Proceedings of the Standing Senate Committee on
National Finance
Issue 27 - Evidence - July 12, 2005 (Morning meeting)
OTTAWA, Tuesday, July 12, 2005
The Standing Senate Committee on National Finance, to which was referred Bill C-48, to authorize the Minister of Finance to make certain payments, met this day at 8:37 a.m. to give consideration to the bill.
Senator Donald H. Oliver ( Chairman ) in the chair.
[ English ]
The Chairman: Honourable senators, I call to order the thirty-ninth meeting of the Standing Senate Committee on National Finance.
Senator Tkachuk: Mr. Chairman, I have a question regarding the process that we are following. I notice that we will give clause-by-clause consideration to the bill this afternoon. Perhaps you could explain why we are hearing testimony and giving clause-by-clause consideration in the same day.
The Chairman: The steering committee arranges witnesses and deals with the procedure of the committee and it recommended that after witnesses we move to clause-by-clause consideration.
Senator Tkachuk: Who is on the steering committee?
The Chairman: Senators Downe, Day and I are the three members of the steering committee.
Senator Tkachuk: Mr. Chairman, are you in favour of clause-by-clause consideration of the bill today?
Given Senator Austin's arguments that it a Senate tradition not to have clause-by-clause consideration immediately following witness testimony, I find it unusual that we will proceed in that way.
Our side might prefer to have a minority report, and this arrangement would not allow sufficient time to have another meeting.
We are asking for witnesses and then planning to do clause-by-clause consideration right away. I do not understand why we are doing it this way; it is disrespectful of the witnesses.
Senator Austin: Perhaps I could explain my statement in the Senate. Bill C-43 was a substantial bill. Time and time again, Senator Lynch-Staunton argued that a committee ought not to give clause-by-clause consideration to complex bills immediately following the appearance of a minister or parliamentary secretary.
However, a committee is free to determine how to proceed to clause by clause. As well, where a committee has decided to do clause by clause, it can proceed. When bills are complex, time should be taken for members of the committee to further consider the testimony. The idea that it had to be on a separate day was never a part of my argument. There needs to be a break between testimony and clause-by-clause consideration when a member of a committee wishes to consider the evidence.
Senator Tkachuk: Will we have a break after hearing the testimony of the witnesses?
The Chairman: As you know, the procedure of a committee is determined by the steering committee, which is the master of its agenda. The steering committee makes recommendations to the committee but the full committee takes the decisions.
Senator Tkachuk: Should the steering committee's recommendations be put to a vote?
Senator Harb: I am of the view that we could accommodate Senator Tkachuk and have a one-hour break before going to clause-by-clause consideration. We have a good spirit of cooperation among the members of the committee and I hope that we can accommodate the senator. We are here to deal with this bill and give it the due diligence it deserves.
I looked through the bill and did not see anything earth-shattering and we will have other bills to consider. If colleagues wish to accommodate Senator Tkachuk, I am in favour of doing so.
Senator Tkachuk: I prefer to be accommodated by having clause-by-clause consideration on another day, possibly Monday when we return. Senator Austin argued that C-43 was complex and this is not complex, but the budget was much clearer than this bill because it contained estimates and clarified what the government is trying to do.
Bill C-48, by its very nature, simply allocates money to a fund, therefore making the intentions of the government unclear. That is why this side has made strong arguments about the process. We are not arguing the idea that we would spend money to have housing, for example, but rather the process, which is wrong.
Why is the minister not here?
The Chairman: Senator Eggleton has a point.
Senator Eggleton: Perhaps we should hear from the witnesses and deal with this question of procedure later.
Senator Tkachuk: This is not only procedure; it is truly important.
Senator Eggleton: Let us put it to a vote. Senator Harb suggested an one-hour deferral at the end of the hearings. I was fine with that until I heard Senator Tkachuk mentioned Monday, which I believe to be a stalling tactic. Given the size of this bill, clause-by-clause consideration should not be delayed; we should stick with the current schedule.
Senator Stratton: Senator, are you saying that you will not give us an opportunity to prepare a minority report?
Senator Eggleton: You have had a lot of time to prepare. You have been critical of the bill not having much in it and you know every word in it. I do not think that is a problem at all.
Senator Downe: On Senator Stratton's point, last week, this committee offered to senators the opportunity to meet on Thursday and Friday when we were here for extended hours, and they rejected the offer. I think it strange that they now want more time.
Senator Stratton: If I may, the Standing Senate Committee on Legal and Constitutional Affairs is meeting for three and one-half days this week to hear witnesses on Bill C-38. We are sitting for one day and doing clause-by-clause consideration in that one day. We have a foreshortened list of witnesses. We wanted to hear the testimony of 11 witnesses. How many are we hearing from today?
Do not tell me this is the spirit of cooperation. Do not tell me this is not a ramrod, because it is, and you know that.
Senator Downe: Again, on that point, we offered the opposition additional time last week. Everyone went back to their area and returned at an additional cost to taxpayers. There was extra time last week on Thursday and Friday, yet that time was refused by the opposition.
The Chairman: Senator Harb, you have made a proposal.
Senator Harb: I think colleagues should have the whole week to prepare a companion report to the report that you take to the Senate. Subject to the steering committee meeting next week before the tabling of the report, my colleagues should have the opportunity to prepare such a report.
The Auditor General has slammed the government day in and day out for not doing exactly what the government is doing now. Instead of doing it the other way around, which the Auditor General is opposed to, the government has Parliament's authorization to put the money aside. We should applaud the government.
The Chairman: We will get to that in just a moment. We will get the bill later on.
Senator Harb: Let us figure out a creative way to accommodate my colleagues.
The Chairman: What is your proposal?
Senator Harb: I propose that my colleagues table a companion report at the same time you table your report to the Senate, outlining the members' views, objections or suggestions.
Senator Tkachuk: I think that would be fine. We will do that.
Senator Day: Another creative solution is to hear from our colleagues at third reading. I think we should get on with this hearing now. In effect, the only thing that has not been said is that we have a full day of hearings; this is like three separate days of hearings because we are having a full day as opposed to two-hour time slots as we normally have.
We have lots of opportunity to ask questions and let us get on with this hearing. We are all back here to proceed with this, and then we will get into third reading next week.
Senator Tkachuk: I have one more question, chair, before we go to Mr. McKay, and I thank you for your patience, Mr. McKay.
The Chairman: It reminds him of the House of Commons.
Senator Tkachuk: Exactly. Did the minister give any excuse as to why he is not here? I know that in the committee I am on with Senator Fraser, we do not consider any bills unless the minister attends. In this case, it is a budget bill, and the Minister of Finance is not here. No offence to you, Mr. McKay, but we did ask for the minister.
The Chairman: The clerk of the committee phoned the minister's office and I am instructed by the clerk that the minister is not available to appear before this committee for two weeks.
Senator Tkachuk: Is that a problem? Could we not have met in two weeks?
The Chairman: The steering committee made a determination that witnesses were available to be heard today. Mr. McKay, who was in Vancouver, was available to come back and is back here this morning and is available to speak on behalf of the Minister of Finance and the government.
Senator Austin: There is no rule that requires the minister to appear on a bill; it is the custom to have the minister. In this government, the ministers have been highly cooperative in appearing on their legislation. It is something I recommended to them and they follow it; but there are times when ministers cannot appear. The parliamentary secretary in this chamber and in the House of Commons appears as a matter of routine in the place of the minister, and speaks on behalf of the minister and the department.
It is not a fair comment to raise the absence of the minister. We have the department representative at the political level as well as at the official level; that has been the custom in the House and it is the custom here, when a minister is unavoidably absent.
Senator Tkachuk: I think it is fair to bring it up. You may argue it is not fair, and that is fair enough on his part. This is a budget bill. It is a very unusual budget bill. It caused a lot of controversy, and the minister should be here today.
I would like to make a point on this side that we are very disappointed that the minister did not see fit to defend Bill C-48 here in person, and is doing whatever it is that he is doing. I do not think there is much more important for a Minister of Finance than to appear in front of a parliamentary committee defending a budget bill. That is his job.
Senator Austin: Honourable senators, I would like to point out that in this government, the parliamentary secretary, Mr. McKay, is a member of the Privy Council. He attends meetings of the cabinet and cabinet committees dealing with this type of legislation. That is an advance in terms of the previous role of parliamentary secretaries.
The Chairman: The last word is to Senator Day and then we will start with the proceedings.
Senator Day: This is what Mr. Goodale said when he appeared before us, this committee, on June 22 of this year with respect to Bill C-43, the companion bill to Bill C-48. Mr. Goodale said:
I have relied very heavily on the good work of Mr. McKay. I want to say on this occasion before a parliamentary committee that he has done extraordinarily good work in making sure that the proper parliamentary attention is given to matters that pertain to the Department of Finance.
The Chairman: Thank you, Senator Day. Honourable senators, I earlier called this thirty-ninth meeting of the Standing Senate Committee on National Finance to order. I want to remind honourable senators once again that what we do in this committee — and our field of interest — is government spending, either directly through the estimates or indirectly through bills.
[ Translation ]
Last week, Bill C-48, to authorize the Minister of Finance to make certain payments, was referred to our committee by the Senate.
To start our meeting this morning, I would like to welcome the Honourable John McKay, Parliamentary Secretary to the Minister of Finance. Mr. McKay was elected to the House of Commons for the first time in 1997.
[ English ]
Mr. McKay was named parliamentary secretary to the Minister of Finance in July 2004. Peter Devries and Werner Heiss accompany Mr. McKay.
Mr. McKay, you have the floor. Following your presentation, senators will pose a series of questions to you based upon your remarks and the bill.
The Honourable John McKay, P.C., M.P., Parliamentary Secretary to the Minister of Finance: I want to thank the committee for its particularly warm welcome.
I hope this bill emerges a bit better out of this committee than it did out of the last committee. I went in the last House of Commons committee with a full bill and came back with a title. I am hoping to do somewhat better this time around.
Senators have rightly pointed out that this is a unique bill. It deals with unplanned surplus legislation, and in that respect, we are in somewhat unchartered territories.
It provides a framework for further investments. All of you know what the investments are — affordable housing, environment, foreign aid, post-secondary education — so in that respect, I doubt that very many senators would disagree with investments in those particular areas.
I want to come back to the notion that these investments are made out of surplus funds. As all of you know, it is conditional upon at least $2 billion being set aside for debt relief on each of the two years applicable to the legislation, 2005-06.
I want to reference remarks made before the House committee by Charles-Antoine St-Jean, Comptroller General of Canada, which may or may not give some relief to some of the concerns that I anticipate will come from honourable members.
The Chairman: He will be appearing before this committee.
Mr. McKay: I think his remarks bear repeating, because he has set out a framework for thinking as to whether this is or is not an appropriate way to go when you anticipate spending monies out of unplanned surplus.
He indicates that the bill is unique in that it is the first time that spending authority is subject to a minimum fiscal surplus. This represents, in his opinion, “a prudent approach.” He points out that $4.5 billion is a cap. He says that the approval is well in advance of a year end and provides lead time to determine the specific management framework concerning the programs. I anticipate some concerns about the lack of specific details that one would anticipate in a budget.
He says prior to such payments, the specific terms and conditions would require Treasury Board approval. Terms and conditions would detail more specific program parameters, along with the appropriate level of audit, evaluation, reporting and accountability. He indicates his office reviews such proposals prior to their submission for Treasury Board approval and then goes on to talk about a few other things, which I am sure he will raise later on in the day.
His remarks before the House were interesting and gave us some comfort concerning the approach to unplanned surplus legislation. As you know, the government has stated on numerous occasions that we do not intend to go back into deficit. That is something that we simply will not do.
As you know, all of these items are on the government's agenda. This legislation supplements the government's agenda and includes $1.5 billion for post-secondary education. We hope to make education more accessible, particularly for low-income students and Aboriginal Canadians, with this money in the event that it becomes available. We hope it will also supplement labour market agreements such as the Workplace Skills Strategy announced in the 2004 budget. This proposal dovetails nicely with the government's commitment to provide significant new funding in support of post-secondary education by way of intergovernmental transfers.
The second proposal is with respect to the environment. This bill anticipates $900 million for the environment. We hope this will improve public transit systems and a portion will go to energy-efficient improvements in low-income housing.
Budget 2005 proposes more than $3 billion in new investments to access climate change and protect our natural environment. When combined with the $2.2 of existing funding, the resulting package represents a major step in part of a longer-term strategy to obtain these objectives.
Honourable senators will be interested that since 1997, this government has invested over $10 billion in environmental issues.
The third area is the proposed investment in foreign aid of $500 million, which is clearly a goal to increase Canada's influence in the world. Canada as a member of the international community recognizes that it has a responsibility to help other countries.
I probably represent the greatest concentration of Tamil Canadians, Tamils outside of Sri Lanka, and the generous response of Canadians to the tsunami relief was particularly heartening. When you combine that with our assistance in both Haiti and Afghanistan, you will note that the government has made significant responses to issues that have arisen over the course of this past year.
The minister has been very active in debt relief for poor countries, and we have taken a role of leadership in the past while. It is our intention to double international assistance from 2001-10. Budget 2005 provides $3.4 billion in new resources to do that, and Bill C-48 enhances that initiative.
The final initiative is in the area of affordable housing, which is a further $1.6 billion in housing construction, including Aboriginal housing. We made about $3 billion in funding commitments since the year 2000 to help ease the affordability challenges faced by many Canadians.
Again, my riding provides an interesting example of these initiatives. At one point, we provided accommodation for approximately 1400 homeless people on a per night basis. With the initiatives in the area of homelessness and affordable housing, that number is in the order of about 75-150 people per night. I cannot say that the drop in the numbers is entirely due to Government of Canada initiatives, but I do know the government took a significant lead in the area of homelessness and affordable housing. While this issue will always be with us, certainly in the case of my particular riding, this has been a very welcome initiative and we hope that Bill C-48 continues that initiative.
Again, using my riding as an example, federal-provincial cooperation made possible a pilot program for affordable housing ownership to assist low- and middle-income Canadians. I could bore you for several hours with the intricacies of that initiative. It is exciting and I am proud that the Government of Canada has taken some leadership in the initiative. This further supplements the $2 billion that the Government of Canada spends on an annual basis.
In conclusion, we hope that Bill C-48 complements much of what the government has done to date, particularly Bill C-43. We continue to meet our commitment of balanced budgets over the next five years. I note in passing that the street, if you will, big S, seems to have supported this budget, or at least not felt that it affects the fiscal framework of the Government of Canada, and the fundamentals of the economy continue to remain strong notwithstanding some nay-saying by certain members.
The Chairman: Thank you, Mr. McKay. One thing I notice you did not deal with was something that this committee deals with — that is, the estimates process. We are a parliamentary committee, and we are interested in things like parliamentary accountability and transparency and so on.
One of the difficulties with this bill is that we are to vote almost $5 billion for which there are no ready parameters or strategies for payment and no real estimates. I note you quoted with a lot of delight the Comptroller General who, you said, gave you a lot of comfort. We are parliamentarians and need to have some comfort in regular parliamentary oversight.
Where in this bill is there a provision for Parliament to have ongoing oversight into the spending proposed in Bill C- 48?
Mr. McKay: Mr. Chairman, I am sure you will pursue that line of questioning with the Comptroller General, and I would encourage you to do so. He will provide you with a more detailed and impartial perspective.
The Chairman: You are a parliamentarian as well.
Mr. McKay: All of these spending initiatives will be subject to the usual parliamentary oversight. If a budget proposal goes before Parliament, it will come back. It is still reviewed by the supplement process.
Perhaps, Mr. Devries could add to that answer, but it starts out as unique legislation, which is unplanned surplus legislation. The money does not exist unless there is a surplus. The spending initiatives will not exist until there is a surplus. In some respects, it is unfair to anticipate detailed spending plans on particular monies until that contingency arises.
Mr. Peter Devries, General Director, Deputy Minister's Office, Department of Finance Canada: Mr. Chairman, in some ways, the provisions of Bill C-48 are not any different from the provisions in Bill C-43 with the exception of the conditionality that payments cannot be made until we have a surplus of at least $2 billion.
In Bill C-43, the $700 million for early childhood development is in some instances the same as what we are asking for in this bill with respect to the major blocks of spending we have set out.
However, as Mr. McKay noted, the Comptroller General indicated before the committee in the other place that departments and ministers will follow a set of criteria prior to access to these funds.
The Chairman: Did your department draft the criteria?
Mr. Devries: The criteria are the same as any other government spending initiative.
The Chairman: Is the Department of Finance involved?
Mr. Devries: No. That it is the responsibility of the Treasury Board Secretariat and ministers. Prior to any payments, the Treasury Board will have to approve the funding agreements with the eligible recipients. The supplementary estimates, departmental performance reports and reports of plans and priorities will include these payments in their records and the Auditor General will audit them and show them in the Public Accounts of Canada.
The Chairman: Would they come before parliamentary committees?
Mr. Devries: Yes, these are statutory programs and because of the authority set out in the bill, the programs set out become statutory payments.
The Chairman: Oh my goodness. That is even worse.
Honourable senators, I ask Senator Tkachuk to allow Senator Ringuette to precede him with her questions because she has to attend another committee.
Senator Tkachuk: In the spirit of cooperation, I agree.
Senator Ringuette: Mr. McKay, I have listened carefully to your presentation this morning. The housing and education programs would be funded via transfers to the provinces. It seems that these initiatives exist and the bill simply speaks to additions provided the money is available. However, the public transit funding targeted in the bill is new because I do not recall such a program. How will that initiative proceed?
Mr. McKay: I anticipate that it will proceed with negotiations by the relevant minister, presumably Mr. Godfrey, to develop individual agreements with municipalities, as appropriate.
Senator Ringuette: He will negotiate with the municipalities and not with the provincial governments.
Mr. McKay: No. A fairly broad discretion is outlined in clause 3 of the bill where it states:
3. For the purposes of this Act, the Governor in Council may, on any terms and conditions that the Governor in Council considers appropriate, authorize a minister to
( a ) develop and implement programs and projects;
( b ) enter into an agreement with the government of a province, a municipality or any other organization or person;
( c ) make a grant or contribution or any other payment;
( d ) subject to the approval of Treasury Board, supplement any appropriation by Parliament;
( e ) incorporate a corporation any shares or memberships of which on incorporation, would be held by, on behalf of or in trust for the Crown;
( f ) acquire shares or memberships of a corporation that, on acquisition, would be held by, on behalf of or in trust for the Crown.
There are a number of ways that the government could approach the specific item to which you refer.
Senator Ringuette: Depending on where you live in Canada, there is a different definition of public transit. In my province of New Brunswick, support for public transit means support for the passenger trains to link the many small communities throughout the province. Only three cities in New Brunswick have public transportation.
In respect of the gas tax issue, the allotment for provinces was on a per capita basis. Will the allotment for the public transit funds be determined on a per capita base so that there is an equal distribution across the country?
Mr. McKay: I refer to a press release from Minister John Godfrey that says:
The investment of up to $800 million will be allocated to provinces and territories on a per capita basis. Consistent with the intent of this initiative, it is proposed that the agreements stipulate that the funds be distributed within each province and territory to municipalities and transit agencies based largely on transit ridership.
The short answer to the question is overall, it will be a per capita basis but the specific is on a ridership basis.
Senator Ringuette: Thank you.
The Chairman: Mr. Devries, in which clause does it state that the government will make these payments statutory?
Mr. Devries: The very nature of the bill automatically makes the payments statutory. Mr. Heiss will explain further.
Mr. Werner Heiss, Director and General Counsel, General Legal Services, Department of Finance Canada: Clause 1 states:
1. (1) Subject to subsection (3), the Minister of Finance may, in respect of the fiscal year 2005-2006, make payments out of the Consolidated Revenue Fund up to the amount that is the difference between the amount that would, but for those payments, be the annual surplus as prepared in accordance with sections 63 and 64 of the Financial Administration Act and $2 billion.
That authority provides statutory appropriation with one limitation the amount, which is determined based on the surplus. The maximum is $4.5 billion and the individual limits are contained in clause 2(1). This is a statutory authority to make draws on the Consolidated Revenue Fund, CRF, for the appropriation.
The Chairman: In terms of parliamentary scrutiny, what does this language do?
Mr. Heiss: This is an appropriation so Parliament would approve it.
The Chairman: We are voting now for $4.5 billion and thereafter have no other say.
Mr. Heiss: You have further say, as Mr. Devries pointed out because the estimate process of any statutory appropriation, of which there are many, including those provided for in Bill C-43, is such that it is still reported. Hence, committees can still obtain the information and request additional clarification. It is reported through the estimate process and through the public accounts. The reporting on those expenditures affords parliamentary committees an opportunity to scrutinize and review. It is no different from any other statutory appropriations and, I believe, 75 per cent of government expenditures are in that range.
Senator Stratton: We thought we had that when adscam occurred. How much money disappeared into that without parliamentary scrutiny?
Mr. McKay: Only Justice Gomery knows for certain, and he is not saying, yet.
Senator Tkachuk: What was your involvement in this process, Mr. McKay?
Mr. McKay: My involvement was after the fact. The arrangements to enter into the parameters of the bill were negotiated among the House leaders and, once the parameters were set, the drafting of the bill took place. I saw it when it appeared in the Department of Finance where we went through it clause by clause.
Senator Tkachuk: At the committee's meeting on Bill C-43, the Minister of Finance said that he talked on the phone every day about this. Did he not call you concerning this bill?
Mr. McKay: I called him, certainly, but he did not call me.
Senator Tkachuk: You said that you had nothing to do with the drafting of the bill. Did you talk to him about it during the process?
Mr. McKay: Yes, I spoke to him near the end of the process.
Senator Tkachuk: Despite the fine words of Senator Day about your running the department, it is not quite the case in respect of this bill.
Mr. McKay: There are days when I think that would be a good idea.
Senator Tkachuk: We do too, I think.
Mr. McKay: I could go to clause by clause on that point alone.
Senator Tkachuk: I want to be clear on this, you spoke to the Minister of Finance, but not about this bill, or you spoke to him but only at the end of the process. When you read the newspaper articles, did you pick up the phone and ask the minister what was happening?
Mr. McKay: I am not far from that.
Senator Tkachuk: Were there discussions about what was taking place? He must have talked to you about what was going on.
Mr. McKay: We spoke several times, but the main concern was to fall within the fiscal framework and maintain the fiscal discipline that the government has fought so hard for over the last number of years.
Senator Tkachuk: You did not care what was in it; you just made sure there was no deficit.
Mr. McKay: Obviously, you care what is in it and the piece about affordable housing is important to me. However, looking at it from a finance perspective, you want to ensure you are not going into deficit, that you stay within the framework and none of your fundamentals are impacted in any way.
Senator Tkachuk: Let us get to that affordable housing. Mr. Fontana said in committee that the government originally committed to spending $1.5 billion over five years, which Minister Goodale reiterated following the tabling of the budget in 2005. Bill C-48 now has accelerated that commitment to two years and increased it to $1.6 billion.
When Senator Carstairs spoke about this particular bill in the Senate, I asked her whether it was new money or old money or accelerated money or compressed money or whatever it is that you people in finance do. She said that it was compressed money, that the $1.5 billion became $1.6 billion; $1.5 billion was previously the amount budgeted and it was compressed in two years rather than being spent in five years. There were comments also that it is new money. Could you clarify that for us?
Mr. McKay: This is all new money.
Senator Tkachuk: Did not the minister of housing know that?
Mr. McKay: I was there for his remarks; however, I do not recollect them precisely so I cannot comment on his remarks.
Senator Tkachuk: He clearly stated that this was not new money. Then Senator Carstairs, in the Senate chamber, stated that it was not new money. She said that the money was compressed from five years to two years, and therefore it was more money per year. That is what she informed us in the Senate chamber so she obviously did not know what she was talking about either.
Mr. McKay: I have no comment.
Senator Tkachuk: Is there confusion in the government as to how much money is spent?
Senator Eggleton: You are taking the comments out of context.
Senator Tkachuk: Would you like to have the whole works?
Senator Eggleton: I have it here.
Senator Tkachuk: So do I, but I am asking Mr. McKay. You can ask your questions on your turn.
Mr. McKay: If we keep this going, something good could happen. This is a $4.5 billion contingent spending, of which $1.6 billion is allocated for affordable housing. I would anticipate all of that to be fresh money.
Senator Tkachuk: It is all contingent on the $2 billion.
Does the money become available when the surplus is at $2 billion in the first year and then $2 billion in the second year? When can the cabinet spend the money?
Mr. McKay: That is entirely within the prerogative of the government. In theory, no money could be spent in the first year — assuming there is a surplus.
Senator Tkachuk: Let us say the surplus is $3 billion.
Mr. McKay: That could be applied entirely to debt relief, for instance, and the entire set of initiatives postponed to the following year, if that was the decision of the government.
Senator Tkachuk: What has to happen in the second year?
Mr. McKay: Presumably in the second year, in order to fulfill the bill, you have to have at least a $2 billion contingency and then you would have to do your $4.5 billion of allocated spending over the course of that year.
Senator Tkachuk: It has to be over $2 billion the first year and $2 billion the second year, although it does not necessarily have to be spent in the first year, the total must be $4 billion or $4.5 billion.
Mr. McKay: It must be $4.5 billion. You have to hit your thresholds first of $2 billion in each year, and the spending after that is entirely contingent on that surplus.
Senator Tkachuk: It is possible that no money will flow at all for two years.
Mr. McKay: That is a possibility.
Senator Tkachuk: There is a possibility that the government will spend the money on something else.
Mr. McKay: That is a possibility.
Senator Tkachuk: We have spent the $2 billion and we have another $2 billion but we have $4.5 billion to spend. How will that work? Now we have $2 billion in the second year but you have $4.5 billion committed to spend with your partners, the NDP.
Mr. McKay: The $2 billion on the first year is mandatory, and the $2 billion on the second year is mandatory. The $4.5 billion is discretionary as to when it is actually spent. It all could be spent in the first year out of surplus or the second year or some combination thereof; or it could not be spent at all in the event that there is no surplus beyond those $2 billion amounts.
Senator Tkachuk: When you have a budget, you have estimates and budget bills; people who receive the money can plan — there is some process to it. Provinces can plan. Here you have money allocated for housing and education, which you say is all new money — there is some confusion so I will leave you within your own group to straighten that out. Who is handling all this? If you do not have to spend it, how will the people plan to deal with this? For example, for education, lowered tuition fees were promised by Mr. Layton. How will people know to have lower tuition fees if this is the way you will do business?
Mr. McKay: We are in the fiscal year 2005-06 and we will not know what the surplus is until September of 2006.
I do not want to be too crass about it, but if I was a department anticipating receiving money, I would not be booking this money until I knew that surplus was in place. Then presumably there would be an allocation, and by then, presumably, the department will have worked up plans as to how to deal with that particular money.
Senator Tkachuk: Will Parliament then be asked how that money will be spent? When you decide to spend the money in the fall of 2006, if you are still the government, will Parliament be asked to allocate the money or will cabinet allocate the money on its own?
Mr. Devries: Bill C-48 gives the government authorization to make the payments to the entities that have been set up in that fiscal year. The government will not be going back to Parliament for authority to spend that money. Bill C-48 gives the authority to the government to spend that money. It has set it out in four main categories. What the responsible ministers will be doing over the course of 2005-06 is setting up funding agreements with the eligible recipients so they are in place prior to the end of this fiscal year, conditional on a surplus of at least $2 billion at the end of this fiscal year and next fiscal year. Once those funding agreements are signed prior to the end of this fiscal year, and once we know what the final surplus will be, then the government can allocate the funds according to Bill C-48 and the agreements that it signed with the eligible recipients.
Senator Eggleton: We thank you, Mr. McKay, for being here today with the Department of Finance officials. I want to go over three areas of concern raised at second reading in the Senate. Senator Tkachuk has touched on the terms of accountability.
Many senators feel that Bill C-48 definitely does not have the kind of detail that Bill C-43 or other budget bills have. Normally, when a bill is debated there is more understanding about where the money is going than there is in this case where there are few if any details about any of the programs. It is left up to the departments, which is understandable considering that you do not know whether all the $4.5 billion or half of it or none of it will be available. It might be some time before that amount is known.
Accountability to Parliament is still important. I have heard two answers that relate to parliamentary accountability. One is that members of Parliament, either in the House or the Senate, would have the opportunity to look at this in detail and question officials when it comes to supplementary estimates. Secondly, we have the annual report on planning and priorities. Are those are the two instruments of parliamentary oversight for the $4.5 billion?
Mr. McKay: The first response has to do with the Comptroller General's remarks, which I quoted in part. These terms and conditions would detail more specific program parameters along with the appropriate level of audit, evaluation, reporting and accountability provisions. My office reviews such proposals prior to their submission for Treasury Board approval. I suppose the first answer is that the Comptroller General is satisfied with the very nature by which the government is going about this process.
You in part answered your own question in that this is unplanned surplus legislation. These initiatives will not happen unless there is a surplus. We are in uncharted territory. Parliamentary oversight is there almost by definition. Parliament has, in effect, no limitations on what questions it can ask about any spending initiatives, let alone spending initiatives in Bill C-48.
Senator Eggleton: I am trying to establish the instruments of that parliamentary oversight.
Mr. Devries: There are a number of instruments and the first one is going through Bill C-48 and the broad parameters of what the government is requesting. Then, as Mr. McKay indicated, prior to the departments signing agreements with any of the eligible recipients, they will have to go to the Treasury Board and have the board review those agreements. The Comptroller General will have to be satisfied that those agreements follow the conditions set out by the Treasury Board Secretariat in signing such agreements.
Once these agreements are in place and the payments are made, they will show up in supplementary estimates as a statutory program for information purposes, but of course, the committees involved in reviewing those supplementary estimates can then ask any questions of the minister or officials involved with respect to more details on those programs. The Auditor General audits the flow of monies. The Public Accounts of Canada publish the final results and the individual departments put out the details of these programs as well as their results in their departmental performance reports and in the reports on plans and priorities. Those too are subject to review by Parliament.
Senator Eggleton: Education is an issue with respect to the provincial responsibility in this regard. The provinces do not have to tie in matching funds and presumably, they will not be stuck holding a bill at the end when the $4.5 billion runs out.
Since education is a provincial matter, how will this money be related to that responsibility? Will the funding take the form of previous government programs such as the millennium scholarship fund? Will there be provincial consultations? How do you see this dovetailing with the provincial responsibility?
Mr. McKay: The bill itself simply refers to supporting training programs and enhancing access to post-secondary education. There is a certain element of open-endedness to that and necessarily so. Access could mean dealing directly with students, possibly enhancing the Canada student loans, but the greater likelihood would mean dealing directly with provinces in their areas and in some manner sending that money over to provinces. It also dovetails nicely with the government's anticipated initiatives with respect to Aboriginal students. It may actually take some direction in that respect as well.
Senator Eggleton: Anything that would involve tuition fees, for example, would result in a consultation with the provincial government?
Mr. McKay: It would pretty well have to, I would think.
Senator Eggleton: The details of the programs are not here, as we know, because they are to be worked out. You talked about that. However, there is a lot of information given as to existing government programs in the areas of housing, environment, post-secondary education, et cetera. I take it that the spending of this $4.5 billion is not necessarily tied to those specific programs. The transit program is a new program, I would think. Is it fair to say that most of the money is likely to go to existing programs or that it is a framework or guideline for how this money is likely to be spent?
Mr. McKay: Subclause 2( d ) refers to foreign aid not exceeding $500 million, and I cannot imagine setting up a specific program for $500 million. I would think that becomes part of CIDA's operating budget. That would seem to me the straightforward answer with respect to that.
With respect to $1.6 billion for affordable housing, including housing for Aboriginal Canadians, I think the minister, in his remarks to the House committee, talked about a number of initiatives on which he would like to proceed.
With respect to the $900 million on public transit and energy-efficient retrofit program for low-income housing, I responded to Senator Ringuette and talked about initiatives for public transit. Those may well be new initiatives entered into by Minister Godfrey for specific issues.
Senator Stratton: I would like to go back to the question of process raised by Senator Tkachuk. In any fiscal year, you have two sets of estimates, one in November and another one just before the end of the fiscal year.
If you cannot make a determination on your balance sheet until after you close the books on the year, how do you deal with the $4.6 billion? Do you deal with that money in the following fiscal year?
Mr. Devries: As we mentioned before, these are statutory programs and they are included in the supplementary estimates and the Main Estimates but for information purposes only.
What will happen in this case is that with respect to fiscal year 2005-06, we determine what final surplus in September of 2006. It is determined that the surplus is greater than $2 billion. Just for the sake of argument, we assume that half of the $4.5 billion asked for in Bill C-48 gets allocated at that point in time.
Senator Stratton: Will we find the details in the supplementary estimates?
Mr. Devries: At some time in September or October of 2006, the government would issue the cheques.
Senator Stratton: When does Parliament get a chance to examine the details?
Mr. Devries: They would examine the details in the first supplementary estimates of 2006-07, in around November, as per tradition.
At that point, under the various departments you would know who would receive monies under Bill C-48 and how that money was allocated and to whom, all post facto .
Senator Stratton: There is no ongoing control whatsoever.
Mr. Devries: Let us go back to Bill C-43, which provided $700 million for early childhood development. That money went into a trust to be paid to the provinces subject to the passage of Bill C-43. The details of the payments to the provinces will be found in the supplementary estimates tabled this fall, post facto.
Senator Stratton: Part of my concern with respect to the main budget bill, not the NDP budget bill, is that the government determined a significant sum of money for daycare, and the provinces are negotiating those payments.
The Minister of Finance appeared before this committee on the main budget bill and said that there is nothing in the bill, whatsoever, for rural Canada, people from small villages or farm families. He admitted that fact and that he could not find a way of including something for that group.
With respect to daycare, this funding is for towns and cities of a size that can afford to have daycare centres. The parents of children in rural Canada are completely left out, as are the children.
Perhaps the Honourable Mr. McKay could tell the committee what is in the bill for farmers and others in rural Canada?
I understand the inclusion of Aboriginal housing in the bill because I have been on many reserves over the years and the housing has been deplorable for a very long time. However, what is in the bill for farmers? What is in the bill for rural Canada? What is in the bill for fisheries?
The bill includes $1.6 billion for affordable housing, $1.5 billion for post-secondary education, $900 million for the environment, $500 million for foreign aid, and $100 million for protection of workers' earnings.
What is in the bill for farmers who are in desperate straits?
Mr. McKay: The superficial answer is nothing. You might say that about pretty well anything. This bill is of limited scope in that it contains only four items. It does not cover the waterfront. However, when I break it down a little more carefully, I do not see any paragraph or reference in the bill that excludes a farmer or anyone else from accessing money for energy-efficient retrofits. I do not see any reason why a farmer or his family would not be able to access post-secondary education, similarly with amounts for affordable housing and even with foreign aid.
There is no reference to the word “farmer” or “fisher” or “person in transportation” because the bill is a general benefit to all Canadians.
Senator Stratton: Farmers are going through a particular crisis because of low commodity prices coupled with the strain of BSE. They are trying to survive economically and avoid bankruptcy but I do not see anything in the bill for them.
Mr. McKay: On that point, I want to ensure that you understand the government announced a $1.1 billion program for farmers last March, a significant amount of money for a particular industry.
Senator Stratton: Yes, the government announced $1.1 billion while the farmers need $5 billion to $7 billion. It smacks of tokenism because farmers are still going bankrupt and committing suicide. That is the real concern when $500 million is provided for foreign aid. I quote from the NDP website:
Five-hundred million in foreign aid, which, in the first year, puts Canada on the path to honour our long- broken promise to the world.
When the Prime Minister earlier committed to the 0.7 per cent of GDP to foreign aid, how much closer does this $500 million take us to the 0.7? Currently, we are at just under 0.3 per cent. How much more do you need to reach 0.7 per cent?
The government is committed to achieving that figure but it would not commit to the year 2015, as most countries have committed to the number agreed. What does will this $500 million in foreign aid accomplish?
Mr. McKay: My recollection of the numbers is that to achieve that figure, it would be something in the order of about $41 billion over ten years — a significant sum of money. Prime Minister Martin's commitment, as I recall, was that the government would go to 0.7 per cent only on the basis of available resources. He was not prepared to make commitments that he was not able to complete.
I point out too that in order to be “ODAable,” as they say, many things are included and many are not included. Canada's assistance in Haiti and Afghanistan and anticipated assistance in Darfur are not included in the ODA figures.
The Chairman: Why is ODA?
Mr. McKay: The amounts are not considered Official Development Assistance. The Government of Canada has many initiatives for significant sums of money that do not count towards the 0.7 per cent target.
Canada has been a world leader in debt relief for low-income countries, but none of that counts for the purposes of achieving the 0.7 per cent commitment. Prime Minister Martin phrased his response to your inquiry quite well when he said that Canada will make specific commitments to 0.7 per cent, will set meaningful targets that can be achieved and will move towards that goal.
Senator Stratton: He has backed off a previous commitment.
Mr. McKay: I do not think so.
Senator Stratton: You did not answer the one fundamental question: What will the $500 million in foreign aid do? The NDP website said that in the first year the amount will “put Canada on a path to honour our long-broken promise to the world.”
Senator Murray: Are we talking about ODA figures?
Mr. McKay: Not necessarily.
Senator Murray: There you go, senator.
Mr. McKay: Generally speaking, we do not take our policy instructions from NDP websites.
Mr. McKay: I can say to you only that for foreign aid, it is an amount not exceeding $500 million, even though it might be “ODAable.”
Senator Stratton: My point is that there are no details of the spending of $500 million. At least in respect of the $1.6 billion for housing and the $1.5 billion for post-secondary education, there is a bit of detail in the bill. Yet, you cannot tell me what one cent of $500 million will be used for.
Mr. McKay: I do not know that it will be realized because it is unplanned surplus legislation.
Senator Harb: I have a few questions to ask about the method of delivery. I understand this will allow the government to allocate $4.5 billion in the event there is a surplus over $2 billion.
Many of those programs that the government will be spending on will involve provincial governments. If there were a discussion now with the provincial governments on the methods of transferring these funds to the provinces, would there be any say for Parliament in terms of how this money is distributed?
Do a preset number of provinces have to come on board before we can fulfill this commitment, or will we give the funds to whoever comes along?
Mr. McKay: Each of the four separate initiatives is unique. We just talked about the foreign affairs money. There is no specific issue that needs to be realized with respect to whether you enter into negotiations with provinces or anyone else. It is simply a departmental transfer on the face of it; and whether it is applied to matters with respect to ODA or other matters is entirely within the prerogative of the government.
With respect to affordable housing, you have a variety of alternatives, some of which the minister has outlined at the House committee that he would like to see go forward. If you look at clause 3 of the bill, you can see a variety of ways in which the government could enter into various funding agreements with various entities, be it a province, municipality or another entity. That would be a response on affordable housing.
With respect to post-secondary education, I think that the greater likelihood is entering into an arrangement directly with the provinces. I think that would be the greater likelihood; but, again, that may unfold in a way we cannot quite anticipate at this point.
Senator Harb: Really, nothing will prevent the government from setting up a corporation of sorts in order to dispose of some of these funds through whatever arrangement they want. For example, a board of trustees or a board of directors of that corporation will say, okay, the money is here but this is how we will spend that money. Through that, we can deal with some of the concerns some of my colleagues have raised, and that is the accountability to Parliament. In essence, the government for example, could fulfil its commitment in saying that the money for housing will have CMHC as a delivery mechanism. The same applies for education where the millennium scholarship fund could be the delivery mechanism. Nothing would prevent the government from doing that and then, at a later date, coming back to Parliament and saying the money is there, this is how we will spend it, and report on an annual basis to Parliament in terms of how the money is spent.
Also, I do not see anything in the bill that says every penny of that money would have to be spent in 2006 or 2007 or 2008. It is just that the money will have to be allocated for that year. Am I correct or am I missing something?
Mr. McKay: Let me respond to the first part of your question. Going from allocation to spending is another issue.
If you look at subclause 3( e ), it says:
( e ) incorporate a corporation any shares or memberships of which, on incorporation, would be held by, on behalf of or in trust for the Crown.
Mr. Devries has made the analogy to the monies allocated for child care, and this is a parallel concept.
In theory, if we realize the surplus and there is in excess of $2 billion, the monies could be allocated to an entity contemplated in 3( e ). Then monies would be distributed according to various agreements as that entity entered into, and that would still require parliamentary scrutiny, which Mr. Devries is quite prepared to explain more thoroughly.
Senator Harb: Mr. Devries would it then allow Parliament to ask the organizations about how they are spending the funds?
Mr. Devries: Yes, Parliament could come back to those organizations and ask them how they allocated those funds, and the results they achieved with that money.
Senator Harb: Would that be subject to the Auditor General's ability to audit these organizations?
Mr. Devries: The Auditor General has the ability to go into these organizations to do that, depending upon the amount of money they have, as we saw through Bill C-43.
Senator Harb: Do they have to spend the money in the year that they receive the money or can they spend it over a longer period?
Mr. Devries: With regard to the funds allocated under Bill C-48, they are conditional on there being a surplus of at least $2 billion in each of the two fiscal years in question. That can only be determined when we have the final results.
What Bill C-48 does is establish a liability with respect to either of those two fiscal years, so that the reserve surplus is charged against the surplus in those two fiscal years.
The organizations that are eligible to receive the money might receive the funds in one cheque or allocated over time. It depends on their funding requirements.
Senator Harb: When you give them the cheque, do they have to spend it?
Mr. Devries: They do not have to spend it all at once. They would spend it in accordance with the agreements they have set up with others.
Senator Harb: This is a tricky question for you. Is there anything in the bill that prevents the government from giving tax reductions to low- and middle-income earners?
Second, if you have $500 million to spend on top of the base of $2 billion, how do you allocate it? Is there a formula that says because I only have $300 million or $500 million to pass on under this agreement, I will put a certain percentage in foreign aid, another percentage in housing, and so on?
Is there a constructive type of formula in terms of how to divvy it up?
It looks rigid to me. You are pretty sure you will get the $4.5 billion and you are saying how much you will spend in each area. However, if you do not get that much, is there a formula for how you will spend that money?
Mr. McKay: Let me go at the first part of your question with respect to how this money will be spent. As we have repeated, it is $2 billion spent first and then you are into contingency money. If revenues tank, the money will not be spent.
The revenues may tank for a variety of reasons. Primarily, I suppose, the economy would not do so well and the government revenues would not meet budget projections. The first response to your question is that this is within the fiscal framework and this is based upon our projections going forward over the next two years. Some pretty bad things have to happen to the economy before we would not anticipate spending this money.
The second part of your question was could we avoid the spending by passing on tax relief, thereby intentionally reducing revenues to the Government of Canada?
That would take a far bit of manipulation, one of which would be that the next budget bill would have to anticipate substantially reducing government revenues. Frankly, I do not see that as being in the works, but you could intentionally manipulate your revenues so that they are so impoverished to avoid spending money in the Bill C-48 area. I cannot imagine that, but I guess in the realm of theoretical possibility that is true.
As to whether there is a preset formula, if $4.5 billion is something less than $4.5 billion, do we do a percentage of this and that, no, there is not, as far as I know.
The Chairman: Senator Harb asked a series of excellent questions, and I have a question for Mr. Heiss following up on what Senator Harb asked. Two people turned to subclause 3 ( e ) as an example, which says:
incorporate a corporation any shares or memberships of which, on incorporation, would be held by, on behalf of or in trust for the Crown;
This committee knows that in the case of endowments and foundations and so on, the Department of Finance has drafted agreements with these foundations that exclude parliamentary scrutiny.
How will the Auditor General or Parliament have the right to scrutinize these funds held in trust for the Crown unless there is a clause indicating that there will be parliamentary scrutiny?
Are you suggesting that you will draft it so that there will be a clause saying that Parliament shall have the right to scrutinize? As you well know, a number of foundations and endowments you have set up exclude that scrutiny.
Mr. Heiss: That will be up to Treasury Board policy in terms of approving the terms and conditions of the particular agreements that will be presumably concluded with a particular corporation. You will have to ask Treasury Board that more specifically when they come, but I believe the current policy is that, in fact, that type of scrutiny would be available under the terms provided.
The Chairman: As a matter of course and as a matter of practice from now on? Is that what you are saying?
Mr. Heiss: You will have to address it more specifically to Treasury Board, who in fact sets those terms and conditions of entering into those agreements. It is certainly something they can determine.
Mr. Devries: Bill C-43 gives the Auditor General the authority now to go in and do performance and compliance audits in those foundations that receive at least $100 million over the five years.
The Chairman: Anything under that, we still cannot get the scrutiny of the Auditor General.
Mr. Devries: Under the specific acts, no. However, if the Auditor General wanted to look into that, I am sure the government would accommodate her in those cases.
The Chairman: That is the Auditor General, what about Parliament?
Mr. Devries: There again, Parliament can call these organizations before it, as have you done in the past, and ask various questions of interest to this committee.
Mr. Heiss: Traditionally, in the context of entering into these agreements, Treasury Board requires that the corporations make available and table their financial statements. Hence, Parliament has an opportunity to raise questions and invite the corporations to participate.
The Chairman: That is good to know.
Senator Trenholme Counsell: This is the first time I have had a chance to be in the finance committee. It gives me an opportunity to look at a finance bill very closely, for which I am appreciative.
Most of the things that were on my mind have been addressed. I have heard, although I do not know exactly who said them, words such as “reckless,” “unplanned,” “scary,” and “wasteful.”
It seems to me this is a very cautious bill, given the commitment to the deficit. I do not see anything new in this bill. It is just making a greater commitment, if possible, than we have been able to make before. Is that correct?
Mr. McKay: You are correct. This is unique in that it is unplanned surplus legislation. My colleagues to my left and right could correct me, but I do not recollect a bill such as this ever having gone before Parliament, effectively saying, “In the event that we have money, these are the areas in which we would like to spend the money.” It is unique in that respect, and therefore cautious and prudent.
I referenced my remarks to the Comptroller General, and I am sure you will ask those questions of him later in the day. He used the phrase “a prudent approach to fiscal management.” I believe this bill represents that approach.
With respect to many of the media stories that the government was shaking on its commitment to fiscal discipline, I think the average person has effectively dismissed that speculation.
If you can determine what has happened to the dollar based upon Bill C-48, you are a far wiser person than I am. I cannot see any impact on the interest rates or on inflation or on any economic activity. We are running at significantly low unemployment rates and particularly high employment participation rates. I believe 6.7 per cent is the last unemployment figure, and the year 2000 was the last time we had that kind of rate. The employment participation rate fell off slightly but it was replaced by many full-time jobs.
The economy is doing reasonably well. Canadians realize that the government should initiate some spending, and the bill has been reasonably well-received. People and, indeed, economic commentators have spoken, and I think we are enjoying the benefits.
Senator Trenholme Counsell: The uniqueness of the bill is of interest to me. All during the 1990s, we tackled the huge deficit, but the wording in the budget did not state that if we met out commitment to the deficit such and such would happen.
Mr. McKay: When you are digging yourself out of a $42 billion hole, you do not think about what you will do once the hole is filled in.
Senator Trenholme Counsell: Philosophically, we were doing that, but it was never written just like this.
Mr. McKay: When you have a deficit that is accumulating into a very significant debt, you cannot think about what you might do in the event that you have extra.
This is the eighth surplus in a row, and we were receiving criticism that, at least in the last two or three surpluses, the government was, in effect, spending the surplus without authorization. This bill actually addresses that specific criticism. It is quite a step forward for the Government of Canada to say, “Okay, in the event that we do have an unplanned surplus, which is what it is known as, excess revenues over what we anticipate spending, then we would like to spend it in these areas. Here, Parliament, what do you think?” That is what we are here for. “Here, Parliament, what do you think? These are the four areas in which we would spend monies.”
Senator Trenholme Counsell: Again, I find Bill C-48 a very cautious yet visionary budget bill. I am interested that in regards to post-secondary education that Aboriginal students are included because I believe that is the only, true long- term answer to their health and social problems.
Is there any indication from your position as to how much of this $1.5 billion would go to Aboriginal Canadians?
Mr. McKay: I do not recollect any specific allocation. That is still a matter of some negotiation.
Senator Trenholme Counsell: I have heard someone mention the fact that decreasing tuition is a priority. Is that correct, or is that just speculation?
Mr. McKay: The phrasing of the bill is “increasing accessibility,” so it could be tuition or something else.
Senator Trenholme Counsell: Have other budgets included energy-efficient improvements in low-income housing?
I think I need to have a lot of money before I can even think of accessing the budgetary provisions for energy- efficiency changes to my own home.
Mr. McKay: I think the anticipation is that it builds on previous initiatives. I do not know that this will be a stand- alone program. I am not in any position to answer that question specifically. We would have to get you an answer on that, other than what I have just said.
Senator Trenholme Counsell: Public transit is not within your department, but I wonder if there has been any continuation of the talks done by the former Minister of Transportation with regard to things like the new types of train service in the Windsor-Montreal corridor, and also from downtown Toronto to the airport.
Mr. McKay: I know that Minister Godfrey has talked to some mayors about what they would do with the public transit money. I do not recollect any conversation about the Quebec-Windsor corridor as to whether that might include something to do with Pearson airport to downtown Toronto. I am in no position to answer that question, it would fall within the prerogative of Minister Godfrey and the negotiators.
Senator Trenholme Counsell: Do you know the figures for international assistance for 2001, and what those figures will be in 2010?
Mr. McKay: The ODA, as rightly said by Senator Stratton, is just under 0.3 per cent and the base is $3 billion. It grows at 8 per cent annually and is generally set at twice the anticipated GDP rate. If the average GDP rate is anticipated to be 4 per cent over the years going forward, the increase to that particular budget is at twice the GDP rate, which is 8 per cent.
Senator Trenholme Counsell: I have heard that there is a backlog in processing the funds for social housing. Do you know anything about that in terms of the budgetary process?
Perhaps we should hear about your success so we can take the news home.
Mr. McKay: Senator, your question is quite ironic because one of the postal codes in my area has been designated as one of the poorest areas in Canada — Scarborough. We have off-loaded poverty from downtown Toronto to some of the suburbs. I will be keenly interested to see how this rolls out but I cannot give you a specific answer to that question.
Senator Trenholme Counsell: Perhaps we could ask the minister that question later today.
Senator Murray: I have one question for clarification concerning the $2 billion surplus each year. This bill would authorize the spending of anything over and above that amount up to $4.5 billion. If the surplus is greater than that figure the government could spend, as it has before, on new foundations, for example.
Mr. McKay: There is no formal restriction in the bill. As senators are aware, this is enabling legislation and the government may spend the money.
Senator Murray: It is able to spend more than the $4.5 billion proposed in the bill.
Mr. McKay: There is no argument on this point.
Senator Murray: It does not offend me that the government made a deal with the New Democrats, or with the idea of putting more money into these general fields. I cannot argue with that, especially when there is so little detail about how it will be spent.
We are talking past each other to some extent. Most committee members are concerned about parliamentary control of the public purse, and officials are telling us about various internal checks, balances and processes. When we talk about parliamentary control, officials tell us that this is statutory authority, like any other. We know what statutory programs such as old age security, equalization and employment insurance.
This bill compares to those statutory programs in the most narrow, legal sense because it is enabling legislation. Mr. McKay is correct in that it is unique. There has never been a bill like this one before Parliament. It is an unprecedented assault on parliamentary control of the public purse, of which the foreign aid issue that arose between Mr. McKay and Senator Stratton is a good example. It is foreign aid, not Official Development Assistance. I believe that we now have an idea what constitutes Official Development Assistance. Foreign aid; this could be a plaque in Italy or Scotland.
I did not watch much of the Gomery inquiry but one day when I did watch, there was a learned discussion between senior public servants about whether the sponsorship program was truly a program. I believe that the consensus of the public servants was that it was not a program in the sense that there were no parameters.
A program, as understood in public administration, is something quite different from an initiative. We are getting into just such a process with this bill. This is almost a blank cheque to the government for spending in these various undefined areas.
It provides the authority for government to set up public, quasi-Crown corporations and to enter into agreements with various public or private bodies; and that is it. When will we learn the details?
There will be supplementary estimates somewhere down the road, reporting in the public accounts and the report of the Auditor General. This makes a mockery of parliamentary control of the public purse. I do not have anything more to say about it, unless I am provoked.
Mr. McKay: We discussed foreign aid so I will use those figures. Bill C-43 allocates $500 million and Bill C-48 allocates $500 million. What is the difference in respect of parliamentary oversight between those two allocations? The only essential difference that I can see is that one is committed spending and the other is not.
Once the $500 million allocation goes to foreign aid there is nothing to prevent Senator Stratton, Senator Murray and Senator Tkachuk from asking the minister or other authority to appear to answer why they spent the money on things that are ODAable, post facto .
Senator Murray: It is not the nature of the business, with respect. This is not the way, as you have observed, that Parliament controls the expenditure of money.
Mr. McKay: In effect, government is inviting Parliament to have a say on monies that might materialize. I would deem that parliamentary enhancement rather than parliamentary derogation.
Senator Murray: What is our say? Should we put more money into these general fields? Parliament traditionally has insisted on a great deal more information than is contained in this bill as to where the money is going and for what purposes.
Even if you had said “official development assistance,” I would have had an idea of what that meant. However, the expression “foreign aid” is there for a reason. Somebody has an idea of how they will spend that money outside what is traditionally and generally understood to be official development assistance. I would love to know who that somebody is, or what that idea is, but we will never know until much later.
Mr. McKay: I suppose the other response is would you prefer a situation that currently exists, which is that unplanned surpluses are allocated according to the priorities of cabinet?
Senator Murray: That is exactly what we are doing with this bill.
Mr. McKay: No, you are not. You are directing the government into four specific spending areas.
Senator Murray: They are not very specific areas.
The Chairman: Once you reach your $2 billion threshold, and if you had a $5 billion surplus, you can still use that $5 billion for other than the four items in this bill.
Mr. McKay: It is not binding, but no budget bill is ever binding. It reads as “may spend”; there is no “shall” or “must” — we “may” spend. That is the exact same phrasing as all budget bills.
The Chairman: As your lawyer said, the word “may” under the ministerial section is what gives you the statutory power.
Mr. McKay: Which is parallel wording to Bill C-43 or any other budget bill that appears before this committee.
The Chairman: I will not put words into Senator Murray's mouth, but one of the evils he is pointing to is what if you decide to come in with another two-page bill asking Parliament to vote $15 billion for six categories of spending. Is that the precedent and is that the way we want to go in Canada?
That is what I think is at the root of what Senator Murray is really asking you. How much further will this go? Should we bring in a three-page bill this fall asking Parliament to vote another $15 billion? Is that the way we want to proceed?
Mr. McKay: In the event that we anticipate unplanned surpluses going forward, it may be that this will be the way that the government will proceed. It may well be that this is a precedent. It may also be that it is not a precedent. I do not know.
On your hypothetical example of $15 billion, the threshold question is do you want to enter into the intellectual parliamentary concept of unplanned surplus legislation? If that is not a good idea, if you prefer to leave the discretion in cabinet, that is a decision that Parliament is able to make.
If this bill represents an initiative that Parliament thinks is a good idea, namely having some say at least — maybe not as fulsome as Senator Murray and others would like to have — perhaps this is precedent-setting legislation.
Senator Murray: The purposes of this act, in a very general way, are the environment, training programs, post- secondary education, affordable housing and foreign aid.
3. For the purposes of the Act, the Governor in Council may, on any terms and conditions that the Governor in Council considers appropriate, authorize a minister to...
That is a big spending power authority right there — projects.
The rest of the subclauses state:
( b ) enter into an agreement with government of a province, a municipality or any other organization or any person;
( c ) make a grant or contribution or any other payment;
( d ) subject to the approval of Treasury Board, supplement any appropriation by Parliament;
( e ) incorporate a corporation any shares or memberships of which, on incorporation, would be held by, on behalf of or in trust for the Crown; or
( f ) acquire shares or memberships of a corporation that, on acquisition, would be held by, on behalf of or in trust for the Crown.
It is not unusual to see this authority given to the Governor-in-Council in a specific statute for a specific purpose. We are saying for the purpose of this act, for anything to do with environment, post-secondary education, affordable housing and foreign aid, the cabinet can authorize a minister to do any of these things.
We are handing ourselves over bound hand and foot to the cabinet. Parliament will get a look at it perhaps in due course when there is a supplementary estimate, or when the public accounts come in or the Auditor General has something to say about it.
One hopes that people learn from their mistakes but you are letting yourself in for the kind of abuses that took place in the sponsorship area.
Mr. McKay: With the greatest of respect, I disagree profoundly. We are putting before Parliament, if you will, something of a fettering of the Governor-in-Council. If this bill does not exist, then presumably $4.5 billion can be spent in ways and means that are entirely the prerogative of cabinet and you have no say.
Senator Murray: That is not true.
The Chairman: Even if you reach your $2 billion threshold and you have an additional surplus of $4.5 billion, you do not have to spend it on Bill C-48.
Mr. McKay: Exactly; but at least Parliament has some opportunity to pronounce itself on this amount of spending in these four areas. Otherwise, it has nothing to say.
Senator Tkachuk: Could you then have a bill that would just allow spending for all government departments?
If you accept this in principle, it does not have to be limited to four. It can be limited to 15, and say we are going to allocate $10 billion for defence, environment, agriculture and so forth, go through the whole list, and we do not need a budget.
Mr. McKay: We are getting off into some fairly theoretical, hypothetical situations.
Senator Tkachuk: You brought it up — I am following up. You are the one who said this is a great thing; I am just asking you the question. Why cannot it be done for all the departments?
Mr. McKay: In theory, there is no reason why you cannot do it for all departments.
Senator Downe: When Minister McCallum was before this committee, talking about the expenditure review exercise, he spoke about the reallocation of programs for government priorities; and obviously, this arrangement with the NDP is now a government priority.
Do you know, in the negotiations — and you may not because your involvement appeared to be limited — if the NDP expressed any concerns about what was cut under the expenditure review exercise that they wanted restored?
Mr. McKay: I do not recollect any crossover between Bill C-48 and expenditure review.
Senator Downe: They were looking for additional funding. They were not interested in restoring anything that had been cut is what you recall.
Mr. McKay: I do not recollect any connection between restoring something under expenditure review and Bill C-48.
Senator Downe: Just a brief comment on the previous discussion, the other side of the argument than the one advanced has been that the government has been under tremendous criticism because the Department of Finance has been underestimating, or has been unable to project the amount of the surplus. At the end of the fiscal year, the government had to put that excess surplus on the debt, which was a public policy decision, but there was no debate.
It could be argued that this bill could be a precedent for setting out a framework for public policy debate, including parliamentarians, as to what we should do every year if we end up with these massive surpluses, as opposed to having it automatically go on the debt.
Mr. McKay: There is some fettering now of government discretion by virtue of Bill C-48.
Senator Day: I would like to follow up on Senator Downe's point. I want to get the process in mind. In September of this year if there is a surplus, suppose the government wants to put some of that towards the accumulated debt. This is an unbudgeted, unaccounted-for and unpredictable surplus. Say 50 per cent goes to pay down the debt, and the government wants to use the other 50 per cent for whatever priority issues might come up. How could the government do that after the budget has been out and this is an unplanned surplus?
Mr. McKay: Do you mean a surplus in September of this year for the fiscal year ended March 31, 2005?
Senator Day: Yes. I want to know the accounting process, because the supplemental estimates are over for the fiscal year. How does the government spend that money?
Mr. Devries: There is no authority for the government to allocate that excess surplus, if it happens to be in excess of the $3 billion set in the budget, to any other initiative except for it to be applied against the debt.
Senator Day: Perfect. This is giving authority to the government to spend the funds, but there is a built-in assurance that there will be some money available to pay down the debt of $2 billion in the year before this is triggered, and then it is enabling legislation. As you say, it gives the government the ability to do this within these various categories; is that correct?
Mr. Devries: Yes.
Senator Day: Have there yet been any funding agreements for one of these various categories under Bill C-48? I would like a sample of one to see what it looks like and what would be triggered as a funding agreement.
Mr. Devries: To my recollection, there have not been any yet. There has been a press release by the Minister of State indicating how the $800 million will be allocated, but the agreements have not been signed yet. It is my understanding that no agreement has been signed.
Senator Day: Could you refresh our memory on the allocation of the $800 million?
Mr. Devries: As Mr. McKay said earlier, that would be set up on a provincial per capita basis.
Senator Day: Do you mean within an existing funding arrangement?
Mr. Devries: A new funding arrangement would have to be set up. It will build on one already in place for the transfer of the gas tax to the provinces and municipalities.
Senator Day: That was the point I was trying to make. There can be existing mechanisms in place that can be supplemented, or there can be new programs established, but in each event, there will be some type of funding agreement entered into.
Mr. Devries: That is correct.
Senator Day: This committee maintains its mandate throughout to deal with government spending and estimates. There is no reason why this committee could not bring in you or any other representatives to ask about a funding agreement at any time. These funding agreements would be in place by the time the surplus is established in September.
Mr. Devries: These funding agreements would have to be in place prior to March 31. We have to establish the liability with respect to each of those two fiscal years during the fiscal years in question. We cannot do it after the fact.
Senator Day: Before the fiscal year is out, you know the mechanism by which funds may be disbursed in these various funding agreements. The funds that may become available will be determined March 31. Around September of the next fiscal year, you will determine whether there will be some funds that might be disbursed under those existing already established funding groups.
Mr. Devries: That is correct.
Senator Day: Therefore, we could bring somebody in and study it well before the funds are spent and disbursed?
Mr. McKay: No question.
Senator Eggleton: There is accountability.
The Chairman: The Department of Finance put out a document for this committee called “Bill C-48, an act to authorize the Minister of Finance to make certain payments,” and it contains certain questions and answers.
I would like to follow up on what Senator Day's question that says,
Are the spending commitments outlined in the recently announced agreement with the province of Ontario over and above those contained in Bill C-48?
The answer that is given is,
The agreement with the province of Ontario included commitments for incremental spending on post- secondary education, housing and infrastructure, which are also included in Bill C-48.
Then it goes on to say,
It would be possible for the government, once it is reasonably satisfied that a surplus of at least $2 billion will be realized by year-end, to use the authority under Bill C-48 to satisfy its commitment to the Government of Ontario in the priority areas identified in Bill C-48.
Mr. McKay, how much of Bill C-48 could potentially be spent in Ontario?
Mr. McKay: Actually, we do have that information. There is no question that there is some overlap, and the numbers I have presume an equal amount in both fiscal years, which may or may not occur. As I have said previously, you could spend it all in one year and none in the next.
Given that caveat, Bill C-48 overlaps with the Canada Ontario agreement could potentially be $200 million in 2005- 06 and $200 million in 2006-07 for higher education. It could potentially be, for housing and infrastructure, $150 million in each of those years, and on the cities initiative, $149 million in each of those years.
The Chairman: That is $500 million.
Senator Murray: We were led to believe that Bill C-48 was in addition to existing commitments, among which I thought were the commitments made in the agreement with the Government of Ontario; right?
Bill C-48 was not even a gleam in the eye of Mr. Martin or Mr. Goodale when the agreement with Ontario was done, was it?
Mr. McKay: The genesis of Bill C-48 was when the Conservatives did an about face in April, and the Ontario negotiations started earlier than that period of time. I cannot recollect when the agreement was actually entered into, but it was a similar period of time, certainly the spring.
Senator Murray: Ontario will get its piece out of the agreement between the federal and Ontario governments. There is nothing new for Ontario in Bill C-48, right?
Mr. McKay: Right.
Senator Tkachuk: The general income tax rate reduction was left out of the Budget Implementation Act, Bill C-43. The Minister of Finance wanted it reduced from 21 per cent to 19 per cent. My understanding is that as part of the deal with the NDP, that would be gone in order to pay for this particular $4.5 billion, but then there was some kind of an arrangement made to bring in this tax cut under a separate bill. When is that bill coming?
Mr. McKay: Bill C-43 deleted the sections with respect to the tax reductions for corporations from 21 per cent down to 19 per cent, and you know the parameters as well as I do. There is no connection between the deletion from that and the paying for in Bill C-48. They are two separate ideas.
Senator Tkachuk: The NDP wanted that out of principle. You agreed to it so you must know why they wanted it.
Mr. McKay: There is a principle but it is a little lost on me.
With respect to the reintroduction of those tax measures, notice is on the Order Paper.
Senator Tkachuk: Will that happen in the fall?
Mr. McKay: Yes.
Senator Tkachuk: There is $100 million for the protection of workers' earnings in the event of employers' bankruptcy. When will that bill be introduced?
Mr. McKay: I will leave that response to the officials because that is not part of Bill C-48, as you are aware.
Senator Tkachuk: It was part of the agreement.
Mr. McKay: It was part of the agreement but not part of Bill C-48. It is not clear to me that it requires a legislative initiative. I defer on that particular question.
Mr. Devries: I do not have the answer to that question.
Mr. Heiss: I do not know.
Mr. Devries: We will obtain the information for the committee, senator.
Senator Tkachuk: Was a written agreement made between the government and the NDP on all of these matters or was a napkin simply tabled with the Department of Finance?
Mr. McKay: I have heard various versions that the agreement was reached in a motel room, in the back seat of a Chevy, on table napkins and on dissolving paper.
Senator Tkachuk: Those are all new to me. Is there a piece of paper between the two the parties with an agreement between two the parties?
Mr. McKay: I have not been privy to a specific form of agreement between the two parties. There may well exist a form of agreement and I would assume that there is but I am not privy to it.
Senator Tkachuk: You think there is an agreement.
Mr. McKay: I am working on an assumption only because I have no basis to state further than that.
Senator Tkachuk: That would be the normal thing to do. Should such an agreement be tabled in Parliament?
Mr. McKay: I do not think I should respond to that because that should be determined by Parliament.
Senator Tkachuk: Do you think it should be made public if it is not laid before Parliament? We do not know what the agreement is because we have only the bill. If an agreement exists, then perhaps it should be tabled. Is there more to this?
Mr. McKay: If there is more, it is not within my prerogative and I have not seen anything.
Senator Tkachuk: I am sure you will see it later.
The Chairman: Thank you, senators and Mr. McKay, for providing the committee with an overview of this two- page bill.
Senator Murray: While departmental officials are here, I want to ask for general information on something that has been on my mind.
Would they obtain for the committee some of the departmental studies with regard to the various scenarios of the price of oil and the effect on the economy and on the fiscal position of the federal government. I presume the department has been conducting those projections.
Mr. McKay: I would have to anticipate that that is true.
Senator Murray: Would the department allow us to see those?
Mr. Devries: I will see if they are available. In a number of cases, the studies are published and available on our website. I will take a look at that.
Senator Day: Is that information critical to the study of this bill?
Mr. McKay: No. It is for the general knowledge of committee members.
The Chairman: We appreciate the input of the witnesses to our study of the bill, in particular in respect of the parliamentary aspects, which are extremely important to many senators around this table.
Honourable senators, our next witnesses are from the Treasury Board. Charles-Antoine St-Jean is the Comptroller General of Canada.
Mr. St-Jean began his career as a chartered accountant with the well-known firm of Ernst & Young. During 1984- 98, Mr. St-Jean provided leadership to several public sector portfolio clients including the Canada Post Corporation, the Canadian Broadcasting Corporation and the Canada Customs and Revenue Agency. In 2000, he joined Cap Gemini Ernst & Young as a vice-president. He was appointed Comptroller General of Canada in May 2004.
Mr. St-Jean is joined today by Mr. John Morgan, the Acting Assistant Comptroller General. Welcome, gentlemen, and we look forward to hearing your views on Bill C-48. Before doing so, I wanted to hear from Senator Tkachuk and Senator Stratton.
Senator Tkachuk: I have a motion to adjourn.
Senator Harb: Can we hear from the senator?
Senator Tkachuk: There is a motion to adjourn on the floor. All in favour?
The Chairman: All those in favour signify by saying “aye.” Contrary minded?
Senator Harb: We have not called a vote. I wanted to find out the rationale for my colleague in trying to put in a motion to adjourn a debate. If you want to vote on it, go ahead. I just find it bizarre.
We are about to hear from a distinguished group of people to tell us about a very important piece of legislation and we are turning around to adjourn the debate. Is he planning to take a holiday? We are here to work.
Senator Stratton: It is your side that did not have your numbers here, senator. That is why; we are just waking you up.
Senator Harb: My colleague went to the bathroom. Is that a good enough reason to adjourn?
Senator Day: I told the Chairman.
Senator Harb: If you have to go, you have to go.
Senator Day: Mr. Chairman, calling this meeting back when I had asked you if it is okay if I went outside for a short while, starting the meeting and then allowing this kind of nonsense to happen is not the way we normally act in this committee.
Senator Harb: We have to have bathroom rules here.
Senator Day: It is not the way we normally act. That is the way you act. That is not the way we act. When you embarrass your Chairman, who is your side, that is not fun.
The Chairman: Senator Trenholme Counsell has asked for the floor.
Senator Trenholme Counsell: I think of the Senate as a dignified body and I am really shocked that this kind of behaviour would take place in the presence of such distinguished representatives of the government who are with us today.
You were in the process of reading their biographies, and this is a great sign of disrespect to Mr. St-Jean and Mr. Morgan. I think it is rudeness beyond acceptability.
Senator Tkachuk: If we are going to have this discussion, it is always in order to move adjournment. It is one of the rules that we have.
Senator Harb: Change those rules.
Senator Tkachuk: You can go ahead and do that if you wish, Senator Harb. All I did was move the motion. It was perfectly in order to do so. It is not a sign of disrespect to anyone.
I have no interest in passing Bill C-48. I oppose this bill. There is no reason for me to be here except for my role as a member of the opposition, and to ensure that, as best we can as a Parliament, we get to examine the bill. It was okay to have clause-by-clause today, not to allow us the opportunity to debate this over a number of days. That was all okay, but when I move a motion of adjournment, somehow it is a sign of disrespect.
Anyway, with that, let us go on. I am sure that he was not too upset, and our witness probably enjoyed it very much.
The Chairman: Senator Tkachuk, there is a motion on the floor. Are you withdrawing that motion?
Senator Tkachuk: I thought we voted.
Senator Day: We did and you lost.
Senator Tkachuk: I am not withdrawing that motion. I thought we voted.
Senator Day: I think it is important for the record. We sat here for two hours and 15 minutes; I spoke to the Chairman and asked if I had time to leave for a short while and said please do not start until I get back. I come back in here and the meeting has started and there is a motion on the floor. Now, I do not know how this thing got started, but I was just down the hallway a little bit — I can tell you which cubicle I was in.
Senator Tkachuk: You have eight members here on this committee.
Senator Day: I do not care how many members I have here. I am the vice-chairman of this meeting. I asked the Chair not to start the meeting until I returned.
Senator Tkachuk: What is your point?
Senator Day: The point is that you should not have entertained this motion until we were back here because we were just outside in the hall.
Senator Tkachuk: I will make a point of waiting for you all the time, Senator Day.
Senator Day: Would you?
Senator Tkachuk: I will make a point of that.
Senator Day: We have all heard it. I am sorry you got caught up in this, Mr. Chair, but you know that is the case, that I did say that. Let us call the question.
The Chairman: All those in favour of the motion raise their right hand.
All those opposed to the motion raise their right hand.
Motion defeated.
Mr. Charles-Antoine St-Jean, I would like you to make your presentation. We would like you to make your presentation and following that, honourable senators will have a number of questions about your oversight and the parliamentary scrutiny for this bill, and accountability and transparency components of the bill and what your procedures will be. You now have the floor.
Mr. Charles-Antoine St-Jean, Comptroller General of Canada, Treasury Board of Canada Secretariat: Thank you very much, Mr. Chairman. I welcome the opportunity to appear before this committee to respond to its questions regarding Bill C-48.
As you mentioned, my colleague, Mr. John Morgan, the Acting Assistant Comptroller General for the financial management analysis sector from my office is with me here today.
[ Translation ]
As you may know, my mandate is to strengthen financial management and internal audit throughout the federal government. One of my responsibilities is to oversee new spending initiatives and so I am keenly interested to ensure that appropriate mechanisms are put in place with respect to the proposals outlined in this Bill.
[ English ]
Similar to other appropriation bills, Bill C-48 would provide enabling legislative authority to ministers to make payments for the specific purposes approved by Parliament.
The Chairman: Mr. St-Jean, could I ask you to slow down? What you are saying is translated either from English to French or French to English, and we have to be fair to the translators.
Mr. St-Jean: Bill C-48 is unique in that this is the first bill that provides spending authority subject to a minimum fiscal surplus in 2005-06 and 2006-07. This represents a prudent approach to fiscal management in that such fiscal dividends would only be authorized to the extent that there is a $2 billion surplus in those two years. In addition, it provides for a $4.5 billion cap on the spending proposals contained in the bill over the two-year period.
[ Translation ]
The approval of such a Bill, well in advance of year-end, also provides more lead-time to determine the specific management framework concerning the programs.
[ English ]
Prior to such payments, the specific terms and conditions would require Treasury Board approval. These terms and conditions would detail more specific programs parameters along with the appropriate level of audit, evaluation, reporting and accountability provisions. My office reviews such proposals prior to their submission to Treasury Board for approval.
Subsequent to Treasury Board approval and prior to March 31, agreements would then need to be signed with the recipients outlining the terms and conditions for the payments and their dependency on the determination of the fiscal surplus.
[ Translation ]
As the financial results are being finalized, the amounts owing to recipients under these agreements would then need to be confirmed, charged to the surplus and audited by the Auditor General in accordance with the Government's accounting policies.
[ English ]
To the extent there is an earlier certainty of the fiscal surplus in excess of $2 billion, the amounts payable under the agreements could be determined prior to year-end. The amounts payable could then be released, as they are needed, in accordance with the terms and conditions of the agreements.
Along with any specific reporting that may take place with respect to the overall measures contained in Bill C-48, it is expected that the various estimates documents and the Public Accounts of Canada would highlight the responsible ministers and departments, the recipients, details on how these funds are intended to be used and subsequently how they have been used.
[ Translation ]
Mr. Chairman, this concludes my opening remarks. I would be pleased to respond to any questions that your Committee might have.
[ English ]
The Chairman: Thank you. In item eight of your opening remarks, you say that:
Prior to such payments being made, specific terms and conditions would require approval by the Treasury Board.
I would like to know what role you personally or your office will play in drawing those specific terms and conditions, and secondly, have some of those terms and conditions been drafted already, and to what extent are they prepared?
Mr. St-Jean: For all new transfer payment programs, specific sets of terms and conditions must be set out to describe the nature of the activity, what we call the result-based accountability framework, and also our technical documents that spell out the way those funds are disbursed and monitored. Specific terms and conditions describe that, and those are reviewed by my office any time there are new terms and conditions or new programs.
The Chairman: Have you been reviewing terms and conditions for Bill C-48?
Mr. St-Jean: Not for Bill C-48, as they have not been given the specific programs yet. The government has announced that they intend to spend money in those areas. When programs are clearly identified where they say the money will be coming from Bill C-48 and there are specific terms and conditions, they will be reviewed at that time.
The Chairman: So at present, as we speak now, there are no terms and conditions for any of the four categories specified in Bill C-48 that have come to your office for your review?
Mr. John Morgan, Acting Assistant Comptroller General, Financial Management and Analysis Sector, Office of the Comptroller General, Treasury Board of Canada Secratariat: Mr. Chairman, not specifically for Bill C-48; however, for the transfers of sums related to the gas tax revenues, the terms and conditions related to that particular program, a component of which would relate to public transit, that has come through the office, and we have provided comments on that. However, the public transit component of Bill C-48 has not yet come through.
The Chairman: For education and foreign aid, nothing has come before you yet in terms of terms and conditions.
Mr. St-Jean: That is a fact.
The Chairman: When do you expect it? We have been told two different dates. First, the actual surplus would not be known until August, and then later they said September of this year. When would you expect the terms and conditions to be laid before you?
Mr. St-Jean: I made reference to the prudent nature of this approach for spending. It could come at any point in time during the year, but before March 31. My predecessor at this table said all the agreements have to be in place, signed, sealed and delivered, before March 31, so I expect those terms and conditions to come during the year, well in advance of the year-end. Then you have a clause that says, “Amounts cannot be disbursed or cannot be incurred unless you have certainty of the surplus.”
The prudent nature of the bill gives us time well in advance to use all the instruments and the due diligence on the proper design of the program so that it is completed with sufficient lead-time. This bill makes it easy to do all of that sooner, which is the neat thing about it.
Senator Tkachuk: I got the impression from Mr. McKay that the money could be spent all in the first year, over two years, or all in the second year of the agreement. That is not what I heard from you, so I want to clarify that point. This does not mean that even though everything is all organized, the money is spent. How does that all work? How does the authorization take place?
Mr. St-Jean: The terms and conditions go with the Treasury Board submission. That is where it is approved for spending. When are you talking about spending, you use the word “spending” and not “disbursement.”
Senator Tkachuk: What is the difference?
Mr. St-Jean: There is a big difference in the sense that the prudent nature of financial management asks us as much as possible to disburse the funds only when the need comes in. Here, the approach would be to commit the funds, to make the liability on the books of the Government of Canada, but the actual disbursement could be over a year, two years, three years, depending on the need of the organization. It is a bit more prudent.
Senator Tkachuk: In reality, under Bill C-48, this money does not have to be spent over two years. It could be spent over five or six?
Mr. St-Jean: It is incurred. From an accounting point of view, it is booked in the accounts of the Government of Canada over that period of two years, but it is possible to disburse the cash over time and as the need arises, which gives Parliament a better oversight on the activities.
Senator Tkachuk: For example, could the housing money or the foreign aid money be tucked into next year's budget? The money is here in Bill C-48, but it can be tucked into next year's budget. Mr. McKay said that the money does not have to be spent this year. He actually made quite a point of saying that they can do what ever they want to do. They can wait until next year to spend the money.
If you reduce the amount of planned spending on foreign aid next year because $900 million is included this year, then there is no new money for any of the items. It can be tucked into the budget and it will not be necessary to put this bill into next year's budget. Is that right?
Mr. Morgan: I would expect that next year's budget would reference the spending related to Bill C-48. However, the degree to which there is certainty as to that spending will depend on the amount of the eventual surplus.
Senator Tkachuk: There will be no way for the NDP to know any of this was new money. They do not know the planned expenditures next year so they can take this $900 million and tuck it in the foreign aid budget next year. How will the NDP know whether this is new money? They will not know for certain.
Mr. Morgan: I believe Budget 2005 showed a three-year profile of planned spending. I suspect that there would be some ability to determine that, although I am uncertain of the level of detail related to the individual measures.
Senator Tkachuk: The government has been setting up three-year, five-year and 10-year spending timeframes for the last seven or eight years. Does anyone know anything more than that, especially the citizens of Canada.
Mr. St-Jean: Those numbers are public, as my colleague referenced, such as the planned spending for the next three years. That would be the reference level so a member of Parliament could confirm whether that incremental spending is taking place by referring to the previous year.
Senator Tkachuk: I may want to come back to that point.
Senator Harb: I have not had an opportunity to see the agreement between the NDP and the government. I looked at the bill and cannot help but think that either the NDP is truly naive or the government is truly clever. What do you think?
You are with Treasury Board, and you are likely shaking your head over the proposed legislation that attempts to propose spending for the next three years because you know, as we all know, that Parliament cannot oblige a future government to do that which a previous government has decided to do. Is that true?
Mr. St-Jean: I had that discussion with the Auditor General just last week. In terms of this three-year approach to spending the government is signalling well ahead of time what it intends to do with the surplus. This is a prudent way of proposing the management of the financial affairs of the Government of Canada because it gives sufficient lead-time to the departments to think through their spending. In the past, it was done at the last minute as the fiscal year drew to a close, and at times there might have been agreements needing refinement later.
The three-year planning gives us plenty of time to target and to develop the proper instruments, terms and conditions so that an audit can be performed, and to put in place the proper management framework. The Auditor General said that my point has some validity, although it is not perfect.
Senator Harb: It is terrific to have a plan before Parliament and Canadians that has two components: capital expenditures over the next five to 10 years and operating money for staffing and social programs. However, something strikes me differently about this because we have only part of the story. The government proposes to commit to $4.5 billion above any surplus of $2 billion. Do you have on the books what the government will spend on those same items in the succeeding fiscal years?
Mr. St-Jean: Bill C-48 covers only two years. That is the extent of the authority sought in the bill.
Senator Harb: In a sense it is conceivable that the government will proceed and spend the money without putting new, additional money for those programs.
Mr. St-Jean: It is not within the scope of the bill to go beyond two years.
Senator Harb: It is conceivable for the government to proceed with the $4.5 billion commitment within the two years. That would mean that it would not have to take any money from the pot.
Mr. St-Jean: It is conceivable to the extent that the bill refers to “may incur,” not “must incur,” and that the spending can take place during the year if there is enough certainty of the $2-billion surplus. The government might choose to enrich certain programs if it has that certainty. It provides the government with the authority to spend but that is all.
Senator Harb: My next question is in respect of the capacity to disburse the money. For example, you can allocate $50 billion for education but if you do not have the capacity to spend it, the money will not be spent.
Has Treasury Board looked at the capacity to spend that money should the government proceed and put it in place first? I raised a question recently with an official from Treasury Board who appeared before this committee. It was about the reallocation of resources and the appropriation of funds within departments and across departments. How will this program be managed relative to other programs of the government? Will there be a special secretariat to ensure that the money came as a result of a commitment, political in nature but parliamentary in substance? We want to ensure that it is done well and that government has fulfilled its obligation. Will you do it like that or will it be treated like anything else?
I do not know whether you have read the agreement between the NDP and the government. Might anything in that agreement tie the hands of Treasury Board in administering that program?
Mr. Morgan: I am not aware of the details of the agreement with the NDP. Legislative authority will be provided through Bill C-48 as laid out in the bill. It will be for the government to determine the precise allocation of those funds within the limits set out in the bill. There are a couple of unique things about the bill: It is subject to a $2-billion surplus; and, if the surplus does not provide the full $4.5 billion over that two-year period, there will have to be some mechanism in place to determine the relative allocation of those funds to the recipients as laid out in the bill and in the timeframe of the two-year period. That is something that is unique.
Other than that, in terms of the parameters, I believe that a number of these measures will build on existing programs. It remains to be seen what the details are in terms of programs, but our understanding is they will build on existing programs. In that respect, things should move faster in terms of firming up the terms and conditions.
Senator Harb: It is an excellent precedent. It is terrific to see the government coming forward with long-term plans in terms of intentions of how and what they will spend on what programs.
I want to ask if you have conducted studies to prepare an action plan for the Government of Canada so this will not become the exception but rather the norm. In that way, municipalities, provinces and even Canadians can see what is coming in three years or five years from now so that they can do proper planning.
If a hospital is in the process of planning to buy equipment, they know first-hand that there will be money coming over the next 24-48 months.
Mr. St-Jean: We have informed them that in the event of a surplus they may be eligible for funds. This is a “may” and there is a big caveat, which is the fiscal position of the government; is it prudent to make those payments?
Senator Harb: Do you suggest that this should become the norm? Do you suggest that in the event of a surplus that is where we will spend the money? As parliamentarians, we would then have some guidance and, as Canadians, we would see how the government might spend money in the future.
Mr. St-Jean: As I mentioned to my colleague, I find this to be a very prudent way of doing business, giving a heads- up a long time in advance. When the government has surpluses, it can say where it wants to put the funds, which gives officials time to have discussions with various levels of government and other partners. With advance notice, governments can find the best configuration of partnership to deliver on some of the programs.
Personally, I like this kind of approach. It has to be limited in terms of scope. It has to be a small percentage of the overall spending, but it gives some heads-up to all parties.
The Chairman: This is the second time you used the word “prudent”; you used the phrase “prudent nature of financial management,” in the overview of your presentation.
What is prudent about having a bill pass Parliament that says if we pass a limit of $2 billion and realize a surplus, we may or may not spend the surplus on the four items? What is so prudent about “we may or we may not”? There is no obligation to spend it on these four items, so how does that make it prudent?
Mr. St-Jean: What is prudent is that it allows for additional planning time. Determining the financial position of the Government of Canada is not a simple task. Things change. There are additional revenues or expenses and it is tough to get a good handle on the fiscal position of the Government of Canada in the last two to three months of the year.
This bill lets us say that we understand the complexity of coming up with a financial position, so do not wait until the last minute to come up with programs to spend the additional surplus. Recipients can tell us well in advance, what they would do with a certain fiscal position. This bill enables them to start discussions with all of their prospective partners well before January, February or March.
The Chairman: There is nothing mandatory in this bill — the government may do what it wishes. Your prudent approach could raise false hopes for potential recipients such as low-income students, people living in social housing, Aboriginal Canadians, and so on. If the money is available but may not be used, does this not raise false hopes? What is prudent about that? Do you understand my question?
Mr. St-Jean: I appreciate that; I think your question deserves a more political answer. I am just dealing with the people that are trying to develop complex programs. There are many players and we have to have contractual agreements in place with clear guidelines. For the people who are executing those programs, it gives us a lot more time.
I appreciate that might be creating some false hope. If the fiscal surplus is not there, some people will be disappointed.
The Chairman: Even if it is there, it may not have to be used.
Mr. St-Jean: I appreciate that; even if it is not there, the way that the bill is, it is a “may.”
The Chairman: Exactly.
Mr. St-Jean: It is more for Parliament to exercise its role there, to decide what they want to do with it. However, they give guidance to the civil servants and also partners; these are some of the areas we would like to explore ahead of time.
The Chairman: They may be wasting their time and effort if it will not be used as well. I made my point, I think. I do not know if you understood it.
Senator Stratton: You talked about the control given by government with the use of Treasury Board approval as an example, and that would be used for accountability. Was not that the same Treasury Board approval that gave approval to the sponsorship, to the misuse of HRDC money, and for gun control?
Based on that, if we have been exposed to the Gomery inquiry as to the sponsorship scandal, the HRDC scandal and the gun control scandal, how in the world could Canadians expect there to be a change in what will happen with this money — for example “for foreign aid, an amount not exceeding $500 million”?
I did not get a satisfactory answer from Mr. McKay. There is no description or control as to how that spending will take place.
I quote from the bill, subclause 2(2):
The Governor in Council may specify the 10 particular purposes for which payments referred to in subsection (1) may be made and amounts of those payments for the relevant fiscal year.
And from clause 3:
For the purposes of this Act, the Governor in Council may, on any terms and conditions that the Governor in Council considers appropriate, authorize a minister to
How can we expect change and give reassurance to Canadians that we will not have another sponsorship scandal, another HRDC scandal or another gun control scandal?
Mr. St-Jean: On that point, I would like to give you 100 per cent assurance it will never happen again; I cannot. Things will happen, unfortunately, and this is a reality of life.
What we can do, though, is minimize the risk that they happen in the future; and that is what we are working very hard at doing.
Two things come to mind that have changed some of the conditions that allowed those things to happen. One is the renewal of all the transfer payment policies for the last two to three years and last year in particular. There has been a massive push to review each and every one of the terms and conditions of the transfer payment programs that exist. There are about 750 of them, so there is an extensive inventory of instruments that deal with roughly $25 billion of transfers a year.
We have many complex instruments, which are under review. They are challenged and in place with stronger terms and conditions. There is an accountability framework an auditing framework and an evaluation framework. The Treasury Board and the Office of the Comptroller General with other departments are working on the terms and conditions. That element gives us a better sense that we will have better control.
We are significantly reviewing and revamping the internal audit policy and the chief financial officer model to put in place better governance of internal audit and more independent auditing. We are discussing those matters and exploring how to provide stronger checks and balances. This is a work-in-progress.
The minister is very supportive of the approach, and the community in general is supportive. We will see some fundamental changes in the next few months to give us more assurance and minimize the risk.
The government has announced that by March 31, 2009, it wants most or all the departments' financial statements audited, and we are working hard to make this a reality. We are starting with a readiness check this fall with the first wave of departments. A number of actions are being taken to strengthen the financial management and control.
Senator Stratton: Take, for example, the gun control issue. In previous years, this committee received the supplemental reports from the Department of Finance. Year after year, we complained because the department needed additional funds for gun control. The problem escalated over the years; we complained, but nothing changed.
How do you prevent that from happening again? The government made a commitment that gun control was supposed to cost virtually nothing to the Canadian taxpayers, something like $85 million and, in the end, it ended up costing in excess of $1 billion. How can you tell us what is committed to a program without knowing where it will go? How can you assure the Canadian people and this committee that a situation like that cannot occur again?
Mr. St-Jean: I cannot go back to what happened in the past. I just started my job about a year ago. We are looking at improving the reporting to Parliament. We are improving the RPP, the report on plans and priorities, and the departmental performance report, DPR, in terms of content and quality.
In the coming years we will ask all departments to provide us with their financial statements as part of the DPR; a few years after that the departments will be audited. We are asking for more disclosure in the DPR, and the audit committee will be asking for much stronger disclosure.
In the private sector, we have MDA, or management disclosure and analysis. I would like to see those documents become more robust so that this information provides more transparency. These are some of the things we are working on to help us in the future.
Senator Stratton: You have not told me, not in my mind, how that would change what took place with respect to gun control. The government kept feeding it despite the fact we knew what the numbers were in each supplement and despite the fact that, year over year, the money was growing exponentially to the program.
You as a Comptroller General can raise the flag, but if the government decides to plow ahead anyway, it will plow ahead.
The Chairman: Mr. St-Jean, do you wish do comment?
Mr. St-Jean: My role is to report and ensure that the reporting take place. That is what I will do.
[ Translation ]
Senator Murray: Mr. St-Jean, you say there is a $4.5-billion cap. There's nothing preventing the government from spending, beyond this bill, any surplus of $6.5 billion.
In theory, we're talking about an amount of $6.5 billion, that is a surplus of at least $2 billion and $4.5 billion in spending. Beyond that amount, there's nothing preventing the government from spending any surplus. Are you confirming that?
Mr. St-Jean: The government announces what it wants to do through budgets, through the Estimates.
[ English ]
Senator Murray: Prudence is very much in the eye of the beholder. I have the December 2003 communiqué when the Martin government was sworn in and the later communiqué when you were appointed. These communiqués deal with the re-creation of your office as an independent office. You have been here since, on several occasions, with Mr. Alcock.
I entertained the illusion, as it has turned out to be, that the re-creation of your office as an independent office would be an ally to Parliament in terms of strengthening or regaining some parliamentary control over public spending. Perhaps that is not your job.
You have good things to say about this bill, and I am trying to understand it from your perspective. I suppose it is true that identifying these general areas of activity gives you and some others inside the government a better idea of where $4.5 billion of surplus money might be spent and therefore, in a general way, give you an opportunity to focus your minds on how this might be done. However, from a parliamentary point of view, it is an abomination. It is another blow to parliamentary control of the public purse.
Mr. Chairman, the committee may want to call Mr. St-Jean here in six, 12 or 18 months to discuss all of this again. As of today, there is not much he can tell us except that he looks, as we all do, at clause 3. There it is. It sets out the fact that the Governor-in-Council may authorize a minister to spend money in all these ways, and all Mr. St-Jean can tell us today, and it is not fair to ask him to tell us more, is that there will be terms and conditions approved by Treasury Board, and before Treasury Board approves them, and indeed before Treasury Board gets these submissions, his office gets a chance to review them. That is all there is. That is what you have come to tell us.
The Chairman: That, and the fact that it is prudent.
Senator Murray: I appreciate that but, for the moment, I am not sure there is much more he can tell us.
The Chairman: Do you have more to tell the committee, Mr. St-Jean?
Senator Murray: I do not think you know any more than we know.
Mr. St-Jean: As I mentioned, it is more a matter of the process.
Senator Murray: We are talking about two different processes: your internal process and our parliamentary process.
Mr. St-Jean: I appreciate the difference.
Mr. Morgan: As was referenced earlier, the nature of the statutory spending in Bill C-48 is similar to other budget bills including Bill C-43. While there is an overall aggregate of $4.5 billion, it is subject to a surplus of $2 billion. Other provisions in Bill C-43 spoke to funding for the transfer of gas tax revenues to trusts for the provinces and for child care. Previous budget bills provided lump sum payments to trusts for the benefit of provinces. The bill is not unusual in terms of its level of detail but it is unique because of the conditional surplus of $2 billion.
Senator Eggleton: Earlier, you said that this bill would give Parliament — not Treasury Board or the executive — better oversight. I heard you say that and I want to explore how that better oversight will come about.
If there were no Bill C-48, and if the government were to see a potential surplus this fall for spending on things in addition to reducing the debt, the normal practice would be to decide on a program and book it by the end of March. For example, the money could go into a foundation. That would be a normal way of doing things, and then a decision is made and the money is spent. Is that correct?
Mr. St-Jean: Yes, that is correct. The entire surplus must be charged against the debt unless you have an instrument such as this bill. In this case, Parliament has some flexibility to suggest spending if there is an appropriate surplus because it would not know the details on a timely basis before March 31. Rather than put all of it against the accumulated deficit, Parliament could authorize spending, but to book it for March 31. From that perspective, there is more flexibility.
Senator Eggleton: We know now, which we would not have known before Bill C-48, about the spending envelopes that the $4.5 billion would go into in accordance with the division of the relevant formula.
Mr. St-Jean: This is new.
Senator Eggleton: More importantly, if by March 31 a decision were made the additional revenue would be available to put into these spending programs. The agreements would be in place but would still be subject to the final determination of the surplus, which would not be known until about August or September. Is that correct?
Mr. St-Jean: Yes.
Senator Eggleton: That means the government could set up this money at the end of March but not a penny could be spent for about five or six months. Is that correct?
Mr. St-Jean: Yes.
Senator Eggleton: Five or six months gives Parliament ample time and opportunity to bring in ministers and departmental officials to talk about every little detail.
Mr. St-Jean: I should correct that; if there is sufficient indication that there would be a surplus greater than $2 billion, some spending could take place before March 31 that could be charged against it. Generally speaking, spending should take place after the surplus is determined and audited.
Senator Eggleton: That would be five or six months after the March 31 fiscal year-end.
Mr. St-Jean: Yes, it would be around September.
Senator Eggleton: This is quite different because of the period of time created by that condition. Parliament could look at any of the proposed expenditures before the money is spent. Any parliamentary committee could make recommendations on the expenditures before they occur. That has never happened before.
Senator Murray: Read clause 3.
Senator Eggleton: The expenditures have to be booked by March 31, but the money cannot be spent until the surplus is determined and audited.
Senator Murray: When would the programs and projects come before us? Read clause 3.
Senator Eggleton: That would happen any time between the end of March and the end of September.
The Chairman: Mr. Morgan will give us the answer.
Mr. Morgan: I will try to provide a bit more information. Given that the agreements have to be signed by March 31, we are trying to flesh out the details of these programs to set up the agreements. It is likely that in 2006-07, the departments could include the terms, negotiations and their respective directions in their RPPs. I believe there would be some opportunity to look at these documents as part of the estimates process. As we indicated earlier, these are statutory disbursements but they are reported in the estimates and are subject to the scrutiny of Parliament.
Senator Trenholme Counsell: This has been most interesting. I will ask about your printed opening remarks because they seem contrary to the inferences we heard earlier that this is not only very prudent but also immensely detailed in terms of what you will require of ministers and departments before and after the money is spent. It is highly detailed and strict in respect of specific program parameters, appropriate levels of audit, signed agreements, accounting policies, et cetera. In particular, number 14 says that it will highlight the details on how these funds are “intended to be used and subsequently have been used.”
Have you been more strict in terms of applying all of your skills, interests and concerns to this bill? It is unique, as we have been told, and somewhat open to interpretation. Would this be considered quite routine now in 2005 in terms of the level of requirements and expectations of ministers and their departments?
Mr. St-Jean: As mentioned earlier, we performed a great deal of work to renew terms and conditions of about 740 transfer programs. I believe that there are 100 programs left. We are putting these standards in place to ensure that we have clear conditions under which to make those payments.
The DRPs and the RPPs are strengthened every year with the expectation that we will see more robust reports from the departments. This process will take more than one year to complete, but we are moving toward a more comprehensive disclosure to enable Parliament to do a scrutiny of the spending.
If you want to call a department to explain a certain program, the information is in their DPRs. That gives you the information to start asking questions.
Senator Trenholme Counsell: Did you feel that because of the unique nature of this bill, you were facing a special challenge?
Mr. St-Jean: I appreciate it might be perceived differently by different stakeholders. The business of government is quite hectic with many different agreements and discussions taking place all the time.
What this gives us is the heads-up to have stronger, better-defined agreements, with better expectations spelled out in the agreements. There is better research and this document gives us more time to do due diligence.
That would be the major difference; otherwise, it would be the same.
[ Translation ]
Senator Day: I still do not have a clear idea of the role of your office or the role of the Treasury Board Secretariat. I would specifically like to understand the agreements you discussed. There have to be agreements for beneficiaries before March 31. Is your office negotiating those agreements?
Mr. St-Jean: No, those agreements are negotiated by the various departments responsible for the various programs, in cooperation with the Treasury Board Secretariat, which currently plays a supervisory role in ensuring that the agreements are consistent with the government's policies and objectives and with the customs and usages of the best practices.
Subsequently, once my office and my colleagues are involved in the review of terms and conditions, we must ensure that the managerial framework of these agreements is appropriate. However, the nature of these agreements and all the negotiations are determined by the departments, in some instances by the Minister of Finance himself, depending on the agreements, and in cooperation with the Treasury Board. Our sole purpose is to manage.
Senator Day: Let's say your committee wants to study these agreements before funds are disbursed. Does one have to go to the Treasury Board Secretariat? Is it preferable in future that you review these agreements before us?
Mr. St-Jean: From my understanding of the system of governance, I think it would be more appropriate to ask the minister responsible for that agreement, program or initiative to come and discuss the proposed approaches, mechanisms, partnerships and control mechanisms with you. However, above all else, it's the department that acts.
Senator Day: It is our intention to do that before these funds are disbursed. Can we do that?
[ English ]
Mr. Morgan: I would think ministers would be available. Certainly, if the details and funding agreements were signed, the reports on plans and priorities would give an opportunity to ask the ministers about the details. Depending on the certainty of the surplus, that would drive when the funds are actually advanced on those agreements, but that could take place after September of the following year.
Senator Day: I want to make sure that until this agreement is in place, you as “verificateur” will make sure there are no funds disbursed; that is one of the steps that must be in place.
[ Translation ]
Mr. St-Jean: All new agreements and programs must be reviewed by my office to ensure their terms and conditions are up to standard. To add to the comment by my colleague, I would say that it is the RPP that would give you the heads-up on initiatives planned for next year. Based on the initiatives disclosed at that time, you could invite them to come and discuss their plan.
[ English ]
Senator Banks: Mr. St-Jean, thank you for your indulgence. I am not normally a member of this committee but I once was, and I am reminded today how much I miss it.
As a clarification, does your office normally examine detailed program spending terms and conditions before the passage of a budget bill that authorizes the commitment of the funds, the booking of the funds?
Mr. St-Jean: I have been there for a year. I would not think so, no.
The Chairman: Mr. Morgan, do you want to answer?
Mr. Morgan: In order for these to be booked, we would review the funding agreement to ensure the liability is created by March 31. We would be privy to that and ensure we can book the funds.
Senator Banks: Will that be the case if this bill is passed?
Mr. Morgan: Yes, by March 31.
Senator Banks: Thank you.
Senator Tkachuk: Does not the budget normally do what you say Bill C-48 is doing? Does not the budget lay out the parameters of spending?
Mr. St-Jean: What is new with this bill is that it gives you a one-year heads-up.
Senator Tkachuk: Is not that what the budget does? I have heard the Minister of Finance talk about 10-year spending. Is this an oops-I-forgot budget, or how does this work?
Mr. St-Jean: As we mentioned before, unless you have this in place or in any kind of future budget, the surplus has to be booked against the accumulated deficit. Here, that gives you the opportunity to do a fiscal dividend so you can book before closing your books; that is a new approach. In the past, any surplus had to be booked automatically against the accumulated deficit. This bill gives you the latitude to keep your book open even after March 31 and make a decision to book it or not depending on the fiscal position of the government. That is a new one.
Senator Tkachuk: What is to stop a government for doing it for all the departments? What is to stop the government from saying oh, we have a budget and a month later introduce another bill saying if there is any extra money, we are not even going to tell you how we will spend it; we will spend it on anything we want.
Mr. St-Jean: I referred to the prudent nature of this year because this is a relatively conservative amount compared to budgets in the past. When you compare $4.5 billion to a surplus of recent years, it is in the ballpark of our experience.
I would have some problems with a considerably higher amount.
Senator Tkachuk: What is the difference if the principle of this is okay? You are the comptroller. You are giving comfort to the government in saying it is okay to do this. If it is okay to do this for $4.5 billion, it is okay to do it for $10 billion or $15 billion.
Mr. St-Jean: I am saying it is okay in that it gives a margin of precision, which is, compared to the experience of the past, not unreasonable in terms of the potential surplus. It is relatively modest compared to the overall budget of $200 billion. This amount represents 2 per cent of the budget.
The Chairman: Mr. St-Jean, thank you for your presentation.
I now invite Mr. Stanley Hartt and Mr. Finn Poschmann to come to their seats. Honourable senators, I would like to extend a welcome to Mr. Finn Poschmann from the C.D. Howe Institute, which is a national, non-partisan, non- profit organization that promotes the application of independent research and analysis to major economic and social issues.
Mr. Poschmann is the associate director of research and senior policy analyst at the C.D. Howe Institute, where he has worked since January of 1998. For more than a decade previous, he was with the Library of Parliament's research branch. He has worked in numerous areas within the field of economics but has primarily been concerned with public finance and taxation and federal-provincial relations.
Mr. Stanley Hartt is appearing today as an individual. Mr. Hartt holds a law degree from McGill University. He was a partner with the law firm of Stikeman Elliott until 1985. From 1985-88, he served as a deputy minister of the Department of Finance. From 1989-90, he was the chief of staff to Prime Minister Brian Mulroney. He is currently Chairman of Citygroup Global Markets Canada. Mr. Hartt must appear before another committee, so perhaps he could speak first.
Mr. Stanley Hartt, as an individual: Thank you. I have three comments to make.
First, senators should be alarmed at the precedent that Bill C-48 sets for the manner in which legislators are invited to use or, in this case, fail to use, the traditional power of Parliament to control public spending. Those powers were hard-won. We did not shed any blood in this country over this control, but our forbears in Britain, whose parliamentary system we inherited, did. The supremacy of Parliament on spending matters is a very valuable tradition; we should not be casual about this tradition.
I watched my former colleagues in the department and the new people from the Treasury Board try to make a silk purse out of a sow's ear this morning. The concept that spending should not be authorized based on, “The Minister of Finance is authorized to spend money on” and then a word is inserted at the end, or four words, at the end of that sentence. They are all good things, motherhood and apple pie, and they would all be wonderful things to spend money on, but not without program parameters and without any sense of how the money will be spent, in full knowledge of the fact that the government will feel it necessary to divest itself of the actual money in terms of legal commitment by March 31. It will then say to you, “Honourable senators, oh, you know, after March 31, after the conditional agreements are signed and entities are set up to which we have got rid of this bothersome, troublesome, pesky money, you will still be able to call people in and ask them questions.” Sure you will, but you will have decided already that the money can be spent, whether you like it or not, and this is an awful thing in terms of our parliamentary traditions.
We normally spend money out of budgeted revenues or even planned borrowings. The suggestion has been made that it is a great national interest to preserve the lapse or to prevent the lapse. The lapse was not invented in order to handcuff governments or to cripple legislators in their attempts to do the wonderful things that they try earnestly and all day long to do. The lapse was invented for the opposite purpose. If, at the end of the fiscal year, the money is not spent, guess what; it reduces the debt. That does not mean it goes into a black hole. If a priority arises that you wish to deal with thereafter and there is not enough money in the current year, you can always re-borrow what you just paid. The lapse was invented to give Parliament another chance to say whether money should be spent or not. To say that to avoid the lapse, we take it, we pass it over to another entity, a corporation with or without shared capital, or some trust or some foundation, and then it is gone, but we can always ask questions, I do not find that comforting or prudent or desirable in terms of our parliamentary traditions.
The second point is that priorities change. As Deputy Minister of Finance, I always had to deal with a list of pressures. Let me tell you, it was long, because the departments would furnish us with all kinds of things that were important.
The interesting thing is that Canada does not lack for good causes. We have scarce resources and lots of good causes. The pressures are always there.
I have nothing against these four things, because they are all good, but why would we want to say we will take $4.5 billion and just commit it to that, and then we can ask questions about the details, and the Comptroller General will come back and tell us about the details of the agreement?
Let me give you one example that stems from the work of this Senate itself. I had the honour to be one of the counsels to 10 of your colleagues when they went to the Supreme Court in the Chaoulli case. Senator Kirby's committee, then vice-chaired by Senator LeBreton but now by Senator Keon, came up with an incredible report called The Health of Canadians: The Federal Role . That report recommended the health care guarantee to prevent individuals from falling through the cracks of our medical system and not getting medically necessary services within medically advisable time. Because this report was so groundbreaking, the senators — 10 of them, not the whole committee, because one or two abstained — decided to engage counsel and intervene in the Supreme Court. They were granted the right. Their factum was the source of most of the reasoning of the majority of the court.
Here we have the court saying that it is no longer up to government, no longer up to cabinet, no longer up to the Prime Minister, even with or without the NDP, to decide how much money there is for health care. There is now an obligation of result, $41 billion over ten years, which sounds like a huge amount. The provinces agree on the amount and everyone cheers the health care accords. The problem is that if the people do not get their necessary treatment in the time that medical science says is the maximum amount of time, then the government is vulnerable to further actions that could next time actually deprive us of our medical care system.
The Prime Minister says that Canada will not have a two-tier medical system, but races around giving out asymmetrical negotiated one-off grants based on Bill C-43, and he even talks about some of the things that might be done under this bill.
I say to you, why would Parliament want to commit its priorities for the next two fiscal years before they knew what they were? We have an example of one that is earth-shattering. It is one that most Canadians, if they could understand what is going on, would say, “Yes, you give money for that.”
The NDP should be blushing because they did not withdraw this budget bill and suggest putting the money into medicare in light of that judgment. The health care guarantee does not mean it can be applied only in relation to a publicly funded, universal health care system that is government delivered and paid. It is valid to satisfy the constitutional rights of Canadians by having private sector supplementation to eliminate the bottlenecks in the public system. However, Parliament has not yet made that decision. When Parliament does decide, it might need some of this precious surplus.
My final point is the mechanics of Bill C-48. I have always objected to the institution of the concept of foundations as a way to avoid lapse. The Auditor General commented that it makes it difficult to determine whether the spending went to where it should go leading to the question; did we receive value for money? The expectations must be determined before you can know whether you received value for money.
Clause 3 bill builds on the mechanics of the foundations by creating many new ones — companies with share capital and companies without share capital, grants, and payments in any way. It is simply a matter of taking the money off the books. I am not certain whether it is prudent to do that or why that would add predictability.
The Gomery committee will report on December 15, if they keep to the announced schedule, and thirty days following that, the Prime Minister has promised to call an election. Add the writ period to that timeframe and there will be a new Parliament before March 31.
This bill appears to be nothing but an attempt to save political skins in the interim. Far be it for me to say, given the roles I used to play, that there is anything wrong with saving political skins. Let us call a spade a spade and stop trying to make this bill appear prudent and the way of the future. As a former deputy minister, I think that if it is the way of the future, it is a bad thing.
Mr. Finn Poschmann, Associate Director of Research and Senior Policy Analyst, C.D. Howe Institute: Thank you, senators. I had difficulty in preparing my speaking notes on Bill C-48 but I did find a nice lead-in: Bill C-48 is very short. Brevity can be a good feature in many walks of life and in legislation. Perhaps it is a good thing that Bill C-48 is short because it proposes to spend about $11.25 million per word. That is pretty much where my kind comments end.
Bill C-48 is problematic for a lengthy list of reasons, some of which have been spoken to by Mr. Hartt. Bill C-48 arrived from outside the budget process so it was completely severed from the tradeoffs normally involved in budget making. Budgets are intended to reflect the balance of competing priorities that policymaking and politics produce. Bill C-48 is a footnote to that process.
As well, the bill focuses relentlessly on the money and leaves out important details on the nature of the expenditure. It is a triumph of politics over policy and asserts that money is to be spent on a few categories and matters not what they are. It is an appropriations bill, a spending authority bill. Worse, Bill C-48 does not include guidance on how to prioritize even within the list of categories. The federal budget is supposed to the document that reveals government's choices about spending priorities. We are looking at $1.5 billion dollars of incremental money presumably to be spent on post-secondary education and affordable housing. Normally, such a tradeoff is revealed when the budget is tabled but Bill C-48 would punt that decision into the political murk and the $4.5-billion spending authority with it.
The bill does not explain what it speaks to accomplish. No objectives or goals are defined so you cannot say whether the bill achieves according to its intent. The spending imperative runs over the efforts of staff in many departments to control costs and reign in spending. The government's expenditure review process, barely out of the cradle, has been tossed by the wayside and replaced by a half page of scribbled lines.
Bill C-48 would throw money at spending in areas where a substantial amount of money can disappear with little to show for it. That is not helped by the fact that the bill does not state its intent in the first place. It has a backward- looking mechanism to determine spending amounts that is foreign to budget-making. We do not draft budgets in that way and the Auditor General will have difficulty when trying to sense of it at the end of the year.
The mechanism undermines public sectors managers to stay within budget near the year end. I do not see it as smoothing out the process. The policy makers and public sector managers still know that any money they do not spend by March 31 will go to another program. If you are not in one of the four areas, then you know for sure it will go to another program. I do not see where March burn off is limited by this process.
If the government of the day were to put its mind to it, there is an out and they would not have to spend a single penny in any of the areas identified by Bill C-48. Parliament could vote the supplementary spending authority that would eliminate the surplus. Imagine a February budget in 2006. It could lay out new foundations, new trusts and new allocations to which the money would be committed by March 31, and it could be in any area chosen by the government because it would be a new budget with no constraints. Bill C-48 is not helpful at steering spending and it moves Parliament farther away in respect of how priorities are sorted through by government.
Bill C-48 will not be easily corrected because the flaw is fundamental to the concept of the bill. I presume Bill C-48 will pass but I hope that in the future the other place will send proposed legislation that is more amenable to proper oversight.
Senator Tkachuk: If the surplus went to foundations or other organizations listed in the budget and left there, would it fulfill the requirements of Bill C-48?
Mr. Hartt: Yes, in the sense that you cannot have it both ways. If you need to create a mechanism to declare the money spent, then “spent” is the operative word. The liability is created because the expenditure is booked and the money is gone from Parliament's purview. Perhaps the foundation could be told to spend or to not spend the money when it so chooses.
I am not implying any bad will behind this bill but I worry about the opposite phenomenon — that the orgy of spending becomes habit forming and continues into periods when we are not blessed with such great resources. The beneficiaries of this spending do not stop asking for money just because there is no longer a surplus. If they receive the money when there is a surplus, what happens when we no longer have a surplus? They still expect it, want it and might turn back on parliamentarians.
Orgies of spending are always bad and when it is done to prolong the life of a government by one week or a few months, it is truly bad.
Senator Eggleton: Think about the Conservatives' years of spending orgies.
Senator Tkachuk: Senator Eggleton threw me off what I was going to ask.
Senator Eggleton: That was my intention.
Senator Tkachuk: It came back quickly. I asked Mr. St-Jean earlier about whether this money can be placed in next year's budget. Mr. McKay said that the money does not have to be spent this year, it can be spent next year; there is no obligation to spend it this year and the government can decide whenever it wants to spend it.
In reality, none of this is necessarily new money. In theory, I am not saying in fact, because I would not think that the government would do anything like this — all of this could be in the budget and this could all be a sham. This could all be in next year's budget. In other words, money originally allocated would simply be not allocated and this money substituted.
Mr. Poschmann: I just realized that a good way to describe this is as a sort of quantum neverland. What happens by March 31 is that an agreement has to be in place — a trust, an agreement with a locality, whatever it is — it can be anything, but it has to be fully in place by March 31 in order to tell ourselves that there is a commitment. However, it is a contingent commitment because, as we heard this morning, we simply do not know whether the authority will be there under the terms of Bill C-48 to fulfill that contingent commitment.
The money is both spent and not spent at the same time. You do not know until there is a quantum click five months down the road that tells you whether your program is alive or dead. It is a very strange neverland. It makes it hard to figure out from an outsider's perspective, who wants to look at the spending plans and search for evidence about what is to be achieved this year and next, and why government is comfortable appropriating funds for doing that. It makes it hard to find evidence about those priorities.
Senator Tkachuk: My understanding from the bill is that the money has to be over $2 billion dollars in surplus funds — in other words, the first $2 billion goes to the debt. Let us say it is only $1 billion over that in each year, so there is only a total of $2 billion of the $4.5 billion. Does this bill take any effect or does it have to have the full amount?
Mr. Hartt: It seems to me it can be partial amounts.
Senator Tkachuk: It can be partial amounts.
Mr. Hartt: Yes.
Senator Tkachuk: Cabinet will decide how these partial amounts are allocated. They will say we only have $2 billion so we will spend it on this. That is why I wanted the agreement tabled because I do not know whether the NDP wants to be involved in this whole process. They are the ones who made this agreement; and it is public knowledge that they were part of it.
Is there a way for them to become part of it without this information becoming public as to how this money will be allocated in the future? Will it be simply the NDP and the Liberals getting together and saying we only have $2 billion and we will spend it on whichever of these four items we want today?
Mr. Poschmann: Let me phrase this carefully. I am unaware of any legal manner in which an agreement, if there is one, could influence how money is allocated under this bill.
It may do so through a mysterious process in cabinet but that is entirely a political process. After this legislation is passed, if it is, it would have nothing to do with the chamber anymore.
Senator Tkachuk: This is a political bill; it is not like a legal document. In other words, if the NDP feels the promises are not fulfilled, they cannot sue anybody or sue the people or the government, or take the Minister of Finance to court for not following through in an agreement that they have signed with a minister of the Crown.
Mr. Poschmann: That is correct. The government of the day retains a tremendous amount of discretionary power over how the money is allocated under this bill, including the ability to propose other spending legislation that would eliminate the room for spending under this bill.
Mr. Hartt: Do not forget that the previous witnesses from the Department of Finance and the Comptroller General's office made it clear that the knowledge of which you speak will not be known to anyone, cabinet included, until September or so of next year. The Prime Minister, if he meant what he said, has already promised us there will be an election before that. You are talking about the NDP suing; politically their reaction would have to be in the House, but in the next Parliament.
Senator Tkachuk: Thank you, chair.
The Chairman: This bill, as the lawyer for the Department of Finance told us, under subclause 1(1), says:
... the Minister of Finance may ... make payments out of the Consolidated Revenue Fund
Later on, if you look at the purpose clause of the bill, which is clause 3:
For the purposes of this Act, the Governor in Council may, on any terms and conditions that the Governor in Council considers appropriate, authorize a minister to
It lists a long series of things, not one of which gives room for any parliamentary oversight.
Is there anything that either of you can suggest to this parliamentary committee, something that could be said or done to improve this to give some parliamentary oversight so there could be transparency and accountability built into the system?
Mr. Hartt: Senator Eggleton pointed out twice to previous witnesses that Parliament has oversight in the sense that after the fiscal year end, as it is becoming clear whether there is any money and what it might be spent on, they can call people in and ask for explanations. That is a kind of oversight, but it is not the kind of oversight that I traditionally associate with the parliamentary control over the spending power. In other words, the money is blown; now we are going to be told, because people are nice and they will show up and sit in this chair, how it was blown.
Mr. Poschmann: I do not think I have anything to add to that. The list of possible uses and payments from clause 3 is not that different from authorities granted under legislation. What is odd about this bill is the way it is disconnected from the rest of the priority-setting process.
Senator Harb: Gentlemen, each of you made comments on parliamentary oversight that impressed me. I am not about to read what is in the mind of the government but I think the government, in drafting the legislation the way it did, has that exactly in mind.
Let me say why it has that. First, as part of the authorization, there are subclauses 3( e ) and 3( f ). I suspect that is where the government could deal with this notion of oversight; it could take the money, put it in either a new corporation or buy shares in one of the existing corporations, and say it has fulfilled the commitment under the agreement. It could then say that it wants to look at other elements of how to spend the money — agreements with the provinces or the municipalities, or the capacity to spend that money.
I asked the Treasury Board earlier if the system had the capacity to spend the money even if you were to put it in there. If you do not have the capacity to spend, then the money will not be spent.
I say the government was exceptionally smart in trying to deal with the wishes and aspirations of Canadians in coming up with something that is flexible, such as Bill C-48.
Of course, we would have preferred not to have it in the shape that it came to us. However, under the circumstances, Mr. Hartt, you stated yourself there is nothing wrong with political arrangements. I think it was perfectly right for the government to respond to the needs of Canadians in that they did not want an election. By and large, they wanted to see the government implement some of the commitments they had in previous bills and previous budgets. This is the better of two evils, sleeping with the devil or dealing with the devil. I think it is good. What do you think?
Mr. Hartt: As I said, Senator Harb, I have nothing against the subject matters to which money could be allocated. No one could have; these are all good things.
Who could say they were against affordable housing, foreign aid, the environment or training and education?
The problem is that normally, in a budget, Parliament is presented not just with a list of subject matters to which money will be allocated, but with some backup, some preliminary program parameters and some intent for how the money will be used.
The budget documents — I know, because I used to prepare them — are very thick, and they go as far as ways and means motions and back-up material. A lot of energy and effort is spent by department officials going around and explaining to Canadians in general and interest groups speak for groups of Canadians how this money will be spent.
What is unnerving about this bill is that an arm was twisted in a hotel room, or anywhere else, I have no idea where it was, and a list of good-sounding things was established. Money was allocated.
I accept your point that some effort was made to ensure that, through Treasury Board, there was scrutiny of the mechanics by which the money would be readied for disbursement. There was some responsibility exercised, but it is such a far cry from the normal budget process that I urge you, even if you hold your nose and support this bill and pass it, not to continue the rhetoric that this is a good idea and this is how we should do everything in the future. This is not a great innovation.
Mr. Poschmann: Mr. Chairman, there is an interesting segue in the question from talking about Parliament to talking about government. This legislation asks Parliament to pre-authorize contingent spending on a bunch of nice things and a player to be named later. That is the novel part of this legislation for the budget-making process. I think Mr. Hartt is right to express worries about where it leads.
Senator Harb: There is a Catch 22. This is exactly what the Auditor General has told us over and over again. We know that before the government spends any money, it has to come to Parliament and ask for authorization to spend that money, and then proceeds to set up corporations, agencies, and foundations and do the good things they want to do. The government does exactly what the Auditor General asks it to do, and then we have to turn around and start whipping them.
Mr. Hartt, knowing what we know now, and the fact that we have this bill before us, what would your recommendation be to the government, if you were in an advisory position? Would you recommend it set up a corporation, put the money aside, and identify the parameters of the programs under which they would spend that money, or just pass it like a flat cheque to the provinces and tell them to spend it on anything they think is best?
Mr. Hartt: I am glad you continued to ask me what I would advise the government to do. I do not think you would want to hear my answer to that question unqualified.
If you had the Auditor General sitting in this seat, she would say, “Senator, please do not tell me this is what I wanted you to do. Yes, I want to know that Parliament has taken cognizance of the spending before it happens. Yes, I want to know before money is passed into a foundation just to make it disappear by March 31 that somehow there is some basis for me to audit what it is it was spent for so I can tell you whether you got what you were paying for.”
I do not think the Auditor General would applaud this. I do not know if you are scheduled to hear her or not, but I cannot imagine she would say putting a nice sounding word at the end of a sentence that starts, “The Minister of Finance may make payments to,” is what she was looking for. She was looking for program parameters designed to enable her to say, “Parliament intended to accomplish this by the money it voted, and it either did or did not accomplish that.” That is what an auditor can do. An auditor cannot invent what was in your minds when you authorized this. Frankly, I am not sure there is any mind in which the “this” is present, even as we sit here today.
The Chairman: The Auditor General looks for value for money. I cannot recall the Auditor General ever saying she wanted to have a series of foundations and endowments set up at arms length over which there is no parliamentary scrutiny.
Mr. Hartt: She said the opposite.
The Chairman: Exactly.
Senator Murray: I have already indicated my scorn for this bill. Mr. Hartt, I wonder if you are too strict and taking too classic an approach as to what should be done with a surplus. I understand your position is that it goes to pay down the debt, and if you need more money for something else, go borrow it from the money you have used to pay down the debt.
You are almost old enough to remember the St. Laurent government. Mr. St. Laurent saw a windfall coming one time from the estates of a couple of dead, dying, or recently deceased Canadians, and his government took the point and endowed the Canada Council.
An argument could be made that this is what is happening with this bill. The government could say, “We are up to $4.5 billion, and we are saying it can go to this or that.”
I objected to the foundations at the time they were created. However, my objection was that so many of them were being created through legislation but rather through the Canada Corporations Act and, as several people have observed, put beyond the reach of Parliament. That would be, in many cases, the last we would hear of how the money was being spent by these non-governmental agencies for public policy purposes. That was my objection. We are making some headway, slowly bringing them back in within our purview, so that is progress.
I tend to think that if there is an unanticipated surplus, it is a proper decision for the government to take. If the government decides it does not want to spend any of it or not all of it on reducing taxes, or it wants to spend all of it on reducing the debt, then it can put it to some other purpose.
My problem is that in this bill, Parliament has really nothing to say beyond authorizing the generality. To me, compared to this, the foundations are looking pretty good. The idea of the foundations, given proper parliamentary oversight and accountability, is looking pretty good.
Mr. Hartt: Senator Murray, I do remember Mr. St. Laurent. I met him several times. My father was a member in his party in his government. I remember that era very well. I will bet you money that you will not find that a bill to say that the unintended surpluses that came from the estates of the two people shall be used to form — fill in the blank — the Canada Council, and nothing more. My bet is that somebody knew the Canada Council's mandate and an enactment established the roles and members' of the council.
This is what is wrong with this bill. I am not against the Canada Council. You could have changed all these four things and given all this money to the Canada Council. My problem is not with the fact that surplus monies are spent but that they are being spent in an ersatz, innovative, outside-the-budget process with no back-up, no program parameters and none of the historical precedents.
Senator Murray: Is it your position that the surplus should go only to pay down the debt?
Mr. Hartt: It would depend on circumstances because there are times when the answer to that would be yes, but not always. For example, it would have been so much better if in the original budget there had been a list of spending, with matching revenues; an estimate of the surplus; a list of additional spending should the surplus be greater than anticipated; and a fully fleshed out set of parameters just like every other program that is funded by the budget.
Senator Trenholme Counsell: Mr. Hartt, I am interested to know why you spent about one-half of your presentation on the Supreme Court decision. I know you are using it as an example of needs that may arise from unexpected sources. Is it for that reason only or is there another reason for your dwelling on the Supreme Court decision?
Mr. Hartt: I did use it as an example because it is par excellence. Rarely does any event, political pressure or even court decision, take out of the hands of the Department of Finance, the Minister of Finance, the entire cabinet, Parliament and the government, the discretion about how much is enough for a goal or a program. In this case, there is an obligation of result. The government, if it chooses to maintain a monopoly over a universal, state-paid, state- managed health care delivery system, has to ensure that no Canadian who has access to a lawyer falls between the cracks and receives medically necessary treatment in a time that is not medically timely. Any such person could sue, the result of which could be a declaration that goes beyond declaring invalid two clauses in Quebec's legislation that made private insurance illegal.
I am using it as the example par excellence. I have to confess that it is also because the senators on the Standing Senate Committee on Social Affairs, Science and Technology came up with the perfect, totally complete and self- defining constitutional fix such that I thought senators would have some sympathy for the example.
Senator Trenholme Counsell: I do not know whether this question is appropriate as a follow-up. You seem like a very wise man and you represented the senators in this decision. Is there a little manoeuvring going on? Where is the integrity in all of this? I am amazed by the amount of attention being afforded this today.
Mr. Hartt: So that all conflicts of interest are declared, I wrote a paper in 2002 for the C.D. Howe Institute, which was the locus classicus of this argument that the Charter guarantees Canadians timely access to the health care that the government provides. It found its way into the court case, which had already begun in Quebec, and it was cited not only by the senators in the report of the committee but also in each factum made before the court: the Canadian Medical Association, various health clinics from British Columbia and two appellants who had launched the suit.
I originated this argument so I am not here to shill for the senators but rather to shill for my paper, the C.D. Howe Institute, the brilliance of the Standing Senate Committee on Social Affairs, Science and Technology and the wisdom of the Supreme Court.
Senator Banks: I will revert to the second question raised by Senator Murray in respect of parliamentary scrutiny of substantial spending, a large part of which is from parliamentary appropriations, not just from the proceeds of estates to which Senator Murray referred.
The Financial Administration Act, which created the Canada Council, specifically excludes the Canada Council from section 17, which is the intrusive kind of audit in which the Auditor General may determine whether there is value for money.
The Auditor General is the auditor of record for the Canada Council but that is to determine that the books are in order. However, the Auditor General, in that and other cases such as some foundations, does not make a determination as to whether the money was spent on other than the general intent outlined, perhaps similar to the content of this bill. There is no specific application made to Parliament or elsewhere with respect to the policies, which change from time to time, of Canada Council's spending. Part of the reason behind that is the thinking in respect of matters to do with the arts, their adjudication and that of the Social Sciences Humanities Research Council and the Canadian Foundation Institute that decisions are better made by persons other than politicians, even other than bureaucrats. Do you agree with that premise?
Mr. Hartt: Absolutely, senator. The arm's length independence of granting councils and agencies is important. Imagine, after some of the scandals witnessed recently, if we were to find that a ballet dancer received a grant to study because she worked for a candidate of a certain party? That would be terrible.
I hope that you are not suggesting that it is precedence so we should have an environmental council, a post- secondary council, a housing council and a foreign aid council, all of which would have independent granting authority. This spending is of a completely different nature.
The Chairman: Mr. Hartt and Mr. Poschmann, I thank you for taking time from your schedules in the middle of a sunny July day to help us in our deliberations on this difficult and important budget bill.
The committee adjourned.
Proceedings of the Standing Senate Committee on
National Finance
Issue 27 - Evidence - July 12, 2005 (Afternoon meeting)
OTTAWA, Tuesday, July 12, 2005
The Standing Senate Committee on National Finance, to which was referred Bill C-48, to authorize the Minister of Finance to make certain payments, met this day at 2 p.m. to give clause-by-clause consideration to the bill.
Senator Donald H. Oliver ( Chairman ) in the chair.
[ English ]
The Chairman: Honourable senators, I would like to resume the hearings we started earlier today. Our first witnesses are from Human Resources and Skills Development Canada. I would like to extend an extremely warm welcome to Ms. Flumian, with whom I had lunch last week. She is the Deputy Minister of Labour, Associate Deputy Minister of HRSDC and Associate Deputy Minister of Social Development Canada, and wears other hats as well.
Also present today is Ms. Kolk, the Associate Assistant Deputy Minister of Housing and Homeless, and Mr. Smith, Vice-President, Assisted Housing.
As is the practice of this committee, we would like you to make your presentation and, following that, honourable senators will have a few questions about Bill C-48 and your presentation in relation thereto. You now have the floor, and I welcome all of you.
Ms. Maryantonett Flumian, Deputy Minister of Labour, Associate Deputy Minister of HRSDC and Associate Deputy Minister of SDC, Human Resources and Skills Development Canada: Thank you, honourable senators. First, I would like to offer the regrets of the minister, Mr. Joe Fontana, who would have loved to have been here. The alternative is that he is at his mother's funeral today. Nevertheless, bringing his greetings, I am here to discuss housing and homelessness components of Bill C-48.
As you know, $1.6 billion is slated to be used to address affordable housing and homelessness issues in Canada, including Aboriginal housing. This funding will help many Canadians in bringing us closer to the goal of safe, affordable housing for Canadians in need.
[ Translation ]
Having a home matters to Canadians, and it also matters to the government. It is a foundation from which we can develop and grow as individuals and it's at the centre of our future as a country.
[ English ]
We live in a country where most Canadians are very well housed, where about 80 per cent of our citizens enjoy good housing conditions — affordable, uncrowded and in excellent repair. However, many Canadians — about 1.7 million of them — are without safe and affordable housing, and some are at risk of becoming homeless. That figure of 80 per cent means little to the men, women and children who are still living in poor housing conditions. More needs to be done, and this $1.6 billion is a way to accelerate that process.
The Minister of Housing is making great efforts to see housing and homelessness issues on a continuum along which we find various needs from emergency shelter at one end and transitional assisted housing, affordable housing and other types of housing at the other market end.
[ Translation ]
The Canadians we find along this continuum have many faces: our youth, new Canadians, single mothers and women fleeing violence, seniors, persons with disabilities, and Aboriginal peoples — all with various needs.
People become homeless or at high-risk of homelessness for a variety of reasons, many of which are complex, with social and economic dimensions to consider, and many jurisdictions to coordinate. Some fall into a downward spiral from job loss, others because of alcohol and/or drug addiction. Many have mental health problems and no supportive housing exists for them. Another unfortunate reality is that of family violence.
And there are also repeated incidences of youth who travel from smaller rural communities to large urban centres, but who don't have the resources they need to succeed.
[ English ]
No matter what the reason, homelessness and affordable housing are issues that require concerted, sustained, collective action. As Minister Fontana is fond of saying, having a stable place to live is the fundamental building block for success in almost every other area of life — education, health, the overall environment and the economy. It is a worthy investment.
The Government of Canada has a responsibility to provide housing and homelessness solutions for its citizens. Canadians expect the federal government to be a key player in this regard. By engaging our partners, communities, other levels of government, non-governmental organizations, the not-for-profit sector and the private sector, the government hopes to help build better lives and stronger communities, and increase the overall chances of those individuals for success in life.
Already there is a strong foundation to build on. Success has been achieved in towns and cities across Canada under our existing programs, such as the Supporting Communities Partnership Initiative, or SCPI, the Residential Rehabilitation Assistance Program, or RRAP, and the Affordable Housing Initiative, which have shown us how to bring together partners from different sectors to find housing and homelessness solutions for Canadians. All these initiatives demonstrate how we are making a positive difference in the everyday lives of Canadians, and that the government is moving forward on the promise to ensure that all Canadians have access to safe and affordable housing.
[ Translation ]
In addition to federal investments, the partnerships we have forged through the National Homelessness Initiative have leveraged substantial resources from other sources; over $1 billion since 1999.
And even more funds have been leveraged through the Affordable Housing Initiative. While the proposed $1.6 billion for affordable housing will it require matching funds from other levels of government, it is our hope that we can continue to leverage additional dollars to make our investments go farther.
[ English ]
These achievements of the Government of Canada's housing and homelessness programs provided the basis upon which we decided to seek further input from Canadians on the elements of a new housing policy, known as the New Canadian Housing Framework. This framework will serve as our plan for our investments. It will recognize the housing needs of all Canadians along a continuum of need and opportunity. It will be built on the collaboration and successes that we have achieved so far.
Starting last December, we began consultations in 13 communities across Canada and held five expert round tables on issues such as, and including, the social causes of homelessness, horizontal approaches to dealing with these issues where further supports to housing are necessary, the issue of affordability, and increasing and improving the financial tools and instruments to help develop better responses. In this process, we involved parliamentarians, housing experts, service providers and other interested parties, including Aboriginal Canadians.
The consultation provided Canadians with an opportunity to share their views and ideas about our future directions. A few common themes emerged from the various consultations. I would like to take a moment to share some of them with you today because they are shaping our spending plans for the $1.6 billion.
[ Translation ]
Many presentations from communities emphasized support for a locally based approach, with a flexible toolkit of programs and services that can be adapted to meet local needs.
[ English ]
We heard that there are challenges with the capacity of the not-for-profit sector to deliver projects and meet the administrative and accountability requirements of our existing programs. Also, service providers who work with homeless people across the country stress the need to combine housing with support services for those with mental illness, addiction problems or physical disabilities to find and maintain stable housing.
The housing framework that we are building with our partners will serve as a guide for the federal government to make strategic use of allocated resources, including the funding derived from Bill C-48. For example, it is our intention to use some of the $1.6 billion toward a transformation of the Aboriginal housing system to support both on- and off- reserve Aboriginal Canadians. In the past several months we have become deeply engaged in policy development on Aboriginal housing within the context of the Canada-Aboriginal Peoples round table process. First there were progressive discussions that took place at the housing sectoral session held by Minister Fontana in November. These were followed by the Aboriginal policy retreat on May 31. This is an exciting process that does have historic ramifications. This is a system that has been designed, and will be delivered, by Aboriginal Canadians.
We also continue to work with other government departments and Aboriginal stakeholders on an ongoing basis to develop this transformative approach to Aboriginal housing. It is important to link our housing efforts to economic development and labour training opportunities in order to maximize impact and benefit. We are working towards deliverables to be announced at the first ministers' meeting this fall.
[ Translation ]
Another priority is to focus on neighbourhood revitalization initiatives and community-capacity building in places that face bigger challenges, like Vancouver's Downtown Eastside, Toronto's Regent Park, Regina North-Central, and across Atlantic Canada, where the housing stock is the oldest in North America.
All the while, we will continue to seek new partnerships with various sectors to tackle our common housing challenges and to meet the needs of vulnerable Canadians. Our commitment to a new Canadian Housing Framework is about developing a smarter, long-term vision of where our country is headed. If we are to build sustainable, vibrant communities, we must develop policies that support the principles of sustainable development and inclusion. The new Canadian Housing Framework builds on our current housing homelessness initiatives, helping us to identify and fill gaps in the housing continuum.
[ English ]
Oversight is also a key consideration of our approach. You can rest assured that we have a solid basis with which to work. We will follow all the applicable laws, regulations and policies, including all of the Financial Administration Act and Treasury Board guidelines, in shaping our new programming. These laws, regulations and policies are already used to guide all of our existing programs, administered both by the National Secretariat on Homelessness and by the Canada Mortgage and Housing Corporation, and they will continue to be followed and strengthened in our future initiatives. We take those commitments seriously.
In closing, I should like to reiterate that the $1.6 billion for affordable housing in Bill C-48 will go a long way towards supporting targeted revitalization projects and increasing our partnering model to link together our network of partners involving housing and homelessness issues. The proposed funding will also be the basis for the development of a transformative approach to Aboriginal housing that will promote both market-based approaches and respond to those who are the most in need.
[ Translation ]
As a country, we are indeed blessed and should be proud that our citizens are among the best housed in the world. But we must remain active and continue to work together to make housing available to everyone. Having a safe place to come home to is important, and we are committed to addressing homelessness and delivering on housing for all Canadians.
[ English ]
Mr. Chairman, my colleagues and I are happy to take any questions you may have. Thank you for the opportunity to make this presentation.
The Chairman: Thank you for that presentation. As you indicated in your remarks, this bill authorizes, for affordable housing including housing for Aboriginal Canadians, an amount not exceeding $1.6 billion. You told us that you certainly intend to follow all the rules and laws for the Financial Administration Act and the Treasury Board guidelines. I would like to know specifically, given this legislation, what you have done so far to prepare for your Treasury Board presentation, and what you have done by way of preparing documents outlining specifically how and where this money will be spent on the three types of initiatives that you enumerated in your presentation. In other words, how far along is the preparation of the documents that will need to go to Treasury Board before you can get your approval?
Ms. Flumian: I will begin and then turn to my colleagues for more specific details.
Mr. Fontana launched consultations on the national housing framework last December. We concluded those consultations in the late winter and have begun to shape some of the way forward in terms of various aspects of that agreement. I will have both Ms. Kolk and Mr. Smith speak to some of the specific items.
At the same time, we have also been working specifically on the items having to do with Aboriginal housing. In both those cases, our thinking is well advanced. We will be going into the cabinet process early in the fall to conclude the specific directions based on the options that we will be putting forward as to where the government will want to go. As soon as some of those decisions are taken, we are well positioned to be able to act.
I will now turn to Ms. Kolk to speak to the nature of our consultations on homelessness and housing and also on the Aboriginal round tables, and Mr. Smith will speak to where CMHC has been in this process, and the various tools and instruments they are looking at rolling out.
Ms. Bayla Kolk, Associate Assistant Deputy Minister, Housing and Homelessness, Human Resources and Skills Development Canada: As Ms. Flumian said in her remarks, and in answer to you, we had extensive consultations across the country at the community level, and led by Minister Fontana. It was compelling that these consultations reflected this outlook across the continuum. We had everyone talking to us, from those at the far end of the continuum dealing with emergency shelters and people on the streets, up through those who have experience on longer term sustainable solutions, assisted and supported housing, right up through to the marketplace. We were pleased that some entrepreneurs from Toronto, Vancouver and other places were present and had thought about the possibilities of investing in affordable housing, and particularly in mobilizing more private sector support as part of our partnership.
We have taken the results of the consultations, written reports and gone back to stakeholders, to try to take the best of the ideas, to see how we could roll out some compelling initiatives within the time frame that was set before us — and then along came the $1.6 billion. As we thought about it, we wanted to ensure a big private sector involvement here. We looked at some of the big projects across the country, such as Regent's Park in Toronto and the downtown east side in Vancouver, and pondered how to mobilize partners to do more than emergency shelters and revitalize neighbourhoods.
The Chairman: In terms of Regent's Park, which you referred to, what kind of documentation or preparation have you made for a presentation to Treasury Board for approval to spend some of this $1.6 billion?
Ms. Kolk: We must take it to cabinet committee before we get to Treasury Board. We have been to cabinet committee with presentations that give design and outlook. We were recently there with the go-ahead to talk to provinces and territories, and that begins this week. That will lead us to a cabinet presentation on issues that document the plans around Regent's Park, the outlook there for mixed income approaches rather than stigmatization and “ghettoization.” We are now looking at appearing before cabinet committee by September or October, and then after that, the Treasury Board submission will roll out the implementation, and that should be in the following months, by early winter.
The Chairman: Mr. Smith, did you want to add something?
Mr. Bill Smith, Vice-President, Assisted Housing, Human Resources and Skills Development Canada: I can make a few comments on CMHC's involvement. We were also part of these discussions. I was asked to comment on tools and instruments. CMHC's focus has generally been on the housing supply and housing finance tools, so part of the work that we have done in preparation is to meet as our management committee and sketch out the full range of potential interventions that might make sense on the part of government. We presented those to our board and had discussions with them around the end of May, and are coming back again with the longer-term ideas.
The first piece would be that we do have a menu of potential selections in the hopper, both with our board and through the ministry for consideration, and they focus primarily on those two areas. The housing supply area would range all the way from actual building and conversion to some of the rent supplement initiatives that are being talked about or are under way under the affordable housing initiative.
On the accountability and control side, the best example I could give of preparing for a cabinet committee meeting and Treasury Board is probably in regard to Aboriginal housing. We have actually drafted an accountability framework which deals with not just putting the supply in place but tests around making it last, tests around transferring responsibility for ensuring that the housing serves people well for many years, First Nations and other Aboriginal housing.
The Chairman: What percentage of the $1.6 billion would be for the Aboriginal component?
Mr. Smith: I defer to Ms. Flumian.
Ms. Flumian: It has not been finalized, but it will be a significant chunk of the $1.6 billion.
Senator Stratton: I have travelled to the northern regions and to reserves for 40-odd years, and it does not seem to me as though the state of housing for Aboriginals has changed. It seems that no matter what governments do, the status does not change. There is a constant need and requirement that cannot be, or does not get, fulfilled. Is there an answer to this problem, or will we simply have to continue to deal with this situation?
Ms. Flumian: If I may, I would answer that question in two fashions. Bill C-48 does speak to some of the most immediate needs. As you are well aware, $295 million was set aside, $200 million to be spent in the next two years to deal with the most immediate needs in terms of facilitating new construction. CMHC is putting up $83 million to facilitate the construction of about 4,400 new, non-profit housing units. In addition, CMHC will facilitate, through another $20 million investment, the renovation of about 1,100 existing units, for a total of $103 million. The Department of Indian Affairs and Northern Development will continue part of the funding for an additional construction of about 2,000 new housing units. That is intended to deal with some of the most immediate needs.
Part of what we are working on collectively in the area of Aboriginal housing is to distinguish what we can do for market-based approaches from those that are truly needs-based. The view would be that in some fashion the approaches that we are working on with all parties involved in the Aboriginal discussions would allow us to treat equity in the same fashion that other middle-class Canadians are able to treat their equity. As well, these approaches would allow us, without going through elaborate legislative changes, to find the proxies, working with financial institutions and other partners, that would put conditions in place, in some cases on-reserve, to facilitate the creation of a more market-based approach to housing. That would leave governments to deal with the more needs-based on- and off-reserve issues.
Many of the approaches that we are trying to develop through this continuum of need in the national housing framework is based on market models. That is further enhanced by the fact that if you could put some of those conditions in place, then governments would not have to work alone in dealing with some of these issues. If you could put some of these market conditions in place such that financing would be easier to acquire, then we could leverage not only the best that government can bring but also individual investments, investments by banks and other financial institutions, and potential investments by some pension funds. Creating some of those market conditions might make those investments possible. In northern and Aboriginal communities, the needs are great.
Senator Stratton: Do you know the supply requirement numbers? Could you relate those to the committee? I heard that numbers on a stopgap measure are in the area of 3,550 units, with 2,000 of those for Aboriginals. I heard about this process of a privatized approach, but you have not told me how you will close that gap in the sense of reducing the numbers to an acceptable level for Aboriginals or others in those homes, and for us.
Mr. Smith: I have a couple of comments on that. The on-reserve shortfall is about 20,000 units. The combined production, in terms of unit supply, of Indian and Northern Affairs and CMHC has been about 2,200 units. I have to look up the extent to which this gap is growing but the short-term, three-year intervention made through the $295 million will produce 4,400 units. That estimated amount over the next two years is designed to stop the backlog from growing, which is growing largely because of the demographics of First Nations people. Off-reserve, the numbers are more difficult to ascertain, certainly by identity group. However, we could develop those figures and give you our best estimates later, if you wish.
Senator Stratton: I would be interested in knowing those numbers. When you are dealing with reserve shortfalls of 20,000 units and an interim stopgap of only 4,400, do you know what the on-reserve demand is annually? Will this stop-gap measure at least keep us current over the next two years, or where will it put the numbers?
Mr. Smith: Yes, the 4,400 units would keep us current and a bit more, although I would need to look up the percentage. I believe that it is about 2,000 per year.
Senator Stratton: The demand is 2,000 per year? The core would remain at 20,000 units based on that information?
Mr. Smith: We should be able to reduce that a bit over the next two years.
Senator Stratton: If you are to offer these people opportunities to own their homes, then you will need to afford them the timing options. They would want to know how long they would have to wait, whether it be two years or 10 years. I would like to hear more about that if you could send us the information.
Ms. Flumian: The gap will be 6,400 houses in that two-year period. In addition to the 6,400 houses, we will add 5,400 serviced lots and renovate about 1,500 homes. We need to think of the two departments, because we are talking about on- and off-reserve for Aboriginals.
Senator, the heart of your question is whether we can keep up and whether we are doing it in the right way. The short answer is that everyone thinks we are not, and therefore we are trying to deal with the immediate need. Hence, we have the commitment in Bill C-43 for a two-year time frame.
Working with Aboriginal groups, we are looking at a dedicated effort to changing some of these programs, while keeping the best of what works and understanding that part of the issue is money and part of it is the ownership issues associated with it. We have looked at many models, one of which was unveiled by the British government a while ago on building equity in the area of social housing. We are exploring models tried in other countries to figure out the best way to proceed. Dollars are finite but priorities can continue, so it is important to determine how to leverage the funding to provide additional monies and introduce more players in order to help build a sense of ownership and attachment to these homes. The process is more complicated than the financial instruments we have at play. That is why we are trying to develop a way to work with Aboriginal groups that not only takes into account their needs but also starts to position them for running their own housing system.
Senator Stratton: It has been a long time coming, and it took the New Democratic Party to make it happen.
Ms. Flumian: We have been working on it for a long time, senator.
Senator Tkachuk: You used the figure of 80 per cent, and you said that 1.7 million people are without safe and affordable housing. Of that group, how many of them are defined as Aboriginal Canadians?
Ms. Flumian: I do not have the number off the top of my head, but perhaps as we speak —
Mr. Smith: We have it by group. I do not have it overall, and I do not have it here at the moment. It varies dramatically by location.
Senator Tkachuk: I am asking on the basis of the 80 per cent: of the 1.7 million, I want to know how many of those are Aboriginal Canadians.
Ms. Flumian: I do not have that information to hand. We will get it to you. If anyone has the number, please volunteer it.
Senator Tkachuk: Will that number guide the $1.6 billion?
Ms. Flumian: The distribution of it, yes it will. Many of our Aboriginal Canadians are those who are the most in need, and I think you will see that reflected when the numbers are finalized.
Senator Tkachuk: When you say “poor housing conditions,” are you talking about housing, or is it housing rentals as well?
Ms. Flumian: Correct. That is why we speak of a continuum.
Senator Tkachuk: What is defined as a poor housing condition? What qualifies it? How do you get the numbers?
Ms. Flumian: The overall number of 1.7 million Canadians in need are people who are spending more than 30 per cent of their disposable incomes on housing; many Canadians are spending 50 per cent of their disposable incomes on housing.
Senator Tkachuk: What does that mean? It means they could have a nice place, but perhaps be short of food or whatever.
Ms. Flumian: It is slightly unlikely, but yes.
Mr. Smith: The measure is a little technical.
Senator Tkachuk: I am asking for the measure. You are spending the money on housing. I want to make sure that that is the right place to spend it.
Mr. Smith: There are 1.7 million Canadian households in what we call core housing need. Core housing need involves three things: it involves the condition of the housing — does it need serious repair or not? Is it big enough for the people who live there, following the national occupancy standards? The primary condition is the one Ms. Flumian mentioned, whether that particular household could meet their housing needs in adequate and suitable accommodation, spending 30 per cent of their income in that locality. It is a measure that is developed from the census information every couple of years. Therefore, the three things are: is it affordable at the 30 per cent level of your gross income? Is it big enough — then the national occupancy standards go into all kinds of details of how many people can sleep in a room and at what age — and does it require major repairs?
Senator Tkachuk: Ten years ago, what was that figure? Was it higher or lower?
Mr. Smith: It went down in the last five years, and I do have that somewhere here. In 1996, it was 17.9 per cent; in 2001, it had gone down to 15.8 per cent.
Senator Tkachuk: What was it in 1996?
Mr. Smith: It was 17.9 per cent of Canadian households; now it is down to 15.8 per cent in 2001.
Senator Tkachuk: After $2 billion a year for 12 years — about $22 billion — that has been the result?
Mr. Smith: The $2 billion a year largely would not figure in that number, because that number is mainly people who have been looked after by it. When Ms. Flumian talks about 20 per cent of Canadians, and I talk about the 1.7 million households or 14 per cent of households that are in core housing need, there are a chunk of people who are looked after now in our investments in social housing. Our estimate is that about 630,000 households receive a subsidy from that $2 billion now. To a large extent, because of that subsidy, those people have been removed from core housing need, and what remains are largely others.
Senator Tkachuk: Are you saying that almost half the people of Canada cannot afford a house? What are we talking about here?
Mr. Smith: We are saying that fourteen per cent of Canadians are at that standard, at the 30 per cent level, or with those other factors.
Ms. Flumian: Over 80 per cent of Canadians are extremely well housed.
Senator Tkachuk: That is a very positive spin on the situation.
Ms. Flumian: That is the way I actually said it.
Senator Tkachuk: After $22 billion, one would hope so. The leader of the NDP, Mr. Layton, has talked about homeless people. Actually, on this $1.6 billion, he focuses on homeless people.
In the housing program itself, is there a special program for those who are homeless? If so, what kind of a program is that, and what percentage of this 80 per cent are people without any homes at all; that are what would be considered homeless?
Ms. Kolk: Under our programming we have a large program called the Supporting Communities Partnership Initiative, which was started in 1999. It exists presently in 61 communities. These communities have largely focused on new emergency shelters. We can say that approximately 4,000 new emergency shelter beds have been created across the country. Hundreds of new housing projects that are of assisted and transitional supportive housing have been created.
It is hard to quantify the homeless. Since 1999, we have built a database that we call HIFIS, the Homeless Individuals and Family Information Service. We have provided the emergency shelters with information technology so that we can collect information about who are the homeless, what are their problems, is this an income affordability issue, is this about mental health, about drug addiction, about alienated youth? As you can imagine, it is about all of the above, but the collection of the information is in order for us to get a better idea of the proportionality and thereby target our programs to them.
The idea of the Supporting Communities Partnership Initiative is that it has federal leadership but it is up to the communities to mobilize their non-profit sector, their private sector partners, those who know how to provide social services and take a holistic approach to helping the individual who finds himself or herself in a shelter, and to make sure that that individual does not adopt that as a way of life, and get them into drug counselling and labour market training. It has been the cornerstone of our homelessness initiative to have this program in 61 communities. That program is up for renewal next year. As part of our efforts in going to cabinet this fall, we will be proposing how to make that programming even more effective. The primary focus will be getting people out of the shelters and into longer-term affordable housing.
Senator Tkachuk: What is the housing budget now for this fiscal year? Is it $200 million?
Mr. Smith: There is approximately $2 billion of appropriations that go to CMHC. I am not sure what the —
Ms. Flumian: That is on the CMHC side. What do we spend on the homelessness side?
Ms. Kolk: We are now at $400 million over three years, in our current phase of this homelessness initiative.
Ms. Flumian: As I mentioned earlier, Indian and Northern Affairs does spend money for housing on-reserve.
Senator Tkachuk: We have the $2 billion plus the $400 million over three years, plus whatever is spent on the Aboriginal housing.
Mr. Smith: Indian Affairs and CMHC together spend roughly $260 million a year on-reserve. I believe we are about $130 million of that. CMHC spending, though, is long-term subsidy to repay loans for putting housing in place, to a large extent. Therefore, you will not see the same amount every year; it is spread over a lot of years.
Senator Tkachuk: Plus you will get a new $800 million per year for the next two years, providing that the budget surplus is there, is that not correct? On top of this, we will have $800 million per year.
Ms. Flumian: I do not know that there has yet been any determination made on how that money will flow, or what amounts will flow. It will not necessarily be evenly divided over two fiscal years. It will depend on the size of surplus, as you are aware.
Senator Tkachuk: Then, over how many fiscal years will it be?
Ms. Flumian: It will be over two, but we do not know if it will be an even split; that is my point. That is why we are developing and designing flexible uses for these instruments.
Senator Tkachuk: Mr. Fontana talked about compressing the five years into two years. Senator Carstairs also said in the chamber that five years' worth of money will be compressed over two years. Therefore, it is not really an increase in money; it will just flow faster.
Ms. Flumian: It is an increase. This $1.6 billion is an increase.
Senator Tkachuk: All the budget numbers you have now will be the same. They will not be compressed. According to Mr. Fontana and Senator Carstairs, those five-year numbers will be compressed into two years.
Senator Eggleton: That is a matter of interpretation.
Senator Tkachuk: Why do you not read it?
Senator Eggleton: I have read it. You are distorting it.
Senator Tkachuk: I am? Do you want me to read it again into the record? Would you like to be the witness here? Why not ask the questions after I finish, and then you can clarify it?
Senator Eggleton: Do not distort it, then.
Senator Tkachuk: I am not distorting it. I am telling you what Mr. Fontana told the house committee, and what Senator Carstairs told the chamber. The five-year budget will be compressed over two years. She made a big point of saying that. You were there. What did she say?
Senator Eggleton: Read the context.
Ms. Flumian: I can only say that the numbers that we cited are actual expenditures on an annual basis. The $1.6 billion is new money for us, over and above the budget numbers we have given you. Since I have heard Mr. Fontana before, I suspect — although I am not sure what your reference is, but if it helps the discussion — that he may have been referring to a campaign commitment and a platform commitment which was expressed over five years and now has been compressed into the two years proposed in Bill C-48.
Senator Tkachuk: Perhaps we could table Mr. Fontana's comments into the committee reports, because he does not say that in his comments.
Senator Eggleton: Do you want to compare notes?
Senator Tkachuk: I have it here.
Senator Eggleton: I would be happy to help educate the senator.
The Chairman: I will come back to you. Senator Murray is next.
Senator Murray: It is nice to see you again, Ms. Flumian.
Ms. Flumian: Likewise, senator.
Senator Murray: I think the last time we met at a committee, you were here with respect to the firearms registry.
Ms. Flumian: I get all the best files in government, sir. Before that, there was the closing of the fisheries.
Senator Murray: You are a trooper. I am far from as well informed as I should be about the housing activity of the federal government, but here we have, all of a sudden, a potential windfall for federal housing activity of $1.6 billion. Already you have your budgets and your programs and so forth. When this windfall suddenly materializes, what do you do? I heard your statement. What I got out of it is, “Well, we are going to do what we are doing, except more of it. We will do better with it.” In the course of the conversation here, I am reminded that there is still a Minister of State for Homelessness, is there not?
Ms. Flumian: Mr. Fontana is the minister for all of the above.
Senator Murray: But there is a national secretariat of some kind.
Ms. Flumian: That is Ms. Kolk.
Senator Murray: Are you not the line department?
Ms. Kolk: It is with HRSD, but reporting to Ms. Flumian, who reports to Minister Fontana.
Senator Murray: In his capacity as —?
Ms. Flumian: Minister of Housing and Labour.
Senator Murray: That is not one portfolio, is it?
Ms. Flumian: For him and me, it is, so we have CMHC and we have the homelessness secretariat.
Senator Murray: There is homelessness and there is housing. Indian Affairs has a piece of it?
Ms. Flumian: Correct.
Senator Murray: Then all of a sudden before your very eyes there is $1.6 billion, and Indian Affairs must be saying, “Let us agree that we will get a certain chunk of this,” and you, Ms. Kolk, are saying, “Homelessness will get a certain percentage.” Are most of the housing programs delivered through CMHC?
Ms. Flumian: Except for the homelessness ones and the ones at Indian Affairs.
Senator Murray: CMHC will not try to get its piece of the action?
Ms. Flumian: I did not spend a lot of time in my opening remarks on the continuum, but I will spend time now. No doubt one thing that the Prime Minister must have had in mind in styling the portfolio as a new one at the federal level, combining housing and homelessness and making Mr. Fontana responsible for it, was that since the days of program review and the government's decision at that point to essentially exit the housing business directly, except through partnership with the provinces and matching the funding at 50 cents to the dollar, we were asked to step back. That is why, from our standpoint, we will not be spending the $1.6 in the same old ways, and that is why, from our standpoint, it is not a windfall.
The marching instructions under which we have been operating for the last year or so were to stand back and look at the entire area of housing, not only the federal roles but engaging in discussions with our provincial partners and the not-for-profit sector and other significant players in the housing market — banks, insurance companies and others out there — to have a look at the whole continuum of housing in this country.
Was it working? Clearly, with over 80 per cent of Canadians being housed in a fashion that most would say, by any measurable standard, is more than adequate, we have a lot to be proud of in this country. However, for that less than 20 per cent at the other end of the continuum, there are significant gaps. There are regional imbalances. Because of the programming that primarily is delivered through CMHC, which is matched with 50-cent dollars, some provinces had capacity issues with how they could deliver on those 50-cent dollars and therefore enjoin them. Under the Affordable Housing Initiative, $1 billion was set aside for expenditures in affordable housing. Large amounts of it, for some period, went uncommitted and unspent because provinces either did not have the fiscal capacity or did not have housing at the heart of their priority list. Therefore, those dollars were going unspent.
In addition to that, since the homeless issues arose in this country, and we had a separate program for that, all sorts of supports were being provided for emergency shelters. The question is: What happens when a person leaves the emergency shelter and gets on with the rest of his or her life?
Our instructions were to stand back and look at the entire continuum of housing, not from the standpoint of the federal government re-entering every sphere of it but from understanding what the continuum looked like, following discussions with our provincial and territorial colleagues and the other key providers I spoke of to determine if we had the continuum properly understood and if the incentive structures were properly constructed so that we could actually have the right players playing in the right places. Our instructions were then to move forward with what the next generation of programming would look like, in order to be able to help out.
Let me take the case in point of Aboriginal housing for a moment. There is great need, and some would argue not enough focus and attention paid to actually dealing with the problems on their own, and the demographics take us to a place where those needs continue to increase.
Senator Murray: I will come back to that.
Ms. Flumian: There are two players in that field. The Auditor General has already said —
The Chairman: Could I ask that your answers be a little bit compressed? I have four other senators who wish to ask questions, and we have only 10 minutes left.
Ms. Flumian: I will go quickly to the point of Aboriginal housing. We have been asked by observers, such as the Auditor General for example, why we cannot focus on one window for Aboriginal housing. In order to focus on the one window, we have to understand the needs, and we are talking Aboriginal so we are talking on-reserve and off- reserve. We are talking to the various groups to which this applies, but we have at least three players at the federal level. How might we work to provide programming that is more continuous to them, and for which they might come to one place? How could we manage this in a better fashion so that our response is more nimble for them, and so that they need express their accountability requirements only once, instead of across many programs and issues.
Senator Murray: How does this relate to the $1.6 billion that you say is not a windfall? You have been tasked with looking at the continuum, as you put it, but they did not provide you with a budget for that purpose.
Ms. Flumian: They told us to do the policy work and come back with our recommendations. Prior to that, the government had made a commitment in its platform for five years' worth of expenditures in the housing field, which approximates the earlier discussion we had on the $1.6 billion.
Senator Murray: The amount of $1.6 billion is already part of the government platform?
Ms. Flumian: No. We are distinguishing the commitment made in the government's platform and the commitment being made now in the budget bill to give effect to the platform commitment. We did not have the $1.6 billion.
Senator Murray: Are you referring to Bill C-48?
Ms. Flumian: Yes. We do not have the $1.6 billion in our reference levels.
Senator Murray: In that sense, it is not a windfall?
Ms. Flumian: That is correct. One year ago, we had been asked to come forward with new plans and policies.
Senator Murray: Therefore, you know how you will use the $1.6 billion?
Ms. Flumian: For that, we will go to cabinet in the fall, as we said earlier. We will have conversations with members in the other place, after which we will have the details for senators.
Senator Murray: In respect of off-reserve Aboriginals, what do we have now in place in terms of federal involvement in housing?
Mr. Smith: There is little direct involvement, but the government has an urban Aboriginal strategy that includes housing and 14 centres across the country to work with Aboriginals.
Senator Murray: Is that funded by Indian Affairs? Where does it come from? That is a good question.
Ms. Flumian: It is housed across many departments that play a role. The strategy for urban Aboriginal is not to be prescriptive and design only one program. For example, the needs in Regina are very different from the needs elsewhere. In addition, as I say, the program is housed in various departmental budgets. The 14 centres have agreements that cause a series of departments to focus on their specific issue, so that they all dedicate a portion of the funding.
Senator Murray: Surely the provinces are involved in that, and you do not have to go to the provinces to ask?
Ms. Flumian: No. We also work with municipalities and other not-for-profit providers.
Senator Murray: Currently, some housing is provided. Are you thinking of a new program for off-reserve Aboriginal housing?
Ms. Flumian: We would prefer to not be prescriptive in our programming. In other words, we do not want to design a program that tells everyone how it must line up, because the needs are so varied. We prefer to have instruments and tools, as Mr. Smith spoke about earlier. That would allow someone at a local level to fashion programming tailored to the needs of a particular group. We would provide an array of instruments, financing and other important social needs because the house and the roof are only parts of the solution.
Senator Murray: Is that with the provinces?
Ms. Flumian: Yes, and with other not-for-profit groups. We would be happy to come back in the fall and speak to this with greater detail.
Senator Tkachuk: You said that the $1.6 billion was part of the Liberal Party platform for housing. Was the money in the 2005 budget, tabled in February by the minister, part of the $1.5 billion?
Ms. Flumian: The only additional monies provided in Bill C-43 were the $295 million dedicated specifically to Aboriginal housing over a two-year time frame that I spoke to earlier.
Senator Tkachuk: Is that on-reserve?
Ms. Flumian: That was specifically for on-reserve.
Senator Tkachuk: That was part of the $1.5 billion?
Ms. Flumian: It was not in the accounting, as I understand it.
Senator Tkachuk: In the Budget 2005?
Ms. Flumian: Over the next few years, $295 million is to be expended for Aboriginal housing on-reserve.
Senator Tkachuk: None of the $1.5 billion is part of the current housing budget as it stands, as far as you understand?
Ms. Flumian: Yes.
Senator Day: Is the $1.5 million the same as the $1.6 million that we have been talking about? For the record, the figure is $1.6 million.
Senator Trenholme Counsell: I will be brief. I was most interested in the words “transformative approach to Aboriginal housing,” and I would like to hear more discussion on that. Are government monies put into programs in the spirit of Habitat for Humanity to help the people keep a home, care for a home and manage a home? Not everyone who needs it receives assistance through housing initiatives. Are there government programs or initiatives that involve federal and provincial levels?
Ms. Flumian: Yes, we have the residence rehabilitation program, which is one of our more successful programs. Mr. Smith will say a few words about what we spend and how we spend it.
Mr. Smith: That is a suite of programs in the budget. It helps to prepare some 20,000-23,000 homes per year. A large component of that is homeowner-related. There is also a rental component, one to help shelters and one to help elderly people stay longer in their homes. The program is funded over three years at $384 million, and I think it is $128 million this year. That program comes up for renewal next year.
Senator Trenholme Counsell: That program is for repairs to housing. Some people eventually find themselves living in new homes through one avenue or another, and then not knowing how or being able to take care of those homes. That is why I mentioned Habitat for Humanity, and the kind of support that some people need from time to time in order to manage. Does the federal government put any money into that kind of initiative?
Mr. Smith: Senator, are you speaking to financial assistance or to advice and help on how to do things?
Senator Trenholme Counsell: Is advice available to homeowners, which would take dollars to hire advisors? Of course, Habitat for Humanity operates with volunteers. The ongoing support and counselling is a very large part of their program. In this case we are not talking about volunteers, although that could be part of it. Is there a commitment of federal dollars to such a program?
Ms. Kolk: We do much of that through various partnering approaches. For example, we have a pilot project in British Columbia called the Family Self-sufficiency Project. People who have moved up a bit through the continuum now find themselves either renting or owning a home. However, you cannot expect overnight that they know how to maintain their budgets and their homes, and this spills over into good parenting habits to ensure that their children know the local schools. We do not have one big program but we partner with Habitat for Humanity or the B.C. Family Self-sufficiency Project.
We are looking at doing more of this type of thing, so we have partnered on “Home Save,” which is geared to financial self-sufficiency linked to housing. It is very much part of our future direction. We started in a small way through a number of pilot projects across the country.
Senator Trenholme Counsell: If I might add, chair, I would hope that from time to time, when there is new money available, that this kind of thing will be considered because it is a big challenge. It is sad when you see a family who have never had a home before get this precious roof over their head and then not be able to take care of it through no fault of their own. For one generation after another, they have not had the learning experience of taking care of property.
Ms. Flumian: As we move into the areas of neighbourhood revitalization and trying to increase home equity and ownership for more and more Canadians, you will find that this component will probably be expanding.
Senator Harb: Looking at things from the outside, one would think now that we have three women ministers or associate deputy ministers. Do they pay you for all these portfolios?
Ms. Flumian: I wish. That is how they found the $1.6 billion.
Senator Harb: I know you deserve it.
I want to ask you about this $1.6 billion of which the government has made a commitment for affordable housing, including housing for Aboriginal Canadians. I know there has been a great amount of discussion in your department about devolution of the housing portfolio to the provinces. Today you talked about the fact that you have taken a little bit of a step back, by trying to analyze housing needs, consulting with the private sector, special interest groups and so on, which I think is a good idea.
However, in light of the fact that the decision has not yet been made, what do you think would be a good idea for your department to do to get us out of this situation that we may find ourselves in, were we to hand over $1.6 billion to the provinces without knowing how they will spend it? If your department were to go to the Government of Canada and say “Listen, we have a department called CMHC; give us the money. We will put it in trust until such times as we figure out how to spend that money, in order to ensure that the people who need affordable housing do receive it, how it can be managed and how we will report to Parliament on how the money is being spent.”
I know they probably have not called you, but I have heard of the unsolicited proposals that from time to time just show up at the doors of the government. Are your officials working on an unsolicited proposal that you can drop at the doors of Treasury Board or the Minister of Finance? Do you have something that would say “I know you are thinking deep and hard about it. In the event that it happens and that you have that surplus, we are available to do the delivery and the management”?
Ms. Flumian: First, I would like to make one thing clear: We work closely with our provincial and territorial colleagues in the delivery of our existing programs. In some areas we deliver directly,but most of our funding is with them on matching 50-cent dollars. This $1.6 billion is different. It is intended to be a federal spending. Having said that, and because of all the complexities that I gave in my earlier answers — which were too long for some honourable senators but it is a very complex area — therefore we want to leverage the $1.6 billion to get as many other areas of the world working with us as possible. We would be looking to see if we can add to that $1.6 billion by having provinces also invest in some of those areas — perhaps not in the same area, but in an area along the continuum. We would also be looking to see how we can attract monies from other places. The moment we do that, it leads us to what you called our unsolicited proposal, if I can put it that way, of how we might manage some of this money differently, through a housing trust or other arrangements whereby other parties would also invest, and from which communities or individuals could draw down.
We are exploring a couple of options that look like that in the Aboriginal area as well as in other programming we would run. We are working; we are not sure which of these options will find favour at the end of the day, but that is very much one that is live. We are engaging all sorts of great minds to help us put something like that together in a way that it might work, and that other countries and other jurisdictions have tried, and that might lead us to some additional and better outcomes than the ones we currently have.
Senator Eggleton: You do not yet have the $1.6 billion, so I guess you have not yet spent it.
Ms. Flumian: That is right.
Senator Eggleton: You have outlined today a number of programs that you operate. Is it not fair to suggest that they are the framework for what you would then develop as the $1.6 billion program, as opposed to plucking some new thing out of the air?
Ms. Flumian: We would work on the foundations that we have built, and we would have to invent some new ones, too, because there are some gaps in that continuum.
Senator Day: I have one comment, and that is that I am pleased you are here today and have given us that background with respect to Aboriginal housing on and off-reserve. Your offer to come back after you have made the submissions to and have had some more specific direction from cabinet will be very helpful to us. I am hopeful that my colleagues will agree to do that.
The Chairman: I would like to echo Senator Day's comments that we would be delighted if you came back after you have made those initial presentations to cabinet and Treasury Board.
On behalf of the committee, thank you very much for coming and helping to explain that $1.6 billion.
Our last witnesses, honourable senators, are with the Canadian Council of Chief Executives, and I am delighted to welcome Mr. Stewart-Patterson and Mr. Boutziouvis. The council is a not-for-profit, non-partisan organization composed of the CEOs of Canada's leading companies. It engages in an active program of public research, consultation and advocacy.
Mr. Stewart-Patterson joined the CCCE in 1996 after 15 years in the media as a reporter, editor and senior manager. Among other positions, he has been the parliamentary correspondent of The Globe and Mail 's Report on Business in Ottawa, editor-in-chief of the Robinson-Blackmore newspaper chain in Newfoundland and Labrador and business editor for CTV's Canada AM.
A past president of the Ottawa Economics Association, Mr. Boutziouvis was educated at the University of Western Ontario, and Ottawa and Carleton universities. In addition to successful completion of the Western executive program, he holds a master's degree in public administration and bachelor's degrees in economics and biochemistry.
Welcome, gentlemen. We have been struggling to understand the complexities of Bill C-48 and we welcome your comments on it. You will make your presentation and, following that, honourable senators will have some questions that they would like to put to you.
Mr. David Stewart-Patterson, Executive Vice-President, Canadian Council of Chief Executives: Thank you, Mr. Chairman, for your kind introduction, and thank you to all honourable senators for the opportunity to appear here. Bill C-48 does open up complex issues, but it is a brief bill, so my initial comments will be brief. However, the discussion which ensues will be as complex as you wish it to be.
To start, I should say that business leaders in Canada understand the political realities of working in a minority government. Politics is the art of the possible and, therefore, it is sometimes necessary to do things which are less than perfect. In hindsight, one could argue that the main budget implementation bill, Bill C-43, might have made it through without the need for this side deal with the New Democratic Party. There were indications from time to time, from budget day onward, that the Conservatives were prepared to support it as it originally stood. In any case, that question is moot. The deal was done, and whatever the need for Bill C-48 in terms of political expediency, I would like to make the point that we do not believe it constitutes sound public policy.
I want to make it clear that the major concern of the Canadian Council of Chief Executives is not with respect to the policy objectives of the bill. The environment, training and post-secondary education, affordable housing and foreign aid are all worthy causes and areas in which government can, and does, take positive action. I also accept the assurances of the Minister of Finance that this bill does not increase the risk of the government falling into deficit. The spending promises it contains are conditional on surpluses of at least $2 billion in each year.
However, we consider that the bill has two fatal flaws. The first major failing is one of policy. It sets aside $4.6 billion, roughly speaking, for spending in four policy areas, but it gives no indication of how this money will be spent. It puts forward no targets and no goals — not even a vague notion of what outcomes we are trying to achieve with this money. What I heard of the preceding discussion has illustrated that to some extent. People can always find ways to spend money if you give it to them first, but a lot of forethought has not gone into where the value will come from.
It also ignores alternatives to public spending in aid of some of those goals. Perhaps the best way to illustrate that is with respect to foreign aid. The government has already committed to a large increase in foreign aid, particularly for areas such as Africa. It has announced in the international policy statement a major revision of the way in which it spends, one that will concentrate aid in fewer countries but more effectively. We consider that a positive direction but, on the other hand, this is a very new direction in terms of how Canada spends its money abroad. We need to evaluate how effective this new approach is. In the meantime, while we are already putting in more money and spending it in new ways, should we be throwing more money at a problem when we do not know how effective the new approach will be?
More to the point, it is also important to recognize that the best way to achieve some of these goals may not necessarily involve public spending. If I can stick with the foreign aid component, there is a broad consensus, and you heard it in some of the G8 discussions over the past week, that the most effective thing Canada and other industrialized countries can do to help the poorest farmers in the least developed countries is to free up agricultural trade through the WTO. None of that kind of looking at alternatives in terms of the best way to meet these policy goals is addressed in the rather brief text of this bill.
If I can summarize that problem, essentially Bill C-48 abandons any pretence of meeting what I would consider are the primary responsibility of any government to ensure that public money gets used as effectively as possible, and provides value to taxpayers. These may be worthy goals but there is no indication of how much value will be delivered for the money that is set aside.
That leads me to what I consider to be the second major flaw in the bill, which is its lack of regard for basic principles of good governance. In the other place, I described Bill C-48 as a post-dated blank cheque. It gives a future cabinet authority to spend all this money in any way it sees fit, including new programs, agreements with other governments, grants and contributions, and even in setting up new crown corporations. At a time when Canadians are calling for greater transparency and greater accountability in the use of public funds, this bill shifts more than $4.5 billion behind closed doors. It will allow the government of the day to make political decisions about where and how to spend this money without the need to come back for further parliamentary approval. It may not expand the risk of return to financial deficits but I would argue that it increases, rather than decreases, the democratic deficit.
In conclusion, this bill is symbolic of the extent to which this Parliament has become consumed with short-term politics and has abandoned the responsibility to think about the longer term needs of the country. Canada's chief executives spoke out bluntly a few weeks ago in launching our Canada First initiative. We distributed to the committee copies of that statement. The fact is that when the economy is strong and governments are racking up surplus after surplus, it is easy to become complacent, but the danger signs are out. The competition around the world gets more intense by the day.
I believe that if we want to sustain and build on the quality of life that we as Canadians have come to take for granted, it is time for all of us to take a step back from some of the short-term politics that we have had to endure in recent months and start thinking more seriously about what we want our country to look like a decade from now, and what it will take to get us there from here.
With those brief comments, I stand ready to answer whatever questions honourable senators may have.
The Chairman: Thank you very much.
Senator Downe: I assume, Mr. Stewart-Patterson, that, in the absence of any alternative, your association would support the status quo, which some people have argued is simply the Department of Finance underestimating the surplus year after year, and that money automatically going to pay down the debt. Is that the position of your association?
Mr. Stewart-Patterson: On the subject of how surpluses should be used, I have argued many times in the past that first of all it is important for government to constantly look at how it can spend money more effectively, and reallocate money from uses which have proven to be less effective to those which have proven to be more effective. In that context, the least effective use of public money is paying interest on the public debt, and therefore debt reduction is the single most effective way to reallocate spending to more effective uses. Paying down debt is good public policy and a way to ensure the government's ability to sustain and improve spending in areas that will add to the quality of life of Canadians over time. I do not have a problem, and neither do our members, with using more money to pay down debt. There may be other things we would like to see happen, but debt reduction is not a bad thing
Senator Downe: I appreciate that answer. That is really the debate. On one side, the Department of Finance has been doing what I and many others have suggested as underestimating the surplus and automatically putting it to the debt. The other argument is that we have a public policy vacuum because we are not having a debate in this country about where the surplus should go.
This bill has weaknesses, as we have heard today, but it sets in place a process for discussion. If we are to have a surplus over the next 10 years, how will we spend that money? We may put it into debt and tax reduction, or public transit and the environment, and education and housing. This bill opens up the debate. That is more of a comment than a question.
Mr. Stewart-Patterson: I do not disagree with your sense that it is important to think in the longer term and to look at those alternatives, but unfortunately this bill cuts off debate rather than opens it up. It says that whatever is over $2 billion in the next two years will be spent on these four areas. We do not know how it will be spent or what it will achieve, but it will be spent on that and nothing else. It has precluded discussion of whether that money, if it comes in, will be spent in other areas, or will be used to reduce the tax burden, or will go to pay down debt. It has narrowed the debate rather than broadening it.
Senator Downe: I disagree. I think this bill at least sets some targets. I am not here to defend the NDP, but I think the government did the right thing. In the absence of this bill, everything would go automatically to paying down the debt.
Mr. Stewart-Patterson: In the absence of this bill, I would suggest you would have more discussion going forward about what should be in the next budget and about how the money would be spent, and spent effectively, or used for other purposes, as opposed to simply sort of drawing it up on the back of an envelope, “Here are four areas. Here is $4.6 billion. Go to it. Come up with some proposals that will use it up.”
Senator Downe: I think it is clear, when you look back over the last three years, that that simply is not happening. There has not been that debate in this country. When we had the massive surplus, it automatically went to pay down the debt. Leading up to that, the Department of Finance consistently told the public that the surplus was very small and that there was no money for the numerous suggested things. Then, six months after the books were closed, the department determined that it had made an error, and there were billions of dollars in that surplus. That is a substantial amount of money. Professionals in that department got the number wrong and so the amount went to the debt.
That is not necessarily the wrong thing to do, but we should have had a debate about it, and this bill will help to set the stage for that debate.
The Chairman: Senator Stratton has a supplementary, and Mr. Boutziouvis would like to comment.
Mr. Sam Boutziouvis, Vice-President, Policy and Director of Research, Canadian Council of Chief Executives: Thank you. I would throw up a caution sign here, Senator Downe: First, in our view, this bill will reduce the government's fiscal flexibility, and we need greater flexibility, moving ahead. With respect to the debt pay-down, we have been highly supportive of the government's fiscal parameters over the past decade. In fact, we have argued strenuously since 1994- 95 that we needed to balance the books. The government's fiscal parameters have been budget balance, contingency of $3 billion to the debt and, recently, a target of debt-to-GDP ratio of 25 per cent. These excellent fiscal parameters, in our view, have served the Canadian people well over the past decade.
Bill C-48, arguably, would affect those fiscal parameters. Mr. Don Drummond of the TD Bank, former Assistant Deputy Minister in the Department of Finance, raised the cautionary flag yesterday by saying that in order to provide some protection against moving back into deficit, the federal Liberals announced that Bill C-48 would be funded only if the government surplus exceeded $2 billion in this fiscal year and next. He further stated that this effectively marks the end of the federal government's policy over the past decade that committed it to placing an annual $3 billion contingency reserve, if not used, against the debt.
We need to answer the question about whether $3 billion will continue to be put down on the debt. Mr. Drummond raised this question and I would throw up a cautionary signal, as Mr. Stewart-Patterson has done in his opening remarks.
It would be a leap to suggest that the very important fiscal parameters will continue to be adhered to. Within our council, we have suggested an additional fiscal parameter: expenditure restraint, moving forward. We have done a great deal of work in that regard and we are happy that the government came forward in Budget 2005 with an important set of rules in respect of expenditure restraint.
What happens to those rules with Bill C-48? We cannot but throw a caution sign with regard to the government's fiscal parameters that have served us so very well.
Senator Downe: I read that a former economist with the Bank of Montreal had said that there is not a problem in running a deficit. Your association disagrees with that?
Mr. Stewart-Patterson: Deficits may happen, regardless of how much planning is done and care is taken. The government's determination to avoid deficits has served this country and Canadians well. The surpluses have been the result of important public policy decisions made in the 1990s: elimination of the deficit, placement of fiscal prudence and sticking to it, come hell or high water. I see that determination slipping away in ways that I believe endanger many of the goals that we share for the future of the country.
Prudence is not a bad thing in any time period. When I look at what is happening in the United States, India, China and other parts of the world, I see some real challenges that we need to be prepared to face. It is not a good time for being less careful with the public's money.
Senator Stratton: It has been suggested that if nothing were done about paying down the debt, then over 10 years the growth in the economy would bring the debt-to- GDP ratio down to 25 per cent. Is that true?
Mr. Stewart-Patterson: If the economy grows and the debt remains constant in absolute dollars, then that ratio will decline as a share of the economy, eventually. How fast it goes down depends on how fast the economy grows. That is why we are spending so much time talking about what kind of policy will drive and accelerate growth in this country, because that is where the revenues and the true quality of life will come from.
As far as I am concerned, paying down the debt brings the ratio down sooner, and so it becomes a lesser factor in terms of what governments have to give to that pot as opposed to what they have available to spend on other things, which are more valuable by definition. There is also the absolute dollar question. If you are not paying down the debt then you are paying interest. How many Canadians think it makes sense to pay interest only on their mortgages? It makes sense, from a family point of view and from the country's point of view, to pay down debt over time. The faster you pay that debt down, the faster you have more flexibility to do other things with your money.
Senator Stratton: I agree with you completely. I was curious as to what your number is. Mr. Boutziouvis said that when it hits 25, we will be comfortable. I agree that it should continue apace to be paid down by $3 billion. That still leaves room fiscally, from the forecasted projections of surpluses, for the federal government to do social things as well. Would you care to comment on that?
Mr. Stewart-Patterson: If I may, it is fair to say that Canada has been through an extraordinary string of strong economic years — seven and counting. Whenever that fact arises, I cannot help but remember my mother, a minister in the Presbyterian Church, saying that seven good years would be followed by seven pretty lean years. The modern equivalent would be to say that the economic cycle is not dead, and that economic risk has not gone away. The fact that we have had seven good years does not mean that we will have seven more good years, and we can count on that. Debt-to-GDP ratios and the size of the contingency fund are arbitrary decisions. There is no magic number that is optimal. It is prudent and, in the interests of Canadians, what we want is to preserve and improve, to ensure that we build our capacity over time, rather than settle for what we have and maybe risk even that.
Senator Tkachuk: We should not try to rewrite too much history, but in the 1990s a positive thing happened for Canada when all political parties in the House, except for the NDP, were determined that the deficit had to be brought under control. There is no question that Mr. Martin and the government provided leadership, but they had the support of all political parties, except the NDP, and that should never be forgotten.
It is interesting to note that in this discussion, the Minister of Finance did have a plan. His plan was to address the issue of productivity, and to bring down the corporate tax cuts from 22.9 per cent to 19 per cent to be more competitive amongst G8 countries. That was his plan and that was his intention.
I have been a member of this committee, chair, and I have been involved in banking. We always hear the people from the Department of Finance; they have their little book about tax expenditures. I think if you reduce taxes, you create more cash, but they do not. They always look at it as a cost. If you reduce this much tax, this is what it will cost. They came here before this committee and argued that in the department, and they have always said that.
We must remember what the discussion was and what the announcement was by the NDP and the government when they came up with the $4.5 billion. It was the argument that by getting rid of this corporate tax cut — that was the argument of the NDP — we would be able to pay for these social programs. That is what happened. However, the Minister of Finance has said that he will introduce the tax cuts under a separate bill.
The Chairman: He told us that when he was here.
Senator Tkachuk: I do not know what the cost will be of this separate bill, according to the Department of Finance. I hope he does that because I think this is important.
Do you feel confident that he will bring in this bill and that it will include the tax cuts that he had promised in Bill C- 43?
Mr. Stewart-Patterson: I take the Minister of Finance at his word, that the tax cuts will proceed as originally announced, and that the only question will be how that promise will be fulfilled legislatively.
Senator Tkachuk: Do you have any fear that he will postpone everything for two years to satisfy the Department of Finance's argument that this $4.5 billion has to be paid for first?
Mr. Stewart-Patterson: The fact is, and the minister has pointed it out, that the tax cuts were not scheduled to take effect until 2008 at the earliest. From a practical point of view, it does not really matter when, between now and that date, the legislation gets passed. The danger is that the longer you put off bringing forward the legislation and passing it, the more uncertainty you leave in the marketplace.
People are making investment decisions now, and if they are investing in a plant or a major operation that will be amortized over 10 or 20 years or longer, what the tax rate will be for sure three years from now still has an impact on whether that goes ahead or not.
From the point of view of what is good for the country, it will be good for the country to get the bill passed or to get that legislation passed as soon as possible. The Minister of Finance has been categorical in saying that it will go ahead regardless, all of which simply highlights the fact that the corporate tax cuts had nothing to do with funding Bill C-48. The money for Bill C-48 all comes out of projected surpluses in the next two fiscal years, which is before the first of the tax cuts was even supposed to take effect. The time value of money alone suggests that it is not the foregone tax cuts that will pay for it.
Second, since the minister has promised the tax cuts will be there anyway, nothing has changed, so they cannot possibly be the source of revenue.
What I would say is that, in effect, as you pointed out, we have had a major round of tax cuts on the personal side and on the corporate side over the past five years, yet federal revenues from corporate tax is now higher than it has ever been. I think that is a good illustration that tax cuts have a dynamic impact, not simply a static cost. I would suggest that the tax cuts from the October 2000 mini-budget, if it still warrants that title, have more than paid for themselves already.
Canada is not alone. Almost every country in the OECD has recognized that lower corporate taxes, rather than higher corporate taxes, is the best way to higher economic growth. The Minister of Finance has said that we will proceed with them on schedule, which is at least recognizing the importance of staying competitive on the tax front.
One of the points that we have to make is that, in terms of the government's ability to do more for Canadians on the social front, it probably would pay if we got smarter and moved faster and further on a corporate tax front, rather than waiting.
Senator Tkachuk: That was my second question. It has been answered.
Senator Eggleton: Of course, all of those provisions in Bill C-43 about the tax cuts could have been in place by now if the Conservatives had not flip-flopped on their position and decided they wanted to defeat the government on Bill C- 43, as opposed to supporting it as they originally said they would. If they had done what they originally said they would do, we would not have needed Bill C-48.
However, my questions will go to the two areas of concern that you have raised. One is on policy and the other on good governance. On policy, you said that in Bill C-48 you do not have targets, goals outcomes and such. I have been through a lot of budgets and I do not remember an awful lot of detail or a lot of items in a lot of budgets. I look at the provisions in Bill C-43, which you did not oppose, and there are all sorts of programs here — $398 million over the next five years to enhance settlement and integration programs; the $5 billion that goes into child care; $1 billion that goes into an innovative clean fund; $171 million over five years to celebrate Canada, to help Canadian diversity find its voice in communities across the country.
Then, of course, there are two enormous amounts of money that came about as a result of negotiations at the federal-provincial-territorial level: the health care package, $41.3 billion over 10 years, and the equalization and territorial formula at $33.4 billion. All of those, talking about accountability, were all worked out before members of Parliament other than the government knew about them.
I wonder what really is terribly different about Bill C-48 from many other budgets, where we have a very minimal amount of information. I do not recall too many cases where I have seen things such as goals, targets and outcomes.
Mr. Stewart-Patterson: If I may, senator, if you are suggesting that budgets routinely throw money at problems without analyzing them first, I would suggest that there is a broader problem with financial management. My experience with the way in which the Department of Finance operates and with other departments suggests otherwise.
If I can take my own example — again I cannot speak to every line item in the budget because I do not know what has gone into that. I do serve in a volunteer capacity on the board of directors of the Canadian Youth Business Foundation, which does micro-lending and mentoring for entrepreneurs across the country. We were started by private sector donors. Industry Canada became a significant partner in the 2001 budget. We went through a mid-term evaluation as a result of that first agreement, which among other things suggested that not only were we doing a pretty good job in using that money but that there should be — international experience as well as our own suggested — an ongoing government role in the kind of activities in which we engaged.
In going to the government to argue for an expansion and renewal of our funding from the government, I know that both volunteer board members as well as the senior management of the foundation met with senior officials and ministers, and my point is that we had to come forward with a very specific and compelling reason as to why we, as opposed to all the other people who come to government looking for money, deserved to be trusted with the taxpayers' dollars.
It was very important for me to be able to look the Minister of Industry in the face and say “We have surveyed all of our clients who have received loans since Industry Canada came on board, and that shows that, for an average loan of $12,000, 87 per cent of which has been repaid with interest, these young Canadians are producing an average of six jobs. Do you have any other programs in the Department of Industry that are producing better results than that? If not, may I suggest humbly that we deserve further confidence from the government.”
That was a long, roundabout explanation, and I apologize. However, the point I wanted to make was that my personal experience with the formal budget process suggests that a lot of thought and analysis goes into, line by line, the items that make up a budget each year.
That does not mean that things do not get made up on the fly. It does not mean that you do not get large sums. The health care accord that you mentioned was a negotiated agreement. What went into that negotiation? I was not behind the doors, and I cannot speak to the intent of the analysis, but the point is that it was a negotiated agreement. The budget gave effect to that, but the negotiations happened first.
The point I am making with respect to Bill C-48 is that we know from the political context that the money that is being laid out was a negotiated amount. The areas were agreed. You can tell me what you have heard from other witnesses engaged in the actual programming here, but what I heard from the session immediately previous suggested that the monies come first, and now people are being asked to go out and find useful ways to spend it, which is, in my view, the wrong way round.
Senator Eggleton: The money only comes if we go over the $2 billion.
Mr. Stewart-Patterson: That means we are asking people to spend a lot of time planning for stuff that may not even happen.
Mr. Boutziouvis: Senator, you yourself outlined in Bill C-43 a number of funds to which the monies would be disbursed. With all due respect, this bill suggests for authorization purposes that the Governor-in-Council can use any number of mechanisms in order to disburse the money, and there is no detail on what mechanism will be used to disburse the funds. It is short on specifics in that regard, and that, to us, suggests some questions that need to be asked.
Senator Eggleton: Bill C-43 is short on a lot of the same details you are looking for.
Mr. Stewart-Patterson: Let me say, senator, our support for Bill C-43 was not 100 per cent enthusiastic, either.
Mr. Boutziouvis: You yourself suggested that the monies in many cases were going into particular funds. As Mr. Stewart-Patterson has suggested, item No. 3 is basically carte blanche on how the monies will be disbursed. When will they be disbursed? I heard this morning questions about when the monies will be disbursed between the two years. I am not even sure with respect to your discussions that went on this morning. I am still not clear about when the monies will be disbursed.
Senator Eggleton: Can I ask you about good governance? You talked about post-dated blank cheques and raised concerns about accountability. The Comptroller General was before us earlier today and called this a prudent approach. He said that several times. He said this would actually lead to better accountability.
I realize that you would like more information, and that you feel that this is a post-dated blank cheque, but the practice of the government in the past, if it were to continue and if there were no Bill C-48, would mean that if in the fall we see that there will be a greater surplus — which is not an unusual circumstance — then the government might decide, as they have in the past, how much of that surplus they want to go to debt reduction and how much they will book before March 31, whether it be for foundations or any of those other vehicles that we have known in the past. The government has made that decision and then announced it.
This goes to Senator Downe's point. They are now saying that, for $4.5 billion, here is how we see this falling out. That is more information than we have ever had before. It may not be a great amount, in your opinion. In terms of good governance, I think, as the Comptroller General says, you would have to see it as something that is a little bit better on accountability.
I might add, talking about the debt and getting off this $3 billion debt reduction, yes, I agree with you that it automatically may not happen for the first time, but it could still happen because perhaps the surplus they will see, going in, ends up being much more than the $4.5 billion, so there could still be more money going against the debt, which is not unusual. It certainly would work in with the commitment of Mr. Goodale of going to 25 per cent of debt- to-GDP by 2015.
On the question of good governance, do you agree with the Comptroller General?
Mr. Stewart-Patterson: If I may, the Comptroller General is probably perfectly accurate in saying that there would be adequate oversight within the rules as administered by the public service on behalf of the government. The point I was making is that by essentially pre-approving these expenditures with only a vague policy envelope, senators and members of Parliament are virtually surrendering further parliamentary oversight and accountability. I am not suggesting that there would not be accountability within the normal Treasury Board approval process, or in the way that governments work in terms of the administration. What I am suggesting is that there is no more oversight in terms of the political decisions about how that money gets spent, where it is allocated and in what form, whether it will be grants and contributions, whether we will create a new foundation or a Crown corporation. Once this bill is passed, that decision rests with cabinet, and cabinet alone.
Senator Eggleton: What about the annual report to Parliament on planning and priorities that departments must submit?
Mr. Stewart-Patterson: I am not suggesting that suddenly the government is no longer accountable as a whole. I am saying that this is blanket authorization ahead of time, and it gives a great amount of authority to the cabinet and, by extension, takes away that much decision-making power from this body.
Senator Eggleton: That is blanket authority that they would have without Bill C-48, simply because they would just decide that.
Mr. Stewart-Patterson: We have already received our invitation for the Finance Committee of the House of Commons pre-budget consultations. I know from experience that groups line up by the dozen across the country for input into the budget. We have not had any input into Bill C-48.
Senator Eggleton: I want to ask you about expenditure restraint. You have indicated a concern about that. I am told by the Department of Finance officials who were here that what we are talking about in Bill C-48 is taking the expenditure level up to 0.1 or 0.2 per cent higher than where it would otherwise be, which does not sound terribly high. It would park us at around the 12 per cent of GDP mark, as government expenditure. That, to me, looks quite favourable compared to what it was during the Conservative years, when it got up as high as 18 per cent. Certainly, when it was turned over to us, it was around 16 per cent. How do we consider this to be a runaway, reckless expenditure?
Mr. Stewart-Patterson: When expenditure goes up by close to 15 per cent in a single year, when it is rising by more than 40 per cent over five years. I am looking at the spending growth over the last five years. I do not think many Canadians have seen their paycheques rise that fast. What concerns us is not the absolute level of expenditure, but rather the rate of growth.
The other thing leading back to tax policy is that the larger you want government to be, the larger its role, the more expensive its role within your economy, the more attention you must pay to tax structure. If you look at the higher-tax economies in Europe, you will see that they have tax structures that are much more biased towards consumption taxes, value added taxes like the GST, rather than towards taxes on corporate and personal income. That debate is basically absent in Canada. We have not had any serious discussion, even on the corporate side, since the 1990s.
Finally, in response to your point that, well, $4.6 billion is something behind the decimal point in terms of the total bill, that brings me back to C.D. Howe. If there is $4.6 billion here and $4.6 billion there, eventually we are talking about real money.
Senator Eggleton: I agree with you, but it is certainly not in the category of runaway or reckless expenditure. I agree with you that it is serious money.
Mr. Stewart-Patterson: What is your definition of “runaway”? Fifteen per cent in a year is not enough?
Senator Eggleton: What we had in the Conservatives years was certainly runaway. It was a much bigger percentage of the GDP then than it is today.
Mr. Boutziouvis: There have been other spending increases since the 2005 budget. You must take all of the spending increases in context. You have the federal-Ontario deal, which adds about $700 million, and all sorts of other measures have been added in as well since the February budget. That would be part of Bill C-43. You are looking at least at a 3.5 per cent increase in spending for this particular fiscal year, on top of the increase that was already forecast in the 2005 budget.
Mr. Stewart-Patterson: This is all part of the confusion. There have been some allegations that, since the budget, the government has announced more than $20 billion in spending. The minister has said no, it is really only 9, because we double and triple counted some of this stuff. All of this contributes to confusion as opposed to clarity, which is what we are trying to get at.
Senator Murray: It is good to see you here. I would like to engage you a bit on some general matters that arose from our discussion here and from the document you left with us. First, I could not forbear to say that much of the reaction to poor Tim O'Neill's comments to the effect that we should not be so completely doctrinaire about deficit financing is in the nature of hysteria. Of course, I take your point that we should not be casual or complacent, given our history about deficits. However, the year may well come when we have to go into deficit financing for whatever reason under whatever set of circumstances because it is in the national interest to do so. We should not be hung up on some doctrinaire considerations from doing so when those conditions exist.
We must avoid what forms the background to much of the hysteria: the habit of running up ever bigger deficits year after year, in good times and in bad times, as happened throughout much of the 1970s, never mind the Conservative years. For much of that time the federal government ran a deficit on its operations. At least we turned that around when we were in office. Almost every year, we ran a surplus on operations. Of course, it was the interest on the debt that created the huge deficit.
This leads me to my next point. I hope that we have learned from the experiences of the 1960s and 1970s that committing ourselves to long-term spending on the basis of economic growth and revenue projections that turn out to be less buoyant as time goes on is a recipe for disaster, especially in a country such as Canada whose economy is so exposed and vulnerable. We are living in a fool's paradise if we think that we will never see a recession again. I hope that we do not experience that again but it is highly likely that we will. Perhaps you would care to comment on whether the contingency reserve, et cetera, will provide a sufficient hedge against recession.
I asked the officials from the Department of Finance this morning to provide us with some of the scenarios that they likely play with in their work to determine the effect on both our economy and the federal government's fiscal position in respect of various oil price scenarios. I hope we will have a chance to look at that.
I agree with your response to Senator Downe that Bill C-48 seems not to open up the debate about options in respect of surpluses but, rather, to foreclose a good part of such debate. However, in terms of this debate, what is your view of the arbitrary one-third, one-third, one-third proportion? You will recall that one third of any surplus should go to debt reduction, one third to tax reduction and one third to new initiatives.
With some money at our disposal, we cannot be unmindful of the fact that we have a great deal of catch-up to play in this country, much of it related to the serious cutbacks instituted during the 1990s. In one of the documents you mentioned the state of our infrastructure, which is quite worrisome. Some of that infrastructure is directly related to matters such as trade, transportation links and trade links with our biggest customer. Others have to do with the liveability of our big cities, not to mention the money that has to be spent on defence and security, where a big catch-up has to be done. Leaving health care aside, it is a big one that is staring us in the face. These are serious areas of catch- up, and no doubt you could name others, so I guess I have some bias toward investing in the infrastructure rather than necessarily putting one third or other amount into tax reductions for your members.
Mr. Stewart-Patterson: Tax cuts go to individuals, if I am not mistaken.
The Chairman: Senator Murray has asked three separate questions so perhaps you could take them in turn.
Mr. Stewart-Patterson: First, with respect to your comments in terms of how far we should go in trying to avoid a deficit, any number we pick will be arbitrary. It is a matter of how we choose to manage that risk and how serious we think the risk is. No matter what number you pick, it will amount to a probability of avoiding a deficit, not an absolute certainty. The general approach of the Department of Finance has been to remain prudent enough to avoid deficit in the case of a mild to normal recession, while acknowledging that if we have a real 1981-82 kind of recession, we would tip in; and that risk is acceptable.
It is an arbitrary decision, and if we have a bias, it is better to be more rather than less prudent. We have consistently expressed ourselves comfortable with the notion of the $3-billion contingency and the additional prudence factor is built in, which tends to be smaller in the immediate year and grows over time, along with the uncertainty, so the out years have more prudence built in.
I agree with you, senator, that five-year projections are notoriously unreliable. Conservative finance ministers faced that reality and it never comes out that way. With respect to Mr. O'Neill's comments, as he pointed out, it is not that one deficit will kill the country. If I may, the problem is that deficits are kind of like potato chips: you cannot have just one. That has been the experience and that is why there was such a public, political and business reaction.
Senator Murray: It has been the experience since the 1970s; it was not always the case.
Mr. Stewart-Patterson: As well, you have to consider who the pollster is talking to and what the experience base is that Canadians are responding on to this issue. It took a long time to build the consensus back in the 1990s that we had to deal with the deficit. We had to go so deep in the hole before people would coalesce around that, which means that it was deeply embedded. Canadians accept the idea that it is better to be prudent rather than to take more risk. We are not fans of the arbitrary formulae for the use of surplus amounts, but 50 and 50 at least had the virtue of saying there needs to be a balance in terms of how governments act on the economy. When you are talking about the catch-up issue, the fact is that, in dealing with the deficit, we had to be pretty tough in many areas of spending. We also had to raise taxes that are only now being unwound, in some cases.
The critical point is what are we doing with that money? Governments do some things that affect increasing future economic growth and, therefore, increasing the tax base. You can make that argument for things such as economic infrastructure because the state of the roads, airports and public transit in cities affects the ability of a city to attract investment and make our communities desirable places for people in which to live and work. Education is another area that clearly affects the economy.
Governments redistribute income for current consumption to make the lives of Canadians better today, but that does not have much effect in generating increased income and revenues for governments in the future. It is a continuum. Many government actions benefit Canadians now and have growth impact.
Our view has always been that you need to have a balance in government policy between what governments are doing to meet the needs of Canadians today and what governments are doing to improve the lives of Canadians over time by growing the economy. Fifty-fifty is arbitrary; one third, one third and one third is also arbitrary, but at least they have the virtue of saying that balance matters.
In our view, coming back to Senator Eggleton's comments, we feel that we have lost that sense of balance. The balance has tipped too far towards saying that “We have lots of money, let us spend it,” and not enough attention being paid to economic policy and what it will take to build a stronger economy and therefore a stronger tax base to support governments over time in meeting needs such as health care, which we know will get more, not less, expensive.
Senator Trenholme Counsell: It is clear from your learned presentations that you are certainly against the process. One can understand much of what you have said about process. However, if you can move beyond process to the choices that were made, to the values that were expressed in those four choices, would you care to comment on those choices in terms of building capacity in Canada: the choice of education, housing, the environment and, of course, foreign aid? Do you see any link between building capacity and the first three that I mentioned?
Mr. Stewart-Patterson: I agree. As I said, it is not that we have a quarrel with any of the policy areas as ones in which governments have a legitimate and constructive role. The question is what will they do in those areas, and what value will that produce in terms of the future growth of the economy, or what value will it produce in terms of the benefits that Canadians will realize today?
I illustrated for instance, on the foreign aid side, that there is more than one way to help people in the least developed countries in this world. Sending official development aid is not the only way, and may not be the most effective way.
With respect to environmental policy, there is no question that the quality of life in communities plays an important role in attracting people, and people play an important role in attracting investment. As we move further into a knowledge-based economy, people have more freedom about where they want to live and work, and the work will go where the people are who have the right stuff to do the work that needs doing.
From a quality-of-life point of view, activity in the environmental area can be important. What kinds of activity are we talking about? Urban transit has an impact on large communities, but even there you have alternatives that can be discussed. Whose responsibility is that? How will this money be spent? Is it a federal activity? What is the best thing that the federal government can do directly, or should the money be transferred to other levels of government, under what terms and conditions, with what outcomes, and what strings are appropriate? These are questions to which I do not have the answers, and that is what I find troubling.
Education is an area in which we know there are positive outcomes. Improving training in the workplace, improving education from early childhood through post-secondary we know has a positive impact on individuals, and it has a positive impact in terms of the country's competitiveness and growth as well. Not every dollar spent in education necessarily has the same impact. What is it that we are doing, and how does it compare with the other things we can do in the areas of education, as well as comparing what is an extra dollar for education versus an extra dollar for health care? It is the vagueness of the bill that causes the difficulties.
We know there are positive things that can be done in each of the four areas, but what is the government saying we will achieve with this money, and how do we hold it accountable?
Senator Trenholme Counsell: Much has been learned in issues such as educational opportunities for the children of low-income families and housing. There has been an enormous number of studies. People tell us “Do not do any more analyses or studies. Just do something about the problem.” The government will still welcome your input on how the money will be spent under these four categories. The government is always open to input. They have chosen those four as Canadian values. The door is not closed to learned and good input.
Do you feel you have no chance to have input on how this money will be spent?
Mr. Stewart-Patterson: Clearly, the way in which the bill has been structured means that input has to come afterwards rather than before. There will obviously be opportunities for us, and anybody else, to offer thoughts on how best to spend money within each of those areas.
What is precluded is debate about the ratio and the proportion of new spending, and additional spending in these areas against any of the alternatives. On the one hand, putting that much into designated spending areas precludes talking about options on the tax side, as well as in other areas of federal spending. On the other hand, as we make it clear in our Canada First launch, there is a lot more to building a stronger economy than simply smart regulation and corporate taxation. There is more to the business environment than just the nuts and bolts that affect investment decisions.
That is why we have raised issues that run from how public money gets spent, and public governance, as well as corporate governance, through to issues such as education, training and immigration policy. Canada's high- immigration, multicultural society is potentially one of our greatest competitive advantages, and it is one we are not doing enough to build on. Again, you could argue that some of what needs to be done in terms of improving the ability of immigrants to integrate with our economy could be covered under education.
Senator Trenholme Counsell: Under workplace skills.
Mr. Stewart-Patterson: What are the options that will be considered?
Mr. Boutziouvis: I have no quarrel with the four spending areas, but I must raise the question because it is in the Minister of Finance's documents. After two years, the taps turn off, and you have four spending areas that are important priority areas as chosen by the parties involved, and a commitment to spend this money. It will go to various areas of government, down to the localities possibly, but what will happen after the money runs out? This is the point about this particular bill.
In the past, in our office, we have debated, for example, with respect to the surplus, why not put in place one-time tax cuts as a possible policy option? That is bad policy for us because you cannot guarantee the tax cut. It does not provide certainty that a Canadian, or a Canadian business, or an institution would be able to have a guarantee that that tax cut will remain in place. What guarantee is there in this bill moving forward, and from the institutions and government levels and funds that will receive this money that they will receive the money after the money runs out, whether in two or five years? Given this morning's debate, I am not sure over how much time the money will actually be allocated, but at some point the $4.5 billion will run out.
The Chairman: They may not receive any at all.
Senator Harb: I must admit I loved your statement, Canada First, which you issued on June 28, 2005. It is extremely well done, and bold; it hit the nail on the head.
In one of your statements, you indicated that Canada now has the highest marginal effective tax rate on business investment in the industrialized world. You moved on to talk about, at page 10, second paragraph, just the last two lines under bullet number 3, “First in taxation and regulation.” I could not help but read on page 11 where you talk about the fact that we have a very unfriendly environment for foreign direct investment. In fact, you compare Canada with other OECD members, and you found that, aside from Iceland, we are the least friendly country to foreign direct investment.
My question to you is: Do you think there is a correlation with the fact that we have the third highest marginal effective tax on business investment? Is that why people are running away, or is it a combination of the fact that we have a regulatory regime that is unfriendly to investment and a tax system that is so terribly high, and a lack of human resources at the value-added level? Canada is very good when it comes to post-secondary education. I think we are the highest of the OECD countries for people with post-secondary education, but we are one of the worst when it comes to people who are at the low end of the production scale; that is, people with technical know-how and background. I am struggling between those three, and I am saying that there might be a reason why things are not working so well.
Mr. Stewart-Patterson: If I may, you are right to suggest that there is a combination of reasons. One thing we are intending to do in the course of the next few months is, in particular, talk to our members about their experience on the front lines. What is their experience in terms of how Canada is faring today, whether it is competing for investments within the body of a large multi-national based somewhere else, or the head of a Canadian-based multi-national? What factors are coming into play both in terms of what is helping Canada to attract investment and jobs, and also what is hurting us?
You are right when you talk about the tax rate. Certainly, we believe that the tax rate matters to investment decisions, but we know that it is not the only determinant. People will look at what kind of return they can generate. Taxes reduce returns at the margin and after-tax bases, but if you can generate enough profit pre-tax, you can offset that. What other factors will affect it? The quality of the labour force is there, and certainly we know that people matter, both what they know and what they can do. The quality of a labour force is important. In many ways, it is a competitive advantage, but will we keep it? If you look at how many scientists and engineers we are producing compared with how many are coming out of China and India, even the U.S. is being outstripped on that front. Where does that put us?
The regulatory front can bite both ways. Good regulation can be a competitive advantage. High standards can be a competitive advantage if it adds to your brand and says Canada is a leader in this area, whether it is environmental or energy technology. If you have, on the other hand, fragmented, costly, unpredictable regulatory processes, and I think we have too much of that kind of regulation in this country, as the government's smart regulation initiative recognizes, that has to be hurting us somewhere.
You referred to foreign investment. Again, there is a difference between saying most restrictive and least friendly. It is a bit nuanced. I think the OECD comparison would suggest that Canada simply had more restrictions than other OECD countries except for Iceland, and that puts us just behind Turkey. That is because we have a large number of sectors where, for historic reasons, we said no, we want to keep control in Canadian hands. Whether it is transportation or cultural industries, we prefer to use regulatory restrictions to keep control in Canadian hands. Would Canadians be better off if we reduced those restrictions? What would be the impact? Those are questions we need to look at. It is does not necessarily mean that it is a bad things for Canadians.
The experience elsewhere suggests that countries are coming to the conclusion that fewer restrictions are healthier than more restrictions. We have to look at our rules and the restrictions we have. Are they still, on a net basis, of benefit to Canadians or not? What changes might be of greater benefit? Those are questions we have posed to ourselves as part of launching this Canada First initiative. Those are the things that we will be looking at, and perhaps we can talk about the conclusions that we come to later.
Mr. Boutziouvis: I wanted to add an esoteric point. Mr. Stewart-Patterson has co-authored a book in which a whole chapter was dedicated to building the brand. We need to build the Canadian brand as being an open, accepting society of people, and we are doing that, but also of investment. To put in place tax cuts in February, take them away in March, and put them back in April is not, in my respectful view, a way to build a better Canadian brand of openness to investment and to say to businesses, “We are open for business; come and invest in us.” I am sorry, but it is just not the way to build a better Canadian brand.
We have learned from the Irish example that two or three decades of a dedicated strategy of open markets and continuously pounding on the fact that Ireland is open for business has gone part of the way to explain Ireland's incredible success, but also other countries' incredible success, including the Netherlands and Sweden. The list of countries is quite long. That is why Canada First is so great.
Senator Harb: I understand that you have concerns about the bill. You are capable executives, and I would suggest perhaps you may want to take this as an opportunity to go to the government and make a serious submission. You could say, “Look, we want to see you put some of the money for education into an endowment fund to help produce people with the ability to be electricians, mechanics, plumbers and things like that.” I think this is where we are getting beaten by our competition abroad. We are good with scientists. We have lots of engineers — Senator Day is one of them. However, we must produce more on the technical end of things.
Is that something that you will be doing with your board? Will you be coming forward to the government and saying, “Listen, you are putting forward money for education, and this is how we would like to see you spend that money”?
Mr. Stewart-Patterson: It may be that we will come back with that. I have to point out that the private sector has already been active in some of these areas. A former chairman of ours was head of the Millennium Scholarship Foundation, which aimed at some of those things. We have also seen private sector led initiatives in areas such as apprenticeships.
The Careers Next Generation program in Alberta started essentially out of the oil patch and became fully integrated with the provincial curriculum. It has been successful in an area of the country that has a strong need for skilled trades these days. It has made those career possibilities more accessible to high school students in Alberta, and it is a model that has been looked at in other jurisdictions. To come back to the earlier point, it does respond to some of the points others have raised.
There is no one answer to the challenges we face as a country. As Mr. Boutziouvis pointed out, Ireland had a commitment to open markets and to business labour cooperation. It had investment in education and in infrastructure and, of course, it had basically the best tax rates in Europe. Yet the Irish have just finished doing a major review of their own competitive standing, and they are worried. If they are worried, where are we?
The Chairman: We have reached the end of the witnesses that this committee will be hearing on Bill C-48. On behalf of the committee, I thank you both for coming and stimulating the committee. You can tell by the action and the reaction to many of the things that you said that you did just that. You brought out some good ideas for the committee.
Honourable senators, Senator Tkachuk wishes to move a motion.
Senator Tkachuk: In a moment of civility at 8:30 this morning, we agreed to allow opposition observations to be appended to the report tabled in the Senate after clause-by-clause consideration. Therefore, I move:
That observations prepared by Conservative senators be given to the Chair of the committee by Friday, July 15, 2005 at noon, to be appended to the report to be tabled by the Chair when Bill C-48 is reported to the Senate.
I thought we had agreed to that.
Some Hon. Senators: No, no.
Senator Tkachuk: Oh well, is this not interesting.
Senator Day: It was said that this was one possible innovative way. Perhaps you did not hear those comments.
Senator Harb: I just mentioned that as an option, because that is done often on the House of Commons side. In fact, in a committee that I chaired, on a number of occasions we took back a report to the House of Commons, unanimously supported by all members of the committee, appended to which there were observations made by certain members or parties. However, that takes nothing away from the report that goes to Parliament.
In this case, as long as the bill is reported to the Senate unamended, observations could be attached to the report or my colleague could make them at third reading debate in the chamber. I believe that it takes nothing away from what we are doing. It does not delay anything. It is not a votable item; it is merely an observation. As our colleagues were so cooperative this morning, I thought we would afford them that opportunity. Senators were very positive.
Senator Day: I said during that debate that we wanted to proceed with clause-by-clause consideration as discussed. This sounds to me like something that should be dealt with at third reading, and my colleagues can do that. If they have a document that they wish to file, there is no reason that they should not do so. However, this will be done by way of vote by this committee, and we have not seen this document and will not have it for two days. Therefore, we could give instructions to our chair today to report this bill back without amendment, as I am hoping we will do.
Senator Harb: Nothing will stop us from reporting it without amendment.
Senator Day: If we agree to report the bill back without amendment following clause-by-clause study, what is the next step?
Senator Harb: I would suggest that comments of the entire committee could be included.
Senator Day: That is done at third reading.
The Chairman: That is done in Senate committees from time to time. It has been done in a number of committees on which I have served.
Senator Harb: Perhaps the clerk of the committee can give us guidance?
Senator Day: If we follow this route, we cannot conclude our study today. We would have to return to consider this.
Senator Harb: We can conclude our study today. The bill will be reported without amendment, or not. We will go through this whole process and then observations will be given to the chair. When the chair makes his report, he will do so without amendment, and we will be finished. At the same time, he will say that he has some observations made by some of our colleagues, who will put them on the record.
That has nothing to do with the bill. Perhaps the clerk can enlighten us.
Senator Banks: In my limited experience, we have not accompanied reports with minority reports or observations. The committee either makes observations or does not. What Senator Harb has suggested does not apply so much in the Senate.
Did you say, Senator Harb, that in the House of Commons opposition observations were attached when the bill was reported unanimously?
Senator Harb: That is what I would prefer to see happen. If we report the bill other than unanimously, we may create a question. I would like the appending of observations to be contingent on reporting the bill unanimously. One does not preclude the other.
Perhaps the clerk can enlighten us on this.
The Chairman: It is not normal for a clerk to formally advise committees. That would be new to me.
Senator Eggleton: I would like to hear more from Senator Tkachuk about this matter. It strikes me that we are talking about individual observations while Senator Harb is talking about unanimous support for this bill. That would surprise me, in view of second reading debate on the bill. Could the senator clarify this point? Is it the intent of the Conservative senators to support the bill if they have the opportunity to include observations?
I thought he was speaking about a minority report at first, but now it sounds like individual observations. If that is the case, why not speak at third reading? What is the point of individual observations after the adoption? They will have the opportunity to make individual observations at third reading.
I would like to have some clarification of that point.
Senator Stratton: It would not be an individual observation; it would be the observation of the official opposition attached to the report.
Senator Eggleton: Why could that not be done at third reading?
Senator Stratton: We made the request, and we are asking that we be allowed to do that.
Senator Eggleton: Is it your intent to support this bill at clause-by-clause consideration?
Senator Stratton: We cannot do that.
Senator Eggleton: So this is a minority report.
Senator Stratton: We do not call it that.
Senator Day: We do not have that custom here.
Senator Tkachuk: To return to my motion, I did not call it a minority report; I said “observations”.
The Chairman: Would you read it again, Senator Tkachuk?
Senator Tkachuk: I move:
That observations prepared by Conservative senators be given to the Chair of the committee by Friday, July 15, 2005 at noon, to be appended to the report to be tabled by the Chair when Bill C-48 is reported to the Senate.
I understand that the bill will be reported at the next sitting.
The Chairman: I have been handed a note by the clerk with regard to the Rules of the Senate . It says that observations may be attached as an appendix to a report on a bill. Those observations may be of only one group of senators. The committee must agree to attach observations. Those are the three principles as set out by Senator Harb at the beginning.
Senator Harb: It just goes on the record that someone has expressed views.
Senator Eggleton: It could go on the record at third reading. It went on the record at second reading.
Senator Harb: Of course. There is a value, and reasons for everything. Perhaps they just want to go on the record.
Senator Eggleton: I want to make sure I understand the reasons, and that there are not some little hidden ones.
Senator Harb: Devious reasons? None.
Senator Cowan: Would these observations be expressed clearly as representing the views of the opposition?
Senator Tkachuk: Yes, as prepared by Conservative senators.
Senator Cowan: They would not purport to represent the views of others on the committee?
Senator Tkachuk: No.
The Chairman: Senator Al Graham did that to me all the time when I was chairman on the Transport Committee, as a matter of course.
Senator Banks: Would you ask the clerk to relate those rules again to us, and reference where they are in the Rules of the Senate ? I was told that such rules did not exist.
Senator Day: I have been here for four years. It has always been my understanding that observations had to be accepted by the committee as a whole, so that they are observations of the committee. You are saying that you would like to have observations attached to the report, saying why you are not supporting the bill?
Senator Tkachuk: That is right. We would like it attached to the report. We think this is important enough, from our point of view, that it be done.
Senator Day: We need to make sure that the rules provide for it. If we could find that, that would be helpful.
The Chairman: Here is 96(1):
A question before a select committee shall be decided by majority vote including the vote of the chairman. When the votes are equal, the decision shall be deemed to be in the negative.
Subsection (2) says:
A report of any select committee shall contain the conclusions agreed to by the majority.
There are several parts to this. As I indicated already, Senator Al Graham made observations on reports when I chaired the Standing Senate Committee on Transport and Communications. Here we have one from a report of the Standing Senate Committee on Legal and Constitutional Affairs, dated June 20, 1995, which said “Some members of the committee are not convinced that the so-called presumptive transfer to the ordinary court...” and that was attached to the bill.
Senator Banks: I understand a committee may decide to do those things. What I understood earlier to be said was that we were obliged to do those things.
The Chairman: No, let me reread what I said. At no time did I say that.
Senator Banks: When you were explaining what the clerk had said, I thought you said observations could not be opposed and had to be —
The Chairman: Let me reread exactly what I said. It is in writing. “Observations may be attached” — may, permissive — “as an appendix to a report” — not the report, but as an appendix to the report — “on a bill” — and this is a bill. “Those observations may” — again, not shall — “be of only one group of senators” — not all senators, not all parties, not independents. “The committee must agree to attach observations.”
Senator Banks: That is a rule of the Senate?
Senator Day: What rule is that?
The Chairman: 96(2).
Senator Banks: It says the committee must attach —?
The Chairman : It says:
A report of any select committee shall contain the conclusions agreed to by the majority.
Senator Trenholme Counsell: We are getting a little bit of a mixed message here.
Senator Banks: I am only querying the sentence that contains the word “must.”
Senator Eggleton: If it says that the committee must approve it, do we not need to have that in front of us to approve it? Is there a rule that says you can just attach an observation if it is received by a certain deadline, but that the committee does not have to come back into session to approve it; it can pre-approve it? Is there something that says we can do that?
Also, I want to know if such observations do get attached to the report and the report is received into the Senate and adopted in the Senate, does that mean we have adopted the observations as well?
The Chairman: No, not at all.
Senator Eggleton: I want to be sure of this. Particularly, does the committee have to meet to look at these observations? It says that the committee has to approve them, but we cannot approve them; we do not have them before us.
Senator Tkachuk: We are in charge of our own house here. If we decide to do it this way, then that is the way it is done. There is no problem. We do not have to —
Senator Eggleton: I am trying to figure out what the implications and ramifications of this action are, if there are any.
Senator Trenholme Counsell: What you read on the piece of paper, is that in the book?
The Chairman: No, it is a summary of the rules prepared by the clerk of the committee — the rules and the practice of the Senate.
Senator Banks: I am sorry to return to it, chair, but that was my question. The last part you read said something about the observations must be attached to the report, and that is the part that I am questioning — is that if the committee agrees?
The Chairman: If the committee agrees.
Senator Banks: Thank you.
Senator Tkachuk: That is what I am asking for in the motion — the agreement of the committee to do this. That is all. It is nothing complicated. I thought we already had an agreement.
Senator Day: As I understand it, what is being proposed by the Honourable Senator Tkachuk is that he and his colleague Senator Stratton would like to have permission to attach their own observations, and they need the permission of the entire committee to do that. However, those observations will be exclusively their observations and not the observations of the committee as a whole.
The Chairman: That is correct.
Senator Day: Therefore, we do not have to see them. All we have to do is give permission to attach them.
The Chairman: And those observations, Senator Day, do not affect the validity of the bill being reported back without amendment.
Senator Banks: I am sorry, chair. Senator Tkachuk is right; committees can do what they like, but 96(2) says:
A report of any select committee shall contain —
— although maybe not exclusively —
— the conclusions agreed to by the majority.
The Chairman: The conclusions in this case will likely be that this committee has agreed to report this bill without amendment, and that will be the report of the majority of this committee.
Senator Banks: In addition, the committee has agreed to attach the observations.
The Chairman: Only as an appendix. The report of this select committee shall contain the conclusions agreed to by the majority, and the majority conclusion would be that this bill be reported to the Senate without amendment.
Senator Cowan: That is the conclusion, and then what Senator Tkachuk is asking is for the committee to agree —
The Chairman: Yes, that there can be an attachment as an appendix.
Senator Cowan: — which is expressed to be the view of the minority — of the Conservatives.
Senator Trenholme Counsell: Was the last time this was done in 1995?
The Chairman: No, it happens all the time.
Senator Day: It happens all the time but it is not in the rules. In the rules we have just had passed around to us, there is nothing about doing this. What you are saying now is that the rules have been varied by a practice of certain committees, and I am feeling uncomfortable about agreeing to that. This committee has not done this in the four years that I have been here.
Senator Tkachuk: I am saying that observations are not unusual when reports have been done on bills, whether it is this committee or other committees.
Senator Day: I agree with that, Senator Tkachuk. I do not mean to interrupt you, but we are not talking about observations. We are talking about this committee agreeing to minority observations without seeing them, that they can be attached, and that is quite different from saying observations are a normal thing.
Senator Tkachuk: We do not ask you for approval as to our opinion on the bill. That will be our observations. You can present any observations you want, Senator Day. You can have majority observations for all.
Senator Day: Mr. Chairman, we should follow the rules. I do not see this procedure in the rules, and I feel uncomfortable about agreeing to it, so I am asking my colleagues to vote against this motion. I call the question.
The Chairman: Honourable senators, it has been moved by the Honourable Senator Tkachuk:
That observations prepared by Conservative senators be given to the Chair of the committee by Friday, July 15, 2005 at noon, to be appended to the report to be tabled by the Chair when Bill C-48 is reported to the Senate.
All in favour, raise your right hand.
Contrary-minded, raise your right hand. The motion is defeated.
Senator Harb: I have a motion of my own. It reads as follows:
That any consideration of votes on any motion dealing with the disposition in committee of a bill be held no earlier than the completion of hearing all witnesses.
This has to do with what we saw this morning. I respect my colleague and he is playing by the rules. There is nothing wrong with what he did. However, it is only fair for us to have a clear rule when it comes to hearings that this committee is holding when we have witnesses, some of whom may have travelled long distances to be here with us. We should not find ourselves ever in a position where we shut off debate. If we want to move a motion to adjourn, we can move it at any time after we have heard our witnesses, but while we are in the process of hearing from witnesses I would suggest that it would be highly inappropriate for us to cut off the debate. My motion would apply only during the term of this Parliament because we cannot oblige future Parliaments to adopt what I am proposing, but between now and the end of this Parliament, I would like to see those rules apply, just out of respect for our witnesses.
The Chairman: I will reread it. I have a copy here.
That any consideration of votes on any motions dealing with the disposition in committee of a bill be held no earlier than the completion of hearing all witnesses.
Senator Tkachuk: You cannot take away the right of someone to adjourn a meeting. That is a fairly authoritarian move. It would surprise me if any other senators would even agree to something like that.
Senator Day: I understand the sentiment behind this motion. I would suggest that perhaps Senator Harb would agree to table this motion so that the steering committee can consider it and consider the rules.
Senator Harb: Absolutely. That is an excellent idea, just in the interests of time.
Senator Stratton: Just to be a little facetious here, we are simply trying to ensure that senators are present in sufficient numbers. Quite often, senators go wandering away and then all of a sudden the government is sitting there in committee with two senators while we might have three or four. It is a wake-up call; it is nothing more. It is not vindictive. It is just to wake up senators on the other side.
Senator Day: I move that we proceed with clause-by-clause consideration, Mr. Chair.
The Chairman: Senator Harb, do you agree to withdraw your motion?
Senator Harb: Yes, and I will table it with the committee.
The Chairman: Clause-by-clause consideration of Bill C-48, to authorize the Minister of Finance to make certain payments. Is it agreed, honourable senators, to move now to clause-by-clause consideration of Bill C-48, to authorize the Minister of Finance to make certain payments?
Hon. Senators: Agreed.
The Chairman: Carried. Shall consideration of the title be postponed?
Hon. Senators: Agreed.
The Chairman: Shall clause 1 carry?
Some Hon. Senators: Yes.
Senator Tkachuk: I have an amendment:
That Bill C-48 be amended in clause 1, on page 1,
by replacing line 13 with the following:
“$4 billion.” and,
(b) by replacing line 23 with the following:
“$5 billion.”
The Chairman: Do you have copies of that amendment?
Senator Tkachuk: Yes. You can make copies. One is in French and one is in English.
Senator Day: Mr. Chairman, on that motion, I am asking my colleagues not to support this amendment.
The Chairman: We are making copies so that we can all have the amendment in front of us to read. Were you intending to speak to the motion?
Senator Tkachuk: Absolutely.
The Chairman: Can you wait for just a moment until we all get copies? It is here now. Thank you.
Senator Tkachuk: This just raises the base from $2 billion to $4 billion, and $2 billion to $5 billion, which are the original amounts that the government expected, so that is why I am moving this forward. I would like to speak to it.
I would like to go to the statement of the executive committee of the Canadian Council of Chief Executives, which I thought was a very good presentation. The witness did not read it into the record, so in support of this motion I would like to read the report into the record so that we understand more clearly why this motion is necessary.
I will start with the title page.
Canada First! Taking the Lead in a Transforming Global Economy
A Statement of the Executive Committee Canadian Council of Chief Executives Ottawa June 28, 2005
He came here to present this. It starts off at the top of page 1:
Canada First! Taking the Lead in a Transforming Global Economy
A Statement of the Executive Committee Canadian Council of Chief Executives Ottawa June 28, 2005
I will read very slowly so the translators are able to translate and also so that the reporters are able to report.
As leaders of Canadian enterprise —
— and I am reading on their behalf —
— we are concerned about the future of our country. We know the importance of good governance, rigorous financial management, continuous development of people —
I want to make sure they get it right for the record
— and ideas and above all of sound strategy to drive the sustainable growth of our enterprises. We know that Canada needs no less.
As an economy, Canada today seems to be in great shape. It is the only major industrialized country enjoying consistent surpluses both in its federal budgets and in its trade and current accounts. Its economic growth has been the best in the G-7 over the past five years, driving the unemployment rate to its lowest levels since the 1970s and producing impressive gains in family incomes, profits and tax revenues.
As a society, Canada remains a beacon of hope for the world. Its social services ensure that no one languishes in extreme poverty and that everyone has opportunities to get ahead. Its commitment to spreading peace and democratic values around the world is matched by an unparalleled openness to immigration. No other country has been as successful in shaping communities in which people from every corner of the globe can feel at home.
This is so good, actually, that I am rather disappointed that the authors did not read this out:
But as a political entity, Canada is a nation adrift. A minority federal government is frittering away the fruits of years of sacrifice. Provincial and municipal governments are making this problem worse by demanding a steady stream of special deals that give them a greater share of the taxes paid by all Canadians without accountability to all Canadians. In the political arena, the very idea of strategic policy-making is drowning in the swirling search for momentary tactical advantage.
That is the end of page one. We will go to the second page. It should not be too long because there are only 15 pages.
Public trust is being driven to new lows by a parade of improprieties. Civility and cooperation within the House of Commons have evaporated. The public service has been left paralyzed and demoralized. Millions of Canadians are frustrated and dismayed by this spectacle.
I got a little carried away and I forgot there was a period after “demoralized” and after “spectacle.”
What is painfully absent today is any ambitious vision of what Canada could achieve over the next five to 10 years and any coherent strategy for realizing this vision in ways that could mobilize support across Canadian society.
The Canadian Council of Chief Executives (CCCE) is a non-partisan organization of individuals dedicated to building a stronger Canada and a better world. We have a long and proud history of contributing to the evolution of important national debates, from free trade and constitutional reform to the battles against inflation and government deficits.
In 1999, we launched the Canada Global Leadership Initiative , which produced a declaration in 2000 titled Global Champion or Falling Star? The Choice Canada Must Make . In this declaration, based on months of consultation and research, we addressed a wide range of competitiveness issues, identifying the need for significant tax cuts as an essential first step. In October 2000, the federal government announced a five-year plan for reducing personal and corporate tax rates, and Canadians have been reaping the benefits ever since.
The Canadian economy does not function in isolation, however, and the represent of the world is changing rapidly. Today, therefore, we are launching the next stage in our ongoing work to strengthen Canada's competitiveness and future prosperity.
As the country's political leaders begin a summer break from the partisan frenzy of recent weeks, it is time to put Canada first. It is time to look past the name-calling and finger-pointing and consider what is right for the country. It is time to consider what will happen to jobs and investment in each sector of our economy in the absence of concerted national action, and to talk about our immense potential as a country if we pull out all the stops. It is time for Canadians to work together in shaping the national strategies and public policy choices that are needed if Canada is to take the lead in a transforming global economy.
We claim no mandate from the Canadian people, nor any monopoly on good ideas. But all citizens have a duty to stand up and be counted, to offer their best ideas for advancing the national interest and to make their best efforts to move such ideas forward. In launching our Canada First! initiative, we hope that ours will prove to be one of many voices contributing to a renewed sense of national purpose and direction.
In the months ahead, we plan to bring our expertise in thinking strategically about competitiveness and productivity to the broader challenge of shaping a more prosperous future for Canada. We also will seek out the expertise and advice of others who share our passion for building a better Canada. Our goal is to articulate a strategic vision, an action plan for the country, one that is capable of inspiring broad support across all sectors and regions, before the next federal election.
We start from two fundamental premises: that a strong and globally competitive economy provides the foundation for improving the quality of life of Canadians; and that good governance and sound public policy are necessary conditions for robust and sustainable economic growth. Canada has strengths and weaknesses in terms of the competitiveness both of its private sector and of its governance and public policy framework, and as we launch our initiative, we suggest six critical issues that must be addressed in order to put Canada first.
CANADA'S CHALLENGES AND OPPORTUNITIES
Canada has made immense strides over the past decade as it adapted to freer trade, reduced inflation and interest rates and shifted the federal budget balance from deep deficits to repeated surpluses. At the same time, we are a country whose identity and prosperity flow from our engagement with the world. As the rest of the world changes, we must adapt, and we should be anticipating opportunities and shaping our strategies accordingly.
On the economic front, our world is being transformed by the rapid evolution of Asian economies, especially China and India. This transformation has produced benefits for Canada's resource sector, but poses new challenges to enterprises in both manufacturing and services. In every sector of the economy, Canada faces the need to specialize and to shift towards higher value-added activities.
Despite our trade-intensive economy, too few Canadian companies, especially among our smaller and medium- sized enterprises, export their products, invest abroad or seek out international partners. Both our experience and a large body of economic evidence suggests that, regardless of their ownership, Canadian-based enterprises that are globally engaged are more likely to form partnerships with universities, develop products for export, adopt new technologies and invest in employee training. For our enterprises and our country to prosper, we need to become more globally engaged than in the past.
At the same time, the world is grappling with a very different threat, that of international terrorism. Canada has never limited its global engagement to issues of trade and investment, and both are economic interests and our democratic values require us to be active partners in the continuing struggle against the terrorist scourge. The most direct threat to Canada's interests lie in terrorism's potential to undermine the efficient flow of goods and people across our border with our largest trading partner, the United States. But the more fundamental threat is to the open global economy on which our prosperity is based and to the values that lie at the heart of our society. No national strategy for overcoming economic challenges will be successful unless it also contributes to global peace and security.
CANADA'S STRENGTHS AND WEAKNESSES
In charting a path forward, Canada starts with important advantages, but these are offset by significant weaknesses. The country's fiscal base remains strong, but is threatened by runaway spending growth. Declining tax rates have fuelled economic growth, but our tax structure is biased against investment and our overall tax burden remains higher than that of most of our major trading partners and competitors for new investment. Canada benefits from high regulatory standards, but its fragmented regulatory structure and its processes are too complex, slow, costly and uncertain. We have one of the most highly educated labour forces in the world, but far too many children are failing to complete even secondary schooling. Canada is a global leader in good public and corporate governance, yet public trust in both government and business has been declining.
Beneath the apparently healthy surface of Canada's economy, we see some disturbing signals. In the short term, while the rise of Asia as an economic power has produced significant gains for Canada's resource producers, it also has pushed up Canada's currency, especially in relation to that of our largest export customer, the United States. Business investment in new machinery and equipment is increasing at double-digit rates, but the combination of a higher currency and more intense competition from Asia and elsewhere remains a severe threat to the future of Canada's manufacturing base.
The sheer scale and speed of change in the global marketplace means that Canadian companies in every business have to consider all options for locating their operations and that Canadian governments and communities must do what they can to encourage businesses to compete and grow from a Canadian base. Key economic indicators suggest that, despite our past strengths, Canada has begun to lose ground.
For instance, Canada's labour productivity has grown at an average pace of 1.7 per cent a year since 1997. That is the second-best record in the G7, yet it falls short of the 2 per cent pace that will be needed over the next 30 years to cover the estimated health care, pension and other costs of an aging population. Worse, average output per hour increased a total of just 0.1 per cent in 2003 and 2004. In other words, despite the rapid pace of business investment in new machinery and equipment, we have had essentially zero productivity growth over the past two years.
Another disturbing sign can be seen in Canada's poor performance in attracting foreign investment, which plays a critical role both in job creation and in business innovation. Foreign direct investment into Canada grew at an average pace of nine per cent a year during the 1990s. It failed to grow at all in 2003, for the first time since the Depression of the 1930s, and did not do much better last year, rising just 3 per cent.
It takes a first-class economy to sustain first-class social programs, and Canada desperately needs a coherent economic strategy that will deliver both. If Canadians want today's good news to continue, leaders in government, business and communities must set aside short-term differences and work together to shape a future in which Canada is second to none.
SIX WAYS TO PUT CANADA FIRST
To build consensus around a national strategy, we must do more than put the interests of the country ahead of those of individual citizens, businesses, interest groups and governments. We must agree to be bold in our vision for the country, to seek to put Canada first among nations in areas that are key drivers of national prosperity.
1. First in good governance
Good governance is not merely a competitive advantage; it is the foundation for healthy and sustained economic growth and for social progress. Good governance is as important to the success of countries as it is to that of companies.
A flurry of highly publicized corporate scandals in recent years triggered widespread demands for new rules and tougher enforcement. Market forces also have been at work, often driving change further and faster than governments. As business leaders, we are the first to admit that the job of restoring public trust in private enterprise is far from complete. But by working together, governments, regulators, institutional investors, professional bodies, financial markets and the directors and executives of individual companies have within a remarkably short time transformed Canada's corporate governance practices. These practices stand as among the best in the world.
The federal sponsorship scandal has become the symbol of the need for an equally sweeping transformation of public governance. What Prime Minister Paul Martin has called Canada's “democratic deficit” demands action on at least two levels.
First, public governance reforms must mirror those that have taken place within the private sector in strengthening transparency and accountability. In the private sector, CEOs and CFOs are now required to certify that each of our reports fairly reflects the state of our business, that everything in the report is true, that nothing has been left out that might make what is said misleading and that we are aware of all material facts. We would suggest that governments consider comparable ways to strengthen the personal responsibility and accountability of ministers and deputy ministers.
Second, there is an urgent need to reshape the relationships among Canada's governments. The flexibility of a federal governance structure can be a competitive advantage, but inter-governmental relations in Canada have become dominated by an endless argument over the so-called fiscal imbalance: recurring surpluses at the federal level at a time when many provinces are struggling to stay afloat in the face of dramatically rising health care costs. This has led to a tangled web of one-off and asymmetrical deals that has sent public spending skyrocketing while reducing accountability to taxpayers.
This is further evidence why we need the $4 billion and $5 billion, rather than the $2 billion and $2 billion. Perhaps you thought I was not paying attention.
To position Canada to compete more effectively in the global economy, it is vital to deal with the structure of our federation, not through constitutional change but through a systematic and pragmatic review of what Canadians expect from our governments, which governments can deliver the best value in each case and how to ensure that each government can raise the revenue it needs to meet its responsibilities.
2. First in public services and infrastructure
What governments do, and how well they do it, has a fundamental impact on Canada's competitiveness and economic success. A reputation for solid rule of law, effective policing, an independent judiciary and honest and competent public servants is the necessary foundation for any competitive economy. Sound fiscal and monetary policy forms the base for sustainable economic growth. Effective public services, from infrastructure and education to cultural facilities and national defence, can build on this base and help to make our economy more competitive and productive.
The most important issue with respect to what governments do is not the scope of their activities, but rather the extent to which they deliver value for the money they spend. Governments must be careful to ensure that their activities contribute to future economic growth rather than merely redistributing wealth for current consumption. They also must consider how best to deliver services they deem important, and be sure not to overlook opportunities for partnerships with the private sector if these can provide more competitive and efficient ways to achieve important public policy goals. Whatever governments do, they must do well and they must do better than the country could achieve through other means.
3. First in taxation and regulation.
This interested Senator Harb, so I will read this carefully.
Taxation and regulation are the two most effective ways governments can shape the business environment without engaging in public spending.
Tax policy represents a balancing act. Governments must collect enough taxes to pay for their current activities, while doing as little damage as possible to the economic growth that will determine their future tax base. Taxes on business income and investment are more damaging to economic growth than are taxes on consumption.
This is why European countries with high overall tax burdens and extensive social programs rely heavily on value-added taxes like the GST, while keeping their corporate and personal income tax rates relatively low.
Globally, the most potent tax trend is toward lower rates on corporate income. Since 1997, 25 of the 30 member countries of the Organization for Economic Co-operation and Development, including Japan, Germany, France, Italy and the United Kingdom, have cut corporate taxes significantly. Canada now has the third highest marginal effective tax rate on business investment in the industrialized world.
For emphasis, I would like to repeat that.
Canada now has the third highest marginal effective tax rate on business investment in the industrialized world.
Unlike taxation, regulation can be used to improve competitiveness without direct fiscal costs. Sound regulation reinforces a positive country brand and provides an attractive environment for business investment. Poor regulation undermines growth by imposing excessive costs and delays, uncertainty, inconsistency and duplication.
4. First in business investment and productivity
Finance Minister Ralph Goodale recently noted that the purpose of both competitive taxation and smart regulation is to encourage Canadian businesses to boost their productivity and performance. Faced with an aging population, he declared, “We must improve the productive capacity of our economy if we are to continue to enjoy the benefits of one of the most compassionate and equitable societies in the world and build an even better economy for the next generation of Canadians and beyond.”
Canadian output per hour of work in the business sector stood at 82 per cent of the United States' average in 1999. In wood products, paper, mining, primary metals, motor vehicles and other transportation products, construction, printing and publishing, Canadian productivity is higher than in the United States. But in 19 out of 28 industry sectors, Canadian productivity lags, with ominous implications for the future of Canadian jobs.
It is a good news-bad news story.
Work by the McKinsey Global Institute suggests that government policies play a major role in holding back productivity. Restrictions on foreign investment, for instance, affect productivity by reducing competition and incentives to innovate, and Canada is more restrictive than every other member of the Organization for Economic Co-operation and Development (OECD) except Iceland. Similarly, non-tariff barriers such as marketing boards reduce productivity in Canadian agriculture, while barriers to internal trade act as a drag in sectors such as personal services. Regulatory fragmentation and duplication add to the damage. Maintaining 13 separate securities regulators, for instance, adds to the cost of capital and inhibits business investment and productivity across the country.
Whatever the business environment created by governments, Canada's private sector needs to work harder —
Senator Eggleton: Point of order. Mr. Chairman, would you call the senator to order, please?
The Chairman: Senator Tkachuk.
Senator Tkachuk: Could I finish this paragraph?
Senator Eggleton: No.
An Hon. Senator: He is showing disrespect for the chair.
Senator Tkachuk: The paragraph continues:
— at improving productivity and competing vigorously at home and abroad. As leaders of our country's largest and most globally engaged companies, we have a responsibility do to our part not only in growing our own businesses, but in encouraging others to raise their sights and be bolder in exploring the opportunities of a global marketplace.
Go ahead and raise your point of order. I still have much of this document to read, which I think is really important.
Senator Eggleton: Mr. Chairman, rule 96(7) of the Rules of the Senate states:
Except as provided in these rules, a select committee shall not, without the approval of the Senate, adopt any special procedure or practice that is inconsistent with the practices and usages of the Senate itself.
Rule 37(4) says:
Except as provided in sections (2) and (3) above, no Senator shall speak for more than 15 minutes, inclusive of any question or comments from other Senators which the Senator may permit in the course of his or her remarks.
I would submit, Mr. Chairman, that Senator Tkachuk is well past his 15 minutes. He started reading at 4:47. The rule clearly states that a senator cannot speak for more than 15 minutes.
Senator Tkachuk: I think that, as the mover of the amendment, I have 45 minutes to speak.
The Chairman: It is 45 minutes.
Senator Eggleton: I am fairly new here, and would want to hear from officials on this point. Senator Tkachuk is not the mover of the bill itself. My understanding is that the 45-minute provision applies to only the second and third reading stages and not to committee proceedings. I believe that the 15-minute rule applies in this case.
Senator Stratton: I would suggest that we adjourn this meeting in order to obtain an interpretation. We do not have the answer. If Senator Tkachuk cannot continue because we do not have a clear ruling, then we should adjourn in order to obtain a clear ruling.
Senator Eggleton: I am sure that the chair can give us a clear ruling, based on the rules.
Senator Tkachuk: The chair can do whatever he wants. He can adjourn for a few minutes.
Senator Day: He can also ask you to stop talking, and he has not done that.
Mr. Chairman, it is up to you to take control of your meeting.
The Chairman: The chair has the power to suspend in order to seek counsel and advice on the rules, which the chair will do. The meeting will be suspended for 15 minutes while we seek advice.
Senator Eggleton: Fifteen minutes from 5:20 p.m?
The Chairman: Yes.
The committee was suspended.
The committee resumed.
The Chairman: Honourable senators, our 15 minutes are up and I have had the opportunity to look into this matter.
Beauchesne's Parliamentary Rules & Forms , 6th edition, says — and all senators are familiar with this — that the Speaker has ruled on many occasions that it is not competent for the Speaker to exercise procedural control over the committees. Committees are, and must remain, masters of their own procedure.
On the other hand, that must be coupled with rule 96(7), which Senator Eggleton quoted:
Except as provided in these rules, a select committee —
— which this committee is —
— shall not —
— “shall not” being mandatory —
— without the approval of the Senate —
— and there is no approval of the Senate —
— adopt any special procedure or practice that is inconsistent with the practices and usages of the Senate itself.
It is clear that we cannot do anything in this committee, even though we are the masters of our own procedures, that is inconsistent with what happens in the chamber.
Senator Tkachuk has been speaking to a motion on clause-by-clause consideration. The question is how much time has he had. He has been speaking for 33 minutes. Rule 37(3) reads:
The sponsor of a bill and the first Senator speaking immediately thereafter shall be permitted not more than forty-five minutes each for debate, inclusive of any question or comments from other Senators which they may permit in the course of their remarks.
(4) Except as provided in sections (2) and (3) above, no Senator shall speak for more than fifteen minutes, inclusive of any question or comments from other Senators which the Senator may permit in the course of his or her remarks.
Those are the only rules that we can find that apply to the time limit for the senator speaking. Senator Tkachuk has spoken for more than 15 minutes, and there has yet been no objection to his speaking for more than 15 minutes.
As to whether there is anything inconsistent with the practices and usages of the Senate with what is going on now, Senator Tkachuk is the official critic, or the sponsor for the opposition, of this bill and is, therefore, entitled to 45 minutes. He has already spoken for 33 minutes, which means he has 12 minutes remaining. At the conclusion of that time, including any questions put to him or comments made, he will not be allowed to proceed further with his remarks in relation to this motion.
There is no common precedent in the Senate to impose time limits on debate in committee. Therefore, we must follow the procedures from the chamber. I rule, therefore, that Senator Tkachuk has only 12 minutes more to proceed on this motion.
Senator Eggleton: I appeal the ruling of the chair, because the rule refers to the sponsor of a bill and the first senator speaking immediately thereafter in the Senate. This is not the case at all; Senator Tkachuk is speaking to an amendment that he has moved in committee. I appeal the ruling, and there is no debate on appeal of a ruling, according to rule 18(4), which reads:
Except in accordance with the provisions of rule 37(5), all decisions of the Speaker shall be subject to appeal to the Senate, and such an appeal shall be decided forthwith, without debate.
Senator Tkachuk: As was the adjournment motion. Maybe we will have a few more minutes to talk about it, then.
The Chairman: The ruling of the chair has been appealed.
All those in favour will please raise your right hand.
All those opposed will please raise your right hand.
The appeal is successful.
Senator Eggleton: I move the question.
Senator Tkachuk: We have more speakers.
Senator Eggleton: I have the floor. I move the question. The chair recognized me; I move the question on the amendment.
The Chairman: Senator Eggleton has moved the question on the amendment to clause 1. It was moved by Senator Tkachuk:
That Bill C-48 be amended in clause 1, on page 1.
(a) by replacing line 13 with the following:
“$4 billion.”; and
(b) by replacing line 23 with the following:
“$5 billion.”
Will all those in favour of —
Senator Stratton: That motion is debatable.
Senator Tkachuk: For that reason, I believe that I have another 15 minutes. Therefore, I will continue to make my point here.
Senator Day: Mr. Chairman —
The Chairman: Do you have a point of order?
Senator Day: No, it is not a point of order. I wanted to speak on another issue.
Senator Tkachuk: Do you want to speak on the amendment?
The Chairman: The issue before us now is the amendment to clause 1 on page 1 of Bill C-48.
Senator Day: That is right, and you called for all those in favour.
Senator Stratton: It is debatable.
Senator Eggleton: The chairman has already decided that the question was —
Senator Stratton: Once the chairman puts the question, as the Speaker does, it becomes debatable.
Senator Eggleton: We are dealing now with the vote.
Senator Stratton: No, the question is debatable.
Senator Day: We have debated the question and now we are voting.
Senator Stratton: We are not debating the amendment, we are debating the motion of moving the previous question. That is what is debatable.
Senator Cowan: I move, pursuant to rule 33(2), that Senator Day be now heard.
Senator Stratton: We already have a motion before us. We have to deal with it, and it is debatable.
The Chairman: Wait until I find the ruling. Senator Cowan has made a motion pursuant to rule 33(2), and I want to read the entire rule, which states:
33(1) When two or more Senators rise to speak at the same time, the Speaker shall call upon the senator who, in the Speaker's opinion, first rose.
(2) In the circumstances provided in section (1) above, before the Senator recognized by the Speaker has begun to speak, a third Senator may rise on a point of order and propose a motion naming another Senator who had risen and proposing that this other senator “be now heard” or “do now speak”, and the question on such a motion shall be put forthwith without debate or amendment.
Senator Cowan: That was my point of order, and I made that motion.
The Chairman: I would like to review what has happened. First, I made a ruling in respect of the time limit for Senator Tkachuk to speak to his amendment. Senator Eggleton appealed the ruling of the chair, and his appeal was successful: The ruling of the chair stating that Senator Tkachuk had 12 more minutes was defeated. Following that, the question was called for. The question was on the amendment proposed by Senator Tkachuk that Bill C-48 be amended by clause 1 on page 1, et cetera. Following that, Senator Stratton said that the motion was debatable, and that is where we are now.
Senator Cowan, I do not see the relevance of your point of order now, given the proceedings that preceded it.
Senator Cowan: What is your ruling on Senator Stratton's point? Is Senator Eggleton's motion debatable?
Senator Tkachuk: If we are to discuss this point, I began to speak before Senator Eggleton introduced his motion. Therefore, I think he was totally out of order. I have the right. Senator Stratton spoke, so he was ready to speak.
The Chairman: There is only one issue before the committee now, which is whether Senator Stratton's suggestion that this is a debatable motion is correct. If that is so, then this matter is open for debate. Senator Stratton, did you wish to add a comment?
Senator Stratton: Where are we? I want you to tell us where we are. I do not need another interpretation.
The Chairman: Debate must finish first on the amendment. Beauchesne's says the following, Senator Eggleton, that a motion for the previous question is not admitted in a Committee of the Whole or in any committee of the House, and that the debate has to finish before you can put your motion for the question.
Senator Stratton has said that your motion is debatable. If that is so, I suspect that he will refer to you this provision of Beauchesne's.
Senator Trenholme Counsell: Is the motion for the vote debatable?
The Chairman: He called the previous question.
Senator Eggleton: I called for the vote.
Senator Trenholme Counsell: Is that debatable?
The Chairman: The debate has not been concluded, you see.
Senator Eggleton: Senator Tkachuk's time was up. Since your ruling was revised by the committee, I would suggest that the 15 minute time limit applies, and that his 15 minutes is long up.
Senator Trenholme Counsell: What is the rule regarding —
The Chairman: Senator Stratton had said that he wanted to speak.
Senator Trenholme Counsell: That was long afterwards. We have not dealt with Senator Eggleton's motion.
Senator Stratton: We are now on page 12.
The Chairman: Senator Stratton, you had —
Senator Stratton: When I begin speaking, my 15 minutes will start:
5. First in Education and Expertise
As the baby boom generation approaches retirement, a labour force that makes up a smaller portion of the population will have to support an expanding population of seniors who depend on public health care, pensions and other social programs. Given this reality, we need to ensure that every Canadian is able to achieve his or her full potential.
Canada boasts the highest proportion of people with a post-secondary education among the G-7 nations. But we also have a notable weakness, including an excessive high-school dropout rate, especially among boys and among aboriginal children; a weak recruitment rate for apprenticeships in skilled trades; continuing issues of access to post-secondary education; and an uneven performance by public and private sector employers in encouraging and funding lifelong learning.
At the post-secondary level, the federal government has made research and development a priority for additional funding in recent years, and this is helping Canadian post-secondary institutions to recruit and retain top talent. Canada has been less successful to date in increasing the pace of commercialization of the results of this research.
What existing companies and industry sectors do with the results of Canadian research will play an important role in determining which ones grow and which ones shrink in the decade ahead. But to ensure the healthy growth of our economy as a whole, Canada also must become more creative and more determined in fostering new knowledge-driven ventures and the development of whole new business sectors.
6. First in immigration and integration
Making the most of our existing pool of talent is not enough. Canada always has been an immigration-intensive economy, and we will be counting on immigration for all of the net growth of our labour force in the years ahead. At the same time, other countries are beginning to compete more vigorously for mobile talent.
Canada needs to work harder to encourage talented people to move to our country and to enable immigrants to achieve their full potential within our economy. The open and diverse society that we have built gives Canada a real competitive advantage in the global economy, but we cannot take this advantage for granted.
We need to offer more than an open door. We must make Canada the destination of choice for talented people with skills, energy and drive. As leaders of Canadian enterprise, we are committed to doing our part in strengthening our country's reputation as a land of opportunity.
TOWARD A NEW NATIONAL STRATEGY
Globalization has been good for Canada. The country's willingness in the 1980s and 1990s to open up its economy unleashed a wave of innovation and creativity within the private sector.
That was called free trade.
The simultaneous commitment to sound fiscal and monetary policy provided a solid foundation for more rapid and sustainable growth, a trend that was reinforced over the past five years by falling tax rates.
The continuing evolution of the global economy, however, poses new challenges to every one of our industries. Canada's natural resource wealth, its advanced technology base, its highly skilled labour force and its diverse, outward-looking society give our country the potential to be a model of post-industrial success. In many ways, we already are the envy of the world, but we cannot take either this status or its benefits for granted.
To achieve our country's potential, Canada must move decisively beyond its current complacency and lack of direction. As a country, we must develop a vision of what we want Canada to look like by 2010 and 2015, build a broad consensus around this vision and execute a coherent strategy for turning this vision into reality.
What really matters to Canadians is not where political parties may stand in public opinion polls five minutes from now, but what kind of a country our children will inherit over the next generation, what kind of work they will be doing and what kind of lives they will lead. Five years ago, the Canadian Council of Chief Executives established as our overarching goal to make Canada “the best place in the world in which to live, to work, to invest and to grow.” As we launch the next stage of our continuing efforts toward this goal, we hope that others will join us in putting Canada first.
This document is signed by the executive committee of the Canadian Council of Chief Executives, and dated June 28, 2005: Richard L. George, chairman; Dominic D'Alessandro, vice-chairman; Paul Desmarais, Jr., vice-chairman; Jacques Lamarre, vice-chairman; Thomas d'Aquino, chief executive and president; Gwyn Morgan, vice-chairman; Gordon Nixon, vice-chairman.
Do I still have time left? Yes, I do. Thank you.
This is the spending announced since the Prime Minister's speech to the nation. The department of ACOA, Human Resources and Skills Development, Youth Employment, an amount of money is — I am sorry. ACOA, Enterprise Restigouche, $22,000,883 announced April 21. Human Resources and Skills Development, Youth Employment, $49 million, announced April 21. ACOA, New Brunswick, $30 million, announced April 21. ACOA, Mill in New Brunswick, $100 million, announced April 21. Labour and Housing, Aboriginal housing, $40,300,000, announced April 21. Variety, Windsor-Detroit Gateway, $129 million, announced April 21. Department of Canadian Heritage, Translation of Canadian Literary Works, $500,000, announced April 21. ACOA, Convention Centre in Summerside, Prince Edward Island, $1,500,000, announced April 22. Human Resources and Skills Development, South Dundas, $75,497, announced April 22. ACOA, Restigouche, $22,883, announced April 22. ACOA, Park in Kings-Hants, $67,397, announced April 22. Labour and Housing, reduction in interest rates, CMHC, $200 million, announced April 22. Canadian Heritage, Igloolik Isuma Productions, $50,000, announced April 22.
The Chairman: Point of order.
Senator Trenholme Counsell: I do not know whether Senator Stratton is on the right bill, because he is talking about all of these ACOA items that seem to have no relevance to this bill whatsoever. He has recited a long list of ACOA expenses.
Senator Stratton: As I go through this list, there are appropriate items. For example, we are talking about youth employment and skills training. We are talking about Aboriginal housing. I am appropriately located here. Labour and housing, for example, and reduction in interest rates. They are appropriate items.
Senator Harb: There are some elements in it.
Senator Stratton: There are some elements attributable to this bill directly.
ACOA, Cornerbrook Economic Development Corporation, $42,555, announced April 22. Environment, Parks Canada, $315 million, announced April 22. Labour and Housing, London Food Bank, $45,000. Industry Canada, Canada Research Chair Program, $99 million, announced April 22. ACOA, Tourism Atlantic Marketing Initiative, $4 million, announced April 25. ACOA, eco-tourism sector in St. Stephen, $223,000, announced April 25. ACOA, Arts and Culture Park (Quispamsis), $488,284, announced April 25. Human Resources and Skills Development, Employment Assistance Programs, $269,045. ACOA, Port George Regional Recreation Centre, $27,945. Social Development Canada, 24 Alberta seniors' projects, $398,716, announced April 25. Social Development Canada, Canadians with disabilities, $7,224,608, announced April 25. Industry Canada, Industrial Research Chair, $1 million, announced April 25. Canada-Ontario Municipal Rural Infrastructure Fund, Funding throughout Ontario, $249 million, announced April 25. CIDA, Canadian Red Cross for multi-country malaria prevention program in sub- Saharan Africa, $20 million, announced April 25. Social Development Canada, Manitoba seniors projects, $219,376, announced April 25. Social Development Canada, New Horizons for Seniors program, $25,000, announced April 25. ACOA, Wharf and waterfront development, $127,087. ACOA, Oromocto Boat Club, $42, 231, announced April 25. Immigration Canada, New Foreign Credentials Recognition Projects, $68 million, announced April 25. ACOA, Yarmouth Mariners Centre, $500,000, announced April 25. ACOA, restore the old Canadian Pacific railway station, $529,048, announced April 25. Human Resources and Skills Development, initiative to help address shortage of health-care professionals, $75 million, announced April 25. ACOA, Enterprise Restigouche, $22,883, announced April 21. Human Resources and Skills Development, Youth Employment, $49,970, announced April 21.
I am just checking here. I want to make sure I am completely correct. That is a duplication.
Human Resources and Skills Development, Going to Canada, Immigration Internet Portal, $100,000.
Human Resources and Skills Development Enhanced Language Training Initiative. I was wrong; it was $100 million previously. This one is $20 million; announced April 25. Human Resources and Skills Development Action Plan Against Racism; $56 million; announced April 25. ACOA, farmer's market in Dieppe; $1,250,000; announced April 25. ACOA, student summer employment; $318,930. Health Canada, National Collaborating Centres; $10 million; announced April 25. Labour and Housing, Street Connection; $149,563. ACOA, Holland College Centre for Industrial Technologies; $750,000; announced April 26. ACOA, Village of Chipman; $219,153; announced April 26. Heritage Canada, Toronto Film Festival; $25 million; announced April 26. Environment Canada, Parks Canada; $60 million; announced April 26. ACOA, Youth in the Region Pursue a Career in Entrepreneurship; $64,387. Heritage Canada, Societé nationale de l'Acadie; $65,000; announced April 26. Human Resources and Skills Development, 2,750 unemployed individuals in Peterborough; $770,979; announced April 26. Human Resources and Skills Development; 65 unemployed individuals in Peterborough; $93,083; announced April 26. Human Resources and Skills Development, Saint John, YMCA/YWCA; $228,014; announced April 26. Social Development, New Horizons for Seniors Programs; $10,000; announced April 26. Human Resources and Skills Development, People with Disabilities in North Bay; $202,908; announced April 26. Human Resources and Skill Development; Communities of Terrace Bay and Marathon; $100,188.
The Chairman: Senator Stratton, I regret to advise you that your 15 minutes have expired.
Are there any other senators who wish to speak to this amendment?
There being none, it has been moved by Senator Tkachuk:
That Bill C-48 be amended in clause 1, on page 1.
(a) by replacing line 13 with the following:
“$4 billion.”; and
(b) by replacing line 23 with the following:
“$5 billion.”
Honourable senator, are you ready for the question on the amendment?
Some Hon. Senators: Question.
The Chairman: All those in favour of the amendment will please raise their right hand.
All those opposed to the amendment will please raise their right hand.
The amendment fails.
Senator Cowan: Question.
Senator Tkachuk: I have another amendment to clause 1, page 1. I move:
That Bill C-48 be amended —
Senator Cowan: I called the question.
Senator Tkachuk:
— in clause 1 on page 1 by adding after line 26 the following —
The Chairman: Senator Tkachuk, the question has been called on clause 1.
Shall clause 1 carry?
Some Hon. Senators: Agreed.
Senator Tkachuk: I have an amendment to clause 1.
The Chairman: You had another amendment to clause 1?
Senator Trenholme Counsell: He called the question first.
Senator Tkachuk: I asked to move an amendment to clause 1. Unless there is something wrong with the democratic process, I have the right to make an amendment. We are in committee.
The Chairman: I did not know that Senator Tkachuk had another amendment to clause 1. There was an amendment moved to clause 1 and it was debated and voted on. However, I did not know that the senator had a second amendment.
You have a second amendment to the same clause?
Senator Tkachuk: I have a second amendment to clause 1 on page 1, yes, and I would like to move that.
Senator Ringuette: On a point of order, the usual practice when senators have amendments is to say how many amendments they have on each clause in order that the chair is aware. That is the practice that this committee has adopted in the last two years, and I think that we should continue with the same process. Perhaps Senator Tkachuk would like to indicate how many amendments he wants to propose to clause 1?
Senator Tkachuk: I have one more amendment to move on clause 1.
Senator Ringuette: We have one more amendment for clause 1.
Senator Tkachuk: Thank you, Senator Ringuette. I appreciate that.
Senator Eggleton: On a point of order, the question was called and you were in the process of putting the question. If Senator Tkachuk wants to debate whether the question be put, that is a different matter.
The Chairman: I do not want to be unfair to honourable senators. I had no idea that the senator had a second amendment to clause 1. Not knowing that, and since the first amendment he proposed to clause 1 failed, I wanted to see whether clause 1 would carry. That is why I put the motion. I did not know that he had a second amendment.
Senator Tkachuk: I have a second amendment.
The Chairman: I call upon Senator Tkachuk to move his second amendment.
Senator Tkachuk: Thank you. I move:
That Bill C-48 be amended in clause 1 on page 1 —
Senator Stratton: Can we have a time out?
Senator Day: Can we talk for a second?
The Chairman: We will suspend for three minutes.
The committee was suspended.
The committee resumed.
The Chairman: I call the meeting back to order, and I recognise Senator Day.
Senator Day: I propose a compromise that may achieve the results my colleagues on the other side were looking for in terms of minority observations. I will put the proposal on the record now, following which I assume we will vote on the clauses of the bill.
The Chairman: Could we hear your proposal?
Senator Day: The proposal is that these observations be given to the steering committee for review by noon on Friday. The steering committee would immediately look at them to ensure that they conform to the normal good taste of observations. We will not editorialize but we will be looking at them from the point of view that they are normal observations, having in mind that they will not, in all likelihood, be overly complimentary to this piece of legislation. We understand that fact. That is not the issue. The issue is that the other side is asking this committee to agree to something that this side has not seen. We need that check.
If the observations have not been received by Friday at noon, no observations will be attached to the report. If they are in the proper format, without editorializing, then they will be appended to the report as minority observations and the committee will report the bill without amendment.
The Chairman: I wrote down what you said, Senator Day. What do you mean by “the normal good taste of observations”?
Senator Day: We will be looking at them to see if they are in the normal format of observations. We have many examples of observations, such as “The opposition wishes to point out the following,” or “We do not support the legislation for the following reasons,” as opposed to using inflammatory language.
Senator Banks: The steering committee is yourself, Mr. Chairman, and Senator Day?
The Chairman: And Senator Downe.
Senator Day has put a proposal on the floor, and perhaps Senator Tkachuk could respond.
Senator Tkachuk: My understanding is that we will accept this motion after we finish. Is that what will happen after we proceed in good faith to clause-by-clause consideration of the bill?
I move that the observations prepared by Conservative senators be given to the chair of the committee by Friday, July 15, at noon, to be appended to the report which is to be tabled by the chair when Bill C-48 is reported to the Senate.
The Chairman: You made that motion earlier and it was voted down.
Senator Tkachuk: I know.
Senator Day: It should refer to acting in good faith.
Senator Tkachuk: I want it to be clear that we will act in good faith. We do not recognize any inferences whatsoever that we would put language in the observations that would be considered unparliamentary.
The Chairman: Or inflammatory.
Senator Tkachuk: Definitely unparliamentary or abusive. We would never abuse — let us not go there.
Senator Day: I think everyone understands where we are going. Given that this is a report of the National Finance Committee, this committee must now vote to allow these observations to be attached.
The Chairman: That is correct.
Senator Day: The committee will say in the attached appendix that these are observations of the minority on the committee.
Senator Tkachuk: Exactly. The steering committee is given the same power as the committee to deal with them.
The Chairman: It will be made clear that they are not the unanimous observations of the entire committee.
Senator Day: Mr. Chairman, according to the rules as I understand them, and that is why I voted against this motion earlier, this committee has to accept that observations will be attached to the report.
The Chairman: That is correct.
Senator Banks: Will the characterization of the authors of the report be that it is a minority of members of this committee, or that it is the members of the loyal opposition who are members of this committee?
Senator Tkachuk: “Opposition” is preferable.
The Chairman: Are there any other questions on the proposal of Senator Day? Is the proposal agreed to by all senators?
Hon. Senators: Agreed.
The Chairman: Carried.
Shall we now proceed with clause-by-clause consideration of Bill C-48?
Hon. Senators: Agreed.
The Chairman: Shall clause 1 carry?
Hon. Senators: Agreed.
The Chairman: Carried. Shall clause 2 carry?
Hon. Senators: Agreed.
The Chairman: Carried.
Senator Tkachuk: All on division.
The Chairman: Shall clause 3 carry?
Hon. Senators: Agreed.
The Chairman: Shall the title carry?
Hon. Senators: Agreed.
The Chairman: Shall the bill carry?
Hon. Senators: Agreed.
The Chairman: Honourable senators, at the next sitting of the Senate, shall I report the bill without amendment but with observations appended to the bill?
Hon. Senators: Agreed.
The Chairman: Carried.
Senator Tkachuk: On division.
The Chairman: On division. Honourable senators, is there any further business to come before this committee at this time?
The committee adjourned. |
