STANDING COMMITTEE ON FINANCE
COMITÉ PERMANENT DES FINANCES
[Recorded by Electronic Apparatus]
Tuesday, October 20, 1998
The Vice-Chair (Mr. Nick Discepola
(Vaudreuil—Soulanges, Lib.)): Good afternoon and
welcome to the hearings of the Standing Committee on
Today we are following a series of consultation
hearings on two aspects. The first part of this
afternoon's agenda will be to hear testimony from
witnesses on their recommendations, their priorities,
for the government vis-à-vis the budget upcoming in
February 1999. The second session will hear testimony
on the recommendations to the government vis-à-vis the
MacKay task force on financial institutions.
I apologize for the delay. We have a little bit of a
problem in Ottawa this afternoon. There's an emergency
motion being debated, and members of Parliament have
been called back and forth to return for the vote—I
believe around 5 p.m. or 5.30 p.m. Even Mrs. Wayne has to
leave at 5.15 p.m. So we will start, and if
anyone else joins us, we'll continue.
For the record, I'd like to state that, in accordance
with its mandate under Standing Orders 108(2) and 83.1,
the committee resumes its pre-budget consultation
I'd like to welcome the following witnesses: from the
Federation of New Brunswick Faculty Associations,
Professor John Thompson, past president, member of
the board, and chair of the mathematics department at
the University of New Brunswick; and Dr. Jack
Vanderlind, vice-president. Welcome, gentlemen.
From the Group of 12 for Social Justice, I'd like to
welcome Madam Isabelle Doucet.
Thank you and welcome. I think you already know how our
proceedings take place.
First of all, we don't have anyone from the Bloc
Québécois, but normally they speak French.
Therefore, you have translation devices here. If they
show up, you can use these. Channel 1, I believe, is
the translation from French to English.
The procedure normally is that we leave five to ten
minutes for each group to present its case, and then
we'll open it up to questions from the members of
Parliament. Who would like to start? All right, it will
be Professor Thompson then. Welcome to you again.
Professor John Thompson (Past President, Member of
the Board, and Chair of the Mathematics Department,
University of New Brunswick): Thank you very much.
We do appreciate this opportunity to address the
standing committee on matters of particular concern to
our organization and our colleagues.
I'm going to make some brief, general remarks in
support of the two documents we distributed
earlier. My colleague, Dr. Vanderlind, who happens to
be the chair of the physics department at UNB, will
perhaps cover some details that I may miss.
Universities, as we would like to have them understood
and appreciated, prepare people for life. They are an
important part of the social fabric of Canada and all
other modern nations. What we provide that other
post-secondary training does not provide is a broader
and deeper base that prepares people for changes of all
kinds, whether it be change in workplace, or change in
types of employment, change in social circumstances.
That's what we especially provide.
But, as our brief stresses, there is a series of
important economic aspects to having a university
education, both for the country as a whole and for the
individuals who receive the education. We think the
House of Commons, and the government in particular,
should be taking a longer-term view than has been
apparent over the last few years on funding the
universities through the provinces—where funding
transfers have been quite radically reduced.
This has caused difficulty for the universities, and
it's getting to the critical stage for us in
maintaining the standards in our programs, the
equipment we need to teach, and our competitiveness
with the United States, our chief trading partner.
As members of Parliament may know, across the United
States in the past three years or so, virtually every
state of the union and the American federal
government have been providing substantial increases
in funding to the universities, by one device or
another, and increasing funding to students—averaging
6% to 8% per annum increases depending on the state—whereas
here in Canada we've seen nothing but cuts.
As a result, it's going to be more difficult for us to
produce people who will be as well prepared as those
from many American institutions, if we look ahead to
the next five to ten years, because we will not be able
to replace sufficiently many faculty who will be
retiring. We will not be able to replace equipment.
We will not be able to keep our libraries up to date.
That has a direct economic impact.
As has been said in the brief of the Canadian
Association of University Teachers, which I think you've
received, we do appreciate that the government has
restored some funding to the higher education sector,
both for research and as funds to students. The
restoration of funding to the three federal research
councils has been very important, and I think long-term
benefits will flow from that. It's appreciated that
the Canada Foundation for Innovation has been
established by the current government, and it will have
a big impact.
The millennium scholarship fund is certainly a move that
we hope will be seen to have a major impact in years to
come. But none of these and other recent developments
directly address the fundamental problem we have of
maintaining our physical plants and of maintaining
adequate numbers of trained personnel to teach the
That base funding has an impact on making
the funding that's going into the research councils
more effective, because it is assumed by the research
councils that the universities are providing basic
equipment and other support. But that's becoming
increasingly more difficult to do.
We expect that the government will be putting some
funding back into health care in the next budget, and
we look forward to that. We think that's very
important. But a relatively modest fraction of that
level of funding going back into the post-secondary
system would make a huge difference, and we would hope
that some serious consideration will be given to that.
Funding to health
care will, in fact, disproportionately benefit people of
my age. I'm sufficiently old that I could
retire early next July, but what about the people who
are 20 to 25 years old, who we're all going to be
looking forward to leading this country in the next
millennium? I think the government must take a longer
view on these things and consider the impact on the
next two or three generations.
The briefs we've submitted indicate that from an
economic point of view, university graduates are nearly
all employed. Nearly full employment is the
case for university graduates. But no less
important, they're the ones who generate employment for
many other people in the economy.
Here in New Brunswick, as you may well know—and
certainly the leader of the Progressive Conservative
Party will know this—a large percentage of our economy
is based on the pulp and paper industry. The employees
in that industry earn very high wages, and they help
drive the entire economy of the province and many other
provinces across the country. But the people who design
those pulp and paper mills, who supervise the
maintenance, are engineers. They're trained in
The stresses that the university administrations and
boards of governors are now feeling are leading them in
some provinces to contemplate radically raising tuition
fees for professional schools like engineers. We think
this would be a mistake, counterproductive for the
long-term interests of the country, because it's not
simply the graduates who benefit from the university
education. If you take away the chemical, mechanical,
and electrical engineers, then every one of our pulp and
paper mills across the country would shut down. It's the
same with the professional foresters who receive
degrees in forestry from universities like the
University of New Brunswick. These things are very
important and go well beyond the obvious beneficiaries.
Another concern we have recently across the country is
that part-time enrolment in universities is dropping
very sharply because the support systems that these
students depend on in various ways through Canada
health and social transfers have been declining.
People go back to university to try to complete
degrees or get new qualifications in order to become
more readily employable. If there is a drop in
part-time enrolment—and the latest Statistics Canada
information showing percent changes from 1992-93 to
1997-98 indicate something like a 24% decrease in
part-time enrolment—what that means in crude terms is
that people who would in the previous decade have been
making themselves more employable and contributing to
the society at a higher level, economically and
otherwise, will not be doing this. So we're going to
be creating a situation where there will be more
unemployable people five years from now than there are
that's a serious issue.
In addition to the general concerns across the
country, there are specific regional concerns here in
New Brunswick in particular as a smaller province.
Its fiscal capacity is limited, and the universities
have had a very important role to play in the social
and economic transformations that have taken place here
in the last 25 years.
If one were to look in detail at the transformation in
Acadian society in New Brunswick over the last 30 years
since the founding of Université de Moncton, or
the economic impact at the University of New Brunswick
here on the Saint John campus—of which I'm happy to say
the member of Parliament here has been a very strong,
long-term supporter—if you look at the impact, you'll
see that this is very important to us, but these
institutions are facing very serious difficulties.
So we hope some arrangements can be made with the
provinces to restore some of the funding that has been
removed. We think you can do this without treading on
provincial toes, because it needn't be specifically
earmarked, except in a sort of moral sense, and it's not
as tightly tied to federal guidelines as the acts
governing medicare and health care. So we would urge
that consideration be given to doing something to
restore funding, which will be important to the next
generations of citizens and employees of Canadian
Jack, do you want to add anything?
Dr. Jack Vanderlind (Vice-President, Federation of
New Brunswick Faculty Associations): I believe my
colleague has covered it pretty well. I can't think of
too much he has left out here. I could amplify on some
of these things, I presume.
On the matter of research funding, he noted that CFI
funding has been made available. This does in fact
require considerable support in terms of operating
funding as well.
I have several members in my physics
department, for instance, who have CFI funds but now
are in the operation of having to find operating funds.
Unless NSERC gets matching funding along the way,
it's going to be difficult to make use of all the
equipment that has been obtained.
Prof. John Thompson: If I could add one
point, some of these new arrangements, like the CFI, in
our view, disproportionately benefit the large
metropolitan areas in Canada, because most of the
sources for the matching funding are in the immediate
vicinity of Montreal, Toronto, or Vancouver. We would
like to see some consideration be given in future to
making sure, by appropriate regulations or more
flexible regulations, that this part of the country and
the prairie provinces could benefit in a proportionate
The Vice-Chair (Mr. Nick Discepola): Thank you,
Professor Thompson. You'll be able to give maybe a
more in-depth comment on some of the areas of concern
when the members of Parliament also ask you questions.
I would now ask Ms. Doucet to continue with her presentation.
Welcome, Ms. Doucet.
Ms. Isabelle Doucet (Group of 12 for Social Justice): Good
day. I represent the Group of 12 for Social Justice and I therefore
cover a significant aspect of our society. We live in a democratic
system, but this does not mean that equality and justice prevail
within it. It is sad to note how much time, energy and intelligence
is spent on small debates, while so many important issues remain
We have trouble understanding poverty, but we certainly know
the reasons why it exists. First, billions of dollars accumulate in
unemployment insurance funds, while many workers live in poverty
caused by this injustice.
Second, money is granted to carry out mega-projects, construct
nuclear stations and build huge highways, while families go without
money to pay for hot water, electricity and food to feed their
children, or to buy themselves dentures and glasses. There are even
some young mothers who consider turning to prostitution to make
Third, we agree to pay to salvage a ship belonging to the
Irving empire, while our old helicopters crash. We discuss
providing financial assistance for the big sports teams, while our
young world Olympic athletes lack support.
The banks make huge profits. Businesses get away without
paying income tax. In 1996, 82,000 profit-making businesses did not
pay any income tax. Poor, single-parent families, however, have to
pay income tax.
The Auditor General exposes the cost of unreasonable expenses
and careless mistakes—costs that might have helped pay down the
national debt or found intelligent and just solutions for our
Furthermore, very generous salaries, pension plans and travel
expenses are provided for senators and pubic servants in Ottawa,
while our young students go thousands of dollars deeper in debt.
Studies and reports are prepared, and consultations are
undertaken with little thought for the major expenses they incur.
We recommend that the Employment Insurance surplus be used to
meet EI purposes. We are against big bank mergers. We strongly
recommend support for rural development. We demand a budget that
would ensure that no child went hungry or cold, or wanted for any
of life's basics.
A host of rural development initiatives could be taken. Not
everyone can live in the big cities. People like living in small
regions. They're fine and they like it. We could do lots of things
to help people. In the big cities, there's a lot of pollution and
lots of cars. Living in a big city isn't the answer for everybody.
The Vice-Chair (Mr. Nick Discepola): Thank you, Ms. Doucet.
I will now ask Mr. Ritz to ask his questions.
Mr. Gerry Ritz (Battlefords—Lloydminster, Ref.):
Thank you, Mr. Chairman.
Welcome to everyone here today. This is certainly a
beautiful city to be in on a Tuesday afternoon. I'm
sorry it's such a short stay for us.
A couple of questions came to mind while I was
listening to the professors and reading through their
brief. You have not touched on one thing. You talk
about employment for the educated being lower than for
other sectors of society. I forget the exact numbers,
but it was something like 3.2% are without a job after
they've gotten through their higher education.
We've heard a lot in the last little while about brain
drain. I would like your thoughts on this. Do you see
this phenomenon here in New Brunswick as much as we see
it across the rest of the country? What do you
attribute this brain drain to? What are the causes and
effects of it here in this country? How do we get
around this problem, if it really is a problem? In the
long run, who suffers the most? Is it the people who
leave the country, and leave all of that behind, or the
ones left here to continue on? I wonder if I can get
your comments on this.
Prof. John Thompson: Culturally, from the point of
view of some of us, those who leave may suffer. But, by
and large, they're leaving because there are better
opportunities—academic, economic, or otherwise.
Just this fall at UNB we lost the senior pulp and
paper chemical engineer to the University of Maine,
next door to us in Orono. It's just a few hours
drive away. We've lost this person's expertise because
the University of Maine was able to come up with the
funding to supply his laboratory and technical
assistance. UNB was having to curtail its funding
because our sources of funding are drying up. This is
just one example.
At the student level, it's still the case that a great
many of our best and brightest students leave. They
may be in science, engineering, social sciences, or just
about any subject area. They are leaving for central
Canada. Also, many of them are going to the United
States. They are leaving because in this region there
is a shortage of high-level employment.
We think it is important to try
to stimulate more of that happening here. There have
been transformations in the economy here that are quite
significant, but there still needs to be more.
Right now in some of our hospitals there is a shortage
of nurses. In the previous few years, because of
funding cutbacks and the closing of hospital beds, many
of the younger and more mobile nurses with degrees from
UNB or Moncton have gone to the southern United States
for full employment and higher salaries. This winter,
a number of the hospitals in northern New Brunswick are
finding they can't adequately staff some of their
One could multiply examples. These are just a
representative few. So the brain-drain issue is a
problem right across the country. It's either flowing
to the centre or to the south. I don't know whether
that adequately responds to your question.
Mr. Gerry Ritz: It tells us there is a phenomenon,
but how do we get around it? What is the magic answer
to slowing the tide?
Prof. John Thompson: That was an important part of
If the university system had even slightly better
funding so we could provide better equipment, more
technical support to faculty in some of our
departments and a higher level of training to the
students, it would help retain people within the
university system. By the same token, the higher level
of technical training leads to the spin-offs of highly
qualified employment situations. Let me just give you
one example, since you're not from the province.
Thanks to an investment by the Government of Canada
and to a lesser extent by the Province of New Brunswick
in the early 1960s, UNB started what was the first, and
for a long time the only, department in what is now
called geodesy and geomatics engineering. It's still
the best department in the country. There's only one
other in Calgary, which is an offshoot of our
From that department has been spun off an organization
that supplies very sophisticated, computerized
land management systems around the world. They get
major contracts from Egypt, the United States, the U.S.
defence department, and European countries. They employ
roughly 70 people in their main office in Fredericton.
All these people are very highly trained and they are
employed at quite high salaries. They're an important
small part of our local economy.
There are other spinoffs I could name here in Saint
John or Moncton that were started by people trained in
universities and some of the faculty who trained them.
They are keeping these people in the region. But I
think we need more support, from both the provinces and
the federal government, to have more of these spinoff
Mr. Gerry Ritz: I have one other question for Ms.
The HST has been harmonized here in the Maritimes for
a couple of years now. Is it a move you would like to
see maintained, or should we go backwards on that? Is
there a spinoff onto the poorer segment of society?
Ms. Isabelle Doucet: It hasn't helped the poor.
Mr. Gerry Ritz: Okay. So you're saying we
should back up and take a different approach.
Ms. Isabelle Doucet: I don't know what the
solution is, but it hasn't helped.
The Vice-Chair (Mr. Nick Discepola): In which
respect? I am led to believe the overall rate was
lower by harmonizing, therefore—
Ms. Isabelle Doucet: We haven't noticed any
change in prices. We haven't documented benefits.
Mrs. Elsie Wayne (Saint John, PC): May I just
The Vice-Chair (Mr. Nick Discepola): Sure.
Mrs. Elsie Wayne: It has been very difficult for
the poor, because when they harmonized the HST and
brought it in, it went on children's clothing and many
other articles that weren't taxed before. Those with
lower incomes are finding it extremely difficult.
The Vice-Chair (Mr. Nick Discepola): Even if you
were to take the overall basket of goods that
somebody would use and with a reduced rate, it still
Ms. Elsie Wayne: Yes. For example, you never had
to pay any tax on babies' diapers before, but you pay it
now. Issues like that have been of major concern to
those who are living below the poverty line. May I
just say something else?
The Vice-Chair (Mr. Nick Discepola): Sure, Elsie,
go ahead. We can come back to Mr. Ritz afterwards.
Ms. Elsie Wayne: There is a young lady who is
going to receive an honorary degree from the University
of New Brunswick here in Saint John this week. This
lady has been living in poverty herself, but because of
the type of outreach and work Pam Coates has been
doing, the university is recognizing her and how she
has tried to bring forth to government the problems
She is not always condemning, but she is out trying to
make her point that we have to give our people their
dignity. So Pam is going to receive an honorary
degree. I don't think that's ever been done before at
any of our universities for someone like Pam. I think
it's really wonderful. It shows the type of people we
We have a number of universities here in the maritime
provinces and Newfoundland. They've been rated as the
top universities across Canada. You've heard from
Professor Thompson how in Calgary, Alberta, they are
borrowing some of our expertise and programs. People
don't know that. I want to ask the professor some
There has been a great change since the cutbacks in
the transfer payments for education, and that's where
this comes from. The biggest problem I have when I'm
in Ottawa is that I see that the government of the day
doesn't always understand the maritime provinces, what
they have to offer, what they've done in the past to
build this whole country from coast to coast, and what
they will have to offer in the future. If we do not
get more money put back into education through the
transfer payments, what impact will that have on our
young people, this region, and Canada? If they're not
working, then they're on welfare or UI, and that costs
every taxpayer money.
Prof. John Thompson: In the long term it will
lower the standard of living across the entire country,
including Ontario, because if we're not well employed
we can't buy cars from Oakville or Windsor or any place
in Ontario, and one can go on to include a lot of other
commodities. We are loyal Canadians, as I'm sure the
member from Saint John appreciates as much as anyone
else, but this region of the country was the wealthiest
part prior to Confederation. We lost by national
arrangements that have been made in the subsequent
century or more.
We think our people can compete in any market, whether
it's intellectual, economic, or otherwise. I've
demonstrated this in the past and currently. However,
given the circumstances, we need to have some tangible
support from the central government in order to
continue to develop this area so our younger people
will have the same opportunities, or at least
equivalent opportunities, as elsewhere in the country.
I fully support the member's comments here.
Ms. Elsie Wayne: This issue of transfer payments
is very important, and the three areas that
are so important to all of us across the nation are
health care, education, and social programs. I think
it's something this committee must address to the
We have been exporting brains into central Canada and
across this nation longer than anyone knows—and I'll
just make this point very quickly. When I was mayor I
sent out invitations because we were going to have a
reception in Toronto, and the reception theme was,
“You should see us now”. It was at the Hilton. We
had on one wall pictures of old Saint John and on the
other wall pictures of Saint John today. We asked
businessmen and people from the university to come to
talk. We had 75 businessmen who paid their own way to
go. I sent out 1,500 invitations and 1,000 people
The invitations went to all of those who were
educated here and had gone to Ontario—Toronto and that
Cedric Ritchie, the former CEO of the Bank of
Nova Scotia, said it was the best event he'd ever
attended. He said, “When I look in this room, Elsie,
I'm mighty proud of our people from Nova Scotia
and New Brunswick.”
This is why I say we have so much to offer, but the
image is not as positive up there as it should be. I
feel we have a real job to do.
I wish you had more time
to stay here with us for two or three days, Mr.
Chairman. The whole committee could come and visit the
university, because the one we have here is very
exceptional. It's the arm of the University of New
Brunswick in Fredericton, but it reaches out; it
brings in students from all around the world.
We have taken the leadership role to bring them in
from all around the world and we've been recognized for
that. But we must have some help, because the cutbacks
are really negatively affecting us.
The Vice-Chair (Mr. Discepola): Any comments?
Prof. John Thompson: The member from Saint John
has said it as well as we can. It's very important to
us in this region; it's important for our cultural
diversity, for our social and economic stability, and
for the future of the people coming behind us.
It's one thing for people my age to make arguments for
things that will indirectly benefit us if we have
better equipment and better facilities, but we have
every day to meet students who are 20 years old, and a
lot of our computers at UNB won't handle the software
they need to be properly instructed. So I spend time
every day, and I'm sure Jack does as well in his
department, telling students, well, if you go to that
lab what you're supposed to do won't work. You have to
go to another building and hope that by waiting three hours
you can get to sit at a terminal that will support the
One could go on listing examples, but we think our
region was disproportionately harmed by the cuts in the
transfer payments, whether it be universities or the
rest of society. We think the measures the current
government has taken to restore some funding to the
system are disproportionately benefiting Toronto,
Montreal, and Vancouver.
The Vice-Chair (Mr. Nick Discepola): Professor
Thompson, you've stated that two or three times and
I've taken note.
Prof. John Thompson: Okay.
The Vice-Chair (Mr. Nick Discepola): I've heard
about how you feel that funding.... You were
also quoted saying that funding in health care
disproportionately benefits, and I believe at that
point you were saying one age group, and you referred
to yourself being able to start in July versus another
I'd like you to state how you feel that
disproportion...as well as what you said right now,
that funding, for example, or even the cutbacks
were disproportionate throughout the region. I think
the cutbacks...and I'll get into it afterwards, but
I would like to hear your viewpoint as to why you feel
you were impacted disproportionately.
Prof. John Thompson: On the health care situation,
we have an aging population overall across the country,
and the biggest demands on the health care system are
going to be made by people like me in the next ten
years or so.
The Vice-Chair (Mr. Nick Discepola): If we get
sick—and God forbid, I hope not.
Prof. John Thompson: Well, I hope not, but on
average, I will, speaking as simply a typical
The Vice-Chair (Mr. Nick Discepola): But do you
have demographics that show the Maritimes, for example,
have a disproportionate age group and consume more in
health care than some areas in other parts of the
Prof. John Thompson: I'm sure your other witness
can amplify that, but where there are pockets of
poverty, you find there are greater demands on the
health care system, because people who don't eat
properly and don't have adequate training to manage
their lives in a whole variety of ways tend to get ill
more often. There are a lot of studies like that.
One of my colleagues at UNB, who holds a funded chair
in the education faculty, has done detailed statistical
studies of Canadian and American data that show
children who do less well in school are therefore less
employable and more sick over their lifetimes. And a
lot of other adverse things that happen to people
happen disproportionately if they get a bad start early
I refer you to the work of Professor Douglas Wilms.
I think your staff might be pleased to look this up for
you, or we could supply it. There's lots of
information. I'm just giving you a skimming of that.
The Vice-Chair (Mr. Nick Discepola): Then I
would argue that it's not disproportionate. I would
argue that you are going to find more poverty, more
requirements on education and health care, in the larger
centres. You just have to visit my hometown in the
Montreal area, for example, or go down to Toronto. We
know the problems the homeless and the poor are facing
“Disproportionate” may not be the correct word.
I think you're going to have to
look at the demographics of each area. In a country
such as ours you're going to have to address the
problems where they occur. It's not to say that because of
each region we must...and obligate ourselves to spend
equal funding throughout the country. You have to
attack the problems at their source.
I come back to Mrs. Wayne's suggestion and your
suggestion also—and I'm not only hearing it from
the Maritimes. I think the sentiments of concerns with
health care, with education and social programs, are
echoed throughout the country. No matter where we go
we hear the concerns. But is it always a question of
funding? If I take a look at your suggestion
again, last budget we increased the funding for the
three granting councils by more than $400 million a
year. So by the year 2000-2001, we'll have increased
it by over $903 million. What's the appropriate limit?
Another example I'll argue is that we had a national
forum on health that consulted Canadians. This wasn't a
group of politicians. It was professionals in their
field. It was chaired by the Prime Minister himself,
who said that the appropriate funding levels for health
care should be at $12.5 billion. And what did we do as
a government? The first thing we did was we took $1
billion at the first opportune moment we had and
we put it back in funding.
When I take a look at my home province, Quebec,
which has a disproportionate number of beds per capita
compared to Ontario, the neighbouring province, and when I
take a look at some provinces that spend a
disproportionate per capita amount on education, I say,
is it really—to quote some of my Bloc Québécois
members—la faute du fédéral, or is it a priority
that provinces have chosen to establish for themselves?
Why is it that Alberta, which was one of the first provinces
to introduce massive cuts, did not find themselves with
billion-dollar surpluses in their budget? Isn't
it a question of allowing the provinces to establish
their priorities? Is it just a question that the
federal government should give, give, give? And when
you said we needn't be worried about earmarking funds
for specific areas, it sent shivers down my spine
to hear you say that.
If we're going to give money to the provinces—I'd
like to hear your opinion, both of you maybe—shouldn't
it be specifically earmarked for targeted areas? If
we're going to say we have to reinvest in education,
as a federal politician I want to make damn well sure
that it goes to education. If we're going to earmark
money for poverty, I want to make damn well sure that
the right groups get it.
Prof. John Thompson: I'll be happy to
comment on that.
We agree with you that funds in an ideal world should
be earmarked, and if you can find a device to do that
you won't find any objection from us. All we're saying
is that the federal government should not let
recalcitrance from provinces interfere with taking
appropriate steps, because you'll get a different
attitude from New Brunswick than you will in Alberta,
In terms of the disproportionateness, of course
we've all seen homeless people in Toronto, which we
attribute to the breed of the populace, because Toronto,
by and large, is extraordinarily affluent compared to
almost everywhere in the country, and we do appreciate
that Montreal has been much more disadvantaged than
certain other regions of the country in the past couple
of decades or so. We think that something should be
done there too. But I think if you look at the
problem on a per capita basis, you would find a higher
overall percentage of economic distress in this region
than you would in most other provinces on a per capita
In terms of restoring funding to NSERC
and the other two federal granting councils, we
think this was really a marvellous development. What
are the appropriate comparisons then, you ask?
Should there or shouldn't there be limits, and what should
they be? We are still not devoting to research in
Canada anywhere near the levels on a per capita or GDP
basis that most of our competitor societies are
devoting. So I think that should be the target.
But again, on the funding of the research councils, the
councils expect that the universities that are the
recipients of these grants provide back-up. They don't
pay the professors; NSERC does it. They don't pay the
technicians in the laboratories. They buy some of the
equipment, but they don't pay for the water.
We have superb marine biologists and fish biologists at
the campus here in Saint John and at the campus in
Fredericton. These people in their laboratory set-ups
use huge quantities of water. The university has to
cover that sort of thing. And every year the funding
base is eroded.
Again, on the eroding of the general university
funding base, it's true that Ralph Klein, in his wisdom
or lack thereof, slashed funding to the universities by
roughly 20% in Alberta three years ago, and his
friend in Ontario slashed the universities there
roughly 15% to 17% in their operating grants. But they
started much higher than we did. So when our
government here in New Brunswick, over the past three
years, cut us a total of 6% to 7%, that has a much more
deleterious impact on us than cutting the University of
Toronto or the University of Alberta.
The Vice-Chair (Mr. Nick Discepola): Sorry, I
don't want to monopolize the conversation, but do
you have any other questions? Otherwise I can
Gerry, do you?
Mr. Gerry Ritz: I just have one comment I'd make on your
suggestion, Mr. Chair, that the federal government must
safeguard the provinces' discretionary
spending; that Big Brother knows best. In terms
of the ultimate device the
professor alluded to—what device do we have
to earmark funds—I guess that ultimate device
would be the taxpayer/voter. If they see money going
to places they don't want it to go, they're certainly
not going to patronize that government a second time
around. In terms of the whole idea that the
taxpayer sends in the money and then we decide what
pigeonhole it's going to be put to, we need to
listen a lot more to the people who are sending the money in
and maybe not to some of the departments.
The Vice-Chair (Mr. Nick Discepola): Any
Dr. Jack Vanderlind: I have one short comment just
to illustrate perhaps a little bit of what's going on
in the universities. In my department we have a woman
who's doing world-class research on fibre optics. In
fact, she's probably the most highly regarded
researcher in the field, and she has good connections with
industry and various other things. At the same time in
our department, while ten years ago we counted 15
members, we're down to nine members. She's supervising
four students within the department directly in her
research, and she has several contracts outside. It
is absolutely vital that this whole research effort get
expanded, because she is in fact at the forefront of
research. In the meantime, we find ourselves squeezed.
She has to do more teaching. We all have to do more
teaching every day. The infrastructure is just not
there to support this any more. I think it's
absolutely vital that the base funding to the
university be increased.
The Vice-Chair (Mr. Nick Discepola): To the level
that you're saying other OECD or G-7 countries have as
a percentage of GDP—is that your recommendation?
Prof. John Thompson: Yes, ultimately, especially
on the research funding. Their funding base for
the operating expenses are really two budgets. One is
research granting from a central agency that's there on
a competitive basis, and that's fine. But for the operating
funding we think the best comparison is the United
States right now, especially the state institutions.
But even the much-vaunted private institutions in the
United States of America get enormous amounts of money
from their state and federal governments through a
whole variety of devices.
The Vice-Chair (Mr. Nick Discepola): But with
the greatest respect, I don't know if you can compare
the United States.... When I see my wife's cousins, for
example, who send their children to small universities,
having to spend $16,000 or $17,000 a year for each of
the children, I count myself very fortunate when I only
have to spend $2,500. If the universities had that
kind of leverage, then maybe they wouldn't need as much
I open the question up. Is it fair to
Dr. Jack Vanderlind: If I may
comment on that, my son is currently attending MIT,
where the fees are $23,000 a year. On the other hand,
let me also say that he gets financial assistance to
the tune of $21,000 per year, so I actually pay less
for his fees than I do for my other son who attends
The Vice-Chair (Mr. Nick Discepola): At what
Dr. Jack Vanderlind: No, both are undergraduates.
Prof. John Thompson: I know the
Association of Universities and Colleges of Canada
has collected a lot of statistics in recent years. Mr.
Herb O'Heron is their staff person who has the
data, and he has collected public American statistics.
What he has demonstrated is that the typical student at
MIT, where Jack's son is, or at Harvard or wherever you
want to name—including a lot of these small, elite
colleges—doesn't pay the full shot. Some of them do,
but a great many students get either very large
scholarships—whether on the basis of marks or need—or
they get employed by the college at a very good hourly
rate and are doing routine work that doesn't interfere
much with their studies.
So it's true that some people are paying twenty-some
thousand in tuition. As Jack says, though, a lot of
The Vice-Chair (Mr. Nick Discepola): Yes, but
it's the exception. I think if you include—
Prof. John Thompson: No, the exception is the
Dr. Jack Vanderlind: If I may comment a little bit
more on that, MIT has in fact studied the debt load of
its students when they have finished their four years.
The average debt load is almost $17,000 at MIT. At
Canadian universities, I believe it's running toward
$30,000 at graduation.
Mrs. Elsie Wayne: I have a question on that, Mr.
I have a major concern about a two-tier educational
system. I feel that because of what is happening, that
is exactly what we are going to have. Those who have
the ability to go but cannot afford to be $20,000 or
$30,000 in debt when they are finished aren't going to
go any more. They will then also be a liability for us,
which we don't want. I'm therefore asking you if you
see this two-tier system happening.
It was two-tiered when I graduated. Those who were
wealthy could afford to go to college. Those who were
not wealthy went on to vocational school. Of those
people who went on to vocational school, their ability
exceeded that of those who had the money to go to
college. Do you see that happening again, Professor?
Dr. Jack Vanderlind: Oh, very definitely. In my
day, for instance, I could earn enough during the
summer to finance my education. I don't think any
student can do that any more, so now there are only two
choices: either you have rich parents or you end up
with a big debt when you graduate.
Mrs. Elsie Wayne: That's right. Thank you.
The Vice-Chair (Mr. Nick Discepola): I would
like to come back to the CHST, and I'll reiterate the
frustration I have as a federal politician on how
little latitude the federal government actually has in
the administration of health or education. It's one of
the problems you've highlighted, and it really goes
back to the administration of education, which is a
We can criticize the new system, and I think the
results of the last election made evident how
frustrated maritimers are with the new system. Under
the old system, though, the government essentially had its
hands tied even more. There were two components, one
of which was taxation points—what the provinces can
raise in terms of additional tax revenue.
To quote Professor Thompson, you stated that a small
province has a fiscal capacity that is very limited. I
agree with you. So what we did, then, was change the
system. The cash portion was being reduced to a
significant level, and the taxation points were being
What this really meant was that the federal
government, over time—I think it was ten years at the
time—would have had no say in any of these programs.
This means that even if we had wanted to invoke the
guarantees provided in the Canada Health Act, for
example, we would have had no leverage. In terms of
the leverage Minister Marleau had in threatening
Alberta if it went to a two-tier health system, she
wouldn't have had that leverage because she wouldn't
have had the funding in order to be able to withhold
it. By changing to the new system, we have increased
the cash component but have also guaranteed the
provinces that we will give them stable funding
afterwards, as per their request.
We always see the one side of the equation, which is
that we're getting $7 billion less. That's true over
five years, but for all of the provinces in Canada, not
just one province.
The other side of the equation is that additional
revenues have come in because of an improved economic
situation, to the tune of roughly $2 billion. The
provinces don't say anything about that. They don't
mention the fact that we've been able to address our
fiscal situation and keep the interest rates very low,
thereby reducing the debt payments from most of these
provinces that have a deficit, a debt. My home
province of Quebec, for example, benefits with over
$650 million in reduced debt servicing.
So our hands are really tied. The only leverage that
we may have—and this was espoused in the agreement by
the premiers, in what I think was called the Saskatoon
Agreement—comes from the fact that if we're going
to renegotiate a new social union, we have to make sure
the funds earmarked for a particular area have to be spent
in that area. We may be able to address some of the
concerns you have then.
If the federal government has no leverage and all it's
doing is acting as tax collector, then because of their
capacity to tax more, the richer provinces are going to
get richer. What happens then is found in the concern
Mrs. Wayne has. You are going to have two levels
of education, definitely, but, God forbid, maybe two
levels of health care also. That's what we have to be
cognizant of as a country when we move towards a new
social union. So I sympathize an awful lot with your
concerns and with what you have echoed. However, not
too many people are hearing our side of it, which is
that, damn it all, our hands are tied.
I think there should be national
standards in education. Are we ever going to achieve
that goal with some of the recalcitrant provinces?
Isn't it a shame that my son or daughter can't go to a
similar university in another province because they
have different levels and, as a result, they would
either gain or lose a year? It even happens in high
school. Will we ever move to that point?
Prof. John Thompson: We think all
of these problems should be solvable, but it takes some
will on the part of the federal government. You may
appropriately blame some of the recalcitrant provincial
governments for being uncooperative. On the other
hand, it was a Liberal government that started the
untying of these transfer payments back in the late
1970s. You referred to the old system, but there was
an old, old system in which the EPF funding had much
clearer earmarking. That was removed.
The Vice-Chair (Mr. Nick Discepola): But if you
did the analysis of that system, you would find out
that per capita spending on education in New Brunswick
was a hell of a lot more than in some other provinces,
and you have to ask yourself why that was so. In
Quebec, under those systems, some premiers of that
province decided they would much rather spend money on
asphalting roads just prior to every election, you see.
That was the dilemma we faced. I am being
very facetious, but that's actually a fact. That's why
I believe that if we are going to negotiate anything,
as we should, then we have to make sure we have
more redistribution of the “health wealth, education
wealth, and social services wealth”
distributed throughout. The federation allows that.
Additionally, the opposition members will very often
eliminate the transfers and equalization payments very
conveniently. I disagree with that, because it really
distorts the overall picture. When you look at the
composition of every aspect of the transfers to the
provinces, they haven't done that badly. Otherwise,
why do seven out of ten provinces almost have balanced
budgets? Has the méchant fédéraliste in Ottawa
really been that bad? It's a question of priorities,
and some provinces move much more quickly than others,
my home province being one of the later ones.
Right now, I believe we are starting to get this
debate because we are able to agree on deciding what
our priorities are. I believe, as Mrs. Wayne has
heard, that Canadians are saying that reinvesting in
health, education, and other social programs is a
priority. I think that's what we have to do as a
committee. We have to make sure we echo those
priorities in our report.
Mrs. Elsie Wayne: Mr. Chairman, I would like to
ask Isabelle Doucet a question.
I noted that we have a Romero House—it's a soup kitchen—here
in Saint John.
They have served more
meals per month in the past two years than ever in the
history of any soup kitchen we've ever had in this
I want to ask her, what do you think, and how do you
see us? We won't eliminate it, but we will try to
eradicate some of the problems we have there. I
was appalled, Mr. Chairman, the last time I went;
it was the first time ever I had seen people bringing
in babies, to get milk for the babies.
So, Isabelle, what do we do?
Ms. Isabelle Doucet: One suggestion I would have,
but it wouldn't be an immediate solution, is to have
collective farms for rural areas, where the people who
are on social assistance could work for the money
they're getting. Products would be distributed to the
people in need—collective farms, perhaps in an
area of 50,000 people, like the péninsule acadienne.
Another thing would be workshops where we as families
and single parents could learn mechanics. We can't
afford to pay $35 or $40 an hour to go to a garage, but
we could go to a workshop and learn to do our own
mechanical repairs. There are all kinds of solutions.
Mrs. Elsie Wayne: So are you in favour of what is
known as workfare? The ones on welfare work, and they
get paid for their work.
Ms. Isabelle Doucet: Yes, absolutely—the ones
Mrs. Elsie Wayne: The ones who can.
Ms. Isabelle Doucet: I've looked at the judicial
system, and I know in the health system we could save
enormous amounts of money if we could recapture our
autonomy. That's the word, isn't it?
Mrs. Elsie Wayne: Yes.
Ms. Isabelle Doucet: Autonomy; our self-worth.
Mrs. Elsie Wayne: I guess I'd have to ask this.
Have you seen more people who need health care because
of the cutbacks in social programs? Are they becoming
Ms. Isabelle Doucet: Yes, because there's greater
stress. Greater stress brings on more smoking, more
alcohol use, criminal activity—into the drugs just to
make ends meet, anything at all. It's a fact; it's a
Mrs. Elsie Wayne: Thank you.
The Vice-Chair (Mr. Nick Discepola): Thank you, Ms. Wayne.
Ms. Doucet, you recommended that the surplus from the
Employment Insurance fund be used to meet needs in that very area.
Is the converse also true? If there were a surplus, should we not
give it back to those who contributed to it?
Ms. Isabelle Doucet: To those who need it.
The Vice-Chair (Mr. Nick Discepola): The current debate is
about the fact that, for all sorts of reasons, including a lower
unemployment rate and a larger number of workers who are paying
into the Employment Insurance fund, between $5 and $7 billion is
being added to the Canadian surplus. The members of the opposition,
just like you, I think, are asking us to give this surplus back to
those who paid into the fund, that is, businesses, whose
contribution amounts to 60% of every dollar paid into
Employment Insurance, and workers, who pay 40% of the
contributions, rather than to those who receive Employment
You recommend that the Employment Insurance fund be used for
this purpose. Wouldn't you prefer this surplus to be kept to deal
with the problems you have identified, such as poverty, instead of
giving surplus amounts back to employers and employees?
Ms. Isabelle Doucet: Under the new system, there are a lot of
The Vice-Chair (Mr. Nick Discepola): Who are not eligible.
Ms. Isabelle Doucet: ...who are not eligible for benefits.
Some of them have not worked enough hours.
The Vice-Chair (Mr. Nick Discepola): The members of the
opposition have got together and unanimously say that we should
give the $7 billion back to the employees and employers. I would
like you to clarify your point of view. Would you suggest that we
give them back a certain percentage? Should we perhaps reduce
contributions by 10¢ or 20¢, as was already done four years ago?
Should we use another part to broaden the eligibility criteria, by
reducing, for instance, the required number of hours worked?
Ms. Isabelle Doucet: Yes.
The Vice-Chair (Mr. Nick Discepola): Should we keep the
remainder to deal with problems in the health and education
Ms. Isabelle Doucet: I have no objections to some of this
money being invested in health or maybe even in the legal system.
That's a wink.
The Vice-Chair (Mr. Nick Discepola): No, I am acknowledging
the fact that he wishes to speak. Please continue.
Ms. Isabelle Doucet: I agree that these amounts should be used
to improve the situation of many workers who live in poverty and to
improve the health system. I am in favour of preventive measures,
but I am opposed to the building of new hospitals.
The Vice-Chair (Mr. Nick Discepola): Personally, I totally
support your second recommendation. I am opposed to bank mergers.
Furthermore, we strongly recommend firm support for rural
development. I am often struck by this concern because I represent
a fairly rural riding. In your opinion, how could we maintain and
even improve support for rural areas? This is a matter of enormous
concern, particularly in Quebec.
There are MPs and political parties that raise the case of
regional development programs which exist, including the Federal
Office of Regional Development - Quebec and the Atlantic Canada
Opportunities Agency here in the Maritimes. These programs were
really designed to help and support regional development. They
receive plenty of criticism. Sometimes they work well, and other
times they don't. Do you have any suggestions for maintaining and
even increasing support for development in these regions?
Ms. Isabelle Doucet: It must be realized that we don't all
want to live in big cities. It would be ridiculous and illogical to
want to crowd everyone into a few large cities across Canada. My
suggestions concerning rural development apply to any region in
Among the suggestions I brought to the attention of Ms. Elsie,
there were workshops, a collective farm, basically initiatives to
keep people at home while giving them back their autonomy. They
could be given a garden, trained to do car mechanics and so on.
These would be very practical, realistic, everyday things.
Mrs. Elsie Wayne: I'd like to clarify something.
The Vice-Chair (Mr. Nick Discepola): I'll
recognize Mr. Ritz—I think he's been patient—then
Mr. Gerry Ritz: I'm wondering again about the
professors. We got into a little bit of a debate here
on the CHST. Whose is it to allocate, and then how
should the money distribution be done?
I'm wondering if you put any validity into the idea of
devolvement of some of the powers and so on back to the
provinces themselves, so the tax dollars never really go
to Big Brother in Ottawa; they stay right here in New
Brunswick. It cuts out one level of bureaucracy, if
you will. It gets the dollars closer to the need.
Is there any merit in that type of idea? You can have
national standards, and then maybe we get around the
problem of his daughter going to the university they
both want, whether it's in New Brunswick or
Saskatchewan. The national standards would take care of
that, but the funding itself would stay more in the
Prof. John Thompson: We don't think that's the
best solution. The fiscal capacity of provinces varies
over time. As I mentioned earlier, this part of the
country once had the greater fiscal capacity. It
happens now that Alberta is sitting on oil and gas
wells, which will last for another couple of decades,
and so they've got lots of fiscal capacity.
But as John Kenneth Galbraith
is fond of saying in some of his recent books, there's
often the mistake made by individuals of confusing the
presence of money with native intelligence. I think
there's so much variability and randomness in fiscal
capacity at the local or provincial level that it's
important to have an overall structure with real power.
I agree with the chair of this committee that this should
not be abandoned and should be strengthened.
We've also noticed, historically, in Canada that some
provinces, if they happen to get a more extreme
provincial government in power, end up diverting a lot
of money suddenly from one operation to another,
doing long-term damage. The only brake there is on
that potentiality, which actually happens occasionally,
is the federal government having some serious,
tangible role. We're concerned with regard to the
educational system that there always be an important
Mr. Gerry Ritz: I'm not saying do away with the federal
presence, but the federal government is certainly not
above spending money before election days either. It's
just the nature of the beast. That's politics in
action. But is there not a middle of the road somewhere
that let's us cut out a lot of the overhead expense that
the governments tend to create?
Prof. John Thompson: A lot of overhead expense
has been cut out in recent years at various levels of
government. One can name many examples—the
environmental and health protection areas being some of
them—and this deregulation and depopulation of trained
personnel in appropriate departments is putting
everyone's health and safety at risk.
Mr. Gerry Ritz: But overall, government spending has
continued to rise and rise and rise. So are the dollars
just not going into the right pigeonholes?
Prof. John Thompson: There are many debates. You
expenditure levels rise, rise, and
rise—everything is relative. If you compare the
expenditure levels in the early seventies, the dollar was
worth a different amount in terms of what it would
purchase then than it is now. So one has to be very
careful about saying that expenditures are going up and
Mr. Gerry Ritz: But net income is also going down
The Vice-Chair (Mr. Nick Discepola): As a
matter of fact, if you measure the powers of one level
of government versus another, as a percentage of their
budget, you will see, historically, as Professor
Thompson has pointed out, that the federal government's
total overall spending has been reduced drastically.
I don't know the exact figures; I haven't been on
finance for two years. I had these figures at the tip
of my tongue before, but the federal government
spending, maybe in the seventies, represented 60% or 70%, and
now it's the reverse situation. The provinces have an
overall higher spending, which means, as you have
stated, that maybe the overall powers are really
transferred indirectly, if you measure it as a
percentage of spending.
I think, Mr. Ritz—
Mr. Gerry Ritz:
[Editor's Note: Inaudible]
The Vice-Chair (Mr. Nick Discepola): Well,
you could use it that way, but you forget one very
important thing. Professor Thompson has rekindled my
faith in the federation.
I was in British Columbia in January 1994. We had our
caucus there, and the first opening remarks by some of
the people in British Columbia were that they were fed
up with not getting their fair share of the federation.
We hear that from the “have” provinces quite often.
Even though my province has benefited over the past
several years, the separatists have always downplayed
A federation is a federation. It's like a family.
When one member of your family is down, you get up
and help them. When another member is fortunate and
has a job, then that member helps the family.
I think if we followed your example, and your party's
example, we would see five different regions, and I
doubt if you could see the strength we have in our
country. You really have to consider that very
You represent the west. I ask you, if our
Fathers of Confederation hadn't made the commitment
they did to British Columbia, to tie the east and west
with a national railway, would British Columbia be
enjoying the prosperity it enjoys today?
In the late thirties, the federation came to the aid of
Alberta during the Depression. Now it's Alberta's
turn, and maybe British Columbia's turn, to help the
rest of the members of the family. That's what the
federation is all about. We've got to help each other
and focus less on saying, what do I get out of the
federation as a province.
When we do that, we then live with the uncertainty that
I've lived with for 35 years in Quebec. That's how this
movement starts. If you always demand and exact
something from your family, you start splitting up the
We're getting into a philosophical situation
here. I'm not supposed to do that, obviously.
Mrs. Elsie Wayne: No, you're not supposed to do
that, Nick. You're in the first city incorporated by
royal charter, so it's all right today.
I just want to go back to Isabelle for a minute. I
want to explain to you, Isabelle, why the leaders of
the opposition were saying we should cut the
premiums for those who are working now and paying into
We should cut their premiums. For the business
community, we should cut their premiums.
This was so that for those who paid in, that money
would go back into their pockets. The worker has a
little bit more money to feed his children, pay his
mortgage, and so on.
As for businesses, you know and I know that if
businesses see more money, then they look to see how they
can expand, because they're always taking on the
competition. If they can expand, they create more
But the one concern I have is the change in the
formula for the workers to qualify for UI. Many
people you're referring to in the Acadian Peninsula,
and others as well, including some of our people here,
no longer qualify.
There has to be a better understanding. As the
chairman said, we help each other. We have a lot
of people here who are seasonal workers. They don't
want to be seasonal. They would like to be working
12 months a year, but that's the way it is
because of the climate we have.
So we're saying this money is theirs. We must
put that money back in their pockets and in the pockets
of businesses to create jobs for the people. That's
where we're at. I'd just like to know what you think
Ms. Isabelle Doucet: I agree that it needs to
Mrs. Elsie Wayne: Yes.
Ms. Isabelle Doucet: If it's going
to be in programs other than UI, it needs to be
preventative, like health or social—
Mrs. Elsie Wayne: Or training?
Ms. Isabelle Doucet: Yes, training. But I don't
mean projects in little classes in which they're really
laughing at our intelligence.
Mrs. Elsie Wayne: If you had proper training for
people, with some of the funds that would then produce
jobs down the road for them and they would be trained
to do those jobs—
Ms. Isabelle Doucet: We can do it.
Mrs. Elsie Wayne: I would just like to end with
this, Mr. Chairman. I have two brothers who are
businessmen in the United States. One is in Palm
Springs. He has four or five businesses. He tells me
that when they're going to employ someone, if a
Canadian applies for the job, he usually takes
them just like that, because of their work habits and
the way they've been trained back at home here.
He said that's how the people in the United
States see them. All across the U.S., they'll
take our people first.
We don't need a brain drain. We need to just keep
Ms. Isabelle Doucet: It's the same thing in
Ontario. They'll hire hard workers from the Maritimes.
It's noticed. It's recognized.
Mrs. Elsie Wayne: Yes, and out west they'll do
Ms. Isabelle Doucet: Yes.
Mrs. Elsie Wayne: I have a son out there.
He's been there for 18 years. He'd sure like to come
The Vice-Chair (Mr. Nick Discepola): I want to
jump in on this conversation.
Mr. Ritz, do you have anything else?
Mr. Gerry Ritz: I guess the only thing I'd add to
what Elsie was saying is that you have to remember
something. I know the government is portraying the
fact that 60% of this money is going back to large
corporations, big business.
That's a bit of a fallacy in that the majority of
businesses owned in this country are privately held.
They employ four to five people. Those are small
numbers. Those are the businesses that will create one
more job. It isn't General Motors, the Ford Motor
Company, or Bombardier for that matter that does that.
It comes from the small businesses. It's the little
muffler shop down the street. It's the little
restaurant down the street that with that money coming
back in will create one more job.
That's what we need. There are more than a million
small businesses. If they all hire one person, we have
no more unemployment. That's the whole purpose of
putting the EI funds back into where they've been dedicated.
It's sitting in a trust account. Neither other
taxpayers nor the government have put a penny in, so it
should go back to where it came from. That's the way
Mrs. Elsie Wayne: You can see, Mr. Chairman, that
the two opposition members don't quite agree on this
Mr. Gerry Ritz: Well, there's a pot of cash there
and everybody wants to get their fingers into it,
but you've got to remember where that cash came
The Vice-Chair (Mr. Nick Discepola): If I can
jump in here, let's be very clear that there's no account
sitting there with $20 billion in it.
Mr. Gerry Ritz: No.
The Vice-Chair (Mr. Nick Discepola): That's a
fallacy. Since 1986, the Auditor General has said that
you must group it into your general revenues.
Why did he say that? Because until 1994-95, it was
running at a deficit position. Therefore, the Auditor
General wanted to make sure that by grouping it to
general revenues, you indicate clearly that there's a
responsibility on the part of the government to come up
with the shortfalls when they happen.
For 10 out of
17 years, the fund has operated at a deficit.
This means that for those 10 out of the 17 years, who
really picked up the slack? Canadians did.
Now we're saying no because it's running at a surplus.
We're saying let's give it back to businesses.
I'll tell you that there's not one small business
person in my community who said they wanted me to give
them back 70¢. That's what we would have to give back.
The actuarial studies show that instead of $2.70, it
would have to go down to about $2.10. Then the fund
would run at a break-even projection. If you give back
all these small businesses the full 70¢, do you know
what it means to Canadians? It means now we have $6
billion less left in our revenues. Right away, if you
don't get your additional sources of revenue, you're now
$6 billion in the hole. We'd go back to a deficit
Second, there's not one business person in my
community who's saying they want this back. I think I
can speak for all of them. We got very strong support
from the Canadian Federation of Independent Business,
for example. We would have to give back $3.6
billion to give this back to all businesses. I don't
categorize small versus large ones. If you're saying
you've got to give back to those who contributed, then
in fairness, you've got to give back $3.6 billion to
So that means now there's $2.4 billion again that
we've got to give back. Who are we giving it back to?
It's for those who, thank God, were fortunate enough to
contribute. It's means they're working.
I don't hear that
here. Even Mrs. Wayne said maybe we should reinvest
more in retraining. We should reinvest more in
social programs, for example. Maybe we should reduce
the premium by a certain amount to help businesses.
But that's not what the opposition is crying for.
They're saying we should give back that full $6
billion, because to quote some of my Bloc Québécois
colleagues, c'est du vol, you're stealing it from
No, it's been used
to write down our deficit and debt. Now
we're in the fortunate situation that we can debate and
say what our priorities are. I don't think the
solution should be to all of a sudden give back $6
billion with the uncertainty we face today. This would put
back at risk all the efforts Canadians have made
over the last four or five years.
I would much rather see that money used for enhanced
and improved benefits, for example. As for those who
don't qualify, well maybe we should stretch the elastic
band so they can qualify. Maybe we should invest more
in job creating, for example, for some people. That's
what everybody seems to be talking about. If we do
that, though, where do we get the funds for it? Not by
giving $6 billion back to people, or businesses
Ms. Isabelle Doucet: There are funds for
emergency projects and classes that, as I said
a while ago, are really laughing about our
intelligence and capabilities. So somewhere there
The Vice-Chair (Mr. Nick Discepola): Where are
you going to get the money from if you're saying the
first thing to do is return the $6 billion?
Ms. Isabelle Doucet: I'm not saying you should
return the $6 billion. You can't quote me as saying
that. I'm saying there needs to be—
The Vice-Chair (Mr. Nick Discepola): I wasn't
quoting you; I was quoting members of the
Ms. Isabelle Doucet: Okay.
Mrs. Elsie Wayne: I want to clarify something. We
said there should be an independent commission that
looks at this funding because it gets the politics out
of it. Nick, you know and I know—we've been around
long enough to know—that just as soon as we say we're
going to give some money for something, whether it's
training or this or that, the next thing you know,
somebody who's contributed to the party that's been
governing wants to do the training. So whether or not
they can do the training, they get the grant anyway.
This is what you need to have. That money is there.
We're at a crossroads in our society right now. You've
seen it here. Right here today, when it comes to
education, health care, and social justice, we all know
The Vice-Chair (Mr. Nick Discepola): But Mr.
Ritz has said he wants to see less government
intervention, less bureaucracy. You're not going to
create a new “independent” bureaucracy with a new
administration. You'll need to have—
Mrs. Elsie Wayne: Their money stays in general
The Vice-Chair (Mr. Nick Discepola): No, no,
you said “independent”, Elsie.
Mrs. Elsie Wayne: No, it's an independent
commission. We're saying—
The Vice-Chair (Mr. Nick Discepola): So then,
they can't go to general revenues—
Mrs. Elsie Wayne: No, no, no. It's an independent
commission, but they have control over—
The Vice-Chair (Mr. Nick Discepola): You
Mrs. Elsie Wayne: You and I will have a cup of
coffee later anyway—
The Vice-Chair (Mr. Nick Discepola): Talk to
the Auditor General. If you want independence, then
they can't be included in general revenues.
Mrs. Elsie Wayne: No, he's already said that—
The Vice-Chair (Mr. Nick Discepola): No.
Mrs. Elsie Wayne: —you have to have it in an
independent account. It's an account.
The Vice-Chair (Mr. Nick Discepola): Are there
any comments? Otherwise, we'll adjourn. If you have
any last-minute comments, I'd welcome them at this
stage. If not, I'd like to thank—
Dr. Jack Vanderlind: I have perhaps a slightly
snide comment. Realizing that much of the federal
deficit came from surpluses on the employment insurance
fund, think of what a cash cow it would be if we could
put 97% of our workforce into employment. That's
roughly what education is doing for them. So I think
it would be an excellent investment.
The Vice-Chair (Mr. Nick Discepola): You have
to look at last year's budget. With the means we had, I
think it was called an education budget. I can give
you many examples. You yourself cited the R and D.
We gave $2.5 million in scholarships, which will
help.... It was a
good step, and I hear the message loud and clear.
Prof. John Thompson: I have just one additional
point, going back to your earlier remarks. Our hope, I
guess, is that the federal government will not allow
the difficulty in getting the provinces to agree to
particular arrangements to be an excuse to then do
nothing. The federal government should act in these
The Vice-Chair (Mr. Nick Discepola): We did.
The best example was the millennium fund. Because the
Province of Quebec would always, I guess, claim we were
impinging on provincial jurisdiction, we made it as an
independent body, which then circumvented the
possibility of a little constitutional problem the
Quebec government would have alluded to.
So we have. And I think that's a very clear message
also, that there are priorities, and to quote the
Minister of Finance, “come hell or high water” we've
got to address those priorities with or without the
cooperation of the provinces. But we live in a
federation, and you have to cooperate.
Prof. John Thompson: Indeed.
The Vice-Chair (Mr. Nick Discepola): As the
Canadian government, we can't unilaterally.... The
best example, I think, was the child care program,
where we made the mistake—and I say that as a
politician—of having that program be contingent upon
participation from the provincial government. So we
already dealt with provinces that didn't want to come
So you see, there has to be a dialogue; there has to
be communication. And the best, I guess, reassurance
we have is that out of the Saskatoon declaration,
to paraphrase the Calgary declaration, there seems
to be a unified voice amongst the premiers to rework
social unions for the benefit of all Canadians.
Even the premier of our province stated anything that's
earmarked for any particular thing should go to that
particular sector, whether it's education or not.
That's a great step. He's never admitted that in the
[Editor's Note: Inaudible]
The Vice-Chair (Mr. Nick Discepola): Well,
they've always opted for their opting out or their own
parallel program. That's my fear when you try to
establish an independent body for unemployment
insurance, for example, because you'd have to have
representation from the provinces, big business, small
business, the union, the labour movement—all of a
sudden you've created another bureaucracy.
And God forbid if that ever happened to my province.
You know what would happen. Quebec would opt out, like
they did with the Canada Pension Plan. And then you
have some demagogue, like a Parizeau, on the eve of a
referendum, claiming to usurp the $19 billion to
So there's not very much reassurance from me, as a
Quebec member, that I'd ever trust any provincial
government for an independent body. But I'm getting
off the track again.
Ms. Isabelle Doucet: This is a final comment. I'd like you, as
members, to take up the challenge of looking at the issue of
poverty and to go and meet the people who are experiencing hunger,
cold and debt.
The Vice-Chair (Mr. Nick Discepola): I admit that this is
probably one of our greatest shortcomings as a society,
particularly when it is claimed that our society is supposedly the
best in the world. We have a lot of work to do in this area.
Thank you very much.
Thank you for your insightful representations on behalf of your
regions. Our challenge, as members of Parliament, is
to put all this down in a report and prioritize what
we've heard throughout the country so that our
government can make a better informed decision as to
echoing the priorities of Canadians in the next budget.
To that end, I want to thank the committee
members and also the staff.
In the past five years, the Minister of Finance has
maybe not necessarily heeded on 100% of the
recommendations, but I
would say that our batting average is almost .600 or
.700. What you've recommended certainly doesn't fall on
deaf ears. It's reflected in the report, and it will be
out hopefully by mid-December, in time for the
Minister of Finance to then read it and regurgitate it
and massage it for his ultimate consumption as it will
be echoed in the budget in February 1999.
Thank you once again.
We will suspend until 3 p.m., or until the next
The Vice-Chair (Mr. Nick Discepola): Good
afternoon. We are now resuming the
prebudget consultation process, in accordance with this
committee's mandate under Standing Orders 108(2) and
At this time I'd like to welcome witnesses from the
New Brunswick Chamber of Commerce and in particular
Bill McMackin; from the New Brunswick Student Alliance,
Anthony Knight—welcome, Anthony; from the Newfoundland
and Labrador School Board Association, Myrle Vokey; and
from the Saint John Board of Trade, Linda
Forestell—but I think Michael Murphy is going to be
presenting—and Mr. Smith. Welcome
The format is that we hear from each of you, with roughly
five to ten minutes for your presentations. Then we
will open it up to questions from the members of
Parliament. If there is someone who would like to
volunteer, I'll choose that person; if not, then I'll
go alphabetically with the list.
Mr. Bill McMackin (President, New Brunswick Chamber
of Commerce): Thank you very much for giving
us the opportunity to be here today. This is the third
opportunity I've had to speak to this group, three
or four years running. I think it's always important
for you guys to hear from your customers, maybe even a
little more than once a year.
I'm here in my capacity
as president of the New Brunswick Chamber of Commerce,
which works with the local chambers and boards to work on
federal, provincial, and regional issues on behalf
of our members, almost 6,000 businesses in the province
of New Brunswick.
Earlier in the summer, in June or July, I wrote a
submission that responded to your four questions. To
preface those, a lot of things have changed since July,
at least on the world financial and economic front.
We've seen a lot of turmoil, and I think some of the
great expectations of huge surpluses have been dampened
a little bit since then.
I would also preface my
comments by saying that most of what I have to say here
is a cautious, prudent, stay-the-course approach, and
I would recommend that we continue on that path because
to do otherwise would probably just result in
short-term gain for long-term pain.
With that, I would like to respond to the four
questions that were posed prior to these hearings.
The first one was,
with the budget balanced, what message do we want to
send to the government with respect to priorities for
the fiscal dividend?
It is our opinion that the dividend has been achieved
as a result of mainly a period of high taxes and
somewhat reduced government services. Yet although
spending has been restrained, we're not sure that
spending has been cut into deeply in all areas.
The dividend also depends greatly on a lot of factors
that are outside the federal government's control,
whether it's the dollar, interest rates, and so on, and
the current world situation accentuates how that can be
negatively impacted quite quickly without us being able
to do much about it. We live with a large level of
debt and are vulnerable to these factors because of
Therefore, the New Brunswick chamber strongly suggests
that restraint must continue, that we should have a
strong emphasis on fine-tuning government expenditures,
reducing them where appropriate, reducing duplication
from federal and provincial levels of government, and
focusing those savings and what surpluses we have on
debt reduction. That would be our biggest
priority at this point, to continue to work on debt
reduction areas for the federal government.
As well, and with that in mind, I think everybody in
Canada recognizes we're very highly taxed, and as the
debt begins to be pared down over the next number of
years, there's a need to relieve taxes on really all
Canadians, but specifically those probably at some of
the lower income levels and small business. We've been
working for a while at looking at ways that taxes could
be reduced on small business, specifically looking at
the small business deduction as one way to improve the
growth opportunities for business, at least in our
Lastly, I think what our members have
said is once we've gotten to the point where we've
reduced some debt and we've had an opportunity to perhaps
reduce some taxes, the priorities are fairly clear for
where Canadians want their money spent. They want it
focused into the areas of health and probably some
basic infrastructure improvements. The message
is quite clear to the federal government: start to
focus more clearly on your priorities in those areas.
So in a one, two, three order, it's debt reduction, tax
decreases, and looking at some minimal spending in the
future, when we can afford it, on health and
The other question I respond to is how we can prepare
Canadians to take advantage of the opportunities offered
in this new era. I think the government made a few efforts
last year in the budget to provide
opportunities for higher education. It was billed as
the education budget, and a number of changes were made.
I think those were positive in the sense that they did
provide for some education opportunities. But my
belief is the government has to stop feeling that it
can take a role in every aspect of our lives.
Canadians seem to have boiled down their desires to
having a strong education system and a strong health
care system, and we will continue to help those in need
in this country who can't necessarily help themselves.
We want a strong public infrastructure, and we want
reduced debt so we can hopefully stop being taxed to
death. I think those are the priorities that, if we
focused in on those, will provide the best
opportunities for Canadians into the future.
The last one was, what's the best way the government
can ensure there's a wide range of job opportunities in
the new economy?
I think it has been the chamber's stated position for
a lot of years that ultimately it's the private sector
that creates jobs. As long as the government continues
to manage their situation a little better than past
years, to eliminate the deficit, which at this point
has been done, but to reduce debt and reduce the impact
of taxes on our lives, Canadians will create jobs for
themselves in some cases, but business and the economy
will prosper in a way that will create opportunities
So once again we come back to this: a reduced level of
debt, which will attract business investment into
Canada; reduce personal income taxes so people who are
earning some wages today can get to keep a little more
of them; reduce small business taxes so businesses can
expand and grow and use a little bit of their equity to
leverage it and hopefully to grow their businesses; and
begin to start looking at EI and other premiums that
are really having a negative impact on job creation,
and start to reduce those premiums to a level that's
more reflective of the cost of providing those
services. Then I think what will happen is, if we let
the private sector go to work, the jobs will be
created, and I think we're starting to see that they
are if we keep focusing on those fundamental areas.
Those thoughts were really put together to try to
address your four questions. It's very much summed up
by saying let's continue to manage in a prudent sense, to
focus in on the debt reduction and tax decreases that
we hope are in our future, and for you folks in the
federal government to focus even better your
priorities on things that really matter to Canadians.
If we do those things, I think a lot of the rest of the
challenges we face will start to fall in line.
The Vice-Chair (Mr. Nick Discepola): Thank you,
Bill. That was very clear and concise. It's not the
quantity; it's always the quality, and I thank you for
your explanations. You'll get a chance to elaborate
more on an awful lot of those points as we turn to
Mr. Knight, please.
Mr. Anthony Knight (President, New Brunswick
Student Alliance): Thank you, Mr. Chairman.
I'm here to represent the organization that represents
all university students in the province of New
Brunswick. That's at all seven campuses here in the
province. We're actually the only student group that
represents all the provincial student associations in
In our submission, our major centrepiece was based
upon the need to address the literacy problem in the
country, and we feel that the federal government can
play a significant role in addressing the literacy
problem faced by both this province and the rest of the
Our literacy initiative consists of two components.
One, it consists of something called the literacy
corps, which we believe addresses two major problems in at
least the maritime provinces. In the Maritimes,
students who graduate from programs where education
degrees are granted are entering the
labour market and are faced with a 22% unemployment
rate. Coupled with that, a recent survey of New
Brunswickers found that more than 60% of New
Brunswickers were classified as being below an
internationally accepted level of literacy.
We believe that by placing these teachers who are
faced with a desperate situation of unemployment in
communities where literacy centres could be
established, and pairing these unemployed teachers with
those who are upgrading their literacy skills, it will
allow for a clear and focused investment in New
Brunswickers and Canadians.
We also believe that once these individuals who are
upgrading their literacy skills have attained the
accepted level, government should encourage these
individuals to further pursue education, either by
obtaining a high school diploma, community college
certificate, or a university degree. We believe that by
doing that we are promoting both economic prosperity
and wellness for the individual.
The second component of our literacy initiative is
based on the idea that the federal government make
literacy a priority for the national government. We
believe it can do that by doing three things: first of
all, by setting a target for literacy levels among
Canadians and achieving that target, and then working
to exceed it; secondly, by instating a senior minister
in charge of the state of literacy in the country, one who
would have the political and policy influence in
cabinet, which would begin to address the literacy problem in this
country; thirdly, by increasing funding
from the federal government for the National
Literacy Secretariat—and the initiatives taken
on by the national secretariat should be better than
successful, they should be encouraged.
In addition to our literacy initiative,
we also believe that New Brunswick
universities are severely underfunded. We feel that
action needs to be taken through the Canada health and
social transfer. The federal government should
leave the envelope that is the Canada health and social
transfer alone and allow the provinces to divide that
envelope among health, education, and welfare.
We'd also encourage the federal government to continue
working toward a harmonized student loans program. We
feel there are considerable savings in working
towards that type of a goal. We also believe the
federal government has promised this for at least four
to five years, and we'd like, firstly, an update on
whether or not the federal government is going to act
on this promise.
We would also ask that the federal government begin to
review and also amend the federal bankruptcy
legislation that was instituted back in the spring,
which requires that students who have graduated from
university not have the ability to apply for
bankruptcy until ten years after graduation. We feel,
and we believe, that this legislation classifies
students in the same light as fraudulent criminals.
We'd ask that the federal government review the
legislation and hold public consultation on the
reasoning and the intention behind such legislation.
In addition, in our submission we also go into several
other areas. We believe the registered education savings plans
require further review. In addition to the program,
there are several areas that we believe could better
the program itself. First of all, we feel that the
overall program is targeted to a small portion of
Canadians, that too many people can't afford to put
away money in RESPs. We're not sure how that can be
addressed, but we feel that certainly the plan only
addresses a small portion of Canadians.
We'd also bring to the attention of the committee the
initiatives in the private sector, where pooled funds
are gathered. There are limitations for the families
who are saving to access that money should the young
person choose not to pursue a post-secondary education
that is recognized.
We'd also encourage the committee to look at the
opportunity of allowing catch-up payments for families
to help save for their children's education. This
would be much like the RRSPs that are available to all
We would further ask that the committee explore
opportunities to work with employers and businesses to
help their employees save for their children's
education and to match or to help work towards matching
savings for their children's education.
That's a basic summary of our
The Vice-Chair (Mr. Nick Discepola): Thank you for
those suggestions. They're quite nice. I'm following
some of them myself. Thank you.
Mr. Vokey. Welcome.
Dr. Myrle Vokey (Executive Director, Newfoundland
and Labrador School Board Association): Thank you, Mr.
Chair. Thank you for the invitation to come to this
wonderful province and make a presentation to your
The Newfoundland and Labrador School Board
Association represents all of the children in our
province from K to 12, and I'm speaking from that
perspective as well as for all of the other children in
Canada, especially the most vulnerable, who probably are not able
to speak for themselves.
Nine years ago, the House of Commons unanimously
passed a resolution—it was a noble but unachievable
goal to date—to eliminate child poverty
by the year 2000. Not only have we failed to reach
that goal, but the record shows that we're falling farther
In 1995, 21% of all Canadian children—1.5
million—lived in poverty, and the number of poor
children has increased by 58% during the intervening
years from 1989 to 1995.
In 1997, a couple of years later, our government
allocated $850 million to create an enriched and
simplified Canada child tax benefit plan, and in 1998
the budget approved an additional $850 million in two
steps, one in July 1999 of $425 million and another one
the following year, July 2000, of $425 million. While
this is encouraging, we contend that our efforts must
The United Nations has judged Canada to be the best
place to live in the world. However, this is true for
only some of our citizens. The United Nations
Committee on Economic, Social, and Cultural Rights
produced a set of priority concerns, which will be asked
during the third periodic report on Canada. They had
very specific questions related to food security
for both the federal and provincial governments.
In my province, for example, they were specifically
concerned about the right to food for Newfoundland
residents, considering that the cost of food in our
province is 84% of the social assistance rates.
Federal budgetary decisions have profound impacts at
every provincial level. In my province as well as
others, the new qualification periods of EI mean that
many people now must resort to social assistance when
they no longer qualify for EI. Here in eastern Canada
we're certainly very much aware of the cod fishery
decline and the impact that has had on unemployment and the
need for social assistance.
In my province again—and I'm speaking from that
perspective—over 18% of families, representing
the children in our province, are below the poverty
line. Indeed, the average poor household in
Newfoundland would need an extra $5,300 to bring it up
to the poverty line in my particular province. I
suspect there would be similar statistics from other
provinces as well.
We just had a royal commission on education in
Newfoundland. I would like to read one quotation
from it. It follows:
When children are not adequately fed, they miss
valuable instruction time. They fail to keep up with
their school work and are very likely to drop out of
school early. Whatever the cause of the hunger, it
will affect children's health and educational
achievement in the short term and their economic
security in the long term.
Another statistic is that in March 1989 in our
country, 329,000 people used local food banks, and in
March 1997, eight years later, that number had doubled
to 669,000. The highest rates, by the way, were again
in Newfoundland, where 47% of those assisted were
Let me make a few comments on the hunger and learning
connection and absenteeism. Children who have
insufficient or no food between their evening meal and
lunch the following day have actually fasted for about 18
hours. The body of a normal child
responds to this type of fasting by a drop in
blood sugar, resulting in a
decrease in energy. Protein is
required in the diet to retain desirable blood
sugar levels, which in turn
facilitates alertness. Alertness,
as we all know, is essential for learning.
In my presentation to you in written fashion, sir,
there are many statistics that I will, in the essence
of time, omit. I will refer to just
one study for illustration purposes.
A study conducted in the U.S. over a 20-year period
examined the effects of missing breakfast. The
research demonstrated that breakfast improves
children's academic performance, and the negative
effects of no breakfast or fasting conditions were
shown in relationship to arithmetic performance,
reading ability, emotional behaviour, and overall
late-morning problem solving.
In addition to not being able to learn, poverty
and child hunger affects attendance. We all know that
malnutrition affects children's learning and
behavioural functions, and the compromised immune
system of undernourished children causes them to have
difficulty fighting infection. Therefore, they are
more likely to become sick and tend to miss school, and
hence fall behind in their work.
I know statistics are disturbing and boring, perhaps,
but the faces of despair and the voices of depression
are even more disturbing. Let me give you a couple of
quotations from a report, which is not yet published
but is contained in my submission to you.
This is the story of Annie, who has two children in
Annie and her two children are on social
assistance. In 1997 she and her two children got by on
exactly $9,576. Stats Canada figures show the national
poverty line for a three-person household stands at
$26,637. Last year she had to pay roughly $700 out of
her money toward the electric bill. “It's either
you starve and you keep warm, or you freeze to
death and you eat. That's your choice, one or the
other.” Annie's girls never go to school hungry. On
days she can't afford lunches, she keeps them home.
One other quotation is from a married couple working on minimum
wage, with three dependants:
Now we are living below the poverty line and I'm
ashamed to even say we have to go a food bank. But what
else can we do? Three children are a lot to feed, you
know. When we get our cheques we try to buy meats.
Mom helps out by giving us some vegetables. Most of
the food we get at the food bank is in cans. You know,
soup, wax beans, ravioli, stuff like that. I can't say
that it's nutritious, but it helps when you are hungry.
We reckon the government faces a myriad of needs of
Canadians from coast to coast, and the cost of
providing programming to feed hungry children is
considerable, but we point out strongly that the cost
of not intervening is very much higher.
Further, my friend just speaking spoke about literacy,
and I have a quotation here on that. In an
international literacy survey that was conducted in
1994 throughout Canada, it was shown that almost half
of Canadians lacked the literacy skills necessary to
comprehend a bus schedule.
When I was preparing this report on Thursday past,
there was an editorial in our paper back home; it's
attached to this submission. The title of the
editorial of Thursday, October 15, says “A Third World
in Canada's Backyard.”
One of the quotations says “The living conditions
of Canada's natives”—and I'm just referring to
that because it's in the editorial here, although it is
a very important part of our concern—“are on a par
with the poor of Ukraine, Venezuela, Panama or
Poland.” In our opinion, speaking from the
Labrador perspective, that is not an exaggeration.
Society will eventually bear the cost of these
children who, because of poverty and undernutrition,
are denied equal opportunities in education. The only
question is when we will bear the cost. Do we pay now
for intervention and prevention, or do we pay to deal
with the inevitable results? While poverty and hunger
may often remain a hidden problem, the consequences are
frequently painfully obvious. We can only ignore these
problems at an even greater cost, the cost of
We have two recommendations for your committee to
consider, sir. One pertains to money, and I think the
other one is equally important, if not more so.
It doesn't pertain to money, it pertains to planning.
I'll read both recommendations to you and that will be
the conclusion of my address.
We strongly recommend that the federal government
allocate an additional $425 million to the national
child benefit for 1999 in the 1999 federal budget, along
with a similar amount in the year 2000, thereby
doubling government's commitment to addressing this
As our second recommendation, we strongly urge that
the Government of Canada set out a strategic plan and
set clear goals on how we can proceed to meet the
target outlined in the House of Commons resolution of
nine years ago. In the development of a comprehensive
plan of action that would involve research and program
components, we would expect and urge that the federal
government partner with respective groups in our
society, including school boards, to implement and
deliver the much needed assistance to these children,
the most vulnerable of our Canadian society. If we all
work together and are successful in achieving our
objective, it will be a win-win situation. If we fail
to do so, all Canadians will be the losers, especially
the potential leaders and productive citizens of
Thank you for the opportunity to make those comments
The Vice-Chair (Mr. Nick Discepola): Thank you, Mr.
I'd like to now turn to Mr. Murphy or Mr. Smith.
Mr. Gary Smith (Vice-President, Saint John Board of
Trade): Thank you, Mr. Chairman.
Good afternoon, ladies and gentlemen. My name is Gary
Smith. I'm the vice-president of the Saint John Board
of Trade. I'm sitting in for our president, Linda
Forestell, who was unable to be
here this afternoon. I also have with me Michael
Murphy, who is chair of the board's pre-budget task
We have attended the pre-budget round tables held in
Fredericton for the past several years, and we are very
pleased to be here again today. The Saint John Board
of Trade welcomes the opportunity to present our views
regarding the development of the upcoming federal
The Saint John Board of Trade is greater Saint John's
largest business organization, a partnership of more
than 900 businessmen and women representing more than
600 firms and organizations in the community. It
serves as a dynamic advocate for its members on a wide
variety of issues, and works to encourage the economic
development potential of the Saint John region. The
Saint John Board of Trade's mission is to be the
principal voice for the businesses in greater Saint
John, and it is dedicated to fostering an economic
climate that enhances growth, prosperity, and an
improved quality of life in the community. It has
represented the business community of the greater Saint
John region since its establishment in 1819, and has
members from throughout the region and beyond.
Before we provide you with our views, we would like to
discuss the definition of “small business”. When
small business is mentioned, one normally thinks of a
company with fifty or more employees and with revenues
in the order of $5 million annually. This is not the
norm in Atlantic Canada, and it's certainly not the
norm for our members. What we're really talking about
in New Brunswick and in Atlantic Canada is
micro-business. When you are developing your
recommendations for the next federal budget, we hope
you will keep this concept in mind. To amplify this
concept, it is instructive to consider that 65% of the
members of the Saint John Board of Trade, the region's
largest business organization, employ fewer than thirty
people. Our views, then, embody what we believe is
best for those very small micro-businesses.
The essence of our submission today is contained in
our July letter that was submitted during the call for
written input at that time. I will now ask Michael
Murphy, who is with the Bank of Montreal and who
chaired our pre-budget task force that prepared the
board's July letter, to briefly review it for you.
Mr. Michael Murphy (Chairman, Pre-Budget Task
Force, Saint John Board of Trade): Thank you, Gary.
Mr. Chairman, honourable members, in a letter written to you
in July 1998 we mentioned that “any surplus should be
dealt with carefully, as many factors which contribute
to the `dividend' are not controllable.” Factors
mentioned then included the potential for rising
interest rates, and the economic effects of the ongoing
Asian flu, causing us to say that restraint must
continue. We strongly suggested a continued emphasis
on productivity improvements, along with the continued
focus on reducing duplication between federal and
provincial levels of government. As well, we also
indicated that reducing the debt should continue to be
the government's first priority, and that if there was
a fiscal dividend, some portion of that dividend must
be put toward the debt. These continue to be our first
The global turbulence in financial markets since July
has, in our view, jeopardized the possibility of a
fiscal dividend. In Atlantic Canada, our economy is
often the last to heat up when things are good for the
rest of the nation, and we tend to be the first to cool
down when problems arise. All these things together
make it even more urgent, in our view, that we stay the
However, should there be any surplus, we mentioned in
our July letter a number of matters that we believe
would help our small
micro-businesses here in New Brunswick and Atlantic
Canada. We believe it is vitally important to reduce
small-business taxes and to cap the accumulating
surplus in the EI fund, returning any surplus in excess
of that cap to both business and to their employees in
the form of lower premiums.
In addition, we believe Canadian taxpayers have made
huge sacrifices in the past several years in order to
get us where we are today. That burden should be
relieved. Both corporate and personal taxes should be
Finally, we said that any increases in program funding
should be applied to health care and infrastructure.
On these items we have not changed our view should
there be any surplus with which to work.
In closing, we leave you with this thought: In
September we participated as host to the 69th annual
general meeting of the Canadian Chamber of Commerce,
held here in Saint John. In addressing the
delegates at the opening ceremonies, Prime Minister
Jean Chrétien's main message was to stay the course.
Subsequent to his remarks, the delegates debated a
number of resolutions, including dealing with the
national debt, the EI fund, and corporate and personal
tax relief, and resoundingly supported the points we've
just made to you here today. Those resolutions are now
the official policy of the Canadian Chamber of
Commerce, and you will no doubt be hearing a similar
message from them on these same points in the very near
future. Just remember that you heard it here first.
Thank you for the opportunity to be here today, and we
would be pleased to answer any questions you may have.
The Vice-Chair (Mr. Nick Discepola): Thank you,
I'd like to now call upon Mrs. Wayne to open up the
Mrs. Elsie Wayne: I do have questions, Michael,
but I'm going to put my questions to Gary or Bill,
because I know where you work. You work for the bank.
I want to ask them about bank mergers.
What do you see as the effect the bank mergers will
have on independent insurance brokers and car dealers
if the banks are able to get into the insurance and
auto leasing businesses, as they wish?
The Vice-Chair (Mr. Nick Discepola): We're
going to have a problem here, Mrs. Wayne, because the
current reference is to hold hearings on pre-budget
Mrs. Elsie Wayne: Okay, so you don't believe it
The Vice-Chair (Mr. Nick Discepola): No, but after
these witnesses we will hold hearings on the task
force. I know you have to leave, so my problem would
be how to get their testimony in for the other one.
Mrs. Elsie Wayne: Okay, I'll ask another question.
You just heard from Mr. Vokey, a
representative from Newfoundland. As business people,
how do you see us addressing those major concerns? We
don't have problems to the depth they have them in St.
John's and other parts of Newfoundland, but we do have
problems here as well. I don't think there's any one
of you sitting who wants to see a child go hungry, but
what he has stated has an effect on your health care
system, your educational system, on all of the systems,
if you like, because those who can't learn may become a
burden on society.
What do you see that we should do with that—any one of
Mr. Gary Smith: If I could start off, Mrs.
Wayne, I believe all businesses have some
responsibility to deal with the issue of poverty, and I
believe here in Saint John we currently have a very
significant number of business people involved in that
process, trying to address the issue of poverty in our
I personally have been involved in some of the
meetings. There's no easy answer to that. However,
through the process and by sitting down and addressing
the very significant issues around poverty, I believe
there are results, and we can't always rely on the
government to come to bat in terms of resolving those
So I think it's incumbent upon the
business community, and certainly one of the areas
I have an interest in is to be involved in that
particular issue. As we go forward, I believe we
will resolve some of the issues, possibly not all of
them, but business has to be there.
Mrs. Elsie Wayne: You will
recall that at one time in our city we had a
substantial debt. And do you recall—and I say this
humbly—when I came before you people I told you
people at the board of trade and others that I had
three presentations made to me by my commissioner of
finance to eliminate the debt. I asked him to tell me
the impact on all of the workers and on the community
of doing it in five years, and then to give me one for
eight years, and then one for ten years.
You will recall, Gary, when I looked at the five-year
one, it was slash, burn, and cut, just like we've been
doing up in Ottawa. The impact was so negative on this
community and on those people out there that I wouldn't
do it. So we did it over a longer period of time. And
you can balance that out when you take the human
dimension into consideration, and as businessmen.... I
have major concerns. I really do. I've listened to
this, gentlemen, and I have major concerns.
Mr. Bill McMackin: I should respond as well.
I guess you've posed the question to both of us.
With respect to the timeframe we've been working on,
the financial situation of Ottawa, I see it going back
probably to 1982 or 1983, which means we've probably
been working on it fifteen years, more so than just the
last two or three. So probably we have spread that
over as much of the last number of years as we can
possibly prepare to stomach.
But dealing with the specific question about
the poverty issues and many of those challenges, as a
starting point, I think one of the things we have to
face in this country is that a lot of the people who
are making very, very low wages are
also being taxed very heavily. To start with, if
they could get to keep a little bit more of what they
earn, they'd be one heck of a lot better off.
Mrs. Elsie Wayne: So you'd like the insurance
premium surplus to go back, and we'd cut the premiums
for employees and employers?
Mr. Bill McMackin: I think we have to
recognize that right now the EI premiums are going into
general revenue, which means they're going to pay for a
whole bunch of other things first, so it's going to take
a while before we can fix some of those problems over
the next bit.
If we're going to look at tax decreases for people
over the next little while, I'd like to think everybody
in Canada could benefit from them—but that's probably
a bit of a fantasy—and that some of the people at some
of our lowest income scales at this point,
people who are making and trying to make a living on a
basic living wage or minimum wage jobs because that's
what they can get right now, deserve to keep every penny
they can get their paws on. They need it to pay their
heat and to buy their food, and we need to
lower the taxes at those places as much as possible.
For the business people, the benefit is
that at least those people are going to need it;
they're going to spend it; they're going to go out into
the community and generate some activity out of it
because they need to live off it.
The Vice-Chair (Mr. Nick Discepola): To
play devil's advocate here, I think what Mrs. Wayne is
saying is that for the past four or five years we've
heard the business community say your focus
has to be eliminating the deficit.
No sooner do we eliminate the deficit than now we hear
the same community, three out of five here, say your
focus has to be the debt.
That's your first priority.
priority is tax reduction, and then everything else
seems to be, well, after you've done that, we wish you
luck and maybe you can attack what Mr. Vokey is saying,
child poverty, and what others have been saying, health
and social programs.
I'm playing devil's advocate here, but what's the
benefit to Atlantic Canadians if we solely focus our
effort on debt reduction, for example, as your
recommendation? How does it benefit Atlantic
Mr. Bill McMackin: At this point, and correct me if
I'm wrong, 25% to 30% of our expenditures
annually go into debt service.
The Vice-Chair (Mr. Nick Discepola): It's 27¢
of every dollar.
Mr. Bill McMackin: That's 27%, so I
wasn't far off.
The Vice-Chair (Mr. Nick Discepola): You're
Mr. Bill McMackin: It's like me managing my
household. Over the long term, if I can't get my wages
up right off the bat, if I can't earn more money, one
of the best ways I can help put more money in my
pocket, if I have some, is to try to eliminate some of
my mortgage costs and reduce some of those
interest-carrying charges, or consolidate some of those
We've gone beyond what we can afford right now in
terms of our overall spending. If over the next number
of years we can pare the debt down to some extent,
allow inflation to reduce it as a proportion of GDP and
a proportion of our overall budget, those debt service
costs, it will free up some additional money for other
initiatives in the long run.
What are the long-term easy answers? I don't know.
You guys got us into this mess, and you guys have to
get us out. You have to make some of the tough
decisions about how we reduce the debt in the short term
to try to help out all the people who need it.
The Vice-Chair (Mr. Nick Discepola): But to use
your analogy, what you're saying now.... You're a
small-business person, like I was,
and am, maybe. It's okay to
have a working line of credit. It's okay to have a loan
with your bank, as long as you can still make profits
and meet your repayment criteria. It's okay to have a
mortgage, as long as you can pay that mortgage monthly
and religiously so your bank manager doesn't come. But
why is it that now we must focus on paying down the
mortgage more than we have to, at the expense of maybe
providing an inferior quality of life for our family
members, for example, to paraphrase you? When does
the time come when the business community is going to
say all right, the proper balance is achieved?
It seems to me, just like yesterday, all of a sudden
the deficit was a priority, which we agree. And
personally I think I share an awful lot of your
comments, because I am a small-business person, I have
four children, and I know the costs associated with
everything. The first thing I tell my children is pay
down your credit card balances, because that costs you
19%. And I tell them if you have a mortgage, pay down
the mortgage, because that saves you net, after tax, 9%
or 10%, which is like 18% invested anywhere else.
It seems to me now we've come to a crossroads in our
country where we have to start looking at a more
Where is that balance
we're trying to look for? As per your recommendations,
should all our efforts and all our surpluses be geared
directly to reducing the debt load and the debt, or
should we now take some time and say maybe our priority
should be reinvestment in child poverty and health care
and in other social programs?
Mrs. Elsie Wayne: I'm so glad you
jumped on board with me.
Dr. Myrle Vokey: I hope you read my report, because
it was put together by other members. One sentence that I
didn't read is
“In addressing this very urgent challenge
for our Canadian society, [we are] of the opinion that we are
at the cross-roads of decision-making”.
That just quotes you there.
First of all, as I listen I think
of the balance. It's like the man up by the wall
trying to stop the leaks coming out and reaching either
I suppose we had to make a choice either to try
to reduce the debt now, as my friends are saying, to
release some money from our overburdened tax dollar,
27%, so that we can put more money into health further
down the road and to education and children,
take that balancing act, or we can take less of the
debt-load reduction and put it into preventive and
remediation work right now and deal with children.
Let me make one more comment. I mentioned the
two resolutions here. Certainly the one of money is
important, but throwing money at the problem and
feeding children, as important as that might be, is not
the answer either. It has to be planning at the
community level, at the provincial level, and at the
federal level. We have to involve business. We have
to involve educators and parents. It's an education
program and it has to start now. And it has to be a
collaborative, cooperative, well-planned and strategized
The Vice-Chair (Mr. Nick Discepola): Could you
elaborate on that? In Newfoundland I asked the
same question, and a lot of people said it's not
just a question of throwing more money.
Dr. Myrle Vokey: That's right.
The Vice-Chair (Mr. Nick Discepola): It may not
solve the problem, frankly. You'll throw good money
after bad, or it's like maybe throwing a penny in a
lake: it's just a ripple effect and nothing comes of
You've made a good recommendation here, which is
that we should elaborate a strategic plan. I think we
have the wherewithal within Canada to elaborate that
plan, but how do we go about bringing together all the parties
involved so that we can come with a concrete commitment
and solve the problem? I'd like to complete the thing
once and for all. I don't think we'll ever be able to,
but at least we might address the problem in a concrete
We introduced $850 million, as you outlined, and we doubled
that to another $850 million. We're hoping the
provinces come on board. You're saying another $425
million. Will it all help until we see a concrete
plan and work, all of us, towards it? That's what I
Dr. Myrle Vokey: I don't have a plan in my mind.
I don't think anybody does right now. But in our
committee at the provincial level in Newfoundland—I'm
going to use that as an example—we at our last meeting
decided to incorporate businesses in our towns and
communities in this province. And by the way, the
businesses are there and ready, willing, and able to
help out as much as they can.
You have parents' councils, you have
municipalities, you have all sorts of organizations
that can join the fight, and education I think is a
big part. A lot of parents, single parents and
two-parent families, are in my opinion very anxious to
help their children if they had the wherewithal and the
knowledge to be able to provide nutritious lunches, to
be able to be educated into the propriety and the
importance of nutrition.
Right now our parents and our adults who are caring
for children are hanging on by their fingernails.
They're following the line of least resistance. We see
thousands of children come to school with a bottle of
pop and their bag of chips. School boards are having
canteens with that kind of stuff in it because if they
don't do it there's going to be a confectionery store
right across the road that's going to make the bucks in
place of the children spending the money.
It's heartbreaking to see the sparse dollars not being
utilized as effectively as they can be. So it's
education, it's planning, it's communities, it's
municipalities, it's parents, it's school councils,
it's school boards, and these are the people who are
going to have to work together to attack this problem.
Mrs. Elsie Wayne: Mr. Chairman, a few months ago,
right here in Saint John at Romero House
one of our retired bank managers brought
together our business community and ourselves. There
were representatives locally, myself, and
others. They broke us into different
groups and we came back with priorities on what we
thought should be done, what needed to be done, and the
urgency of these being addressed and so on.
These committees are ongoing. Some of the men
sitting at this table tonight are still involved with
it. It is working. They can tell you about that,
Dr. Vokey, before you leave.
I think what bothers me, Mr. Chairman, is I
have never seen—and I can only refer to our area—so
many children who are going hungry. I have never seen
so many in food banks before, particularly right here.
I have never seen it. I don't know why it is this
When you talk about illiteracy and literacy, I want to
know from this young man what is wrong with the system
that when you graduate from high school you're not
literate, because you should be in every way. So
what's wrong with the system? There has to be
something wrong with the system.
Mr. Anthony Knight: Having already gone through the
system, I think it's dated. I don't think it responds
to the expectations of our business people, of the
people who are going to provide opportunities for the
young people who graduate and go into the workforce
looking for opportunities. I think the partnership
that we've all talked about so far is needed in
structuring a curriculum that helps to prepare the
Mrs. Elsie Wayne: Anthony, could it be because
the computer does the spelling these days instead of
the child? I see that with my two
Glory be to God, we had to spell it ourselves, by God.
And we learned how to spell, and we learned how to
write, and we learned how to speak, and so on, and
composition was another thing. But the computer does
it for them. They don't know a thing when they're
through. It's something I have to tell you, and it's
going to be a very controversial one.
I don't have a problem with controversy, so I'd take
that one up any time when it comes to the computers.
It wouldn't bother me one bit, because something has to
be done. We have young people going through our
school systems who are not fluent when they come out.
And I mean that, they are not. When it comes to
literacy, it is a shame. I interviewed young
people to work for me, and after I asked them to write a
letter I can tell you four out of five didn't get the
Mr. Anthony Knight: That's why what we've always
recommended is that we.... Back in the 1950s, at least
so I'm told—
Mrs. Elsie Wayne: You weren't around then, but we
Mr. Anthony Knight: Not at all yet. But we made grade
12 the generally accepted level of education that
everybody should have.
Mrs. Elsie Wayne: It was equal to anything
you have today when it comes to a BA.
Mr. Anthony Knight: That's what you had to have.
Now we have to at least make the first two years of a
program after high school as accepted as grade 12 was
back in the 1950s.
Mrs. Elsie Wayne: Right.
Mr. Anthony Knight: We have to move on. That was
a long time ago when we said that, and I think we have
to begin to change that idea of what is accepted as our
accepted level of education. I think our business
people are saying, from my experience anyway, that we
don't have the skilled workforce. We have one of the
lowest percentages of university graduates in our workforce
in the province of New Brunswick, compared with
the rest of the country.
Why is that? I don't think it's because of the brain
drain. I think it's because we're not making
post-secondary opportunities after high school as
available to our young people, and that's because of
the costs of education. That's because of the perception
of what an education is within the family, and whether
or not they can save for it, and whether or not they
feel it is for them. And there's a perception problem
among New Brunswickers about what an education will do
for them, and whether or not it's something that's
available for them.
I think our government has a role, and so does our
community, not just our business but our community
groups and our parents and our students, in
changing that perception.
The Vice-Chair (Mr. Nick Discepola): Thank you,
I think you also have to touch on the
drop-out rates. There's a tremendously high
percentage of students dropping out.
Dr. Myrle Vokey: I'd like to make a suggestion to
you, and this is personal, not representative of my
I've been in education all my life, with teachers'
organizations, school boards, and so on, and we've met
before at other functions. But it's been long a
wonderment to me why we don't have a national office of
education. This is a personal thing here. I think
we're the only country in the free-speaking world
without a national office of education.
I know it's a provincial jurisdiction, but we also
know that at the post-secondary level, with language
education and so on, the federal government puts a lot
of resources into education at the provincial level.
And in partial answer to the question of strategizing
and preparing to spend our dollars wisely on poverty
and children—if we do put money into that, and I know
we are, and hopefully we will find even more resources
to put in—I would suggest that part of the strategy
would be a recognition of the fact that our federal
government does have a role to play in the education of
our children, and of our adults as well, and that we
put some structure and some organization at the federal
level to harness, to coordinate, and to
collaborate with the provinces on the delivery.
That's a personal comment. I always believed that,
in my career in education.
The Vice-Chair (Mr. Nick Discepola): Thank you
very much, Mr. Vokey.
Anyone else? Mr. Smith.
Mr. Gary Smith: I would like to elaborate a little bit on
your comments earlier about what you viewed as
business's preoccupation with reducing the debt.
The Vice-Chair (Mr. Nick Discepola): I have
another question on that, which I'd like you to answer
at the same time.
Mr. Gary Smith: Okay.
The Vice-Chair (Mr. Nick Discepola): I just want
to stay on this existing topic, if you don't mind, and
Mr. Gary Smith: I'll incorporate that, if I may.
The Vice-Chair (Mr. Nick Discepola): I'll ask my
Mr. Gary Smith: In terms of
establishing the balancing act that is necessary, I
think it's important to remember....
Certainly the boards of
trade and chambers of commerce throughout the country
represent small business, and yes, they are preoccupied
with ensuring that small business does prosper, because
small business is the largest employer in this country.
When you look at the fact we alluded to in our
presentation that small business in Atlantic
Canada is smaller than small business elsewhere in the
country, there are a lot of small businesses that are
burdened with excessive government costs, such as EI
So when you're looking at how do you balance this
thing, I think it's important to recognize that when
you're looking down the road, yes, reducing the debt is
very important. We expect the government to behave as
business does. No business wants to have excess debt
either. So there is a responsibility that goes with
reduction of debt—not at the expense of everything
else, not to the point where everything else is
There are a few things that can be done.
Obviously, if the incentives are there for small
business to expand and to grow, there are more
opportunities for jobs. If the proper educational
system is put in place, obviously there's more
incentive for employers to hire the right quality of
people, who actually do know how to spell.
The Vice-Chair (Mr. Nick Discepola): But what
we're saying is shouldn't business, who stands to
benefit from a well-trained labour force, also assume
some responsibility in the educating of that labour
Mr. Gary Smith: I do believe business, if properly
approached in an organized way, would definitely
partner in both the issues of education and poverty,
but it can't be a segmented approach. It's got to be
organized. As Mr. Vokey mentioned, maybe it does
require a special office or special commission to deal
with that, but what happens is we do it in a very
fragmented way. It might work in Saint John; it might
not happen anywhere else.
We don't have any national approach to involving
business in any of these issues. We'll continue to
parade about the national debt because....
The Vice-Chair (Mr. Nick Discepola): If I may play
devil's advocate again—and I don't want any of the
media quoting me on this—could it be done through a
special poverty tax to business that business would
voluntarily participate in? Obviously it's a question
of funding. Businesses can't get into the
administration of poverty programs, for example. Is
that what you're implying?
Mr. Gary Smith: I'm not suggesting a tax. I'm
suggesting that you need to get a process in place
where you get the interest groups together,
the stakeholders, and deal with the issue.
I believe business
would embrace a properly formatted approach to dealing
with poverty in this country.
The Vice-Chair (Mr. Nick Discepola): The reason I
bring that up as an example is because in my home province
of Quebec, last year I believe—correct me if I'm wrong
Richard—the government introduced a special tax
on payroll. A portion of it was specifically designed
for manpower training programs. It's a small, minute
percentage, but from the total salary paid out
each year by small business it amounted to quite a
bit. It is being criticized quite heavily. Yet the
government was well intentioned. We want to have a
better-trained and a more highly competitive labour
force; therefore, let's get some money and earmark it
for that. What we're saying is maybe to address some of the
other priorities and problems we should possibly introduce
something like that, but it doesn't seem always to work.
Mr. Gary Smith: I guess to the point—and I can
only speak personally, and not necessarily for the board
of trade—if you're looking at the surplus in the
EI, which is largely funded by small
business, 60%, then maybe that's where those surpluses
should go. Put them in those directions, rather than
impose another tax on small business.
The Vice-Chair (Mr. Nick Discepola): Thank you,
We will now hear from Mr. McMackin.
Mr. Bill McMackin: Which point are we on now, at
The Vice-Chair (Mr. Nick Discepola): Whatever you
want, or I can turn it over to Mr. Ritz, and I'll come
back to you.
Mr. Bill McMackin: I guess I really wasn't given
the opportunity to respond to your question—the same
one Gary responded to a moment ago—as to where do we
draw the line with this, with what we've been
saying about debt reduction. We did focus very much on
deficit elimination over the last number of years, and
now have really switched gears onto what we believe is the
next logical issue. They were all being talked
about in the previous years.
When do we stop and start? Well, I turn back to your
initial analogy, which is what you would advise your
own children to do. You answered the question right on
the money. You'd tell them to make their payments on
their credit cards, and more than their minimum one, I
would bet. You would tell them to try to reduce some
of their personal debt.
That same logic holds as to how much we do over the
next number of years. It depends upon you putting
forward some type of logical and concrete schedule that
says you'll commit to a timeframe over the next five or
six years and how much you think you will reduce for
the next few years.
The Vice-Chair (Mr. Nick Discepola): But we
Gerry, do you mind if I continue?
Mr. Gerry Ritz: Oh, sure.
Mr. Bill McMackin: Was it in terms of specific debt
The Vice-Chair (Mr. Nick Discepola): Yes. I'll
give you the example.
Mr. Bill McMackin: Okay. If that's the case,
that's great. We should commit to those over the next
number of years. If you can create additional
surpluses over that, we can start to approach the other
The Vice-Chair (Mr. Nick Discepola): We haven't
committed to rolling targets, as we did with the
Mr. Bill McMackin: No, you have not.
The Vice-Chair (Mr. Nick Discepola): Okay. But
I'll come back to it. I want to be fair to Mr.—
Mr. Bill McMackin: The difficulty is that the
impression we get is that we've had surpluses for the
last ten years and we've been sitting here beating the
drums saying “Pay down the debt”. We haven't even
reached the date when we'll actually declare the first
surplus. I think it's some point in March.
The Vice-Chair (Mr. Nick Discepola): The
minister did it last week.
Mr. Bill McMackin: Yes, but it doesn't really come
into effect until—
The Vice-Chair (Mr. Nick Discepola): No, that
was for the fiscal year ending 1998.
Mr. Bill McMackin: Last March.
The Vice-Chair (Mr. Nick Discepola): That's
right. There was a $3.5 billion surplus.
Mr. Bill McMackin: But that's the first one.
That's the very first one you've had in a long time.
The Vice-Chair (Mr. Nick Discepola): No, we're
budgeting two more consecutive ones.
Mr. Bill McMackin: That's great. So in a few years we can talk
about it further.
The Vice-Chair (Mr. Nick Discepola): Mr. Ritz.
Mr. Gerry Ritz: Thank you, Mr. Chairman. I
scrawled so many notes here I'm not sure where to
start, so forgive me if I'm a little disjointed.
Thank you for your presentation. It was very
thoughtful and insightful, as we've seen from the
debate here today.
One point the chairman raised was
that being a small-businessman, he understands deficit
and debt and so on. Of course being a
small-businessman myself, the line of credit I carry is my
deficit and the bank loans I carry are my debt.
The federal government in their logic hasn't quite
made that distinction. When I deal with the bank they
insist on targeted payments. They will not let me
carry my loans in perpetuity. So the government also
has to come to terms with that. That's part of that
long-term strategy you've all alluded to. That's one
common theme. Small business has had to refocus and
spend smarter, and governments at all levels have to do
the same thing.
That leads me to another common thread that a lot of
you were talking about, which is the duplication we see
at all levels of government. There is a misuse of
funds because everybody's doing the same thing and
trying to stuff the same square peg into the same round
hole. It doesn't always work.
More money is not the answer. We've seen more money
thrown at a lot of programs. It hasn't fixed them.
We've seen child poverty really initialize in 1989, and
it's become worse. How do we spend smarter? How do we
get governments to direct the funds to the right
Indian and Northern Affairs was talked about. We're
looking at a $7 billion budget. Of that, $3.3 billion
gets to the
reserves. Where does the rest go? The money that goes
to the reserves doesn't go to the right spot. How do
we put strings on a lot of this money? Who oversees
it? The Auditor General has set up red flags on a
tremendous number of departments. Is anybody really
looking? Does anybody really care?
I'll start you off with that and then I'll get into
the taxation thing after.
Mr. Michael Murphy: In our committee, through our
discussions and the evolution of our thoughts, we
thought the right people to administer the new funds
would be the small businesses and the personal clients
of the Government of Canada through reduced taxes.
There's no infrastructure attached to that. Let the
people who receive the money through reduced taxes
spend the money on either job creation or food, clothes
and so on.
It seemed to be a bottom-line approach, and that was
the direction we were coming from. That also is
included in our discussion—not just a focus on debt
reduction. We still consider it important to protect
what we have to allow us to go the next level, and then
to protect at that level, and continue that step upward
at each stage to protect the new or regained social
benefits we as Canadians have enjoyed.
Mr. Gerry Ritz: We'll move on to the tax relief
that everybody has talked about. Should that be a
targeted package? Should it be across the board? What
kinds of dollars should be allocated to tax relief?
What's it going to take?
Newfoundlanders need $5,000
just to get to the poverty line and things like that.
We have a myriad of different tax procedures we can
target. We have bracket creep, where the deindexation
of a lot of things has caused everybody to bump up a
bracket or two. Some of the surtaxes were done away
with last year. How far do we go there? There are
personal and corporate income taxes. The small
business.... Of course private industry is the engine of
What kinds of targets should we set?
You guys are talked out.
Mr. Bill McMackin: In our discussions around the
province, with some chambers at least, a lot
of people have recognized that really, if we're
going to try to focus in on some tax relief, then for the
average Canadian, to give them a small decline
or reduction, like some of the ones we've seen in
recent years that put a few pennies in their pockets at
the end of the year, it almost becomes a bit of a
joke. I've heard people actually joke about it.
So put it to the people
who are going to benefit the most. We've
talked to some of the people who are making the lowest
levels of income. These are some of the poorest people.
Look at where child poverty comes from.
It comes from poor parents who can't find decent working
conditions or take enough money home. Certainly if
we could give them a tax structure that allowed them to
keep more of that money in the first place, then
that's a good start.
From a small-business perspective, one of my personal
fights has been over a tax arrangement called the small
business tax deduction, which basically only impacts
those businesses up to about $5 million.
Well, it would impact, in some cases, some
of the people Gary mentions in his remarks.
A lot of growing smaller businesses are finding that
the tax impact on them as a result of changes to the
capital cost allowance, deductibility, and a number of
different things over the last number of years has
made it to the point that they're getting up into a 46%
or 50% taxation bracket very quickly.
So what, people will say; if they're
making money, they should pay their fair share. And
they should, but it creates the situation whereby some
very small businesses that are growing can't keep
enough of their own money internally in their companies
to allow them to grow. They can't keep enough equity
on their balance sheets to be able to go to the bank
and borrow more. They can't do the things that allow
them to then go forward.
Now, a lot of the businesses that qualify for the
small business tax deduction, which is currently about
$200,000, I believe, and would benefit from an
increased one are those companies that are growing.
These are the ones that are at the 30 or 40 employee
level. They might grow to 60, 70, or 80 employees over the
next five or six years if they could keep a little bit more
of their money in their companies so they
can grow. That's certainly a pet project of ours.
The Vice-Chair (Mr. Nick Discepola): But you
haven't answered Gerry's question.
Mr. Bill McMackin: Oh, shoot, I've forgotten what
it was. What was it, Gerry?
The Vice-Chair (Mr. Nick Discepola): An awful
lot of your counterparts are saying that there should
be general, broad-based tax relief if there is any. The
Canadian Federation of Independent Business
and Mr. Thomas d'Aquino have called for
that. Some of the other chambers of commerce have
called for that.
In your answer, I detected that maybe what you're
saying is that we should have targeted tax relief
that's targeted to the small, lower income—
Mr. Bill McMackin: The Canadian Chamber of
Commerce has said we should rewrite the whole
Income Tax Act and revise the whole
structure. In an ideal world, I can't disagree with
that; but this isn't an ideal world, and I don't think
you guys figure you can deliver on that. If we start
rewriting the Income Tax Act, we'll be here talking
about it in another 15 years.
Mr. Gerry Ritz: We keep adding to it.
Mr. Bill McMackin: You can provide some relief
where it's going to most
help some people and also strategically help some
of the other people who are here asking for help,
whether it's small business—
Mrs. Elsie Wayne: We could put the EI surplus
back or give them a cut.
Mr. Bill McMackin: Will the EI surplus come
Mrs. Elsie Wayne: All right.
Mr. Bill McMackin: I think we're eating our cake
The Vice-Chair (Mr. Nick Discepola): Oh, maybe
the Conservatives are going to change their minds and
not call for the total refund to the business
community. Maybe, Elsie, there's still hope.
Mrs. Elsie Wayne: Maybe 60% of it.
The Vice-Chair (Mr. Nick Discepola): Mr. Vokey.
Dr. Myrle Vokey: I hesitate to answer or respond
to your question, sir, because I'm not a financial
person at all. But let me reflect on a few thoughts
I grew up as a young boy in an environment in rural
Newfoundland that I guess was not unlike rural areas in
many parts of Canada where men and women would
literally crawl on their hands and knees over broken
glass to avoid a handout from government. It was
distasteful. It was disgraceful. We still have
Canadians like that in Newfoundland and elsewhere.
But with decentralization and winding up the outports
and unemployment like it is, I'm afraid to say that in
many parts of Canada, Newfoundland included, the answer
has been to sit back and take a handout. A lot of
Canadians don't like that.
We have to talk about people's self-esteem,
self-concept, and pride. That's part of the
educational process I was talking about a little while
ago. That was the property chain. I think that most
Newfoundlanders, most Canadians, don't want handouts;
they want a hand up. They want to be independent.
When we have a system like we have in Newfoundland,
where people literally can't afford to go to work
because they'll lose money, there's something wrong.
When they can live better by sitting on their
bottoms and watching TV rather than going out to work
at minimum wage because they can't afford to go work,
by gosh, there's something wrong with the system!
Again, I hesitate to speak. You've asked such a
mouthful that I can only look at a little bit of the
picture, but I think that's part of the solution we
have to come to grips with.
The Vice-Chair (Mr. Nick Discepola): What you say
is very true, Mr. Vokey. We tried to
address some of those weaknesses, but we may have
failed in other areas. I think we now have to come
back and maybe have the pendulum swing back to the
Mr. Gerry Ritz: To follow up on what you're saying
and to get back around to the whole poverty situation
and so on, the government has basically taken over that
envelope. By changing charitable statuses and so on,
they've really taken it away from private enterprise.
There are tremendous amounts of charities, community
groups, service clubs and things like that out there
that would do more or could do more.
We talk about kids having pop and chips and so on for
lunch at school. Is there an increasing role for the
old parent-teacher associations that used to be around
years ago but which have now gone by the wayside? Do
we need to see those types of community groups
reinstituted? Do we need to look at this problem
community by community instead of trying to do it
Dr. Myrle Vokey: In our province
we've just come out with a new strategic plan that some
of you may have heard of. It's called “People:
Partners Equals Prosperity”, or something like
that. It's a very far-sighted document that we believe
will do some good. We're going to divide our province
into zones, and we're going to be talking about
community capacity-building and solutions to problems
at the regional level. I believe it has great
One of the speakers we had in just a few weeks ago
came up with a statement that made me sit up straight
in my seat, and I'll just throw it back at you. He
said that one of the oversights in our Canadian
communities is that we put our older people in those
little senior citizens' complexes, we lock the doors
and turn our heads, and we sort of ignore them except
for making sure they have food, water, and lodging and
so on. He said that these people are tremendous
teachers. They have value. They have something to
contribute as well.
Again, now, that's not the answer, but I'm talking
about community capacity-building, where you bring in
all of the resources. Those include educators, health,
industry, commerce, senior citizens and so on. I think
these will all help to contribute to a changing
attitude and an improved self-concept.
Mr. Gerry Ritz: They're all parts of the puzzle.
Dr. Myrle Vokey: Yes, they're all parts of the
Mr. Gerry Ritz: Thank you.
The Vice-Chair (Mr. Nick Discepola): Anyone else?
Mr. Gerry Ritz: No, I think I'm done.
The Vice-Chair (Mr. Nick Discepola): Mr. Knight,
one of your recommendations was that the government
should be more vigilant with the use of RESPs or should
help people or investors invest in them. In looking at
them for the first time in my lifetime—I have a
12-year-old, so I have to decide before he turns 13—my
experience was that if you do pool the resources, you
actually get a higher benefit. Obviously, the
investors can take all the pooled resources and invest
them in one lump sum, as opposed to not pooling.
You've shown some concern over that pooling. What
areas of concern do you have?
Mr. Anthony Knight: Through the
preliminary research that we've done, we think there is
need for increased monitoring of actions taken by
financial institutions in the country in handling
RESPs. We've found that the incentive is just as you
mentioned in the pooled plans. There is an increased
benefit that comes from pooling your resources with
others, but there is a loss of income if your child
either chooses not to pursue a post-secondary education
at a recognized institution or just decides he's going
The Vice-Chair (Mr. Nick Discepola): Okay, and
there shouldn't be a penalty. If you withdraw from
that pooled resource, you don't get any benefit. Fine,
I understand. Thank you.
I'd like to get back to the balance on the debt. I
think most Canadians listened to the Minister of
Finance in his economic update on October 14, but I'd
like to quote from it:
If we assume nominal GDP growth at the rate of 4%
annually and we continue with balanced budgets, by the
year 2002-2003 the debt-to-GDP ratio itself would fall
In other words, there would no more cutbacks, we'd just
let growth handle it. This is much like some people
thinking that we could grow our way out of the deficit.
If we assume a nominal economic growth of 3.5%, the
debt-to-GDP ratio would be about 57% by the year
2002-03. Isn't that sufficient for the business
community? How much further do we have to go?
And what balance do we try to
And don't forget that year after year we have also
budgeted a $3 billion contingency reserve that has gone
directly toward reducing the debt. This year we've
reduced it by about $9 billion. If we continue to
budget that $3 billion contingency reserve as we have
done, we could reduce it by another 3.5%. It seems to
me that we could be at the crossroads, as I mentioned
before. We could use growth to naturally reduce our
debt-to-GDP ratio while also being prudent
For the past five years the vocabulary has used the
words “deficit elimination”. I wouldn't want to see
that turned into a new vocabulary that uses “debt
elimination”, because I think what we have to see is
debt management. Isn't that level and that process
good enough for the business community?
Mr. Bill McMackin: I'm not a person
who would be a proponent of debt elimination. None of
us would probably ever borrow money to buy a home if we
subscribed to that theory, and we wouldn't be able to
afford one until we didn't need it any more. It's a
flawed approach to things.
I've listened to Mr. Martin's projections out to 2003,
and I guess one of the difficulties I have is that 4%
of GDP is fairly aggressive. It's much more aggressive
than what he has tended to use in most of his past
budgets. He's been a fairly conservative person with
respect to the economic numbers he's used in his budget
the last few years. I think 4% would be higher than
those, if I remember correctly.
The Vice-Chair (Mr. Nick Discepola): But I gave
you the figure. Even if we used 3.5% growth, we're
going down to 57%.
Mr. Bill McMackin: Yes, but he hasn't used 3.5%
The Vice-Chair (Mr. Nick Discepola): I don't want
to get into the details, but—
Mr. Bill McMackin: No, nobody does, do they?
The Vice-Chair (Mr. Nick Discepola): Well, we
can't project. You said it yourself in your opening
statements. The statement you made in July is totally
different from what you would say now. I'm sure our
report that we reflect in December will be totally
different from the circumstances that will lead up to
the budget in February. But there is an undercurrent
of opinion that we could possibly manage the debt by
itself through economic growth, so maybe we should turn
to other priorities at this stage.
Mr. Bill McMackin: You have no control over
economic growth, though. It would be like me sitting here
and saying that I'll just allow my expenses to run
amok with the hope that inflation takes care of my
revenue. We have no control over anything like that.
We can't do it, so we have to exercise discipline over
the factors we do have an impact on—spending and
what we do with it.
The government has lost a lot of its control over its
taxation ability because we're really taxed to the
maximum level that most of us in this country can
stomach. I think the prudent approach that has been
put forward isn't unreasonable. With a normal
financial forecast in a more normal environment—we
haven't had anything very normal with the financial
situation over the last few months—with more prudent
forecasts for economic growth over the next four or
five years, there may be some funds left over for
spending other than just debt reduction.
The Vice-Chair (Mr. Nick Discepola): So you
maintain the status quo.
Mr. Bill McMackin: Sure do.
The Vice-Chair (Mr. Nick Discepola): Keep the
course, keep on.
All right, then let me get back to the other question
that Mr. Ritz brought up—and I think Mr. Murphy
alluded to it also.
You're all business people, and you seem to understand
your numbers. On the $6 billion that are generated in
this EI surplus fund, I am hearing different
recommendations from you. I want to try to clarify
them. There's one train of thought that says we should
return it to the small-business community, whether it's
in the 60%-to-40% ratio or whether it's in retraining
programs, for example. There's another train of
thought that you've evoked, that being that we should
reduce personal income taxes.
As small-business people, you understand first of all
that if I return the $6 billion to its “rightful
owners”—to quote the opposition—I now automatically
have $6 billion less in revenue. There are therefore
two outcomes. Either I have to reduce spending again
by $6 billion to keep balanced budgets, or I have to
increase taxes to make up for that windfall. Then, and
only then, can I invest in some other key initiatives
that you've mentioned, such as reducing taxes or
investing in health care. So what's your priority?
Mr. Gary Smith: Well, I guess the surplus in the
EI fund is what they call ill-gotten booty. It's
really something that came as a result of increased
premiums, which probably weren't appropriate in the
The Vice-Chair (Mr. Nick Discepola): We
have decreased premiums since 1993-94, successively
10¢ each year.
Mr. Gary Smith: The fact of the matter is that you
have amassed a surplus. Is that surplus being used
in the way it should be used? That's why we're here.
We're going to get back to the business we're
advocating, and yes, you will have to come up with that $6
billion someplace else. We feel it's an unfair position
for the government to take in terms of the way the EI
fund is being funded. Therefore, the money should go
back to the employers. If you want to come up with
another inventive way of getting that $6 billion back,
then I guess you're going to do that, whether it's
through increased taxes or whatever. But this is not
the way to do it.
The Vice-Chair (Mr. Nick Discepola): Do your
priorities then change? You're saying take this $6
billion and give it back, 60% to the employers and 40%
to the contributors—in other words, the working
Canadians. Then what do we do with debt reduction? Do
your priorities change?
Mr. Gary Smith: If you have your surplus—
The Vice-Chair (Mr. Nick Discepola): You don't
have a surplus. You have a $6 billion shortfall to
make up, first of all. You're proposing some form of
Mr. Gary Smith: We're not advocating that. We're
just saying that the way the EI fund is handled is
The Vice-Chair (Mr. Nick Discepola): Well, let
me use your business analogy. You've generated say
$1 million in revenues, and $60,000 of that $1 million has
come from another product line. You had initially
targeted that $60,000 to a special project in your
company. Now, all of a sudden, you realize that you
should return that $60,000 to something else. Are you
following me? It's not as easy as saying.... Maybe I
haven't used the right example. It's not as clear cut
as saying you're going to have a $60,000 shortfall,
first of all, if you then take that money and earmark
it for what you want.
Mr. Gary Smith: The point we're trying to make,
Mr. Chairman—and again from a personal perspective—is that
you can't put the onus on the business community to
make up for other shortcomings of the government in
terms of the way it spends general revenue. There are
a lot of other areas, such as were alluded to today.
In Indian Affairs and Northern Development
we have $7 billion earmarked and we don't know where $3
billion of it has gone or how it's being handled. Go
there, but leave small business alone.
Mrs. Elsie Wayne: When you
return that money to these small businessmen, they are
then going to take that money and see how they can
expand when they have a little more money in the bank.
They're going to create jobs, and when they create a
job, those people then pay taxes. You will get more
money back through the tax system in the end because of
what they're doing. You're telling the private sector
it should be creating the jobs anyway.
I'm going to tell you right here and now that we just
heard Paul Martin tell us a month ago that we're
looking at a recession, and nobody has addressed it. By
God, I'm going to tell you, we're in a recession. We've
got hungry children now. We had better find a way of
sitting down right away, because we don't want any more
little children starving to death. We don't; not in
I'm going to tell you right here and now
that the only way you're going to be able to turn this
country around is to cut those premiums and give them
back some money. They've got to have some money in
their pockets or they're not going to create jobs for
those unemployed people out there who need them.
That's the only way they are going to do
it. That's a tax cut to them. When you cut those
premiums for them and you put more money in their
pockets, that's a tax cut to them.
The Vice-Chair (Mr. Nick Discepola): For the
average small business with 67 employees, a cutback of
70¢ in their employment premiums will mean how much per
employee to the small business community? Have you
done a calculation? It's about $200 per employee.
Are you telling me that $1,400 to the business
community is a much better investment than attacking
the deficit and the debt and keeping the interest rates
down so that your $70,000, $80,000 or $90,000 line of
credit will cost you only 6% or 7% versus 8% or 9%?
What's more beneficial to the business community?
Mr. Bill McMackin: I've been quiet because I kind
This is a conundrum, because we've treated EI
premiums as general revenue, just like we used to treat
CPP as general revenue. There's no immediate, snap
our fingers, do a quick fix over the next year.
If there's a consensus in this country that EI has to
be taken to more of a revenue in, revenue out
self-sustaining program, then
over the next number of years we need to develop a plan
to do that.
The government will also need to learn to
find other sources of revenues or ways to reduce
expenditures in that respect. There's no quick fix to
this. We have to decide whether that's what we
want, and I think that's more practical.
Our federal governments in this country have always
shied away from tied taxes. We paid exorbitant amounts
of taxes on our gasoline this year and, God knows,
probably diddly of them will go into our roads. For
years we paid into the Canada Pension Plan
with no real sense of
whether what we were paying in was covering the
cost. We now see the same thing happening with EI.
I think part of moving the federal government to a
more balanced, more prudent approach to managing the
funds that come in includes focusing in on EI and
saying that over the next five to ten years or whatever
it takes—maybe it will only be two to three years—we'll
move it to a self-sustaining program. Decide what
surpluses are realistic and start to move in that
direction. I'd be in favour of more taxes that are
tied directly like that. If we could tie the bloody
gas taxes down directly to the roads I'd be happier
too. It makes you guys a little more honest in terms
of actually matching up the revenues generated with
where they're supposed to go.
The Vice-Chair (Mr. Nick Discepola): I concur, and
also I think the EI fund has been used for too many
things over the years. It has been used for regional
development programs, for maternity benefits, for
social benefits, for disability. Those should be
factored into the full equation before we decide how to
Mr. Bill McMackin: I understand,
but the reason I found it very difficult to respond to
that issue was that I don't know that I've heard a lot
of small-business people come out in the past number of
years asking for the premiums to go up. It's been the
other way around.
The Vice-Chair (Mr. Nick Discepola): They have
been progressing downwards.
Mr. Bill McMackin: I mean in the years it's
been spending more than was being put in, if there
The Vice-Chair (Mr. Nick Discepola): But in the
ten years when it was in a deficit position, we didn't
ask the business community or Canadians to make up
those shortfalls later.
Mr. Bill McMackin: That's what I mean. We weren't
asking for that.
The Vice-Chair (Mr. Nick Discepola): It's 4.30.
We have other witnesses, and Mrs. Wayne has to leave at
five. I'll therefore take a quick question from Mr.
Ritz and a quick question from Mrs. Wayne, and then
I'll ask you to wrap it up, please.
Mr. Gerry Ritz: There are a couple of points
I'd like to go through.
You talked about it being in a deficit position for a
few years. I think that was because the system had
been exploited because of all of the extra benefits you
talked about that really bankrupted the program.
Business certainly does benefit from a well-trained
workforce. Nobody's going to discount that. But it
also reflects that benefit in increased payroll for its
workers. When I hired carpenters and so on, if a guy
was a journeyman I had to pay him more than an average
labourer. So you certainly do pay for that training in
other ways than just paying for the training itself.
When you look at a surplus in the EI fund of $6
billion to $7 billion and you're talking about putting
$3 billion of that on the debt, workers and businesses
themselves are paying down the debt when you use that
analogy. You've also talked about a $3 billion surplus
or contingency fund that would go toward the debt. If
you already have a $3 billion surplus and you're
talking about a $6 billion to $7 billion surplus, then
where is the other $6 billion to $7 billion going, or
where has it gone?
The Vice-Chair (Mr. Nick Discepola): Are you
asking me the question?
Mr. Gerry Ritz: Well, I'm just throwing it out
there. It's on the floor. Does anybody have—
The Vice-Chair (Mr. Nick Discepola): If it's
directed to me, I'll answer you by saying that the EI
fund revenues have gone into consolidated revenues, as
have all revenues, as per the request by the Auditor
General of Canada in 1986. He's supposed to defend
Canadians' interests. So they're part of general
Mr. Gerry Ritz: But he also made a recommendation
in 1998 that it be hived off or taken out of general
The Vice-Chair (Mr. Nick Discepola): That's the
debate right now.
Mr. Gerry Ritz: Thank you.
The Vice-Chair (Mr. Nick Discepola): Elsie, do you
want to ask one final question?
Mrs. Elsie Wayne: We've covered it, but I do want
to thank them.
I have to say that I have major concerns about the
issues you brought to the table, Mr. Vokey,
as well as concerns about how we address
them. Knowing the people at the table, I'm sure they
all have concerns too. I made notes on the fact that
you were saying there has to be input nationally, and
I'm very much interested in the idea of a national
office of education.
As far as education goes, as well as literacy and all
of these other issues, they've done an excellent job
today. I thank them very much.
The Vice-Chair (Mr. Nick Discepola): Would any one
of you want to conclude with a few remarks? I'll give
you the opportunity, but I will also echo Elsie's
Mr. Michael Murphy: I just wanted to mention on
behalf of the committee, by way of summing up,
that there may be an appropriate balance of debt and deficit
control. Perhaps we're not sure what that should be,
but whatever moneys there are that can be employed to
assist Canadians, let's do it.
I believe, at any level, if
the spoils can be returned to the small businesses and
individuals of Canada, they will do the right thing
with it, and that should lead to more jobs, as Mr. Vokey
has mentioned, for people with pride. I believe
everyone would agree 100% with what was said. But to
do nothing is a dangerous position, and we would prefer
not to take that one.
The Vice-Chair (Mr. Nick Discepola): Thank you
for your comments. I hear the comments, but I also
believe our government had been given a clear
mandate by Canadians as to how to approach the debt,
and we were elected on that platform, which was to
appropriate 50% of any surplus to debt and tax relief,
and to reinvest the other 50% in social programs.
That's the balance I want to adhere to as a Liberal
member of Parliament. To hear the business
community now harp and harp on debt, debt, debt, I have
concerns about it. So I'm trying to also balance that.
Thank you very much for your input. It's valuable
for us. As Bill said in his opening remarks, maybe we
should hear and listen to Canadians across the regions
more often. I'd love to do that. I do that in my own
riding. But it costs an arm and a leg to have public
hearings like this, so we limit it to once a year, at a
very important time, which is budget preparation. I
believe the report will reflect your wishes and your
The ultimate decision is the government's,
and the Minister of Finance's, in particular, but if
his past record is any indication, usually about 60% of
the recommendations this committee makes are
adhered to sooner or later. So that's a pretty good
batting average, no matter what.
Thank you very much on behalf of the committee
I'd like to now suspend this meeting for several
minutes while we convert it to a meeting on the task
force hearings for the financial institutions.
Thank you very much.
The Vice-Chair (Mr. Nick Discepola): Good
afternoon. In accordance with its mandate under
Standing Order 108(2), the committee now resumes its
study of the report of the task force on the future of
the Canadian financial services sector, commonly known
as the MacKay task force.
We have with us this afternoon, from the Insurance
Brokers Association of New Brunswick, Paulette Holder,
René Bourque, president elect; and
Linda Dawe, executive director. As well,
from the Maritime Association of Mutual
Insurance Companies we have Ray White, director.
The format is similar to the consultations on
pre-budget hearings: ten minutes or so to make your
presentation, and then we'll open it up to questions
from the members of Parliament. I will start with my
alphabetic list again. Welcome to all.
Mr. White, please.
Mr. Ray W. White (Director, Maritime Association of
Mutual Insurance Companies): Thank you, Mr. Chairman.
I appreciate having the opportunity to appear before
the committee to discuss the report of the MacKay task
force. I'd like to focus my remarks today on the
recommendation put forward by the task force that banks
should be able to sell insurance in their branches and
use customer files to market insurance.
I know the report contains some 124
recommendations, many of which merit your
consideration. However, its proposal to expand the
insurance powers of banks would seriously harm the
property and casualty insurance industry and the
consumers it serves. This is what compels us
to appear here today.
Let me tell you a few things, if I may, about the
mutual insurance companies that I represent. The
Maritime Association of Mutual Insurance Companies, or
MAMIC, represents the nine provincial mutuals in the
Maritimes. All these companies have operated for over
60 years, some upwards of 100 years. The mutual system
in the Maritimes serves 45,000 or more policy holders.
We are licensed to sell property and casualty insurance
throughout the Maritimes, serving predominately the
As you can see, I'm not here representing one of the
five, and maybe soon to be three, major banks. I'm not
here representing a huge financial institution with
billions of dollars in assets. Rather, I'm here as a
spokesperson for a group of community-based property
and casualty insurance companies that basically
represent the bedrock of the property and casualty
industry in Canada, the grassroots of the delivery system.
There are some large property and casualty insurers
operating in Canada, but these in no way dominate the
industry. Indeed, these 230 companies compete for
about 1% of the premiums. Many of them are small
companies like ourselves, which serve a very specific
regional or niche market and succeed because they know
their customers well.
Our industry takes some pride in serving our customers
well. Survey after survey has shown that the property
and casualty insurance industry is rated very highly by
consumers in terms of service. To take just one
example, the National Quality Institute asked people to
rate the level of overall service they receive from 21
surveyed industries. Auto insurers were rated in the
top third of all industries. You may or may not be
surprised, Mr. Chairman, to know that the banks rated
in the bottom third.
This, perhaps better than anything, illustrates why
banks want to get into the P and C business. They
don't want to get into our business in order to make
money on insurance itself; what the banks really want
is a closer, more captive relationship to their
customers, at least those who are better off. They know
that everyone needs auto insurance and that anyone with
a mortgage needs home insurance. What better way to
solidify the customer base than by selling auto and
home insurance in their branches, and what better way
to sell it than when a borrower is in a submissive
state, just hoping that their loan will be approved.
That's why the banks have been fighting so hard to
have their insurance powers expanded. I say expanded
because many people tend to forget that the banks are
already in the insurance business. They have been able
to own their own insurance companies since 1992.
Indeed, most of the major banks have established their
own property and casualty insurance subsidiaries since
that time. It seems to be a fact that the MacKay task
force chose to ignore in its own analysis. I was
rather astounded to find out that the poll the task
force conducted on this question did not inform people
that banks already sell insurance.
If you ask a person whether banks should be allowed to
sell insurance and he says yes, does that means that
banks should be able to retail insurance in their
branches, or does it simply mean that banks should be
able to sell insurance through their own companies, as
they are already allowed to do? Whatever you do, the
question was ambiguous. What is not ambiguous,
however, is the poll recently conducted by a very
prominent political pollster, Pollara, which shows
that 75% of people are opposed to banks being able to
sell insurance in their branches if it results in jobs
being lost in the insurance industry. Here in Atlantic
Canada, the level of opposition to that poll rose to
These results speak to a larger issue. The debate
over banks selling insurance in their branches has been
going on now for over a decade. During all this time,
I have never heard a consumer group clamour for
expanded bank powers in insurance. In fact, the
consumer groups share our concern about what these
changes will do to the common Canadian. I have never
heard small towns and communities, many of whom have
been hurt by bank branch closures, eyeing for banks to
be able to sell insurance in their branches. I have
heard only one powerful voice constantly trying to put
this issue back on the agenda. I say constantly
because this question has already been dealt with by
Parliament in both 1992 and 1997. Each time, members
of Parliament of all parties of the House of Commons
voted to keep the current rules in place that say that
banks in the insurance business have to compete on the
same basis as all other insurers.
The reason banks have not been given power to sell
insurance in their branches and mine their customer
list is quite simple. The banks have never been able
to build a convincing case on four key fronts: the
threat of great bank dominance in the financial
services sector, the incidence of tied selling, the
abuse of personal information, and the loss of jobs.
Do we want the major banks to dominate the only part
of the financial services sector that they do not
already control? I shouldn't have to remind you that
there's only one major independent trust company left
in Canada and only one national investment dealer that
is not bank-owned. We, these nine small companies,
have competed with the 230 large companies successfully
for the past 60 years, and the introduction of new
insurance companies for more competition is not a
concern, as long as they act in the same manner and
fashion as other insurers, without the benefit of
confidential data or the opportunity to coerce
customers. Yet this is exactly what has happened every
time banks have been given unrestricted access to other
segments of the financial industry.
Why give banks control of an industry like property and
casualty insurance, which is highly competitive and is
serving its consumers well?
Give the banks what they want and they will not only
come to control the industry, they'll control the
customers. The banks have detailed customer files on
virtually every adult Canadian. Allow them to sell
everything under the sun in their branches and you
multiply geometrically the opportunities for tied
selling and the potential for abuse of personal
I know the task force wants to reassure us these major
concerns can be dealt with by passing legislation. If
only it were that easy. The task force's own poll
shows that 16% of those surveyed thought they
personally had experience of some form of coercive
selling, yet not one of them ever complained to a
The indication is that legislation will be and is
being passed to protect the consumer from coercive
selling. When you have legislation that requires the
injured party to blow the whistle on someone as
powerful as a lending institution, do you really think
the customer is being protected? Such legislation is
being created in a vacuum. Transgression is extremely
unlikely to be reported, and certainly no more likely
than it has been to date.
In dealing with the use of information, we also
understand this is to be legislated against, but who's
going to police this? Will it be the banks themselves?
They have suggested their code of ethics precludes
abuse. Logic would question this. Allowing this to be
self-regulated is like putting the fox in charge of the
Mr. MacKay, in his opening remarks upon delivery of
this report on September 15, stated: “If that sounds
like common sense, it is. We think it is also good
business sense.” Ladies and gentlemen, what makes
common sense and good business sense is not to make
changes now that will require further legislation and
enforcement, but to take the step now to protect the
consumer by not allowing the situation to exist where
coercive methods and misuse of information may well be
employed. Do not allow the banks to retail insurance
from their branches. If they truly want to be in the
insurance business, allow them to be in it on the same
basis as the rest of the industry.
This leads me to the issue of jobs. There are 100,000
Canadians working in the property and casualty
insurance industry across Canada, and approximately
6,500 here in the Atlantic provinces. More than half
of the jobs in our industry are with insurance agents
and brokers. They are to be found in virtually every
community in Canada and are part of the fabric of small
town Canada. Has the track record of the banks in any
way given indication other than that those numbers will
likely shrink, jobs will be lost? Will these
institutions deliver the product with the same
professionalism and concern as the current ones? Will
the bank officer be willing or be given the
resources to deal with the exceptions to the rule to
underwrite insurance to specific needs? We think not.
Finally, the recommendations of the MacKay task force
fail to shed any new light on the current status of a
bank's ability to retail insurance. Banks have been
permitted to sell insurance through a separate company
since 1992. What they have not been given, for good
reason, is the unfettered right to do so through their
branches, or to access and segment bank customer lists.
The whole issue was looked at in 1992, again in 1997,
and the report offers nothing new to indicate why this
should change at this point.
Mr. MacKay noted in his opening remarks that “Canadians
will be best served by an open, competitive sector with
a broader range of service providers”. He states: “Our
recommendations will increase competition and choice
for Canadians. They will also ensure that the
marketplace works more fairly and responsibly.” As
indicated, we welcome change and improvement and thrive
on competition, but we respectfully submit that this
must be achieved in an atmosphere that is in the best
interests of the Canadian consumer and on an equal
basis for all stakeholders.
Thank you, Mr. Chair.
The Vice-Chair (Mr. Nick Discepola): Thank you
very much, Mr. White.
I would now like to turn to the Insurance Brokers
Association of New Brunswick. Ms. Holder will be
Ms. Paulette Holder (President, Insurance Brokers
Association of New Brunswick): Thank you.
Mr. Chairman and members of the committee, we are
pleased to have the opportunity to meet with you today
to express our concerns regarding the report of the
task force on the future of the Canadian financial
The Insurance Brokers Association of New Brunswick
represents the interest of approximately 130
independent insurance brokerages and approximately
1,000 New Brunswickers employed in this sector.
You have already heard from our national association,
the Insurance Brokers Association of Canada, and a
number of our sister associations across Canada. We
endorse their views and share their concerns. We
would, however, like to expand on some of the points raised by
IBAC. We would also raise a number of issues that need
to be addressed as they relate to the policy approach
advocated by the MacKay task force.
It is helpful to recognize that Canadian consumers
greatly benefit from having one of the world's most
competitive property and casualty insurance sectors.
The P and C sector is also the most competitive
financial services industry in Canada, a fact that was
noted recently by First Marathon Securities but
for whatever reason was overlooked by the MacKay task
force. In sharp contrast, and as the MacKay task force
itself points out, Canada's banking sector is the least
The MacKay task force vision for the future of the
Canadian financial services sector is one that is
already well entrenched in the P and C sector. If you
take a look at pages 68 and 69 of the MacKay report,
you will note the characteristics valued by consumers
and the structural features of a desirable financial
services sector are highlighted. Not only does the P
and C sector meet the six basic consumer
characteristics, it also meets the desired
competitiveness features. Our domestic P and C sector
demonstrates how well healthy and fair competition,
choice, innovation, and excellent service benefit
consumers and the economy. Yet the report fails to
recognize that the P and C sector works remarkably
What makes the Canadian P and C sector so competitive,
and how do consumers in this province benefit? To
start with, the Canadian P and C sector is safe,
stable, and reliable.
Furthermore, the very competitive nature
of our business means that consumers benefit. Given
that it's so highly consumer-oriented, Canadians have
an abundance of product choice, rate, service levels
and insurance providers. Consumers know this and they
wield a tremendous amount of power in having our sector
respond effectively to their needs. At the same time,
we refuse to force change upon our customers. We will
use technology, for example, only to the extent that our
customers will allow us.
Consumers also benefit as a result of the
comprehensive code of marketplace conduct that governs
independent brokers across the country. For example,
brokers are required to undergo a rigorous course of
study in order to meet the licensing requirements of
our provincial government. These rules do not always
apply to other distribution channels, however. The
competitive environment is also the most effective way
to ensure efficiency and product innovation, especially
regarding specialty areas that are unique to our
economy, such as our province's fishing, forestry, and
agricultural industries. These and many other important
industry-related facts have been totally ignored by the
MacKay task force. One has to ask why.
Why is the MacKay task force proposing to force-fit,
as George Cook called it, an unproven and uneven
foreign model for our domestic P and C sector? The task
force proposes a policy framework that will reduce
choice and competition. Once there are fewer choices
and less competition it's inevitable that there will be
higher prices. How will this benefit consumers? Why
would we unfairly disrupt what is right about our
financial services sector so banks can gain more
control? Frankly, the MacKay proposal is a solution in
search of a problem.
In trying to resolve the competitive problems of one
sector of the financial services sector, the task force
is willing to sacrifice Canada's most successful
sector. Again it raises the question of why. Beware, we
say. With consumers and small business in tow, we are
about to step off a plane without a parachute.
If the MacKay bank insurance recommendations are
accepted, it is the small-business sector that will
bear the brunt of job dislocation and job losses. Jobs
are already being threatened in this province by the
proposed bank mergers. As you know, independent
insurance brokers are an integral part of the
socioeconomic well-being of our respective communities.
By allowing the unfair competitive advantage, many of
these small businesses will cease to exist. Jobs will
More importantly, consumers in this province will
suffer. Other than increased bank profitability, we
fail to see how putting small enterprises in this
province out of business will contribute to improved
bank rankings. We fail to understand how putting
hundreds of New Brunswickers out of work will benefit
anyone other than the banks. Don't let New
Brunswickers pay the price for bigger, more powerful
banks. Don't let small businesses in this province
suffer because banks feel they have a need to take over
the domestic P and C sector to improve their
Don't allow an unfair policy framework to emerge that
will significantly reduce jobs and regional benefits.
This point takes an added importance given the
uncertainty of our country's economy.
Consumers in New Brunswick are not seeking bigger,
more powerful banks. Consumers in New Brunswick do not
want less competition. Consumers in New Brunswick do
not want to see jobs lost. Consumers in New Brunswick
are well served presently and are not demanding that
banks be given more special privileges.
On the one hand, the task force shows a profound lack of
understanding of the P and C sector. On the other
hand, the task force leans heavily in favour of the
banking sector without providing adequate
justification that in so doing consumers, the financial
services sector as a whole, and the economy will
There's no lack of competition in the P and C sector.
There is, however, a real lack of competition in the
banking sector. We would like to see the competitive
forces that characterize the P and C sector evolve in
our banking sector. This is where federal policy
efforts should be directed at this time. This is a
We urge members of this committee and the federal
government to pause, reflect, and consider this point
before enacting the measures contained in the MacKay
report. There is no rush. In fact, our biggest
competitors on the world stage, the U.S. banks, toast
Canada as being light-years ahead of everyone else. Let
us not make any hasty decisions, because once they are
made there is no turning back. That is the danger.
Furthermore, the report advocates drastic changes that
will alter the fundamental role our banks have in
Canadian society. We don't think Canadians are aware
that this change is taking place. We wonder if
Canadians are prepared to accept such dramatic changes
without the benefit of broadly based discussions.
Collectively, we need to go beyond the issue of mergers
and bank powers. There is a more fundamental issue
that needs to be addressed. We need to consider how
the MacKay report will change Canadians and Canada. We
need to do this now. It ought to be the first step of
the reform process. We hope you agree.
The Vice-Chair (Mr. Nick Discepola): Thank you
very much, Mrs. Holder.
Does anyone else what to add
anything? You can do so also during the answers to
questions we will ask Mrs. Wayne to pose, because she
has to leave in 14 minutes.
Mrs. Elsie Wayne: Yes, I do.
What will be the impact on brokers if the banks are
given what they want? Do you think banks will be able
to create employment opportunities if they're given the
right to sell insurance?
Mr. René Bourque (President Elect, Insurance
Brokers Association of New Brunswick): I'll try to
answer your question.
There's no doubt that the banks will likely employ
some people, but if they don't offer the same services
as brokers, it will be limited. A study done by the
Insurance Brokers Association showed that we would lose
about 25,000 jobs across Canada. One major concern
about these jobs is that a lot of our brokers are in
the smaller communities where you have two or three,
where the branches won't participate. We figure the
banks will probably be in larger centres and
larger call centres.
Mrs. Elsie Wayne: Are you opposed to bank mergers,
or are you just opposed to what the MacKay report
states with regard to insurance and car leasing? What
is wrong with banks selling insurance, if the proper
consumer protection measures are in place?
Mr. René Bourque: We've looked basically at the
insurance side of the study. We don't really have too
many opinions about the bank mergers.
What was the second question?
Mrs. Elsie Wayne: What is wrong with banks selling
insurance if the proper consumer protection measures
are in place?
Mr. René Bourque: We'd like to remind you that the
banks already sell insurance through call centres in
Ontario, and they're very successful at it. What we want
is a level playing field. They want to use the
information they already have on our clients, meaning
the policies, their premiums, and expiry dates. The
banks have all this information because most people
have liens or mortgages on their houses. They want to
use that information. We find it's unfair
competition and we wouldn't be playing on a level
Ms. Paulette Holder: Mrs. Wayne, I would like to
add to that.
If the banks are allowed
to begin selling insurance out of their branches, we
feel that proper consumer protection will be very hard
to regulate and look after.
It's going to be very difficult to prove at any one
point that someone has been a victim of tied selling.
The banks advocate that this would not happen if they
were allowed to start selling insurance from their
branches. However, how can you regulate a perception?
If you have a client who comes into a bank, such as a
young couple just married and looking for a mortgage,
you have the person there getting information in order
to give them their mortgage and at the same time
suggesting—whether it's a blatant suggestion or not,
however it happens to come across to them—that this is
the couple's opportunity to purchase their house
insurance as well. You are definitely taking that
couple's choice away from them.
This is why we are so concerned that the level playing
field be maintained. We want to make sure we have the
same advantages the banks have. If that is set
up, we don't feel it is going to be able to be
Mrs. Elsie Wayne: How will new powers reduce
competition, increase costs and provide less choice for
Mr. René Bourque: Well, on the
first one about increased costs, we figure that with
less market it's obviously going to have an impact on
the entire insurance industry. We presently have
200-some-odd companies in Canada. If the banks take
over 45% of the market, we obviously don't think there
will be 230 companies left. In a way, that will affect
the competition. If there are three banks in the
insurance industry, they would have a chance to bring
up the price.
Mrs. Elsie Wayne: Thank you very much, Mr.
The Vice-Chair (Mr. Nick Discepola): Mr. White
said that out of the 230 companies, you're only
competing for less than 1% of the industry's total
Mr. Ray White: If I may, there's no one company
that really controls the sector in the P and C
industry. There are no very large players in the
The Vice-Chair (Mr. Nick Discepola): Could you
elaborate on some examples of sectors you are
Mr. Ray White: What I mean is that nobody controls
one particular portion, unlike in a lot of industries.
With the banks, you only have six players that each
pretty well share the market. I think it's broken down
in terms of the pieces they have.
Out of those 230 companies, there's probably not one
company that would control more than 3% or 4% of the
total premiums written. So it's a very well expanded
The Vice-Chair (Mr. Nick Discepola): Could you
indicate what percentage of the market share the 230
companies do have? Do you have any idea?
Mr. Ray White: In that 230, we would be referring
to all companies that are currently in the P and C
insurance business in the country. That represents the
total representation in Canada.
The Vice-Chair (Mr. Nick Discepola): So the P and
C business insurance brokers and companies themselves
have about 80% of the market.
Mr. Ray White: The 230 companies represent the
entire premiums written for Canada. That's what we're
talking about. And they would include the companies
owned by the banks and so on and so forth.
The Vice-Chair (Mr. Nick Discepola): If the banks
were allowed to enter that sector, have you any idea
what market share you could stand to lose?
Mr. Ray White: Basically, it would be difficult to
predict how much they would actually take. I think the
suggestion is that given the anticipated relatively
unlevel playing field, as has been indicated already,
the possibility of penetration that would concentrate
that into possibly three large organizations would
cause the demise of a fair number of the 230 companies
that are giving choice to Canadian consumers in terms
of where they can actually purchase their insurance.
But I don't think there is any prediction at this point
as to how deeply they may penetrate, sir.
The Vice-Chair (Mr. Nick Discepola): Have you also
done any impact studies on job losses potentially,
either in New Brunswick or Canada-wide?
Mr. Ray White: We haven't.
Ms. Linda Dawe (Executive Director, Insurance
Brokers Association of New Brunswick): We
have some history in Quebec in the past years.
Desjardins has entered the insurance business, and our
counterparts in Quebec have advised us that they've
lost about 45% of the independent insurance brokers in
that province. We feel that would probably translate
pretty closely to our independent brokerage section
right across Canada.
The Vice-Chair (Mr. Nick Discepola): Is there any
evidence that the banks in that province have decided
to go after a particular profitable sector, whether
Mrs. Elsie Wayne: I have to go, Mr. Chair. I wish
I could stay, but I'll see you later.
The Vice-Chair (Mr. Nick Discepola): Thank you,
Elsie. Have a good trip back.
I've forgotten my question, so I'll turn it over to Mr.
Ritz and then come back.
Mr. Gerry Ritz: Thank you, Mr. Chairman.
Thank you so much for your presentations here today.
The first thing that pops into my head is that
everybody carries a Sears card and different things
like that. Sears sells insurance. You have companies
like Loblaws that have an insurance company. We have
huge retail establishments and grocery stores and so on
selling insurances now, so why not banks? I mean, the
banks are selling it, just not through their
Mr. Ray White: I think the industry
that operates now with, as you say, other retailers
being involved in the business is not a concern. It's
a level playing field because we're all playing a
As I mentioned in my presentation, it's a concern
about the concentration of information, and it's a concern
about the position the consumer may well be in when he's
presented the possibility of buying insurance.
I don't know if any of you here have felt like I have
when I've borrowed money. I've never felt particularly
empowered when sitting there wanting to borrow money. I
think consumers, as a matter of course, would do just
about anything they could to ingratiate themselves to
the person who holds the power. If the suggestion
made is that the bank can look after their house
insurance too, I'm sure I would be quick to say yes if
I thought it might have a possibly positive impact on
me receiving the loan I am looking for. So I think
that's one of the major concerns that is there.
I'm not sure I can state that the other thing is an
absolute fact, but there is an understanding that the
banks have probably as much information on you and me,
as adult Canadians who have borrowed money, as the
federal government has.
In terms of the use of this information, we use the
term “to mine a list”. In other words, we know an
exact profile of that individual. This, of course,
gives the opportunity to select, if you will, the
grander type of business in terms of actually choosing
what customers they do want. Yes, we can say Sears
has a profile on me because they know what my payment
schedule is like. They may know from their records
that I look like a good paying customer, but they
really have no more information on me than that—or I
hope they don't. In any event, they may be attracted
to me because maybe I happen to pay my bills regularly
and they figure they'll give me a try.
So we really are concerned about the wealth of
information that's there within the hands of the banks,
and we're afraid it may possibly be misused both for
prospecting and for choosing who they want to deal
Ms. Paulette Holder: If I may, I'd
like to add to that. The independent insurance brokers
are not afraid of competition. In fact we relish it
and we thrive on it. Our main concern is what Mr.
White alluded to, and that's the fact that the
information the banks have sets them at an unfair
One major piece of information the banks do have at
their disposal is the fact that we, the insurance
brokers, are obligated to send them a copy of the
insured's actual policy if the bank is listed on it as
the lien holder or mortgagee. They therefore have the
information, the expiry date, the vehicle, the accident
information. They have everything. They have a base
there to build on, so it's definitely an unfair
advantage as far as the insurance brokers are
concerned, as well as the clients.
A bank may have a client they have this
information on, someone an independent insurance broker
has written with a particular company. They may choose
not to insure him because perhaps he might be 75 years
old and have two accidents on his record. They may
forgo writing that person. That is not fair to the
consumer, and we are afraid this is what's going
to happen. It's one of our main concerns.
The Vice-Chair (Mr. Nick Discepola): And MacKay's
recommendation on jail sentences or fines ranging up
to $100,000 doesn't go the slightest way to appeasing
Ms. Paulette Holder: Exactly.
Mr. Ray White: As I mentioned in my comments, the
task force did do a survey about the possibility of
people ever having been coerced. Sixteen percent of
the respondents said they felt—I think “felt” was
the term that was used, since it is kind of a
perceptive thing in terms of whether you had or hadn't
been—they might have been in some way cross-sold or
coerced in some way but never reported it.
would question is what change in legislation there
could be that would give the consumer—who is the
injured party—the incentive to in fact blow the
whistle, to use my term, on this financial institution?
By the way, it's the same institution that holds his
mortgage and has the loan on his car. Is he likely
to complain that he really felt they forced him into
this? I'm not sure any legislation could properly be
policed in that
The Vice-Chair (Mr. Nick Discepola): But if such
legislation could be introduced to your industry's
satisfaction, would that be sufficient to appease your
concern? If so, what kinds of restrictions or criteria
should we be looking at in legislation?
Mr. René Bourque: If I may, I think
it's not the legislation that would be introduced, but
how it is policed. It's almost impossible. What
we're asking is how you would police such legislation
when you just see a perception.
The banks are competing with us on a different basis
presently, and we already have reports to our national
association that some brokers have been refused a line
of credit because the banks are saying “We're going to
be competing against you, so why should we advance you
money?” As small-businessmen, that's another concern
we face in the future. How to police legislation
like that is....
The Vice-Chair (Mr. Nick Discepola): Mr. Ritz.
Mr. Gerry Ritz: From my own personal viewpoint,
the bottom line in most insurance
is service. I go there
because I know the people, because they have looked
after me well in the past, and so on. Now, the bank
may coerce you the first time with tied selling or
whatever, but it's an annual renewal. Why would I go
back if I haven't received the service I require?
My mortgage is written now, and it's a five-year or
ten-year mortgage or whatever. Why would I feel
committed the second time around? There might be a
glitch that says they got me the first time, but how
are they going to get me the second time?
Ms. Paulette Holder: To a degree,
yes, that could happen. However, it's very easy. A
lot of people become complacent. We see that every day
in our business. You have your shoppers who will shop
their policy premium every year, but you also have
those people who are set up and have their payments
taken out of their bank account, which would be very
easy for the bank to do at the time they are doing your
mortgage, car loan, or whatever. It's automatically
deducted from your account every month, and a lot of
people just let that go on without paying any attention
to it. As part of the service
we offer as independent brokers, we
make an effort to contact that person on an annual
basis at the very least at their renewal time.
There are many other value-added services that the
independent broker also supplies to the consumer and
for the consumer. As an example, one of the main
things we are concerned about is an insured having
an accident on the weekend. Who are they to call? I
know that I—along with every other insurance broker
who has attended here this afternoon—have had those
midnight calls from insureds in need of help. Where is
that consumer going to be if they have their policy
with a bank?
Mr. Gerry Ritz: There'll probably be a 1-800
Ms. Paulette Holder: That's right, and who are
you going to get on that 1-800 number? Please call
Mr. Gerry Ritz: You'll just get sleepy.
Ms. Paulette Holder: This is something we
have to bear in mind. We have to keep coming back to
the consumer. That is the importance of all this. We
are there to help the consumer, to sell them the policy
that fits them, not to sell them the only policy that
we have available. We are brokers. We broker what
they need for coverage.
Mr. Gerry Ritz: Just to be devil's advocate for a
second, the insurance companies are not without blemish
either. You guys are all networked together now. You
know I had two claims last year, so I'm an undesirable
and you don't want me. That can happen. You are
saying the banks would do that, that they would
cherry-pick the lists. Well, insurance companies can
also do that. I know that if you have two natural
disasters, there is only one company in Canada that
will cover you without pushing your premium way up and
your coverage way down, and that's Portage. At
least I think that's the name of the company.
As legislators, how do we protect consumers from tied
selling from insurance companies? You have my house,
but you also want my cottage, my boat, and my car. It's
good business for you to get it all. There's tied
selling from the banks, and there is also tied selling from
insurance companies. How do we protect the ultimate
Ms. Paulette Holder: To address your point, there
is a computer system. When someone comes in, the
insurance companies check when the application is sent
in. We can see what you've had as a claim history, if
you have forgotten a claim, so on and so forth.
However, that is one of the advantages of the
independent broker system. There are so many
competitors out there that your independent insurance
broker is going to be able to find someone who will
take that policy. That's what we do. If we know you
as a client and a customer in small-town New Brunswick,
and if we know your background, we will go that extra
mile for you. We won't just say carte blanche that
you've had two claims so we don't want to bother with
you. Each individual case has to be considered, and
the independent insurance broker sits down, talks to
you, gets the information, and considers that.
Mr. Gerry Ritz: So the banks cannot compete on
Ms. Paulette Holder: Well, the banks at this
point in time will have one policy to sell you from one
company. The independent insurance broker sells
insurance for varied companies, and each company has
different requirements and stipulations. We're there
to find that niche to put you in when you need to be
put in that niche.
Mr. Gerry Ritz: So as a consumer, why would I
deal with the bank when I can go to you and have the
option of ten different companies? Why would I go
where I've only got...?
Ms. Paulette Holder: That's exactly what we're
trying to tell people.
Mr. Gerry Ritz: I understand that. Thank
The Vice-Chair (Mr. Nick Discepola): The reason
you would go to the bank is that they also are
threatening to renew or not renew your mortgage
that's coming up in six months.
I'm supposed to chair this meeting, but since our
Liberal counterparts aren't here, I'm taking liberty.
I want to play devil's advocate.
The banks claimed in Toronto last
week—and you have sort of corroborated—that they're really
going to go after a specified market. So the Bank of
Nova Scotia or the Bank of Montreal is going to come
out with nice glossy brochures on how you should buy
their encompassing plan, and another competing bank is
going to try to differentiate somehow why you should
buy their coverage.
It seems to me then, as per their claims—and I think
it was corroborated by your industry also—that they may be
able to penetrate by lowballing the marketplace
initially, anywhere around 20% to 25% of the market,
which still leaves 75% of the market for people such as
yourselves. If you are that much better in providing that
I have nothing but praise for your industry. Being a
member of Parliament from the forgotten triangle in
Quebec, we got property and casualty.... The industry
was incredible. I've never had a single complaint from
any constituent of mine about being mistreated in their
claims during the ice storm relief. You acted promptly:
weekends, whatever it was, no questions asked.
I wonder if my account manager would quickly come to
my house and look at the losses or the damage I had.
Anyway, I've got to bite my tongue here.
If you are that much better placed to respond to
the personalized needs of your industry, if you have
a better trained sales force, which you ultimately
do, because your personnel are the key community people
who live, breathe, and work in their communities....
They know their clientele the best.
There's no bank, no matter how well the program is
concocted in the upper echelons of the 29th floor
of a tower in
Toronto, that's going to be able to come up with some
form of system or program that's going to address the
personalized needs you can offer.
Other than the concern about coercive tied
selling, do you think you can compete? What would your
concerns be, and can they be addressed?
Ms. Paulette Holder: I don't think there's any
question we could compete; we've been competing for
years. I think one of the main concerns is that what
may be left of the market out there for the independent
broker is going to be the person who can't get their
insurance policy from the bank because they're not part
of that cherry-picked group.
They're going to be the insurers who have had impaired
charges, have had problems, have had more than one
claim, have a couple of underage drivers—things we
all have our share of in the market. And ultimately
those are the higher-risk, higher-premium people.
That's going to leave the banks with the best of the
best and the independent insurance brokers with the
percentage of the market that's definitely not the best
of the best. Those are the people who result in having
claims, accidents, and losses, and increased rates, higher
premiums, and fewer markets. The market's just going to
whittle itself away.
The Vice-Chair (Mr. Nick Discepola): So are you
saying then that the banks, in introducing their
product, will probably go after a segment they could
Ms. Paulette Holder: Without question.
The Vice-Chair (Mr. Nick Discepola): —with the
most minimal amount of training or investment, because
that's where they could maximize their potential? As a
result, they could possibly lower the premiums in that
category. However, since they siphon off, I guess,
that portion of the market, your industry would be
compelled to increase the premiums in the balance,
because obviously you've got to sustain yourselves and
be there also.
So what's the net benefit to consumers overall? Are we
going to get more competition, are we going to get
reduced premiums, are we going to get competitive
pricing, or.... What's your projection?
Mr. René Bourque: Well, we feel a competitive
insurance industry has flourished within the last year.
Our premiums in New Brunswick, for example, have gone
down for auto insurance for the last five years.
With the more than 100 companies that
we deal with in New Brunswick, there's more than enough
competition, so it looks after itself.
So if we're playing on a level playing field—we'll
say it again—we can't see any advantage as far as what
the consumer can get from the bank if they start to
Do you want me to continue?
Mr. Gerry Ritz: I can go, if you don't mind.
The Vice-Chair (Mr. Nick Discepola): Jump in any
time you want. Go ahead.
Mr. Gerry Ritz: You insurance brokers must have
made a presentation to MacKay.
Mr. René Bourque: We did.
Mr. Gerry Ritz: Okay. Were there issues that were
not addressed that you thought should have been
addressed and were just totally missed in the report?
Mr. Ray White: If I may, as far as the number of
recommendations within MacKay, there are lots of them
on which we certainly agree. We have no misgivings about
them. We don't think the report has really missed a lot with
regard to what it has done.
The only concern we're expressing is that there are a
couple of recommendations in there that we think are
totally detrimental to the P and C industry and the
consumers it serves.
So no, as far as missing anything, I could say that we
haven't found anything.
The Vice-Chair (Mr. Nick Discepola): This is in
both of your presentations. Mr. White, you say that
what makes good common sense and good business sense is
not to make changes now that will require further
legislation and enforcement, but that the necessary
steps should be taken to protect the consumer. You go
on to say that both you and Mrs. Holder state that
there's no rush and that we should take our time.
One of the concerns I have, I guess, as a
small-business person would be that surely you don't want to
wait for each budget so that the Liberal caucus backbench
will jump up and down as the finance minister states one
more time each year that the banks will not be allowed
to get into the insurance business. That's no way to
allow you to plan for your future expansions, etc.
However, I'm wondering whether there's a feasible phase-in
period when we could say that for x years we
guarantee as the government that the banks will not be
allowed to get into the sector, but after that it would
be wide open. Can that be a certain compromise, or do
you feel that at any point in time the banks are too
big and large and that they will come in and lowball
to try to get the market share? Can you enlighten me
on any of those comments?
Mr. Ray White: Remember that the banks
are in the P and C insurance business now. There
are banks that own P and C companies. They're competing
with us. As my colleagues say, we welcome it, because
again, it's the same basis on which we're doing
I think this is our point. As it exists now, as it was
agreed to—the changes were made in 1992—it has been
workable. We welcome the competition of the Personal
Insurance Company of Canada, the Canadian
Imperial Bank of Commerce, and so on.
What we're concerned about is that the report has
come back on an issue that was dealt with in 1992 and
again in 1997. It said no, you're not going to be able
to retail. So we have concerns.
I believe Finance Minister Martin said that there are
some concerns about whether or not in coercive selling
the use of information can be protected against, so it
was wiped out.
What we're a little concerned about is that now, at
this point, it has drifted back in again, and I think we
have our feeling as to why.
The Vice-Chair (Mr. Nick Discepola): But for the
average Canadian, how can he or she see the difference
between being able to sell P and C insurance, for
example, or other forms of insurance over the counter
at the branch level versus establishing another entity
totally? Look at the Quebec model, in which they're
already allowed to sell a certain amount at a caisse
populaire, for example.
What's the difference?
Mr. Ray White: There's the atmosphere, the
closeness of the situation. Again, this is tying it
back to looking at whether I'm here to appease the bank
or really free to choose to buy the product.
The Vice-Chair (Mr. Nick Discepola): So the two key
issues are the potential misuse of private information
and the coercive use of that to sell.
Mr. Ray White: And in the branch, we do have some
feeling that there would be a feeling of that
coerciveness such that because I am in that branch, I
have an obligation to that institution.
The Vice-Chair (Mr. Nick Discepola): You've
obviously sat trembling on the other side of the bank
Mr. Ray White: Too many times.
The Vice-Chair (Mr. Nick Discepola): Mr. Ritz.
Mr. Gerry Ritz: Just to follow up on that point,
say it was a totally separate storefront from the bank.
They're selling insurance now. They're already doing
that, but it's kind of under the counter and
you have to ask an employee, and so on. If it's a
totally separate storefront down the block or whatever,
is that acceptable?
Mr. Ray White: Yes, it is.
Mr. René Bourque: Without using the information
that they previously had—
Mr. Gerry Ritz: It's a separate storefront. That's
what the legislation would protect. There would be no
exchange of information, and so on.
Mr. Ray White: Exactly.
Mr. René Bourque: Maybe to follow up on your
previous question, Mr. Ritz, of whether the task force
had missed anything, as we said in our report, First
Marathon Securities says that the P and
C sector is the most competitive financial service
industry in Canada. That was overlooked by the MacKay
report. We're saying why fix something that isn't
The Vice-Chair (Mr. Nick Discepola): Okay.
Mr. Gerry Ritz: Okay, thank you.
The Vice-Chair (Mr. Nick Discepola): Just for a
point of clarification, Ms. Holder, on page 3 of your
statement, you state that:
For example, brokers are required to undergo a rigorous
course of study in order to meet licensing requirements
of our provincial government. These rules don't always
apply to other distribution channels, however.
I'm led to believe that in all provinces—I know my
province of Quebec well—licensing requirements
apply to everybody who wants to sell insurance. It
might be different for New Brunswick, but I'm not sure.
Ms. Paulette Holder: I'll let our executive
director reply to that.
Ms. Linda Dawe: Yes, I'm going to speak to that.
Independent brokers have a four-step licensing
requirement in this province. Direct writers and
call-centre people who are tied to one company have a
one-step requirement. So we feel that independent
brokers are better educated than other
The Vice-Chair (Mr. Nick Discepola): Again,
that should give you a market
advantage because you're better educated. I
Ms. Paulette Holder: If you let the customers out of
the bank, yes.
The Vice-Chair (Mr. Nick Discepola): There's one
other area of concern that I have personally that you
also outlined. Banks traditionally have picked and
chosen the types of specialty areas they wanted to get
into. Where there was small lending to the business
sector, they chose to lend to the real estate industry.
Then all of a sudden, when the market fell, they
withdrew quickly. They've done that in various areas.
I wonder whether a bank would continue lending to some
areas if they didn't become profitable. I don't know
how you would legislate that.
I want to conclude by turning to a comment that you
made, Ms. Holder, in your concluding remarks. I
believe again that we have probably focused on the
narrow issue of bank mergers. The focus is all on
that. From your industry's perspective, I
understand why you're focusing on it, but as you say,
our future as Canadians goes well beyond just simply the
mergers of banks and their powers.
I'm wondering about two things. If we were to say
that banks should not get into P and C or other
insurance, and auto leasing, do you have any comments
as to whether they should be allowed to merge or not?
The second question would be, as you say, what kinds
of areas and key concerns should we have if we truly
want the financial services sector to be a varied,
world-class, highly competitive, efficient, and
homegrown industry in the face of the global competition
we're facing? Look in your crystal ball and think
of 10 or 15 years down the road.
Ms. Paulette Holder: To answer the last
part of your question—this is just my personal
opinion—if it ain't broke, don't fix
it. We feel very strongly that the service we
offer now as an independent insurance broker
distribution system is to the consumers' advantage. We
would like to see it maintained as it is now.
As I've said before, we are not here to say that we
don't want the banks selling insurance, as they are at
this point in time, but we don't want them to be able
to sell insurance out of their branches.
Looking down the road at the bank mergers, I don't
think anybody has a crystal ball. You can read many
different articles in any paper you pick up, and
everybody has a different opinion. I certainly am not
well versed in that area to say what might happen. The
fewer banks there are, the more power those fewer banks
have, and the less choice our consumers have.
The bottom line
is the consumers. I do not see how it's going to be
any advantage to them. That again is my opinion.
The Vice-Chair (Mr. Nick Discepola): Thank you.
Anyone else? Mr. White.
Mr. Ray White: If we do buy into the idea that the
banks have to be merged in order to be more powerful to
compete in the global market, given that this is correct,
I guess at my level it's hard to judge whether that's—
The Vice-Chair (Mr. Nick Discepola): Those weren't
the words I used; those are the words the industry's
Mr. Ray White: Given that this may be the case, I
guess the question I would have is where does allowing
the banks to retail insurance out of their branches fit
in to that need? Certainly, regarding the merger, we
say yes, okay, things are going to change in the next
ten years; we need a stronger base of bank systems. We
say great. We have no misgivings about the task force
report saying this is the way it should be
accomplished. What we do say is where does this fit
into that? What possible little bit of that thing—the
banks retailing insurance.... Does it give them the
need for that?
The Vice-Chair (Mr. Nick Discepola): Thank you very
much for your presentation.
We want to assure you we will, as a government, commit
to making sure we do what is right for Canadians in
It's a very difficult decision, as you know. We're
focusing unfortunately on one area, which is the merger
of the banks. And I think if you ask the banks
themselves if Mackay made the right decision by saying
the banks should be able to get into leasing and car
insurance, they probably would have said “Damn it all,
we wish he had left it out”, because I don't think
that's what they want to focus on either. But it is a
very important decision nonetheless for our government
to make sure we do keep a world-class, very highly
competitive edge over the next few
years. I'm just wondering what the right decision is
going to be.
If we all had a crystal ball, then we could probably
look out and maybe make the better decisions today.
I don't know what the solution is. I'd much rather see
a very competitive merged bank and insurance
company—at least I'll have six choices of either life
insurance or property and casualty insurance—as
opposed to seeing three banks merge into
two maybe, and then two or three merged life insurance
companies merge into two or three other companies.
So it's a very difficult decision we have to make, and
I believe our decision is going to be rendered much
easier because of presentations such as yours. We will
try to make the best decision possible.
Thank you on behalf of the colleagues who could or
couldn't be here.
I want to say for the record that we have a very important
vote in Ottawa at 5.30 p.m. on this particular motion.
That's why most members were called back for that vote
today, and that's why Mrs. Wayne had to leave also. And
having a slight majority of only nine people, we had to
make sure the government doesn't topple. But your
testimony will form part of the record and all members
will receive a copy of it.
So thank you very much.
I would like now to call upon our next witnesses, Mr.
Glen Calkins from McDonalds Restaurants of Saint John
and Quispansis, and Ms. Twyla Jensen from Right Choice
Computers Inc. Would you please come forward.
Make yourselves comfortable.
These are the last two witnesses, and then we fly to
Thank you both for appearing before the committee. As
good protocol calls for, ladies first.
No? All right, Mr. Calkins, you go first.
Mr. Glen Calkins (Owner\Operator, McDonald's
Restaurants of Saint John and Quispansis): All right,
I'll go first.
First I'd like to thank you for the opportunity to
speak here today. It's regarding the future of banking
Firstly, I don't profess to have any particular
expertise in banking other than writing daily cheques,
making deposits, and borrowing money, both as a
businessman and as a consumer. I have no particular
agenda or special interest. I see benefits and
problems on both sides of the equation, as you said
Here in Saint John I am the owner-operator of seven
McDonald's restaurants. I've been here approximately
one year, having recently moved here from Alberta.
As an owner-operator of McDonald's, I bank with the
Royal Bank of Canada. I also bank with the TD Bank.
I've enjoyed excellent associations with both banks for
many years now. I feel the level of banking service
that has been afforded to me over the last two to three
years is vastly improved over what I experienced over
the last five or ten years. I believe the banks are
making a better effort every day to serve me as both a
businessman and a personal customer on a better basis
than they ever have before. I was used to going to
banks that didn't have managers, and on and on it went.
Now I feel the service has improved.
It would not be appropriate for me, however, to make a
recommendation one way or the other as to the merits of
bank mergers. This is up to you to determine—and more
importantly, the market forces that exist in the
worldwide banking industry today.
My observation of business in the 1990s is one of
globalization. Very often I receive unsolicited offers
from worldwide financial institutions offering a
myriad of services related to my personal and business
affairs. I used to deal with a Canadian investment
company, but now they're a North American-based company.
I receive offers of financing from companies like GE
Capital. I receive pre-approved MasterCards for not
only myself but my 10-year-old son. My Canadian
insurance policies are now owned by international
The point I'm trying to make is that Canadian banks
are players in a much bigger market than what used to
exist in Canada. For years Canadian business was
protected by government policies. I believe this
protection has actually been detrimental to the success
of these companies, and the only way for Canadian banks
to survive is to become global players. To be global
players, the mergers will give them the base and size
to compete with other North American and worldwide
American and international financial institutions need
no more than a telephone and a call centre to reach out
to all corners of the world. I believe this puts our
Canadian banks at a disadvantage. In listening to the
previous presentation on insurance, I'm not sure if the
threat is so much from Canadian banks as from
It is also clear to me that these companies that use
telephones as their place of business pose the biggest
threat to our banking industry. The banks offer
branches in almost every town and city in Canada. They
provide jobs, revenue, and an important tax base
for federal, provincial, and local governments. Large
international organizations barely even have offices in
large Canadian centres, let alone the small towns and
cities. Being left to compete with these huge
international corporations will, in my mind, be the
death of Canadian banks. Branches will not close
because of mergers but rather because of a lack of
It has been suggested that a merger of banks will lead
to a lack of competitive pressure. The proposed
mergers would still leave plenty of competition from
the newly merged companies themselves, smaller banking
entities, and the international corporations I have
been referring to. There are perhaps hundreds of
banking options that are being offered and will still
I feel the best protection for our Canadian banking
system is to give them the size and economies of scale
they need to compete. The competition is there. I
don't believe this will create any kind of monopoly, as
market forces will prevail. Market forces say to me
that mergers would be good, giving us world-class
I would just speak to one other point. I made some
notes while I was listening to the previous
presentation. McDonald's is a huge global worldwide
corporation. We benefit every day from the sheer size
of the corporation and the ability to negotiate with
suppliers and pass along those savings to our
customers, which is what we do every day. We're driven
to provide the best prices to our customers that we
possibly can, and we're only able to do that through
economies of scale. That's just an extra point I'd
like to add.
Thank you very much. That's all I have to say.
The Vice-Chair (Mr. Nick Discepola): Thank you,
Mrs. Jensen, please.
Ms. Twyla Jensen (President, Right Choice Computers
Inc.): I'd like to thank you for giving me the
opportunity of being here today. I'll keep this short
Based on the MacKay task force report, which I have
read, as a small-business owner I fully understand the
concept of growth in competition and the importance of
customer service. All businesses are born small.
Through growth and customer service they are forced to
expand in order to compete and meet the demands within
the marketplace. Competition is already in place with
the American financial institutions. Change we must. It
is proven that one who stagnates withers away, while
those who go forth and change become prosperous.
We need to be a strong, united
Canada and go forth into the new millennium. A strong
and united Canada will create more jobs, jobs that will
be lost if we can't compete.
Having said this, I do support the bank merger, and
feel strongly that the strength of the superbank will
allow competition and better the market share
internationally. However, I do feel that loyal
Canadian businesses need to have protection, perhaps by
government regulation similar to that of the CRTC.
While not totally familiar with the inner workings
within the banking industry, as a small-business owner,
and based on the information I have reviewed to
date, the emphasis seems to be on a defensive
position guarding the reputation of the banking
industry. This has overshadowed the needed relevant
information on the merger, information that could
better educate the consumer and portray the true
outcome of the merger.
The Vice-Chair (Mr. Nick Discepola): Thank you,
Mrs. Jensen. I'd like now to turn to Mr. Ritz for
Mr. Gerry Ritz: Thank you, Mr. Chairman.
I just had one thought when you were talking about the
banks being stronger as they merged. Again, we have
a Canadian bank merging with a Canadian bank. Would
they not be stronger if a Canadian bank merged with a
U.S. bank? Is there some thought there that maybe the
Royal should be shopping in the United States for a
partner? For the TD and CIBC merger, should they be shopping
for partners somewhere else, as opposed to just strictly
Canadian ones? Would that make them stronger as we go into
this globalization and world markets?
Mr. Glen Calkins: I suppose that's a possibility.
It is happening everywhere—Midland Walwyn and Merrill
Lynch and that kind of thing. But I don't believe that's
good for Canada. I believe we're being swallowed up
by too many American companies as it is. We lose a lot
more control that way. I'd sooner see a strong—cliché
here—made-in-Canada solution that allows our banks to
go forward and compete in the world rather than them
being just eaten up. That's what would happen, in my
belief anyway. The bigger
entity would take over the small one; that would
clearly happen. It could happen the other way. The
Royal Bank could buy somebody else.
Mr. Gerry Ritz: I'm going on the premise of a
meeting I had with Bob Kelly, the VP for the Toronto
Dominion bank, in Toronto ten days ago. Their second
step—the first is the merger with CIBC—is
picking off an American bank that would be equal in
value to about what the merger makes them in Canada.
That's their long-term goal. Why would they need the
first step? Why would they not go directly to the
United States and merge up with someone their size now?
Ms. Twyla Jensen: As a Canadian citizen,
I'm quite convinced that if we had the ability within
Canada to make a strong Canadian bank then that should
be done. If we go shopping to the United States we're
giving more business to the United States that way, and
they're going to take a piece of the pie and it's not
going to stay within Canada.
Mr. Gerry Ritz: Is there enough big business in
Canada to deal with big banks, or will they be looking
Ms. Twyla Jensen: I think there is enough business
in Canada, but I think they are going to look
for the international markets, which again will bring
revenues into Canada.
Mr. Gerry Ritz: Thank you.
The Vice-Chair (Mr. Nick Discepola): I'm going
to ask a very delicate question. I don't
want you to take it personally, but I have to ask it
because I want it for the record. Do any of you have
working lines of credit with any of the banks that have
Ms. Twyla Jensen: Yes.
The Vice-Chair (Mr. Nick Discepola): Mr. Calkins?
Mr. Glen Calkins: Personal or business working
lines of credit?
The Vice-Chair (Mr. Nick Discepola): Either.
Mr. Glen Calkins: I have working business lines of
The Vice-Chair (Mr. Nick Discepola): So you both
have. My next question is again very delicate. Have you
been approached by an employee of the bank to make this
presentation, or are you doing this on your own behalf?
Mr. Glen Calkins: I'm doing this on my own.
Ms. Twyla Jensen: As a small-business owner, I'm
here to voice my own opinion.
The Vice-Chair (Mr. Nick Discepola): Thank you
Mr. Glen Calkins: I speak up on many issues. I
have the town of Rothesay building a firehall in my
The Vice-Chair (Mr. Nick Discepola): We had a very
disturbing incident in Toronto, so I just wanted to make
I'd like to touch upon a few key areas. One
of the concerns I have is that you both claim.... Let me
start with the technology component. The banks believe
that they have to be bigger to be able to compete
globally. Mr. Calkins alluded to that fact, and he
used your model also. But I believe that what drives
mergers is essentially economies of scale. McDonald's
certainly wouldn't have the buying power that it does
if it were just the small franchise it was back in the
1950s. You've achieved economies of scale and
therefore you benefit through those economies of scale
with reduced costs. You have a different corporate
model in turning back an awful lot of those profits to
keeping costs down, and you've treated your employees
There has been no similar commitment from the banks.
None of them has stepped forward and said we want to
achieve economies of scale. They camouflage that with
other things by saying we want to compete globally.
What they're really after is merging operations so they
can achieve economies of scale and as a result have a
better profit picture. None of them has stepped
forward and said we are going to reduce service
charges, that we are going to undertake to lend more to
small business. They haven't even done that well. We
For five years I've been in this business. I started
my own computer company at the age of 26. I remember
trembling asking for my first $47,000 loan after having
been refused by another bank. They haven't done
small-business lending very well. It took me ten years to
convince my bank manager that what I had on a 1600 BPI
tape drive was worth hundreds of thousands of dollars.
Now, fifteen years later, they realize that
they can't lend to traditional sectors, all of a sudden
they're going to start lending to knowledge-based
industries. Instead of a 1600 BPI tape it's a little
CD-ROM maybe, which shows that things have changed.
There's no compelling evidence that they have to be big
to compete on a world scale. There are two lines of
thought here. Some of the bank managers, when asked
outright if they could say for our committee what
megadeals they have lost because they haven't been big,
say none. They believe that within the next four
or five years they will have to compete. However, when
you look at the numbers, even after they merge—I don't want
to get into the concentration of power here—they
won't be in the top 20. So is the argument still valid
that you must be big to compete globally? If so, how
If you study the U.S. phenomenon of 9,000 or 10,000
banks all merging, there is an underlying pinning of
evidence that there is a certain level and certain size
that's probably optimal to maximizing and benefiting
from the economies of scale. In other words,
bigger isn't the best. I think McDonald's understood that
very well by their franchising concept. So do they
have to merge to compete globally? If so, I'd like
your comments on that.
And secondly, for Mrs. Jensen, since you are in the
field, another argument they use is technology.
They spend roughly $300,000, or between the two banks about
$600,000, in R and D. It's a far cry from the billions of
dollars the U.S. has spent, even though
supposedly we have a far superior
financial services system in Canada, bar none.
You can clear a cheque from one coast to the other
overnight, whereas it takes four or five days in the
United States. What aspects of technology do they need
to drive them to merging to be globally
If you've been in the field as long as I have, I
remember in the 1970s or 1980s competing with my branch
on the providing of payroll services. They have now
gotten out of that field. Back in 1970 or 1980 it used
to cost $1 million or $2 million to buy an IBM 370 or
360 to provide the volume. Now you can do it with a
little IBM 486 or 586. As a result, maybe the banks haven't
found it as advantageous and they've gotten out of it.
But the fact of the matter still remains that over the past they've
shown through joint partnerships or through
outsourcing, for example, that they may be able to achieve
the economies of scale they want also. The bottom
line is do they really have to merge to be able to be
competitive, or are they using that as a smokescreen to
say we want to achieve economies of scale? I would buy
that argument readily: you want to merge because you
want to save costs and you want to save costs so you
can be more competitive and provide more competitive
products, etc. But then don't say that you're doing it
because you want to merge for competitive reasons, which
I haven't seen them make the argument for.
Mr. Glen Calkins: If I could make the argument for
them, I guess I'd be lobbying and making a lot more
money than I do. I'm not sure. I've always had
aspirations of a career in Ottawa, but not today.
It's difficult to speak to all these issues. I don't
have any relevant expertise in these areas to say
whether a bank merger is good or bad or what the
underlying motivation is. I believe there's been an
evolution in the banking process. There's an evolution
in the world going on right now. I see a possible
threat to the current small size of the Canadian banks
from these huge international corporations that really
don't maintain offices in Canada.
The Vice-Chair (Mr. Nick Discepola): Can you
give me examples? You said yourself you've been
approached by different organizations.
Mr. Glen Calkins: Midland Walwyn has been taken
over by Merrill Lynch, and on it goes. Citibank and
MBNA MasterCard, I get those—
The Vice-Chair (Mr. Nick Discepola): Maybe these
companies are addressing a market need that the banks
so far have refused to address. I'll give you one
The business community has been crying for years for
an option to be able to get financing, to the point
where they're willing to pay a premium. The problem is
that with our traditional lending practices, once the
risk becomes so high that it justifies higher than a 3%
premium above prime, the banks won't do it. Now we
have a phenomenon where Wells Fargo is walking in with
the mindset that's prevalent in the United States.
They say “Fine, we don't have to put up bricks and
mortar, as you've claimed. We'll provide
small-business financing, but we'll charge 6% or 8%.” The
business community I know of is thankful to have that
money, because at least they can continue. In the past
they didn't have a choice.
I can give many examples like that where the banks
haven't lent in traditional sectors, and as a result
they've left the market open for these types of people.
With the credit card business, for example, when you
are forced to pay anywhere up to $100 per credit card
just to become a member and then you're forced to pay
15% to 19% premiums, it's no wonder. I've received
four of them, like you. There's a little catch. The
first year it's 9% and after 12 months it goes up to 15%.
Still, maybe if the banks had been more responsive
to hearing the cries from various sectors they
wouldn't have allowed these institutions to come in and
get a foothold.
Mr. Glen Calkins: I think part of our problem is
the Canadian way. We have long protected institutions
in Canada and we might be paying a little bit of that
If I were arguing before you today over whether Burger
King and McDonald's should merge, it probably wouldn't
be a big topic of conversation. I don't know if it
would have to necessarily go through all these hearings
and everything else. But because it's banking and
there's so much government involvement in so much of
our lives in Canada, this is why we're going through
this whole process.
I think banks should be allowed to go ahead and do the
things they feel they have to do to survive to get the
economies of scale. I don't argue with you there. The
banks will achieve economies of scale; there's
absolutely no doubt about it. But it may be better in
my neighbourhood to have one bank than no bank if the
threat from American competition and worldwide
competition continues to dwindle the Canadian banking
The Vice-Chair (Mr. Nick Discepola): Ms.
Ms. Twyla Jensen: I have to agree with what he's
When it comes back to the merger and
you ask why they need to merge and whether it's the
technology involved, I think the cost involved in
upgrading to the year 2000 probably does play a part
with the merger. A lot of businesses are feeling the
ill effects of the year 2000 fast approaching and
of having to spend thousands and millions of dollars to
get their systems updated to that.
I think there are a lot
of duplicate tasks, and by having two banks merge you can
reduce a lot of the costs by reducing those tasks. Again,
that's money that can be better used in different areas
and bring new marketing strategies on board.
This is money freed up that could be dumped back into
the small businesses.
If indeed what the banks say
they're doing, or going to do, is to invest this money
back to help reduce the fees for small businesses—
The Vice-Chair (Mr. Nick Discepola): I haven't
heard this commitment. Have you?
Ms. Twyla Jensen: I have heard that.
The Vice-Chair (Mr. Nick Discepola): From which
Ms. Twyla Jensen: I have heard this from the Royal
Bank, and actually the TD Bank had said so too.
The Vice-Chair (Mr. Nick Discepola): They said
they would reduce fees?
Ms. Twyla Jensen: They said they were looking at
reducing small-business fees, not taking them away.
They said through the merger they should be able to
free up enough money to again make it better for the
The Vice-Chair (Mr. Nick Discepola): As a small
business, how much do you pay in monthly fees?
Ms. Twyla Jensen: I pay probably about $120 a
month. And I'd love to see those fees reduced.
But again, that's not so much the issue. I think
you're always going to have banking fees and they're
always going to be out there. I deal with a lot of
government agencies using credit cards. They're not
using credit cards from Canadian banks. They're using
credit cards from American banks, credit cards that
they have bid on or whatever the case may be and that
they are getting better pricing on.
The Vice-Chair (Mr. Nick Discepola): But how will
merging allow them to compete in that area? More than
anything else, isn't it price sensitive?
Ms. Twyla Jensen: I think through being free of
the redundant tasks, the duplication of tasks, there
will be more money to put back into the economy.
The Vice-Chair (Mr. Nick Discepola): Isn't that a
code word for job losses, though? How many jobs stand
to be lost if the banks merge?
Ms. Twyla Jensen: I know that speaking to some TD
Bank employees—again, this is just my personal
conversations with them—many of them are fearing their
jobs, because there's been an announcement there will
be many jobs lost through the merger between the TD and
The Royal Bank and the Bank of Montreal are claiming
there won't be any job loss, that they're going to keep
these branches open and that they're going to make full
use of it.
The Vice-Chair (Mr. Nick Discepola): How important
a factor, if you were sitting in my seat, should this
be? How much weight should this be given in making our
Ms. Twyla Jensen: I think it's a very important
factor. But times have changed, and change we must.
Canada must move forward into the new millennium, and
moving forward involves change. If we stagnate, and if
we don't do something to help boost our economy,
there are going to be jobs lost one way or another.
The Vice-Chair (Mr. Nick Discepola): Okay.
I could continue. Do you want to take over?
Mr. Gerry Ritz: I'm just wondering how merging the
banks jump-starts our economy.
Ms. Twyla Jensen: I think through merging the
banks you're going to increase revenues down the road.
Again, I think you've got two banks that are spending
some $1 million a year doing the same tasks. If they
can merge together and loop this into one pot, then
they've got money freed up to let's say do
investments and again get a better return off them, and
to bring on American companies to deal with other more
The Vice-Chair (Mr. Nick Discepola): Are there any
conditions you'd like to see imposed on the
possible merger vis-à-vis lending to small businesses,
for example? Are there any concerns that you both
Ms. Twyla Jensen: I would love to see them be much
more flexible and take a bit more of a risk with small
businesses. I do a lot of mentoring and work with many
entrepreneur groups. One of their big complaints is it
is hard to get a bank to support them in their start-up
If the merger goes through, perhaps we could
get some sort of government regulation for the Canadian
businesses, the Canadian people and the Canadian side,
similar to what the CRTC does to protect the Canadian
The Vice-Chair (Mr. Nick Discepola): Banks will
claim they have such a system in place; it's called an
ombudsman. Have you ever used one for your business?
Mr. Glen Calkins: I'm speaking to you here just as
me, a citizen of Canada. On your point, I believe
that if there is a decision to move ahead, it would be
prudent to put controls in place during the transition.
I get a little worried, though. Sometimes with this
banking merger, the government is posturing. For Mr.
Martin and everyone else, it seems to be quite
political. And I think—
The Vice-Chair (Mr. Nick Discepola): Mr. MacKay
claimed that himself.
“At the end of the day, the orange light is up, but
it's a political decision.”
I think I'm quoting him correctly.
Mr. Glen Culkins: There are political
considerations. You talk about job loss. Well, it
doesn't look good if there are job losses. I don't
think there should be a fear of people losing jobs,
because in most situations people have replaced those
jobs often with better jobs in Canada.
Canada is made stronger by competition.
Canada is made weaker, I believe, by government
regulation and control. I think we're seeing it in the
Maritimes. I think we're seeing it in the province of
New Brunswick. The province of New Brunswick is better
off today than it has been for a long time, because
there's less government money coming here and there's
more responsibility on individuals to get up and
do something in order to find other markets and other
opportunities for the products they sell.
The Vice-Chair (Mr. Nick Discepola): How will
it benefit Canadians?
Mr. Glen Calkins: How will the bank merger benefit Canadians?
The Vice-Chair (Mr. Nick Discepola): Yes.
Mr. Glen Calkins: You're not going to run out
tomorrow and find everything to be rosy because the
banks merged. As I said at the beginning, I'm not
really advocating that. I'm taking the
approach that the banks have to evolve as any other
businesses would, and if they really feel this is
in their best interest, this should be allowed to happen,
unless the government can create a very compelling
reason—and it has to be very compelling—they
shouldn't go ahead and can show it will harm
the country, and I haven't seen that from the
other side. You may be saying you haven't seen a
convincing enough argument from the banks to really
say this is what I'm going to do. I haven't seen
anything really from the government saying this is
going to ruin Canada.
The Vice-Chair (Mr. Nick Discepola): Go ahead,
Mr. Gerry Ritz: I'd just like to make one point.
You talk about ruining Canada. The Competition Bureau
is saying that according to their present regulations—unless
they are changed for these mergers—between
1,000 and 1,100 bank branches would have to close due
to the market share and so on. So that's a tremendous
downturn. It definitely would affect people.
The Vice-Chair (Mr. Nick Discepola): You will
have branch closures.
Mr. Glen Calkins: There's no doubt about that.
The Vice-Chair (Mr. Nick Discepola): You will have
job losses. That's inevitable. You will have a
concentration of power. Just the two banks involved
in the proposed merger would have around 60% of the
marketplace. Take away the franchising model, but if
you saw all the petroleum companies merging into one,
would that concern you?
Mr. Glen Calkins: No, because it wouldn't make a
difference in the price. We don't have any competition
now. It's nothing to say to me it would be any
different if we had one company. I think that was the Liberal
government's platform or policy several years ago in
The Vice-Chair (Mr. Nick Discepola): If MacKay had
said the banks should be allowed to get into the
software business, the hardware business, the Internet
networking business, or into the franchising business,
where would we stop? You know what will happen: the
banks would get into the funeral business.
Mr. Glen Calkins: I think we can play a lot of
“what if” for a long time. I'm enjoying this
conversation very much. I'm enjoying the opportunity
to speak with you.
I don't think people should be afraid. That is one of
the things I pride myself on. I had one restaurant in
Alberta. I picked up my family and moved to Saint John,
where I bought seven restaurants that need a lot of
work. We're losing money on them, but I'm determined to
turn them around. That's the spirit people in Canada
need. We need to be stronger. We need to be more
confident about our abilities.
The Vice-Chair (Mr. Nick Discepola): But we can't
always compare to other sectors, and you've done some
of the comparison. I'm wondering if it's justifiable
to compare. I'll elaborate.
First of all, the
banks have a very privileged status. They are the only
ones allowed to take Canadians' money at a
provincial rate, usually 3%, and to lend it out at double
that rate. Now they have an excessive amount of money
they're trying to place somewhere else. So I have
several concerns as a Canadian, notwithstanding the
competition or the lack of competition. After I was
turned down by the Royal Bank, I was able to go to
the CIBC and get my loan. If
the two of them merge, I wonder if that possibility will
These are the types of concerns I have. The banks have
a very privileged franchise in Canada that's given to
them by the government, indirectly by Canadians. They
then have not only a social responsibility but also a
You and I both know there's
a concept of too big to fail:
knowing that somehow the system,
whether it's the international system or Canadians,
will come to their rescue, the banks will take a little bit more
risk on lending that money, knowing they won't be
allowed to fail.
And worse, if they
are allowed to fail, as a legislator I would much
rather see six players and one of them fail, God
forbid, as opposed to seeing two or three in
mega-failure. Then who bails them out ultimately?
Canadian taxpayers. Because we would ultimately, as we
did with one of the banks in Alberta at one point, have
to bail them out.
So should we change the rules if they're going to
merge? Should we look at the 10%? Should we look at
deposit insurance, for example? Should we look at
increasing the reserves over 10 or 20 years so that if
the banks are going to have this privileged status they
assume more of the responsibility and Canadians are not
left to hold the bag should there be a failure, God
Mr. Glen Calkins: You're in a difficult situation.
I wouldn't want to make the decision that ultimately
you people have to make. Government, though, created
this, and that is probably our problem. And that's
where the politics of it become, as you've just
illustrated, a very important part of it—the
protection of the Canadian public. We have a system
right now that is created by government, is regulated
by government. I think we're having some growing-up
problems. We're trying to wean ourselves off a lot of
government in our lives, but it is difficult, and I
understand that. I do believe there should be some
protection in place for consumers, for business people
The Vice-Chair (Mr. Nick Discepola): Even
though we're having growing-up problems, it's one of the
most respected systems in the world. Even the
Americans claim that we're light-years ahead of them.
Mr. Glen Calkins: Oh no, I wouldn't
give up Canada for anything, no doubt about that. But
I think things have to be allowed to evolve.
If these very grown-up institutions wish to do
this, then I think their wish should be respected.
I think the job of the government is to make sure
the Canadian public is protected at the same time
through the process.
The Vice-Chair (Mr. Nick Discepola): Mrs.
Ms. Twyla Jensen: I guess the question I would
like to ask is what will happen if the merger doesn't
take place? Where is that going to leave Canadian
The Vice-Chair (Mr. Nick Discepola): Short
term, I don't think anywhere, although there'd be some
Ms. Twyla Jensen: Long term. Short term is here
The Vice-Chair (Mr. Nick Discepola): Long term
is what we're trying to address. Unfortunately,
we're focused too much and almost singularly on that
one aspect, which is mergers, as opposed to looking and
saying how should we have a very competitive financial
services sector that's as competitive as it is now, as
dynamic as it is now, that's as world class as it
is now, and homegrown—keeping it here in
Ms. Twyla Jensen: Yes. I don't know about you, but
I'd like to put my money in a bank that I know is
making profit and is still going to be around.
Mr. Glen Calkins: A Canadian one, too.
Ms. Twyla Jensen: A Canadian one at that.
The Vice-Chair (Mr. Nick Discepola): Well, I
used to think the same way when I saw IBM shares
at $370: I wish I could buy them. But as you
can see, you're never too big to fail.
Ms. Twyla Jensen: But again, IBM stagnated for a
long time. They had their product out and stayed
proprietary. Change we must. They tried to
swallow up their market share, and because they held
out too long they lost.
The Vice-Chair (Mr. Nick Discepola): Mr. Ritz.
Mr. Gerry Ritz: You talked at one point, Ms.
Jensen, about a CRTC type of system to look after the
banks. We do have structures in this country that are
kind of unique to Canada. We have the Office of the
Superintendent of Financial Institutions, which is kind
of stand-alone. We also have the Canadian banking
ombudsman, as well as an ombudsman for each of the
banks. So there are some vestiges of what you're
talking about already in place.
Ms. Twyla Jensen: And when were those designed?
Mr. Gerry Ritz: When?
Ms. Twyla Jensen: How old are they?
Mr. Gerry Ritz: Not that old.
Ms. Twyla Jensen: Okay. Not that old is...?
Mr. Gerry Ritz: I don't know.
Ms. Twyla Jensen: Five years old, ten years old,
twenty years old? In the 1970s?
The Vice-Chair (Mr. Nick Discepola): The CRTC has
been around for quite a while. I don't think you want
to.... It's not a very valid comparison, I believe,
when you compare to the CRTC. They're more licensing—
Mr. Gerry Ritz: You're talking about community
involvement by the banks and forced buying.
Ms. Twyla Jensen: Well, what I'm looking at is
we're going into a new millennium. There are a lot of
old policies that have been in place for many years
that were designed a long time ago. We've changed a
lot. Our economy's changed. Our people have changed.
Our needs, our demands have changed. And I think in
some ways a lot of those policies need to change too,
and regulations need to change.
The Vice-Chair (Mr. Nick Discepola): I'd like to
ask you one final question, since you're knowledgeable
in the industry and you brought it up, and you're one
of the few witnesses who have brought it up. Would you
approve of the merger of two different computer systems
with two different corporations prior to the year 2000
with no implementation plan, or would you wait and say
implement your Y2K conversion first and then come see
us with a merger proposition?
Ms. Twyla Jensen: If there were another
company—let's say I was a big company and I was short
a few million dollars maybe of being ready for the year
2000 but they had it—
The Vice-Chair (Mr. Nick Discepola): This isn't
Ms. Twyla Jensen: Okay, but if we merged together
to have a stronger system and be ready to go into the
year 2000 together, I think I'd much sooner have the
merger done before the year 2000 than wait until after
and try to get the bugs out after the fact and spend
more money getting two systems—
The Vice-Chair (Mr. Nick Discepola): That's
where you and I disagree. I'm not going to take an
airplane, I'm not going to move from my house, and I'm
now going to make sure I have my bank account printed
just before midnight 1999.
Mr. Glen Calkins: I'm taking all my money out of
Mr. Gerry Ritz: I think the banks themselves are
saying they can't do it before the year 2000 anyway.
The Vice-Chair (Mr. Nick Discepola): I want to
thank you both for your discussion and your
suggestions. As you see, the decision is unfortunately
too focused on just the merger issue; it's much more
Ms. Twyla Jensen: I think more information is
The Vice-Chair (Mr. Nick Discepola): Yes, and we
are going to take our time. The committee will be
continuing its hearings. I believe now we're not going
to report in December. We will report in December on
the pre-budget consultations we had earlier in the day,
but on the MacKay report recommendations itself we are
going to take our time, until March. I believe this is
what the committee has decided. So we still have ample
time to make our recommendations to the Canadian
If you have anything else you would like to add, you
are welcome to always forward it to the clerk of the
House of the Commons standing committee and we will
Yes, Mr. Calkins.
Mr. Glen Calkins: I'd just like to ask, what
exactly is your mandate?
The Vice-Chair (Mr. Nick Discepola): It is really
large. Unfortunately, when we go from city to city to
city, and it's not unlike this out west, there are two
areas. First of all, people defend their turf, which
is normal. I was facetious before, but if MacKay had
said we want the banks to get into payroll services,
into accounting, receivable services, etc., and you
were in one of those industries, you certainly wouldn't
be speaking with the same conviction you are now.
It's normal for people to defend their turf, as we've
seen. Unfortunately, it's focused the attention away
from where we should be. We should be more far-sighted
in our approach and see where we want to be, as I said
before, to maintain a world-class financial services
sector that's miles and light-years ahead of others.
Then we'll be able to keep some of the more
professional people who are leaving for other parts,
the brain drain, the computer specialists, the
scientists, the professionals who are moving out.
Unfortunately, we're focusing too narrowly on some
issues. We shouldn't be, but that's the nature of the
I believe right now our mandate is very large. It's
all-encompassing; we've really got no limitations at
all. Obviously we've got to give the Minister of
Finance our recommendations to the 124 recommendations
that MacKay put forth, which is a great place to start.
Unfortunately—and this is my own personal opinion, not
even my own government's opinion—I think Mr. MacKay
went too short. He spent 18 months and had more
resources than our committee will ever have. He should
have come up with more clear-cut recommendations. He
chose to leave it to the politicians in the end. Maybe
that's where it belongs, because ultimately it is
Canadians who will decide. But it is very encompassing;
it's not limited in any way.
Mr. Glen Calkins: Thank you.
The Vice-Chair (Mr. Nick Discepola): Thank you
I'd like to now adjourn until tomorrow, when we meet