and colleges and universities were focused upon religious concerns and not upon professional. If you're going to have professional offerings or occupational offerings, as you have had now for a great many years, presumably those occupational offerings ought best be made as relevant as possible to the government of the day, not of 20 years before.

You're granted therefore that the college system, the university system has as part of its mandate the training of individuals for occupational goals. Hence it makes sense to keep those offerings up to date. That's the point I'm trying to make.

The Chair: Thank you very much. We appreciate the Automotive Parts Manufacturers' Association for making their presentation here today.

1700

ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION HOUSES

The Chair: We now welcome the Ontario Association of Interval and Transition Houses. I understand that Eileen Morrow is making the presentation today. Welcome to the committee. We have 30 minutes to spend together. I understand that you are carrying the ball. The weather outside is becoming worse.

Ms Eileen Morrow: Frightful, as a matter of fact, and apparently it's even more frightful in Owen Sound, so my colleagues have been prevented by high winds and freezing rain from travelling that distance. I didn't think it was fair to expect them to give so much to the cause that they would be prepared to risk their lives today, so it's just me. What I'd like to do is just read our written presentation and then I'd be happy to answer any questions you might have.

My name is Eileen Morrow and I'm the lobby coordinator for the Ontario Association of Interval and Transition Houses. On behalf of OAITH, we would like to thank the committee for the opportunity to speak with you again about the issue of violence against women by their partners.

OAITH is an association of 60 women's emergency shelters and other front-line services working specifically with women who are abused by their partners, and with their children. OAITH members represent the majority of emergency shelters for abused women and their children in Ontario. It is the largest association in Canada of its kind.

This is the second time we have appeared before the standing committee under the present government. Last year we came to give you information about the work shelters do within their communities and about the expertise provided by shelters and OAITH to previous governments during many consultations on the issue in the past. We told the committee about the high financial costs of violence against women if it remains unchecked. We also explained the initial impacts of present government budget cuts to our services and the other supports women and children need to escape violence.

We outlined the national and international commitments made by Canada to provide support and services to address violence against women and children, commitments that are binding on provinces. Finally, we reminded the committee of promises made by the Conservative Party before the last provincial election, promises to provide the services women and children need, including increased women's shelter services.

Last year in our presentation we asked that this committee endorse the recommendation of the 1991 standing committee on finance and economic affairs in support of 100% block funding for emergency shelters for abused women. Failing that, we asked you to restore funding cut from already cut and underfunded services and supports for abused women and their children. We specifically noted our suggestion that court surcharge fines be used to set up a fund to restore funding cuts from independent front-line women's services as a result of provincial downsizing and restructuring.

In the subsequent report of this committee to the Legislature on its pre-budget deliberations in April 1996, no attention was given to the issues raised by OAITH in support of survivors of violence. This committee evidently chose then to remain silent and to take no action on these issues.

Sadly, violence has not been made silent or inactive in Ontario. Since we last came here to plead for your support and action, at least 20 women have been murdered in Ontario by their male partners. At least 22 children have been left motherless and two have been murdered with their mother. In many cases, at least seven that we know of from media reports alone, the killers were out on bail or under restraining orders to stay away from their partners.

While these murders are tragic, they are only the tip of the iceberg of the violence women and children all over the province are experiencing. The truth is that most abusers repeatedly commit atrocities on their partners and children without ever murdering them. They use a range of tactics from social control and emotional abuse to physical and sexual assault to establish and maintain the power and control over their family that they believe is their right. This is happening even as we sit here to discuss it.

As a result of efforts primarily by independent women's services and their supporters, public awareness of violence against women has grown significantly, and there has been an encouraging increase in support for survivors and their children over the past 20 years. Women who live and work in shelters and other front-line anti-violence services know that they are using their personal resources to the limit in addressing issues for women and children. As agencies, front-line services know they try to use their limited resources in the most effective and efficient ways to protect, support and inform survivors of violence and their children. We can assure you that women's anti-violence services have not contributed to the deficit in Ontario.

Violence against women is an intractable enemy. Every second woman living in Canada today has experienced at least one incident of criminal violence by a man since the age of sixteen. That's from the violence against women survey from Statistics Canada. That statistic can't be altered without significant public resources dedicated to providing safety, counselling and advocacy for survivors and their children, accountability for abusers, public education and prevention programs.

Instead, we've seen cutbacks to every support that women and children need to escape violence, including to front-line emergency shelters. Initiatives that have been taken by this government were not necessarily the most efficient and effective use of scarce resources. For example, last year this government took $9 million from women's independent anti-violence services. In spite of our recommendation to this committee that the fines surcharge fund be used to support those front-line services, this government allocated most of it to gender-neutral court and police-based victims' services where only women who report to police will be served. Out of this $10-million victims' assistance fund, only a small amount was made available to community-based services of any kind, and then only for one-time grants.

Last year we outlined some of the ways women and children suffered as a result of the cuts. Since then, we have continued to collect that information from shelters. A report entitled Locked In, Left Out containing the results of our information collection and a number of direct testimonies from survivors themselves was released to all of you on November 18, 1996. We would urge those of you who may not have had the chance to read it thoroughly.

Our information collection, although informal, showed that violence survivors were continuing to suffer in violent relationships as a direct result of social program cuts in Ontario. For example, 50% of shelters in our membership reported that women are now able to use the shelter only as a temporary relief from violence, rather than as a new start. Two thirds of our members reported that social assistance cutbacks have been the deciding factor for women in their shelters returning to abusers. In some shelters, two thirds of the women returning did so because they couldn't feed their children on social assistance or welfare. Legal aid plan cuts and restrictions are another key factor in women's decisions to remain in abusive relationships.

Since our last presentation here, we'd like to touch on a couple of additional initiatives taken by the government which had their impact on survivors and shelters for abused women. One is the decision of the government to assume responsibility for abused women's shelters at the provincial level and to absorb the 20% of the per diem for an abused woman's shelter stay paid by the municipal level. This is a decision we welcome, for a couple of reasons: one, the devolution of abused women's shelters to the local level would have been disastrous for many women in Ontario, particularly in smaller and northern communities; in addition, we have long argued that the per diem funding arrangements were administratively awkward and financially insecure.

1710

The transfer of per diem funding to the provincial level, however, has not reassured us that the discrepancies across the province created by the per diem will be eliminated, and we would like to ask this committee to consider that problem. In addition, we would like to stress that the absorption of the per diem will not represent full funding of shelters as first announced by the Minister of Community and Social Services in her press statement regarding the decision. Women's shelters continue to be required to fund-raise a significant portion of their basic budgets. Indeed, we would like to see full funding of all shelters.

The second initiative we would like to comment on is the controversial report commissioned by Dianne Cunningham, minister responsible for women's issues, entitled Framework for Action on the Prevention of Violence Against Women in Ontario. This document has serious implications for the funding of strategies to end violence against women in Ontario. In particular, it recommends that the province shift from providing crisis intervention in women's services to primarily providing prevention programs.

While we fully support increasing funding for prevention and education, have argued for their increase for many years and opposed their elimination by this government last year, we do not support any attempt to diminish the tenuous network of women's crisis intervention services we have struggled to create. We need both if we are to conquer violence against women and children.

It is our opinion that, assurances aside, if these framework recommendations were to be implemented, they would seriously jeopardize the independence of women's services for violence survivors and their children. Inasmuch as it proposes amalgamation and integration of independent women's anti-violence services into generic and gender-neutral organizations, the framework will not serve the needs of women and children to escape violence.

We know it is independent women's services which have challenged all of us to do something about violence against women and their children, especially about sexual assault, woman abuse and child witnessing of violence. It is these services and other women's grass-roots groups which have been the catalysts for progress in this area in all mainstream systems, legislation and public policy. Without them, we fear for the future of that progress.

We realize that the work of this committee under the present government agenda may be largely to find ways to cut spending, but we are here to ask that in this area you make your priority to save lives, not money. We were pleased by the announcement of Ontario Treasurer Ernie Eves on February 6 that the province is enjoying a windfall of sorts in unexpected tax revenue. With that in mind, we would like to make these recommendations to the committee today:

(1) That the victims' assistance fund allocations of the Ministry of the Attorney General be reassessed in order to provide more ongoing support for community-based grass-roots services for women and children experiencing violence;

(2) That the Treasurer free up some of the unexpected revenue increase of the province to increase funding support for abused women and their children within women's anti-violence services, as well as within other supports such as social assistance and legal aid;

(3) That this committee make a recommendation supporting a commitment to recognize the value of independent, community-based women's services and to protect funding for their work with abused women and their children.

(4) That this committee make recommendations to ensure that absorption of the per diem funding from municipalities does not result in continuing disparities of funding across the province, nor that it result in a decrease in funding for any transfer agencies receiving it.

We thank you again for this opportunity to speak to the committee and we would be pleased to discuss these issues and recommendations with you further. I would be happy to answer any of your questions today.

Mr Pouliot: You're safe and sound here regardless of the conditions. It's pretty difficult for anyone, I suppose, not to be directly impacted and not to become emotional. You state in your brief that the situations, the atrocities, have not gone away. In fact, you point out to us some specific examples. You also state that while there has been a recovery, the government has chosen to spend fewer dollars.

I recall vividly, as if it were today, the acute recession of yesteryears when we were the government. No windfalls, very severe, and yet the money was there. I want to choose my words carefully. I don't have to, because I have immunity here, but I will nevertheless and I will be direct, and I don't wish you embarrass you, Madame, or make your situation uncomfortable. This is your brief and I respect you.

There is little difference in our system between parties, and I want you to have a good look at them. When it comes to the most vulnerable, people who can't go and rent the top floor of the Royal York, people who are ordinary or people who cannot run as fast, more vulnerable, there is a marked difference in philosophy and there is a marked difference in party. It doesn't mean that when people choose their priorities, they dislike, that they want to hurt. No, no. It's just that you remind me of the person who will pray for the poor but will hesitate to give five cents to poverty, but they will pray for them and they will wish them well.

It takes courage to come here. The situation is systemic. We need some education. They've done some of that and they're to be commended. But I fear that when the system gets rough -- because in the meantime there's $5 billion over five instalments. I don't mind much of it, not as much as my colleagues, but I find it difficult to see that the more you make, the fastest you can run away, the better off you are, not because I'm envious or jealous, Madame, no, no, I'm past that, I think, but because it is so bloody unfair. It makes so many people suffer, and you judge a society with the weakest link, and we are all on the waiting list. When somebody is in need -- physical abuse, threats, murder at its extreme -- you don't turn your back. You don't pretend to shuffle paper and write or read. You give a hand to those who need it the most. That's what society is all about. That's why we go to the polls.

I appreciate your courage and I hope that at every opportunity you come back and see us, because you must penetrate, because that work needs to be done. There is no way out. It goes beyond the political party. It goes beyond the rich and poor.

I have no questions. It's just that I'm appalled, especially when times are good, that you have been targeted because you're low on the list of priorities. Come back and see us again.

Ms Bassett: Thanks very much for making it here and for your report. There's so much in it. I don't want to make light of all your recommendations, but in the time I have -- Mr Wettlaufer wants to make a comment too -- I want you to explain, so that we come out of this with a message, more than the message you've given about Dianne Cunningham's report, the framework for action.

I preface my remarks by saying we are putting $100 million across nine ministries into women's shelters and violence against women programs, so it may be how we divide up the pie. I wonder, when you say the report "recommends that the province shift focus from providing crisis intervention in women's services to primarily providing prevention programs," can you just talk a little about the importance of having crisis intervention in women's services stay put as it is or to increase it, even. The report isn't going ahead, but I'd just like you to fill it out a bit.

1720

Ms Morrow: I could, no doubt, speak about the report for three and a half days and never deal with everything in it that needs to be explained or that needs to be questioned so that it could be explained. But I will say first of all that the report does not eliminate crisis intervention. It is part of a four-pronged description of what I suppose would be called a model, which is informally described in the report as the assault centre.

Ms Bassett: What I want, though, is what in your view is the importance of having direct intervention, as you see it, regardless of the report.

Ms Morrow: I guess this report would refer to that as a victim-centred model, in other words, focusing on working with women who have been abused by their partners, specifically in the case of our members and the women they work with. Crisis intervention in that case means you are responding to women who are grappling with and living with physical, psychological, emotional and sexual violence on an ongoing basis and its impact on their children, including sometimes direct physical and sexual violence against their children. Crisis intervention is that intervention which seeks to support that woman in taking action to extricate herself from that situation or to deal with that situation and keep herself and her children as safe as possible in that situation if she finds herself in the difficult place of not being able to escape.

Ms Bassett: Does that involve sometimes a person going in and helping out, be there in her home environment if possible?

Ms Morrow: Going into her home to help out would be extremely dangerous. It's not something that's usually done in a situation of violence against women and it's certainly not something that a woman who's experiencing violence would ask that someone do, other than to ask police to respond when there is no other option but to involve the law. Police officers' jobs are not to go in and take any other action than what is extreme physical crisis.

That's not what we mean by crisis intervention. Crisis intervention usually means the woman making contact or someone on behalf of the woman making contact with someone who can help, and sometimes the children making contact with someone who can help in that situation. Then you intervene to deal with the situation that is occurring right now which is imminently dangerous or which is dangerous on an ongoing, repetitive basis, so that there is a pattern of violence that is occurring and that needs to be addressed.

There's intervention and there's prevention, and we would certainly agree that if you could prevent violence from happening before it happens or you could prevent someone from learning the values that make them believe they have a right to use violence against others, that would be something we support and encourage. But I don't believe that gives us the right to abandon intervention strategies. The government has said it's put $1 million into this issue at the moment, and that will not change, so it's only logical then that if you were going to increase prevention and education strategies, you would need to allocate money out of crisis intervention. This report talks about shifting, so that's the message to me, that services will need to be downsized in order to accommodate new strategies.

Mr Wettlaufer: Over the course of the past year I worked in my riding of Kitchener with a committee of health caregivers, psychiatrists, physicians, nurses, hospital spokespeople as well as police, a multicultural centre, victims, and what we were trying to do was make recommendations to the minister and establish protocols if we could. One of the things that kept coming back over and over again was that this is a generational thing. It's something we're not going to conquer in five years or 10 years, but it's going to be conquered in a generation only through education.

One of the recommendations that was made by our committee to the minister was that we establish a format for education through the school system. I know some of your lobby groups think that the best way to educate is through women's shelters. Can you comment on that?

Ms Morrow: I think that independent women's services that speak every day, 24 hours a day to survivors of violence are often current to the absolute minute that violence is happening and the response to it and whether that response is helping, so I believe that front-line women's services and front-line services in general that are speaking directly to survivors are in a very favourable position to be very potent educators. That is not to say that no one else can educate, but I believe that it would be misguided to shift funding out of those front-line educational efforts into others. It would be more appropriate to include all those who are prepared to do education, because we are talking about a systemic political, economic and social problem, and it's intractable and pervasive.

I worked as an educator in a shelter. That was my job, and I can tell you that it's not an easy matter to go and educate. It's not just a matter any more of saying, "Violence is bad and you don't deserve to be hit," and basic education like that. We now have a much more complex task, which is to explain the many complexities of how and why and who and what we're going to do about it.

The questions about violence against women, for instance, and its impact on the children you receive in an educational forum are much more complex because the level of basic education in the community is higher than it was. It's not just a question of someone asking what used to be the traditional question, "Why doesn't she leave?" as opposed to "Why does he hit her?" -- there's a reason why the question is posed one way instead of the other -- it's explaining why that question is posed that way instead of the other or all the complexities of questions that we now get, like, "If this happens, what does it mean and if that happens" -- so it's all very complex.

I certainly wouldn't say that only one particular group can educate. Anyone who educates themselves on this issue in a complex way can educate. Anyone who says to someone they see being abusive, "That's wrong," even though they may not themselves fully understand the complexities of why it's wrong, is educating by proposing a counteropinion, an opinion that doesn't support violence. We have no problem with the education system educating on violence. They're strategically placed to do that.

We would have a problem, however, with women's shelters then being told that they should not be educating on violence or that they're not an appropriate place to do that education, because they speak with survivors and actually survivors are the number one educators on violence against women. There is no one in the world who has ever taught or educated on this issue who didn't get their training from abused women and their children.

1730

Mr Kwinter: Thank you very much for your report. There are some elements in it that are really very disturbing. Can you just enlarge on the statement you make here that 50% of all women in Canada over the age of 16 have experienced criminal violence? That is a damning indictment of our society. I have to take it at face value that that is the case, but I can tell you that the average person, if that is the case, is certainly not aware that is happening. I'd like to get a bit of a definition of what you consider "criminal violence."

Ms Morrow: That statistic comes from the national Violence Against Women Survey that was done by Statistics Canada in 1993. They chose a definition. Anyone who deals with the issue of violence against women has to define what that is. Regrettably, in the report you referred to it was not defined, so we really don't know what the problem is that we're dealing with there.

In the national survey it was defined as incidences of violence that could be charged under the Criminal Code. In other words, it would be physical and sexual violence and threatening death, those kinds of things that could be categorized under the Criminal Code of Canada as acts of violence. It didn't include psychological threatening or threats that couldn't be categorized as violence, which many women receive. For instance, "You leave me and we'll see who gets the kids," is not a threat under the Criminal Code of Canada, but it would be used all the time; that kind of thing. It was only very restricted to what could be considered -- because they wanted to narrow it in such a way that it could be legitimate research, where they knew what the parameters were.

In that context, over 50% of women in Canada over the age of 16 said they had experienced that kind of violence at some point before the interviewer spoke to them.

Mr Kwinter: That survey was done in 1993. Have you got any statistics that show if that is on the increase, if it is steady, if it is decreasing?

Ms Morrow: No, I don't have any update on that. That was the last large survey done in Canada. We unfortunately don't have the resources to conduct that kind of research. Research that's being done right now seems to be focused more on what it is costing and those kinds of gaps that we haven't addressed before.

Mr Kwinter: To get to another subject, one of your major concerns, of course, is the funding for intervention, for education and also for the transfer of the funding from the municipalities to the province. Have you taken a look at the potential implication of the proposals that are being made to transfer education from the municipalities to the province and to transfer to the municipalities some of the costs of welfare, things of that kind, and how that's going to impact on your programs?

Ms Morrow: It certainly will impact on the women who are hoping to leave a violent situation. Right now, the reduction in social assistance has been one of the most dramatic barriers to women leaving a violent situation. Many women who are in that kind of relationship are not allowed to access money in the family or can't control it, can't access it even if it's available, or sometimes they're not permitted to work and so on. Even if they have financial security, it will take them a long time to access it through the law. So for some period of time they will be in need of temporary social assistance if they leave their partner.

That's a very serious concern, because if women feel they can't pay for housing, can't find adequate housing that's safe and can't afford to feed their children, then it's a very huge barrier to women leaving a violent situation. Were that to be increased by a shifting of that responsibility to the local level and various local levels making different decisions about what they will and will not provide in terms of social assistance supports of various sorts, that could make a dramatic difference. It would certainly add to the discrepancies for women in different regions of the province being able to access freedom, basically.

Mr Kwinter: Do I have any more time?

The Chair: I was generous with the other parties, so if you want one more --

Mr Kwinter: No, if it's over, it's over; no problem.

The Chair: I appreciate very much you coming in. It's a very important subject and I'm very pleased that you did make the journey to make this presentation. We appreciate it.

Ms Morrow: Thank you. I'm surprised no one asked me a question about the only 13% of women who use abused women's shelters, because I have a killer response to that.

The Chair: If you'd like to give us a letter on your response to that question, you can consider it asked.

Ms Morrow: It comes from the same national survey, and if you look at the numbers, over half of the women they spoke to stayed in shelters, so that's a little bit more than 13% of 100% of women.

CHAMBER OF COMMERCE OF KITCHENER AND WATERLOO

The Chair: Our next deputation is the Chamber of Commerce of Kitchener and Waterloo. We welcome Mr Lemont and Ms Mailloux to the committee. We appreciate you making the trip today. We understand the conditions out there aren't all that great.

Mr Ed Lemont: Good afternoon. Thank you for inviting us to address you today. My name is Ed Lemont and I am the past chair of the federal and provincial affairs committee of the Chamber of Commerce of Kitchener and Waterloo. With me today is Rose Mailloux, chair of the federal and provincial affairs taxation subcommittee. I would just mention that I'm filling in for Ron Carther, the president of the chamber, who is ill today and could not come down to make the presentation.

The Chamber of Commerce of Kitchener and Waterloo is the product of a merger of the Kitchener chamber and the Waterloo chamber in 1992, a move which recognized the need to cost-effectively service the business community of the two cities. Our mission is to serve business in Kitchener-Waterloo and be its voice in the betterment of the community. Today this chamber has a membership of 1,304 businesses, representing all sectors of the business community. Our membership includes small, medium and large employers who provide thousands of jobs in one of Ontario's most progressive and economically productive regions.

The Chamber of Commerce of Kitchener and Waterloo is pleased to have the opportunity to appear today before the committee as part of the budget consultation process to comment on the fiscal issues facing the province. We are strongly of the view that it is of paramount importance to the fiscal health of both the provincial treasury and economy that government measures and operations be reduced to avoid ever-increasing tax burdens.

Both business and the general public have clearly indicated such tax burdens are no longer to be tolerated. In order to achieve this primary goal of smaller and more effective government, we believe programs must be continually assessed as to whether the service (a) is still required; (b) can be done more efficiently via restructuring of programs, outsourcing or privatization; and (c) can be done by distribution of responsibility for program implementation to lower levels of government.

The key objective is to ensure that government operations are not themselves a growth industry but provide efficient and effective service at the least cost. It is through measures that display a keen sense of a trustee's duty to protect the public purse that public trust in government itself will again be restored. In this spirit, we offer the following comments for your consideration.

1740

Rose Mailloux: Our primary concern is the elimination of the deficit. We're not opposed to tax reductions, such as the personal tax reduction, the removal of the employer health tax premiums for smaller business and other actions, provided they do not hinder the ultimate goal of the deficit's elimination. Similarly, the government's support of R&D and any programs that improve our competitive position in the world and encourage investment in Ontario should be supported by all, provided they too do not encroach on the resources to be expended in the elimination of the deficit.

We also urge you to continue on after a balanced budget to maintain deficit-free budgets until the provincial debt is extinguished. If you find as time goes by that you are ahead of your target, do not give in to pressures to ease up. Continue to press on to reach the goal of elimination that much sooner, so that this short-term pain for long-term gain will be over with and the long-term gain can be enjoyed by us all.

Once fiscal measures have produced a balanced or surplus budget, it is imperative that you continue onward to reduce the debt, particularly while we enjoy a period of low interest rates and modest growth. If you fail to follow through on this key objective in favour of short-term partisan advantage in attracting votes via new spending programs, then we believe you will have failed in your collective responsibility as trustees of the public purse.

The next area we wish to focus on is the GST harmonization. The Chamber of Commerce of Kitchener and Waterloo has and continues to support the benefits of a harmonized sales tax system. Various studies since the implementation of the GST have concluded that harmonization is the key to simplification and cost reduction for business while any regressivity for consumers can be addressed through tax credits to lower-income groups.

The Canadian Chamber of Commerce in its many taxation submissions to the ministers of finance strongly recommends a fully harmonized federal-provincial consumption tax. This system must meet six key criteria:

(1) It must eliminate the taxation of business inputs and the impact of tax cascading.

(2) It must simplify compliance for business and reduce the cost of administration.

(3) It must allow a common collection system with one administration and no duplication.

(4) It must provide a common understandable tax base used strictly to replace revenue forgone by removing the provincial sales tax.

(5) It must offset the negative impact of tax on lower income groups by an enhanced sales tax credit.

(6) It must be visible to consumers.

A recent survey by the Canadian Chamber of Commerce shows that 85% of the respondents feel that the chamber should continue to push forward to encourage the governments to harmonize the GST with the provincial sales taxes.

There have been numerous studies completed by highly reputable sources, including on the benefits of a harmonized system. Provincial government administrative cost savings of $40 million per year under full sales tax harmonization have been reported by the Fair Tax Commission in 1992. The reduced costs of compliance for the private sector are estimated to result in a $65-million increase in business productivity. These are resources which can be put towards tax reductions for consumers and improved competitiveness for business.

The submission of the Canadian Institute of Chartered Accountants to the House of Commons standing committee on finance in March 1994 recommended that the federal and provincial governments replace the GST and the provincial retail sales taxes with one multistage sales tax or value added tax with one single administration which would make use of the already great investment placed by government and by business on the implementation of the GST.

Another study, by the Canadian Federation of Independent Business, addressed the high compliance costs of the GST for business. The CFIB reports the compliance costs to be counterproductive for business, particularly smaller businesses. A survey in 1992 indicated that the compliance burden on large firms is much lower than the relative burden on small firms. Compared to compliance costs of administering the value added tax, the VAT, in other VAT jurisdictions such as the UK, Canadian costs can be almost 10 times higher as a percentage of tax collected.

They concluded that a major reason for this is that the GST was intended to be collected in conjunction with provincial sales taxes. While the GST system collects tax only 7%, in other countries with only one sales tax system they in fact collect between 12% and 25%. It's intended that both taxes be collected together. In addition to this cost of administering the GST, most businesses have the added expense of complying with the PST. It makes economic sense to put the resources together into the collection of one tax with one common administration and set of rules.

The piecemeal harmonization in Quebec and now the Atlantic provinces adds further unnecessary complexities to Canadian business, particularly with extremely complicated rules for businesses outside of the HST provinces doing business in those provinces. The requirement for tax-included pricing at the retail level is proving extremely onerous for national retailers. The long-standing commitment of the Canadian Chamber of Commerce is that the tax should be a visible tax, and certainly with the Atlantic provinces harmonizing now, we have an added level of complexity for business to deal with.

The provincial government raises $9.5 billion via the PST. Of this, about $825 million a year is embedded in the value of Ontario's exports; $2.8 billion is paid by business and is embedded in the price of goods and services we buy. Consumers may in fact be paying more like 9% or 10% in provincial sales taxes. Under a harmonized tax, this hidden tax would be removed, resulting in lower prices to consumers.

Government estimates show that a combined rate of 14% would result in just slightly less tax collected by the Ontario government. The broadening of the tax base to items currently exempt of tax may be softened by a lowering of the provincial component of the tax. A lower tax rate than the current combined 15% rate is obviously necessary. The negative impact of the tax on lower income groups may be further offset by an enhanced sales tax credit.

The removal of sales tax on business inputs and the reduced compliance costs of a harmonized system translates into reduced prices and increased competitiveness of our exports, which translates into jobs as our economy is further encouraged to prosper. Government estimates show that by removing the embedded PST by harmonization with the GST, Ontario's economy could get a boost of 1.7% of GDP, which represents $5.8 billion of production.

In summary, the chamber continues to recommend that the provincial sales tax be fully harmonized with the GST in the form of a value added, multistage federal-provincial sales tax as the best option for Ontario. This would have the characteristics of a single lower rate, a single administration and visibility to the consumer. The evidence is clear and studies support the efficiency of one harmonized sales tax system. Also, such consolidation of tax administration would seemingly be in line with your government's initiatives in other areas such as changes in structuring of municipalities and boards of education.

The Chamber of Commerce of Kitchener and Waterloo encourages the Ontario government to put aside partisan interests and enter into an agreement with the federal government to harmonize for the benefit of the province as a whole.

Mr Lemont: I'd like to make a few comments concerning the role of the province and municipal governments. The delivery of many programs and services to the residents of the region of Waterloo has been a joint responsibility of the Ontario government and local governments. Depending upon the program or service, the Ontario government may directly fund and provide the program or service, or it may set standards and provide full or partial funding for the delivery of the program or service by local municipal governments.

Over the years, this approach has led to a maze of complicated funding and delivery responsibilities between the Ontario government and local governments. It is very difficult for the residents of Ontario to determine who is funding and who is responsible for most of the programs and services. This lack of accountability has caused the size of government to grow unchecked. The demands of local residents for ever-increasing programs and services have not been tempered by the financial responsibilities for such programs and services. Without a clear understanding of the cost of the various programs and services and a realization that they are paying for the programs and services, the residents of Ontario have helplessly watched as the costs of provincial and local government in Ontario have skyrocketed to unbearable levels.

The Chamber of Commerce of Kitchener and Waterloo firmly supports the Ontario government's attempts to disentangle the roles and responsibilities of the province and local municipal governments in the delivery of many programs and services. The disentanglement of programs and services is a necessary first step to impose fiscal responsibility on the provincial government and local government. The residents of Ontario need a clear understanding of what level of government is responsible for each program and service to allow each community to choose the level of program or service they want and can afford.

1750

The second step on the road to fiscal responsibility is the disentanglement and rationalization of local governments. Many regions in Ontario have multiple levels of local government providing duplicated and overlapping programs and services. The Ontario government is supporting these arrangements through its various grants and other funding arrangements to local governments. The transfer of funds to municipal governments is one of the significant components of the Ontario government's annual expenditures. The Ontario government needs to take a strong leadership role in reforming local government to reduce its commitment to local governments.

The parochial interests of many local politicians will cause local governments to continue to grow at ever-increasing rates with little interest in reducing the size of their responsibilities and authorities. The Ontario government has provided, and will likely continue to provide, considerable funding to local municipal governments. The Ontario government should exercise its powers, based upon its funding, to continue to reform local governments across Ontario.

The Chamber of Commerce of Kitchener and Waterloo, along with the Cambridge Chamber of Commerce and the conservative business association of Waterloo region, have jointly prepared a report and presented it to regional and local municipal governments to encourage the reform of our local government. Our three organizations represent over 2,000 businesses in Waterloo region. We believe the recommendations of our report could be used in many communities across Ontario, as well as Waterloo region, to improve local governance and consequently reform local government.

We have attached a copy of our statement "The Opportunity for Change in Local Governance," the report's "10 Steps to Move Our Community Forward," and the local government's responses. Please consider these reports in determining the funding for local municipalities and the necessary steps to streamline government at all levels throughout Ontario.

We trust and expect that a new era of fiscal responsibility permeates the budgetary measures to be recommended by this committee and adopted by this government. We appreciate the opportunity to make this presentation to the standing committee today and look forward to a continuing open dialogue on the above matters and others that may involve the business community.

Thank you again for the opportunity to make a presentation.

Mr Wettlaufer: Thank you, Ed and Rose, for coming and presenting today. I won't say the prime focus, but one of the prime focuses of our government was to encourage more foreign investment in the province, thereby creating jobs. As a result of our policies, we think there has been considerably more foreign investment in the province. Have you seen more foreign investment, more jobs, in Kitchener-Waterloo, keeping in mind that Kitchener-Waterloo was always a fairly good place to invest anyway?

Mr Lemont: I don't have specific statistics, but the general atmosphere would suggest that there has been some additional investment. There is certainly additional activity in the economy at the local level from small businesses, entrepreneurial businesses starting up. So there is activity there, some of it resulting from foreign investment.

Mr Wettlaufer: The Cora group was one of the most published investments in Kitchener. Are there any others of any significant size that come to mind?

Mr Lemont: Not immediately.

Rose Mailloux: I know that current business, particularly high-technology business, is expanding quite well in the Kitchener-Waterloo region. Some of our local companies have gone public recently and they're doing extremely well.

Mrs Ross: I just wanted to ask you about the harmonization issue. A lot of people are worried about harmonizing, that it would impose additional taxes. A friend of mine sent me a letter recently that said that in the Maritimes the harmonization has imposed an additional cost of $3,000 on the price of a new home. Do you have any comments on that?

Rose Mailloux: When the GST was first implemented, the same type of concern took place, because obviously the price of a new home has added on top of it the GST component. Previously it used to be buried in the price of a home. Under the old federal sales tax, it used to be buried in the cost of materials.

However, together with the GST, we have an offsetting rebate for certain-priced homes so that the purchaser can apply for that rebate, and that theoretically is supposed to bring the tax burden back down to what it was under the old FST. I would think a similar type of thing would have to take place if the PST component was added on to the price of a home as well, because obviously you do pay PST on your materials, but currently you don't PST on the labour. That labour, that element of profit, would be subject to a tax which was previously not there. So that would be something the government would have to consider, enhancing the rebate provision to make sure that the cost of a home stayed at the same level, and I don't believe that perhaps has taken place in the Maritimes.

Mr Kwinter: Just out of curiosity, what is the conservative business association of Waterloo region?

Mr Lemont: What is it?

Mr Kwinter: Is it a political organization?

Mr Lemont: Yes, it is.

Mr Kwinter: That's all. I just was curious. I didn't know whether it was small-c conservative businessmen who had some concern or --

Interjection.

Mr Kwinter: Like me, yes.

I want to pursue the area of harmonization as well. There have been an overwhelming number of presenters to us, those who have commented on harmonization, who have advocated that the government adopt a harmonization policy, notwithstanding that there are concerns, and you've addressed some of the ways that those concerns can be addressed in the structure of the harmonization.

Can you tell me, and I'm not asking you -- are you a member of the conservative business association? The reason I'm asking: Do you have an idea why the government doesn't want to do it?

Rose Mailloux: Why the government doesn't want to harmonize?

Ms Bassett: The cost.

Rose Mailloux: I believe it's simply a political hot potato that everybody wants to steer away from as much as possible.

Mr Kwinter: My point is that when you say -- I hear someone saying "the cost" --

Ms Bassett: You know that, Monte.

Mr Kwinter: -- but we have all of these groups who are going to be impacted either favourably or unfavourably by harmonization, and the major sectors in our economy, the automotive parts dealers, the automobile manufacturers, the exporters, Canadian Manufacturers' Association, the agricultural sector, the Retail Council of Canada, the chartered accountants institute, all of these people advocating harmonization. You would think that somewhere along the line there has to be some merit to it, or why are all these people advocating it? Do you have any response to that?

Rose Mailloux: It appears the people who are advocating it are obviously business manufacturers, exporters, the reason being that, as I mentioned earlier, there is a PST cost in their cost of production, cost of doing business. It impacts our exports negatively. Certainly the administrative burden is heavy, and this is a non-productive type of expense. You're administering government red tape. Certainly there are better resources --

Mr Kwinter: Are you saying the burden of administering the harmonization itself?

Rose Mailloux: No, the old. I'm sorry. The current system, which would be alleviated by a harmonized system.

Mr Lemont: I think the reason for suggesting harmonization is purely one of economics, the additional cost of businesses to account for, collect and keep track of two separate taxes. At the same time, on the side of the government, we have two governments, each administering its own sales tax program, each with separate audit departments. There's a duplication of effort there.

Mr Pouliot: Thank you for your presentation. Right after harmonizing the GST and the provincial sales tax, Ernie Eves called Jack Kevorkian, and Dr Kevorkian told Ernie, "No, no, no, you don't need my help. I can do it myself."

When I read your brief and then you blend in, you mesh in, the good wishes of the conservative, with the highest of respect, association of business people -- it's not like government. You don't have several levels of government. This is a presentation from the Kitchener-Waterloo chamber of commerce. You're about to get some of your wish, the business community and the municipalities. They will have far less government within a matter of a few months. They will be in charge. They will have an opportunity to really do what's best. For instance, they will take over policing in their community, they will pay for ambulance service, for seniors etc.

Has there been some fear or some anxiety expressed about local taxation on both industrial but mainly on the commercial levy? What is it going to do to Harry and Jane who are running the bakery in Kitchener? When they see all the moves and the anxiety, what's taking place, it's coming to the local level, there's no question about it. And it's not revenue-neutral, there's no question about that either, because they wouldn't be able to address the deficit etc and give the tax cut.

You can only find money in so many ways, so it's going to cost more at the municipal level. Is there not some anxiety? I would have liked to have seen this discussion portrayed in saying: "Look, we pay too much taxes, and with what is around the corner, maybe you'll be killing us with taxes. You're supposed to help us. You're our friends."

Mr Lemont: We are paying too much tax. I personally haven't seen any concern expressed about the increased taxation because of the shift. Hopefully the additional costs that are being transferred to the municipalities will be more than offset by the decrease in education assessment to the municipalities. Whether that's going to happen, I don't know, and I really don't think anyone knows at this point, but the objective has to be that the overall total has to be reduced.

Mr Pouliot: Thank you.

The Chair: Thank you very much, and we appreciate very much Kitchener-Waterloo coming in, particularly on short notice, I understand. It is very much appreciated.

There being no further business to bring before the committee at this time, we stand adjourned until next Thursday at 10 am. One day left.

The committee adjourned at 1803.