STANDING COMMITTEE ON FINANCE
COMITÉ PERMANENT DES FINANCES
[Recorded by Electronic Apparatus]
Tuesday, October 23, 2001
The Chair (Mr. Maurizio Bevilacqua
(Vaughan—King—Aurora, Lib.)): I call the meeting to
order and welcome everyone this morning for panel I of
Tuesday, October 23, here in Vancouver. As everyone
knows, the finance committee is undertaking, pursuant
to Standing Order 83.1, pre-budget consultations, and
we've been travelling across the country seeking public
input. On behalf of the committee, I'd like to thank
you very much for your presence here this morning.
The witnesses represent the following groups and
organizations: the Coalition to Renew Canada's
Infrastructure; the British Columbia and Yukon Territory
Building and Construction Trades Council; the Greater
Vancouver Regional District; the David Suzuki
Foundation; and the Coalition of Leaky Condo Owners.
From the University of British Columbia we have a
professor who will also be making a presentation.
As you probably know, you have five to seven minutes
to make your introductory remarks. Thereafter we'll
engage in a question and answer session. We'll begin
in the order that appears on the agenda, which means
the Coalition to Renew Canada's Infrastructure will go
first. We'll hear from the vice-chairman, Jeremy Kon.
Mr. Jeremy Kon (Vice-Chairman, Coalition to Renew
Canada's Infrastructure): Thank you very much, Mr.
Chairman and members of the committee. I would like to
present apologies for Jim Facette, president of CRCI,
who is back in Ottawa in bed with a bad case of flu.
I would like to thank you for the opportunity today
and go on to talk about the presentation here. Since
its inception in 1991, the CRCI has participated in
these pre-budget consultations. We're happy to
participate again by providing a message on the need
for a continued long-term plan to address Canada's
physical infrastructure needs.
The members of the coalition are very aware, like
everyone here, that life has now changed for all of us
as a result of September 11. If decisions on
government priorities were difficult before, they are
perhaps much more difficult as a result of the war on
The CRCI also acknowledges the need for increased
security and attention to public safety in the new
reality. With this in mind, our submission to this
committee is focused on the need for a national highway
program. It's no secret that the North American
economy has slowed, consumer confidence is dropping,
and there is increased attention being paid to what the
federal government should or should not do during this
time of war.
Federal revenues are expected to decrease, providing
less room for governments to manoeuvre. However, this
government has maintained that it is committed to
providing Canadians with an economy that will encourage
investment and as much certainty as possible. We
believe that federal investment into Canada's
national highway system is a critical part.
As the collective voice of a broad-based coalition
representing all areas of the economy, we're greatly
concerned about the deterioration of Canada's national
highway system and its negative impact on Canada's
economic growth, job creation, and productivity.
The evidence is clear. Investment into Canada's
national highway system will net governments a tangible
return on that investment, save lives, improve
productivity, create jobs, and contribute to overall
The National Highway System: Condition and
Investment Needs Update, completed in 1998 by both
the federal and provincial governments, reinforced
these points. It also confirmed what the CRCI has been
saying for years: that unless we address this problem
now, the cost to rehabilitate Canada's national highway
system will continue to escalate. The update report
demonstrated that, despite investments made primarily
by provincial governments, the state of the national
highway system has gotten worse since 1988. Cost
estimates have now escalated from $13 billion to $17
billion to bring the highways up to standard due to
What the Liberal task force said in 1992 is as valid
today as it was then. That is, the economic
consequences of poor roads are staggering. Studies
reveal that the productivity of a region is very
dependent upon its transportation system. Traffic
congestion increases the cost of transporting
materials, reducing industries' competitiveness. Bad
roads also have a negative impact on tourism, an
important sector of the Canadian economy, particularly
in this part of Canada.
In 1997 the House of Commons Standing Committee on
Transport came to a similar conclusion. The committee
...an efficient, competitive highway system is one
of the fundamental requirements of a healthy economy.
It has been demonstrated beyond any doubt how important
a safe and competitive highway transportation system is
to trade and tourism.
Mr. Chairman, our full brief, which I believe has been
provided to this committee, outlines the built-in
returns on the investment, including tourism,
lives saved, increased productivity, unity, and trade.
It would be unjust to proceed without mentioning the
$600 million investment announced in the last federal
budget of February 2000. It is our belief that the
attention this committee gave to highways in your
report at that time had a large role to play in the
$600 million commitment.
In July of this year the Canada Transportation Act
review panel dedicated a full chapter to this issue. In
the end, it acknowledged that Ottawa must actively
invest in an important piece of Canadian
infrastructure—our national highway system.
In our full submission, you would have noticed that we
refer to a 1999 national highway system stakeholder
meeting co-chaired by then Liberal caucus chairman Joe
Fontana and the CRCI. The appendix to our
submission lists the participants, representing a broad
width of support, as well as some action items. The
level of commitment from the provinces and other
stakeholders has not changed.
The CRCI has built an alliance of supporters on this
issue that include the Canadian Chamber of Commerce,
the Business Council on National Issues, the Alliance
of Manufacturers and Exporters of Canada, the
Canadian Automobile Association, the Van Horne
Institute, the Tourism Industry Association of Canada,
the Cement Association of Canada, the Canadian
Construction Association, and the Association of
Consulting Engineers of Canada.
The United States, our major trading partner, has made
a major commitment to that country's transportation
infrastructure. The Transportation and Equity Act for
the 21st century, also known as TEA-21, will
provide for the investment of $217 billion U.S. in
transportation infrastructure. Of this total, $175
billion U.S. will be invested in highways alone.
Quoted in the Wall Street Journal of July 8,
1998, economists state that “the six-year plan could
generate more than $450 billion U.S. in economic
activity.” In addition, “the huge program's real
impact could be more than double its price tag....
Public works tend to generate even more economic
activity than other kinds of government” investments.
TEA-21 will need to be re-authorized no later than
October 2003. Our colleagues in the United States will
be seeking a comprehensive re-authorization package for
highways and transit that could reach an annual federal
investment of $50 billion U.S.
If we think we are behind now, Mr. Chairman, we will
definitely be at the back of the line if we do not
commit to increasing federal investment into Canada's
national highway system.
Mr. Chairman, committee members, the CRCI is often
asked how to pay for a national highway program and
whether we think public-private partnerships are an
In June of 1998 the Liberal committee on gasoline
pricing recommended that joint action between federal
and provincial governments, aimed at restoring Canada's
national highway system, be given top priority and that
partnerships be established to undertake repairs at the
earliest opportunity. In his grain-handling and
transportation review, Hon. Willard Estey
recommended that the federal and provincial governments
collaborate to apply some part of the considerable
fuel tax collections to the construction, maintenance,
and repair of highways.
In regard to the question of private sector participation
in rehabilitation of the existing 25,000-kilometre
national highway system, we think it is possible, but
expectations must be realistic. In a report to the
Council of Ministers Responsible for Transportation and
Highway Safety, a working group studied the
applicability of public-private partnerships and found
that many financial analysts are concerned about the
unrealistic expectations proponents have with
respect to the scope and applicability of the
public-private partnership concept in Canada.
However, where feasible, we believe it should be
looked at in cases where new highways are needed that
offer a non-tolling alternative. That is why we made
public in February of this year the concept of the
“Canada Bridge and Highway Authority”.
The quality of Canada's highways influences
corporate decisions regarding location, capital
investment, production methods, relationships with
suppliers and customers, location and availability of
inventory, and access to labour. A long-term plan,
such as the one laid out by the national highway review
policy report and by Transport Canada, would
carry out reconstruction of our national highway system
with maximum efficiency and create a larger economy.
Mr. Chairman, that concludes the remarks from the
Coalition to Renew Canada's Infrastructure.
The Chair: Thank you very much, Mr. Kon.
We'll now hear from the British Columbia and Yukon
Territory Building and Construction Trades Council, Mr.
Tom Sigurdson and Mr. Tony Tennessy. Welcome.
Mr. Tony Tennessy (President, Operating Engineers
Local 115, British Columbia and Yukon Territory
Building and Construction Trades Council): Good
morning, Mr. Chairman. My name is Tony Tennessy.
Unfortunately, Mr. Sigurdson couldn't be with us this
morning, so it's my duty and responsibility to comment
on the brief submitted to this committee back in
August. Certainly, some circumstances have changed
dramatically since then.
The British Columbia and Yukon Building and
Construction Trades Council represents over 48,000
skilled construction and related industry workers in
the province of British Columbia. There are currently
12 international unions affiliated with the BCYT.
The Operating Engineers, who have 10,000 of those
43,000 members, are obviously a significant member of
The brief we submitted, once again, commented on
employment insurance. It's an area that's of enormous
concern to the Building Trades Council, particularly as
it pertains to apprentices. Earlier this year the
government acknowledged the merit of our arguments and
has largely addressed the construction industry's
concerns. We're still waiting for the government to
act on recommendations to remove the two-week waiting
period for apprentices. It's anticipated that critical
skill shortages will exist not only in this province
but across the country. It's important to recognize
that apprentices also work, pay taxes, and pay EI
The B.C. and Yukon building and construction trades
unions have been particularly disappointed with the
insignificant expenditures allocated in last year's
budget for the building and repair of municipal,
provincial, and national infrastructure projects.
Ignoring the problem of disintegration of our national
highway system is not an option.
To restore the 9,000 kilometres of crumbling highway
and 790 bridges in need of strengthening and
rehabilitation, and to permit the widening of the
national highway system, of which only 25% is now a
divided multi-lane highway, Transport Canada estimates
a need of over $17 billion in expenditures. The
five-year plan in the year 2000 budget projected annual
allocations of $500 million for infrastructure works,
of which $150 million will go to highways. The
investment committed by the federal government for
highways is modest, to say the least.
The Trans-Canada Highway, for those who have ever
driven from Golden to the Alberta border, is an
embarrassment. To have signs on that highway
indicating that it's a trans-Canada highway should
certainly be an embarrassment for all of us.
As the United States develops its oil and gas
production from the north slope of Alaska, plans are
being made to construct a new pipeline to deliver
petroleum products to the lower 48 states. There are
currently two proposals for a new pipeline to the
Alaska Highway and the Mackenzie Valley routes. Gas
producers say that ultimately both lines will be needed
and that choosing the first pipeline to be built should
not be an issue to divide the country.
These are big projects. It's estimated the Alaska
Highway route, at 2,800 kilometres and traversing
several mountain ranges, will cost between $8 billion and $10
billion. First nations right of way, environmental
impact studies, and financing are some of the major and
biggest challenges involved in the construction of a
project of this size. Also, a shortage of skilled
labour to build the project looms as another real
obstacle to the project.
Building trades construction workers have vast
experience in pipeline construction. The environmental
sensibility and strategic importance of this project
demands that the job be completed to the highest
quality of standards. Project agreements on large
projects such as this also contain guarantees against
work stoppages and incentives to complete the project
on time and on budget.
As we enter into serious negotiations regarding the
development of our northern gas and oil, the Building
and Construction Trades Council urges the federal
government to require that the project be built by a
fully unionized construction workforce.
B.C. shipyards received some good news earlier this
year from Industry Minister Brian Tobin. In June 2001
the federal government announced measures to stimulate
research and development and provide new financing and
loan-insurance schemes, establishing greater benefits
and support to Canadian firms involved in offshore
oil and gas exploration and other changes that will
contribute to the revitalization of the B.C.
Currently, there are six industrial shipyards in B.C.
employing about 1,200 workers. This compares with
about 5,000 workers involved in the shipbuilding
industry across the country.
Smaller yards in B.C. are taking
advantage of a growing niche market for luxury
In spite of its problems, the development of the
FastCat catamarans by the provincial
government has left a legacy for industry. A skilled
workforce and updated shipbuilding facilities make
Vancouver and Victoria an attractive option for North
American clients looking for economic and accessible
shipyards. There is room for further federal
involvement in rejuvenation of the B.C. industry, and
we encourage the federal government to support the
initiatives by the industry minister in this vein.
The most recent issue to arise in the province of
British Columbia is the 2010 Vancouver-Whistler Olympic
bid. The bid is being led by Jack Poole, who is an
individual certainly of vision and integrity. The
B.C. and Yukon Territory Building and Construction Trades Council
will be fully supportive of this bid. We believe
the Olympics will leave a legacy of transportation
systems and facilities making B.C. a better place to
live and visit. The Vancouver-Whistler bid will be a
great venue to showcase Canada to the world.
In conclusion, we need federal support for trade to
meet the skill shortages for major projects, and we
need transportation infrastructure to make our economy
competitive in the movement of goods and people. We
need federal support for our marine industry, and we
need and urge your support for the 2010
Vancouver-Whistler Olympic bid.
Thank you for this time.
The Chair: Thank you very much, Mr. Tennessy.
We'll now hear from the Greater Vancouver Regional
District: Bob Paddon, manager of communications;
and Her Worship Helen Sparkes, Mayor of New
Ms. Helen Sparkes (Mayor of New Westminster,
Greater Vancouver Regional District): Thank you, and
I'm the mayor of New Westminister and a director of
the Greater Vancouver Regional District and the Greater
Vancouver Transportation Authority, known as TransLink.
I am also the chair of the Greater Vancouver
Regional District administration and intergovernmental
The Greater Vancouver Regional District is a
municipal federation that provides water, sewer, solid
waste, regional parks, housing, planting, and other
services to 21 member municipalities. Its sister
organization, the Greater Vancouver Transportation
Authority, provides transit, supports regional roads,
manages transportation demand, and administers the
vehicle emission control program known locally as
Protecting our region's outstanding liveability and
environmental quality has been a central goal of local
governments in the Greater Vancouver area for many
years. The quality of the region you see around you is
the testimony of that success.
But now we need help from you. The last ten years of
budget balancing and downsizing has sapped the strength
of Canadian cities. The impact on our quality of life
can be seen in substance abuse, crime, congestion,
homelessness, and loss of choice that you will find not
only a few blocks away from here but throughout the
We seek your help not only as a way of helping us with
our problems but as a way of helping the federal
government meet some of its most important objectives.
We suggest to you that the federal government can only
achieve its vision of healthy Canadians if the cities
in which eight out of ten Canadians live have clean air
and clean water. The objective of an economically
competitive Canada cannot be met if the movement of
people and goods to gateways such as Greater Vancouver
are clogged by urban traffic congestion due to the lack
of appropriate transportation alternatives, while our
neighbours to the south pour billions of dollars into
the urban transportation infrastructure and services.
I think I've already heard that from two previous
One of the most promising ways to meet Canada's Kyoto
commitment to reduce greenhouse gas emissions is to
support more efficient urban transportation strategies
such as ours. The objective of a country that is
prepared to fight terror with courage and optimism can
only be met if Canadian cities are strong enough to
face attack and defeat it with economic, social, and
psychological resilience and recovery.
At this moment, the federal government has a historic
opportunity to respond to the needs of Canadians
through partnerships with urban regions that will meet
our shared needs. These are outlined in a draft
position paper on the role of the federal government in
urban regions, which I am tabling with you here today.
I am pleased to inform you that this proposal has the
enthusiastic support of the British Columbia Minister
of State for Intergovernmental Relations, the
Honourable Greg Halsey-Brandt.
We also strongly support the Federation of Canadian
Municipalities 2001 federal budget submission
entitled A Better Quality of Life Through
Sustainable Community Development: Priorities and
Of particular importance in
this submission is the proposal for a program of
federal support for a multi-modal integrated
transportation system at a level of $1 billion per
year, or the equivalent of 3¢ per litre of motive fuel
burned in Canada each year. As the authors of this
proposal with the Federation of Canadian
Municipalities, we were encouraged to see the Canadian
transportation review report
supported by both the concept of federal involvement in
urban transportation and the idea of conceiving fuel
taxes as a road user charge.
There are also many actions within the direct mandate
of this committee that could help. For example, the
federal government could amend the Income Tax Act to
permit employers to provide transit benefits to their
employees on a tax-exempt basis. Parking benefits are
taxable, but most employees who get employer-provided
parking don't pay tax on those benefits.
Another example is that our West Coast Express
commuter rail system is facing significant financial
pressures because of the very high rent charged by a
private company—CP Rail—for use of rail tracks paid
for by the taxpayers of this country.
To sum up, the most pressing need for federal
involvement is in urban transportation. An
appropriately designed federal program will provide
benefits in the form of improved transportation
efficiency within Canadian cities, but also in the form
of increased competitiveness, cleaner air, healthier
Canadians, and cities that are better equipped to meet
the challenges we will face in the coming years as a
The Chair: Thank you very much.
We'll now hear from the David Suzuki Foundation, Mr.
Welcome. It's nice to see you again. You're on the
other side now.
Mr. Jim Fulton (Executive Director, David Suzuki
Foundation): That's right.
Thank you very much, Mr. Chairman. It's nice to be
here and see some friends from a previous life.
We'd like first to congratulate the Prime Minister
for the position he has taken post-Bonn that Canada
will ratify the Kyoto protocol next May. We think
that's a very appropriate step for the Prime Minister
to take and for Canada to pursue.
In terms of the objectives of the standing committee,
you have copies of our material. I'll just try to
highlight it and lead to areas where you might want to
ask some further questions.
We believe very strongly that, of the three areas
you're looking at—one, to ensure that Canada remains a
major player in the new economy; two, to provide
Canadians with equal opportunity to succeed; and three,
to create a socio-economic environment where Canadians
can enjoy the best quality of life and standard of
living. Those three objectives give the Government of
Canada the grounds on which to commit to ratify and
also to implement the Kyoto protocol.
Implementing the protocol can provide a foundation for
the new economy, improve our standard of living, and
provide equal opportunity for Canadians in all regions
to succeed. We also believe our recommendations are
even more relevant in light of the global instability
arising from the horrific events of September 11.
In terms of Kyoto, the plan for implementation, today
the old economy is being infused with significant
investment. Right now in Canada massive expansion of
fossil fuel projects is occurring in the areas of tar
sands development, coal-fired electricity, and natural
gas exploration and processing. At the same time,
throughout the world, renewable energy sources such as
wind power are growing at a rate of 40% per year.
The tar sands expansion, which involves some of the
most energy-intensive petroleum production in the
world, will only serve to hinder our transition into
the new economy, while increasing our carbon dioxide
liability and creating enormous economic risk. In
fact, according to our projections, current plans to
expand the traditional fossil fuel industry will see
our national greenhouse gas emissions rise to 44%
higher than the Kyoto target.
However, there is an alternative approach. This
occurs by increasing our energy efficiency, encouraging
energy conservation, and promoting sustainable,
renewable energy production. By following this
approach we can reduce energy demand, save consumers
money and distribute the benefits throughout Canada,
and reduce emissions.
Due to energy price increases in the 1970s, the energy
intensity of Canada's economy actually decreased.
Between 1973 and the present, economic productivity
outpaced growth and energy consumption by 25%. More
energy was saved over that period than all of the new
energy supply from new oil, gas, coal, nuclear, and
hydro resources combined.
If we look south of the 49th parallel, the
U.S. Department of Energy estimates that the
energy savings resulting from efficiency gains embedded
in the United States economy during the same period
are currently saving that country
between $150 billion U.S and $200 billion U.S.
This is something we think the Minister of Finance
should look very closely at, particularly in light of
the all-party declaration Paul Martin signed in 1993,
calling for 20% cuts from 1990 levels by 2005. That was
signed by all parties in the House at that time.
Keeping in mind that we've actually gone up 15% since
1990 and looking at the 6% reduction we are committing
ourselves to next May, we have a significant shift that
has to actually begin in this budget. Otherwise, the
ratification and implementation will be much more
difficult in the very near future.
History shows that in almost every instance,
innovation and technological advances in energy-related
fields have strengthened the economy, increased energy
security through both price stability and supply
access, and more importantly reduced air pollution in
almost all its forms, including greenhouse gases. In
an official 1998 submission to the United States
Environmental Protection Agency, the Government of
Canada stated that up to 16,000 Canadians die
prematurely each year because of air pollution.
Environment Canada and other agencies estimate the
annual medical costs are in the billions of dollars,
and these health impacts and costs alone require a
public policy response that by definition must alter
our approach to energy production and use. More of the
same, with the only variable being a constant increase
in energy volumes, is simply not sustainable. It does
not meet our international commitments or financial
goals and directly threatens the health and quality of
life to Canadians.
Let me turn to the question of economic instruments.
As a means of promoting the efficient use of energy
resources and in order to achieve the Kyoto protocol
target in a cost-effective manner, the
federal government should implement economy-wide
economic instruments such as a carbon tax on coal-fired
electricity and a domestic carbon trading system with
an enforced national cap on overall emissions. In
short, we believe the polluters must pay, not society
as a whole, and we outline for you some revenue
recycling features that we think the federal
government, particularly at budget time, would find the
most useful way to deal with many of these energy and
On transportation initiatives, we believe there
are alternatives to automobile transportation, but they
need government incentives. Approximately 30% of
Canada's carbon dioxide emissions come from
transportation. The federal government generates about
$4 billion from vehicle fuel taxes, while expenditures
on transportation are less than $400 million. Canada
is the only OECD country that provides no federal
support for public transit systems. We want to
strongly support federal investment in sustainable
urban transportation infrastructure. We reflect
positively on what Minister Collenette has had to say,
that expenditures on transportation have to be
sustainable. We believe that the new initiative that's
just been promoted by Premier Harris in Ontario is very
much in that vein.
In terms of community transportation improvements, we
believe that a community transportation improvement
fund should be established by dedicating 25% or $1
billion of annual federal fuel tax revenues to be
managed by provincial governments and collectively
managed along with municipal and regional governments.
The U.S. Transportation Equity Act for the
21st century is based on this
theory as well as on broader pollution abatement
strategies. The Canadian fund would be aimed at
upgrading and expanding transit infrastructure.
We urge you to take a look at our case study on motor
vehicles and the potential for efficiency and cost
savings because there are many measures that have the
proven potential to reduce the number of vehicles and
trips and the distances of those trips. Public
transit, cycling, and other alternatives such as car
pooling, home-based work, and so on are very much worth
this committee's having a look.
The most successful tool for promoting the development
of more fuel-efficient vehicles is the adoption of
updated corporate fuel efficiency standards. It
would be a good challenge for you, Mr. Chairman. In
1981 I was present in the House and voted through the
fleet efficiency legislation. It was passed by
the House and passed by the Senate, yet it has languished
for 20 years. It's never been given assent by the
Governor in Council; it's just sitting over there
at the Governor General's house. Maybe you could
just hop in a cab, go over, and simply have her give it
royal assent. It's there.
It's widely and effectively used in the
United States. It's used in every European country. I
think Canada is being lax. It's one of the only pieces
of legislation passed in the last 20 years that was
never implemented—passed by the House, passed by the
Senate, and never implemented.
I have a couple of other quick points on areas in
which we think the budget could do some good work. One
is moving more freight more efficiently by rail instead
of by road. Rail already moves 60% of overland freight
in Canada, yet accounts for less than 15% of greenhouse
gas emissions in the overland freight sector.
This is because moving an item by truck over a given
distance requires six times more energy than
moving it by rail. It's good to look at Canada's rail
system, because it has the lowest per tonne mile cost of
all railways in the industrialized world.
Such a shift must be encouraged by pricing and
taxation changes that include in the price of moving
freight by truck all of the external costs such as
those associated with highway damage, air pollution,
public health, and climate change.
Current tax policies that are more advantageous to
trucks than rail are encouraging the environmental
subsidy of trucking at the expense of air quality and
On improving the energy efficiency of residential and
commercial buildings, we believe the Minister of
Finance could implement this and it would have great,
enduring job creation potential in every province and
in the territories. It's something that really
should be brought into this budget.
Canada's R-2000 and C-2000 programs for
building efficiency should be adopted as residential
and commercial building standards. This program could
ensure Canada's housing and building stock becomes
35% to 40% more energy efficient than today's
conventional buildings, resulting in major ongoing
economic savings as well as environmental savings.
We're aware of buildings in cities right across this
country that have done this. There's a very short
period of payback. It's a high employment generator.
It's very popular with people who are in the buildings
because the buildings become more people friendly. So
there are huge numbers of advantages to the federal
government leading on this in every area of the
Given the current recession and overall economic
instability, there is a need for federal leadership on
a program such as this in order to maximize new job
opportunities that fit with sustainable energy, climate
goals, and the implementation of Kyoto.
I have a couple of more points, Mr. Chairman. On
reviewing and updating standards for major appliances
and industrial equipment, we believe that one speaks
for itself. In the United States, for example, the $12
billion that the U.S. Department of Energy has invested
in energy efficiency since 1978 is estimated to have
saved U.S. consumers $100 billion in avoided energy
expenditures. These are huge indirect gifts that can be
provided back to taxpayers and consumers by government
leading on intelligent, informed regulation.
On promoting and encouraging renewable energy sources,
in order to create a level playing field for renewable
energy, the federal government must provide incentives
for the development of low-impact, renewable sources of
electricity such as wind, solar, and micro hydro, as
well as removing current fossil fuel subsidies and
advantageous tax provisions.
We're sure you're aware of the billions of dollars in
subsidies that were identified just last year by
Canada's Commissioner of the Environment, who I think
shocked a lot of Canadians with the depth of largesse
handed over lock, stock, and barrel to the fossil fuel
sector, which is simply no longer competitive, even
In conclusion, regarding Canada's energy choices and
climate responsibilities, the current drive toward
greater fossil fuel production and consumption is
rapidly increasing Canada's greenhouse gas emissions
and our economic dependence on fossil fuels. By so
doing, we are allowing our economy to be entrenched in
yesterday's energy technologies. As such, we are
moving toward de facto violation of international
treaties and commitments made by Canada as part of our
responsibilities as global citizens, in line with
the expectations of Canadian citizens.
In addition, we are moving away from opportunities to
make significant gains in regard to the three
budget-planning objectives outlined by your committee.
As a developed nation with the economic power to
invest in energy efficiency and the technological
capabilities to develop new and renewable sources of
power, Canada has a major opportunity to be one of the
leaders in the coming energy transition and its
associated business opportunities, job creation, and
Following the successful UN climate negotiations in
July, we recognized the positive contribution Canada
made in reaching the compromise agreement and in
committing to ratification of the Kyoto protocol
We are also
encouraged by recent efforts by Prime Minister Blair
and others to encourage more active U.S. participation
in the Kyoto process.
The next federal budget is a critical point in the
transition process and must reflect both the positive
climate and air quality commitments made by cabinet in
recent months and the public's desire to see those
commitments fully realized.
We've attached some recent materials that were
published in Nature earlier this month
indicating that compliance with the Kyoto protocol
by countries like Canada will simply lower, not raise,
overall costs, and I think that's a very important
piece of work done by the Faculty of Applied Physics in
the Netherlands. Also, we've provided some material
from the Union of Concerned Scientists that comes
to some very similar conclusions and includes the
clean energy blueprint.
We hope that material provides you with a good push
for Canada's Minister of Finance, who has been, and I
think continues to be, a real potential leader on the
issue of implementation of Kyoto. He understands it.
He knows where we have to go. He knows a lot of the
proposals on coal, tar sands, and natural gas are
simply going to leave a lot of upstream frozen assets
for those who invest in the wrong technology and the
wrong energy source at the wrong time.
Thanks, Mr. Chairman.
The Chair: Thank you very much, Mr. Fulton. We
will now hear from the Coalition of Leaky Condo Owners,
Mr. James Balderson.
Mr. James Balderson (Coalition of Leaky Condo
Owners): Thank you, Mr. Chairman. My name is James
Balderson. I represent the Coalition of Leaky Condo
Owners, and I appreciate your efforts to provide us with
a slot at this meeting today.
I think it most important that you do travel the
country and hear directly from areas such as Vancouver
and others from coast to coast. I just returned last
evening from a trip to Ottawa—one week of
lobbying—and it was only while in Ottawa, meeting with
MPs and Minister Gagliano face to face, that we were
able to learn the federal government is willing, and we
presume able, to provide the owners of leaky, rotten
condos in British Columbia 25% of the repair bill. Our
estimate of the repair bill for these defective, leaky,
rotten, mouldy homes is $2 billion.
The provincial government to this day recognizes $1.6
billion. The provincial government has been laggard
and has failed in recognizing the magnitude of this
problem and providing any help whatsoever for the
owners. Present moneys going into the Homeowner
Protection Office program go to support a loan
program. The $2 billion in repairs rest on the owners
of these homes. We believe all Canadians, whether they
be on reserves, whether they be first nations, whether
they live in a downtrodden area of British Columbia,
Quebec, or Newfoundland, should be able to live in
leak-free, rat-free, mould-free, safe, warm, dry
So with a commitment from Mr. Gagliano that we can
have $500 million from the federal government, we think
it would be wise for your budget consultation process
to make certain arrangements so that money is
immediately available to us. Then we ask you to
overcome a hurdle, the hurdle being the provincial
government, which apparently is refusing to ask for the
We ask Minister Martin, your committee, and everyone
else to find a way to get this money over the Rocky
Mountains to the owners of these leaky, rotten, mouldy
I'm going to leave it to the economists and so on to
determine the impacts, direct and indirect, negative
and positive, of taking $2 billion from the owners of
leaky, rotten, mouldy homes to repair the walls of their
leaky, rotten homes rather than spend the money on
something else, like an enjoyable retirement, a new
car, a new house, or anything like that. These people
are trapped in their leaky, rotten, mouldy homes. They
need financial assistance in order to repair them and
get on with their lives. We think only massive
financial aid from the federal government and some way
to move this provincial government to tap that money
and get it to us....
our concern at this time.
Because so many people just don't know what we're
talking about until they live in a leaky, rotten,
mouldy home, I have brought for you one chunk of condo
rot that you are free to examine yourself to see what
happens when a British Columbian buys a brand-new home
and lives in it for three or four or five years and
finds the water coming in the roof, the walls, and
everywhere. And this is what happens to the timbers in
These homes are unsafe. They're unsafe physically,
structurally. They're unsafe health-wise because of
the high mould content. And the federal government has
found a way to move first nations people from their
leaky, rotten, mouldy homes and put them up in nice
hotels, while their leaky, rotten, mouldy homes are
demolished and/or repaired. We think such an
arrangement should be found for all Canadians
everywhere, coast to coast.
I'm talking about 100,000 residential units in British
Columbia. It's a $2 billion repair bill.
Minister Gagliano's commitment is for 25% of the
repair costs. I don't know all the budget implications
and how to get it through here, there, or wherever, but
please find a way whereby Minister Gagliano has that
money to send to us. And if it's this provincial
Liberal government that won't ask for it and won't get
it, then we'll dump the government and put somebody in
there who will get it for us. Or we'll find some other
way, and that other way we're pressing right now is
Premier Ujjal Dosanjh, in the dying weeks of his
premiership, wrote a letter as Premier of the Province
of British Columbia to the Prime Minister of Canada on
behalf of citizens of Canada living in the province of
British Columbia, and he stated that this problem was
of such a magnitude that it was beyond the resources of
the Province of British Columbia to handle it. And he
appealed for the disaster relief act to be invoked—or
whatever the proper title is for that piece of
That act, if invoked, would provide the money we need.
But this present government, when we met with Minister
Abbott, didn't even know the former premier had
written the letter. We have made sure he knows about
that. We have made sure that the federal MPs know
about it. This will have an impact on the budget.
This will have an impact on the finances of Canada in a
similar fashion as the ice storm and Red River floods
Any way you can take these matters into consideration,
we will appreciate.
Thank you very much.
The Chair: Thank you very much, Mr. Balderson.
We'll now hear from Professor Martha Salcudean.
Professor Martha Salcudean (Emerita Professor,
Department of Mechanical Engineering, University of
British Columbia): Good morning, Mr. Chairman, members
of the committee.
Thank you very much for the opportunity to participate
in this hearing to address an issue that I feel is
very important for Canada, namely research in Canadian
I am an active researcher, a fellow of the Royal Society
and of the Canadian Academy of Engineering, and
recipient of the Order of B.C. I am a former head of
the Department of Mechanical Engineering and a former
associate vice-president. I have been a member of
numerous national task forces and committees, which
has given me the opportunity to become reasonably
familiar with the research activities in Canadian
My experience is mainly in engineering and physical
sciences and therefore I'll stress issues related to
First, I would like to express my deepest appreciation
to the government for what they have already done in
support of research in Canadian universities. I can
assure you that based on recent visits to several
Canadian universities as a member of a Canadian Royal
Society review panel, this feeling is widely
I would like to make a plea that a stress on and support
for the innovation agenda be continued, despite the
current slowing economy as a consequence of the tragic
events of September 11. If anything, the slowing
economy makes the innovation agenda even more critical.
Canadian universities play a proportionally larger
role in the country's research enterprise than
university systems in other countries. Therefore, it
is critical to take advantage of the full research
potential of Canadian academics. Canadian academic
research is excellent, internationally competitive, and
The international panel members who were my colleagues
in a recent review committee are experts of high
international stature, for example, the former
president of the French Académie des sciences and
the president of the Academy of Medical Sciences of
Great Britain. They have repeatedly praised the
high calibre of Canadian research. It is worthwhile
noting that graduates from all Canadian engineering
schools do extremely well in the graduate programs of
the top universities like MIT and Stanford. The same
can be said of our graduates working in the most
sophisticated industries, for instance, aircraft
industries such as General Electric, where some of my
own graduate students are working.
I would especially like to concentrate my remarks on
the need to increase funding to NSERC, the Natural Sciences
and Engineering Research Council, where I believe the
need is urgent and very significant for the following
reasons. A large number of new professors have been
hired and are in the process of being hired in areas of
high demand such as electrical engineering, computer
engineering, and computer science. Many provinces,
including B.C., are significantly increasing their
intake of students to these programs.
The newly recruited professors are of excellent
quality. They are all active researchers who are
willing to choose academic careers rather than more
lucrative business careers to a large extent because of
the research opportunities that universities offer.
Canada must keep these professors who educate students
at undergraduate and graduate level because it is
critical to provide Canada with the qualified human
resources on which our very economic future depends.
Leaders of local companies, such as, for instance, Danny
Gelbart, president of Creo,
a very successful busy high technology company, have
repeatedly stressed the need for highly qualified
engineers and physical scientists. They're
hiring our best graduates and their success depends on
the quantity and quality of people we can provide.
Human resources are needed at all levels. There is no
question that people educated to the graduate level are
increasingly in demand. If you also consider the
increasing speed at which technology is moving, we can
understand that an increasingly advanced background is
necessary to stay current with these advances. The
fastest growing and most successful companies are very
research intensive, with some being primarily research
and development companies, such as, for instance, in
Vancouver, Electronic Arts, PMC Sierra,
Ballard, QLT, etc.
Canada is an excellent country in which to locate,
start up, and grow such R and D companies because of
our stability and quality of life. Most important, we
are an excellent country for these industries of the
future because of the high calibre of our workforce.
In order to compete in future in this highly desirable
area of the new economy, we need to make sure that we
will be able to provide human resources, which will be
the main assets of this new industry. The people
needed by employers in these diverse technical fields
can be assured only through broad-based funding of the
professors who educate them.
Needless to say, our resource-based industries will
survive only by intensive use of the most sophisticated
technologies, which of course also depend to a great
extent on the talent they can hire. The Canadian
chairs program introduced by the government recently is
a wonderful program to retain and recruit the best
talent to Canadian universities. It is imperative to
use this research talent to its full potential by
adequately funding the research.
Canada is an advanced country; nevertheless we have
the population size of a medium country, and in
consequence we are limited in the scope of our
contribution to the worldwide progress of technologies.
Therefore, it is imperative that we are part of the
international scientific community, in contact with the
best in the world, exchanging ideas and information,
making sure that our Canadian presence is felt and that
we bring back to Canada all important international
scientific and technological advances. This cannot be
achieved without adequate funding of the academic
experts in their field.
Canadian universities are very successfully working
with and attracting funding from industry. Indeed, we
are the most successful country in the world in this
area. Our universities also act as a major
generator of technology. We generate ideas, we patent
them, we commercialize them.
An example of this is my own colleague, Dr. Philip
Hill, who with a small NSERC research grant and a
series of graduate students began work to address the
problem of diesel emissions of nitrogen oxide and
particulates. By 1994, with support from NSERC and the B.C.
Science Council, the technology had reached sufficient
maturity and the necessary steps were taken for patent
protection. In 1995, they formed a new company,
Westport, to bring the technology to market.
Today, this company has 200 employees, a very high
proportion of them engineers. It has a joint venture
with Cummins, the world's largest manufacturer of
diesel engines. Therefore, the door is open, through
Cummins manufacturing, marketing, and servicing to
introduce the new technology worldwide for both
trucking and power generation. The great goal is to
provide engines that will meet the stringent emissions
regulations already announced for the end of the
decade, without sacrificing performance, which, over
the past century, has brought the diesel engine to
worldwide dominance in the industrial field. The
company will grow very significantly in the future and
will provide many well-paying jobs.
I choose this example because I was fortunate to
witness Dr. Hill's assiduous work over many
years, being in the same department of mechanical
engineering. I can attest to the fact that he could
not have achieved his discoveries, nor would he have
commercialized them, without continuous NSERC funding.
It was a small investment with a very large return.
I would like to conclude by assuring you that
engineering and other professors in Canadian
universities will make excellent use of your investment
in NSERC. The students they educate and the
discoveries they make will contribute very
substantially to Canadian prosperity and quality of
life in the future. Thank you.
The Chair: Thank you very much, Professor.
We'll now move to the question and answer session.
We'll have a five-minute round for all members.
Mr. Ken Epp (Elk Island, Canadian Alliance): Thank
you very much, Mr. Chairman, and thank you all for
being here today. I enjoyed your presentations.
They gave us something to think about.
Let me begin with highways. Canada has probably one
of the most difficult situations with respect to a
country in terms of trading between our own areas, our
own provinces, because of the lack of a proper
transportation system east-west. Some of you
talked about rail. The David Suzuki Foundation
said let's have more rail freight, and yet we find that
what has happened in the country is that a lot of the
railroad spurs have been shut down and the farmers, for
example, in the prairies and some of the industrial
producers are forced to use trucks because there isn't
a rail there.
Would you promote that the government should actually
put federal money into a national highway program, or
should we rather use that money to promote and to build
a better railroad structure? Or should we do both?
What's your suggestion here? How do you balance that?
Mr. Jeremy Kon: It's certainly an extremely good
question. I think when you look at the national
highway system, it's some 25,000 kilometres of existing
highways, and these are the major trade highways across
Canada and also linking down into the United States.
The important thing would certainly appear to be to
make sure those highways are in good, safe, usable
condition. That's the number one priority. Where the
volumes are such that twinning would assist
dramatically in reducing accidents, then that is an
obvious thing to do. In a sense, this is not an
alternative to something else; it's a deficit, a
deficiency that needs to be put right.
As a brief illustration, I will tell you that when I
moved from Ontario to B.C., I quizzed the driver of a
huge moving truck just as it left the driveway of our
house in Oakville and I asked him which route he was
going to take. He said he was going to take the
southern route, the U.S. route. I asked why he would
do that. He said he wouldn't trust this load on
the Trans-Canada Highway. That is illustrative of
the condition we have got those highways into.
So, with respect, I think the question is more one of
dealing with a significant deficit that we currently
It's costing us money,
it's costing us fuel, it's costing us further pollution
from that additional fuel being burned to travel on
inefficient and poor highways.
The question of trying to re-enhance the
railway system is perhaps a very different question
that relates to volumes and traffic generation and
the economies that go with that in the rail structure.
Mr. Gerry Scott (Climate Change Director, David
Suzuki Foundation): Thank you for that question.
First of all, we would certainly agree with the
previous contributor in terms of safety and
maintenance. Whatever one's
position on rail, road, and so on, there's no question
we have to have improvements for safety and
maintenance, and discouraging the growth in freight
traffic on the road isn't best done by having unsafe or
unmaintained highways. We have not taken that position.
We also recognize there is a role for trucking.
However, what we have seen in the last two and three
decades is a rate of increase in emissions from truck
traffic that simply is not sustainable. That's part
of a trend of the external costs of trucking being
pushed out and off of the folks who are either using
that freight service or delivering that freight
service. It's the way the world is working
when we're not measuring the external costs.
Those external costs include road damage. There have
been many studies by fairly
unbiased institutions that would say the various
fees, licences, and taxes carried by the trucking
industry do not cover the costs of the infrastructure.
So there is a subsidy there by the general community,
by the crown.
Secondly, when we look at the health impacts of air
pollution, we are in the billions of dollars. The OMA,
the Ontario Medical Association, has probably had the
most sophisticated look on a provincial level, and
they're in the billions of dollars in Ontario alone.
All of that pollution isn't derived from trucking,
but a growing and substantial portion is. So that
is, again, a cost that's unloaded onto various classes of
taxpayers who don't have anything to do with the
The area of climate change is another one where we're
already seeing public institutions spend money on
infrastructure necessitated by climate change. We're
seeing resource industries such as B.C. fisheries and
forestry impacted in very dramatic ways by climate
change, whether it's the pine beetle or impacts on
Those kinds of costs have to be factored into the
costs of trucking—and rail, for that matter, and other
forms of transport.
On the tax system, historically, we welcome some of
the changes on things like capital cost depreciation in
the last budget that changed how rail and road were
treated in relative terms. But we have to go further in
that direction. When we talk about rail-line
abandonment we have to look at a number of areas, from
tax policy to transport legislation, rail legislation,
to see what's happening there.
Just last week there was an announcement in the
prairies of a major takeover of branch lines by a
community rail consortium. I would call upon this
committee and other arms of the federal government to
try to facilitate that. We saw regional
governments, local municipalities, the trade unions
involved take ownership and run on a non-profit basis
lines that otherwise would have been abandoned, and I
believe in this case by CN. We need more of that.
So there are a lot of alternatives, and we're seeing
the rail industry become more innovative. They have
to have those signals that there will be a level
financial playing field, and that must include the
internalization of those costs imposed on
society at large today.
We have seen industry get out of warehousing and
inventory completely. We now have mobile warehouses
called freight trucks. They're destroying the
climate, they're destroying air quality, and we are
literally paying the freight.
The Chair: Thank you, Mr. Epp.
Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): I
would like to welcome everybody here this morning,
and particularly my
old colleague, Jim Fulton, who sat for many years as
member of Parliament from Skeena.
To begin with, you talk about external
costs, Mr. Scott. In Saskatchewan a number of years
ago the federal government made a decision to
facilitate the abandonment of rail lines. What's
happened, of course, is the rail lines have gone. You've
had a concentration of inland terminals so farmers
are now trucking their grain to market.
The province a number of years ago had a fine road
network of thin membrane highways. Now you put the
trucks on these highways and in some cases it's almost
like the highways are bombed. There are all kinds of holes
in the highways. It's a terrible situation.
Now the province is spending millions of dollars on
thicker membrane highways to facilitate the trucks.
This is a vicious circle in terms of the external cost.
I don't know if there's any other comment Mr. Fulton
wants to make on that or not. If so, he can go ahead.
The question I also wanted to ask Mr. Fulton is what
about research into alternatives like hydrogen and
ethanol? There's some of that now going on in the
prairies—ethanol, particularly in Saskatchewan.
Do you have any advice in that area? Perhaps you
have some more comments on the highways.
Mr. Jim Fulton: I'll ask Mr. Foley to
comment on that.
Mr. Dermot Foley (Energy Director, David Suzuki
Foundation): We welcome any effort
made to support the renewable energy industry, and that
includes whether it's renewable fuels like ethanol or
whether it's the purchase of wind power. We're seeing some
new research on the development of tidal power on the west
coast of B.C. Basically, any initiatives that help
move that industry into the marketplace are important.
One of the key elements of the new
economy is the non-fossil fuel economy.
We stated earlier in our brief some of the
statistics around energy consumption, and I'd like to put it
in a context people might understand. In the 1970s we
used about a half a litre of gasoline per dollar of
GDP. Over the period of the energy crisis we've dropped
that to about one-third of a litre per dollar of GDP.
So, in a sense, if you think of the economy as an engine,
it's running much more efficiently now.
One of the aspects of those statistics, which we
haven't looked into but which we think is worth looking
into, is how much of our economic growth over a 20-year
period can actually be attributed to the increase in
efficiency. We've looked at it from the other
perspective, in terms of how much fuel we've saved, but,
in essence, some of that growth can be directly
attributed to that increase. So any research, any
development on non-fossil fuel, on energy efficiency,
on clean renewables, we believe will actually help
Mr. Gerry Scott: In terms of alternate fuels,
the attachment provided in the material we gave to committee
members includes a summary of a new study by the Union
of Concerned Scientists based in Massachusetts. It
points out that if these renewable energy policies and
energy efficiency policies were put in place in the
United States—and their economy is very similar in
energy use to ours, as we know—the consumers in America
would save $440 billion between the years 2002 and
2020. And that is $350 a year in energy costs.
So when we look at the application of renewables in
new technology, it is stimulating the new industries
in ethanol, in wind, which can be very important in
the prairie provinces, as they are in the American
midwest. Also, individual consumers can put that money in
their pocket. Somehow in our society we have failed to
recognize the weirdness where GDP expenditures on
energy waste end up registering as a positive in the
large economic bookkeeping. If we can cut waste, as
every business person wants to do, as every homeowner
and household manager want to do, we're putting money
in our pocket. What a better way to do it than with
clean energy and energy efficiency.
I have a final comment on the railroad question you
brought up. A lot of the studies have shown that
the typical road basket of taxes and fees covers about
60% of the costs imposed on the road system.
This is referenced in one of our reports called Climate
Crisis: Energy Solutions for B.C..
road basket of taxes and fees covers about 60% of the costs
imposed on the road system. We can certainly provide
this study to you as well.
But your Saskatchewan example is well taken and not
untypical. I think we have to look at every fiscal and
policy instrument to keep those rail lines functioning.
I think we need a lot more imagination in the
regulatory area as well.
Mr. Lorne Nystrom: The rail lines have been
abandoned and now the highways have gone to hell. The
provincial government is in trouble, because we have
more highways per capita in your part of the country
because of our geography. Yet there's no federal
cost-sharing of those highways, which are necessary until
there are more rail lines there to haul the commodities to
market. So it's a case of the dog chasing its tail.
My last question is to Mr. Fulton. Is the Bush
administration softening a bit in terms of Kyoto? The
Americans, of course, are very important, as the
economy there is so large. I often hear people saying
that if the Americans don't sign, it will discriminate
against us in terms of our industry competing with
their industry, particularly in the oil and fossil fuel
sectors. Is there any opening in the United States?
Is there any advice you can provide to the committee in
terms of what we may do?
Mr. Jim Fulton: Obviously, that's a very important
question. I just spent most of last week in the United
States attending a very large meeting involving foundations
from across the United States. About 600 of us gathered at
Gull Lake in Minnesota.
It's quite clear from the work they do with the White
House and the U.S. administration on a range of energy
issues that the pressure is growing from within
the United States but also from Europe. We understand
that Prime Minister Blair has made personal
representations to President Bush because of the
extreme concern in Europe. As you know, even though
global ratification hasn't taken place, a lot of
European nations are moving very rapidly down the road
of conservation, efficiency, and renewables. Some
countries, including Germany, Denmark, and Great
Britain, are well on their way to achieving the targets
that were set in Kyoto. So the pressure is certainly
growing from a wide range of partners.
Certainly, in the post-September 11 world, much more
attention is being paid in the United States by
foundations and by people who are in the energy sector
as to how you actually obtain security.
A lot of Canadians forget that we are the largest
provisioner of fossil fuel energy to the United States.
It's not Saudi Arabia or any of the other countries
that immediately come to mind. So Canada plays a very
important role. I think the Prime Minister, in leading
on this, is sending President Bush a very good signal
from their largest provider of fossil fuel energy, that
if we're going to have continental security
and global security, it's not going to come
from the fossil fuel sector. Most studies now indicate
declining reserves of all kinds worldwide somewhere
between 2005 and 2015.
Of all the countries in the world, we're the
second largest per capita contributor to the greenhouse
gas emissions on earth. We have to go to renewables
and to conservation, and we have to get to
efficiency. That's where smart money has to go.
This committee needs to make a very strong
representation to Minister Martin that we should not
see a whole lot of frozen, grounded, and dangerously
abandoned upstream asset investments. Going into tar
sands is a foolish investment. Anyone who studies
where the world is going would know that. Yet most of
the federal fiscal incentives, as the Commissioner of
the Environment pointed out, are still encouraging
investment in coal, tar sands, and areas that are not
in Canada's national interest. Premier Klein
understands this. But because of incentive structures,
long-lasting, multibillion dollar, hidden subsidies, the
Commissioner of the Environment and Canada's Auditor
General to this day have not been able to identify all
of the subsidies that are provided to the fossil fuel
A real challenge for Minister Martin is
to at least level the playing field. In Alberta today
wind energy is cost competitive per kilowatt hour of
production with natural gas. This is in Canada. These
are Canadian technologies. We have to level the
playing field. They're struggling against an
incredibly lethargic regulatory and fiscal instrument
regime at the federal level. This is really the
challenge to Minister Martin. He understands climate
change and how subsidies are being off-loaded on to
taxpayers in the wrong way.
Gerry talked about trucking. You brought up a very
good example in terms of what's happening to
Saskatchewan farmers. They have no choice. They have to
take it by truck. But they're destroying their
neighbour's highways. The province can't pay for it.
We've heard other concerns.
We think this committee has a huge challenge to
remind the Minister of Finance to start putting things
through a sustainability and a Kyoto filter. These are
very important things for the committee to recommend to
the minister to do for the next budget.
The Chair: Thank you, Mr. Fulton.
Thank you, Mr. Nystrom.
Mrs. Sue Barnes (London West, Lib.): Thank you,
Thank you for bringing your various viewpoints to the
table. It's interesting that all of you, and
yesterday's witnesses also, are all talking about
spending initiatives, either through a tax system or
through direct cash to whatever your interest is. No
one has talked about tax cuts. No one has talked about
debt reduction tools. That's a major shift from our
side of the table. Our job is to sift through this and
come up with a report.
Canada, as a federal government, wants to remain
fiscally credible. As I read through your reports,
we're getting the whole spectrum here. I read some of
the reports, and it's not necessary to identify you
individually, but some are saying the new economy is
not good for people. Some of you are saying the only
way to go is the new economy. I'm going to say to you
that I think in all likelihood both economies are going
to coexist and they're both going to have to be
supported. Now the ways you support them come
With that in mind...I will hopefully have a second
question, because I do want to ask and you can be
thinking about it. Where would you go if what was
necessary to accomplish the majority of what you're
saying you want would put this country into a potential
deficit on a short term in a business cycle? Would
you go there, or would you say, oh no, spend all this
money, but no deficit?
First of all, let's go to a couple of things that
you have pointed out. First to our scientists, I'll
say to you that I don't think the federal government is at
all looking to be so short-termed and so shortsighted
to stop research moneys flowing. I don't see that.
I've not heard it. I would be surprised. I'm also
grateful, because I think you do have to maintain that
type of forward thinking without interruption.
To our person from the building trades, one of the
things that I found interesting in your submission, and
you did say it orally, is that you need skills and
learning. Now that happens to be an HRDC agenda
item—a large agenda item of a much maligned department
over the last years. But here you are on the table
asking for the skills and learning agenda, just as the
scientist beside you is asking for the industry
minister's innovation agenda. Both of those, I can
tell you, are big-ticket items.
Let's first of all hear from Mr. Tennessy—I hope
I've said that correctly—on why you think your
industry needs the skills and learning agenda.
Mr. Tony Tennessy: It's become very obvious that
the current demographics of the country not only affect
our occupations but they affect a lot of occupations.
We're losing or going to lose a large number of our
trades people in the next four to five years. We have
that group of baby boomers who are moving through our
system and are taking retirement. As we look at the
types and the large number of projects and the
smaller projects that are on the table, if we're going
to build for the new economy, we have to have somebody
who can build the physical assets.
Mrs. Sue Barnes: That is old economy.
Mr. Tony Tennessy: That is the old economy. We
obviously need the tradespeople who can do that, and
we've lagged behind. We're behind on that, and it's an
area where we have to catch up.
I don't think it's as expensive as you may suggest.
Apprenticeship, which is primarily job-based training,
is much more inexpensive than a university education.
Our apprentices work while they learn. They in effect
pay taxes. They pay employment insurance premiums. So
the cost of training people in the apprentice trades
is not near what the additional costs are for those
who are in the university professions. This is not to
downplay that they're needed. We think our
training is considerably less and we think the
support needed may not be as expensive as everyone
Mrs. Sue Barnes: I'm going to go on to touch a
little bit on the highways agenda and also bring in the
With regard to the highways agenda, I come from a
geography in southwest Ontario where I can tell you the
truckers from other countries gladly cut across from
Detroit over to Buffalo. They're not looking at loads
and the safety factor; they're looking at their time
factor. I think a lot of these highway arguments could
be better linked to the economic needs of this country,
because there really is a north-south relationship to
the cost of doing business with the United States. I
think that would be a much more compelling argument.
Safety can't be discounted, but there's a real economic
For Jim, as to your point on an internal trading
system that is enforceable, I take that to
mean non-voluntary. How has this been advanced to the
federal government? I'd like to hear more about this
and I've not heard very much.
Mr. Jim Fulton: Two years ago we presented a
complete briefing, both in person—we spent a little
over an hour with Minister Martin running through
exactly how to implement many of these instruments as
well as regulations—and also in briefing materials to
him, which we'll make available to all members of this
committee. I think that's probably the best way to do
it. Dermot can add directly to your question on
Mr. Dermot Foley: Right now a committee appointed
by the joint ministers of environment and energy across
the country, including the federal, provincial, and
territorial governments, is developing working models
for how domestic emissions trading would work in terms
of both allocation across provinces and across sectors,
as well as how much you'd actually use the market as
opposed to regulation to allow the reductions to take
place, and also to provide incentives to renewable
energy producers and energy service companies that help
with energy efficiency. In a sense, it's the opposite
of a tax-based system where you're spending money on
programs. You're actually trying to harness some of
those market forces to get reductions.
Mrs. Sue Barnes: I would be interested in
receiving that material, as I'm sure my colleagues
Mr. Jim Fulton: I'll provide copies to the chair.
Mrs. Sue Barnes: Because of time restrictions,
I'm not going to be able to get to all my questions
for all of you. I would like you to comment on what I
was saying about deficit, Bob Paddon.
Mr. Bob Paddon (Manager, Communications, Greater
Vancouver Regional District and Transportation
Authority): Our submission today is not
about increasing taxation.
It's about using the taxes that are already collected.
Here in this region three years ago we were able to
create a transportation authority. We received from
the provincial government a tax room. We now have
access to some of the provincial fuel tax. We have a
number of ways of raising revenue.
We know in Canada that municipalities through their
property tax now carry over 50% of the cost of our
urban regions. So they're carrying a lot of the
expenses to make things happen. Over the last three
years we've been struggling to find ways to raise
money to make the investments this region needs. We
looked very hard at a vehicle levy, trying to apply the
whole concept of user pay. It has failed.
We're now back to looking at property tax, looking at
more fuel tax increase at the provincial level. But as
we make the rounds, what we hear over and over
again—and just last night at Burnaby City Council we
heard this at length—is the fact that $300 million of
fuel tax leaves Greater Vancouver every year. It is
not coming back in any tangible way to the
transportation system. Transportation is—what we have
found—the number two issue in this region. When we
asked people of this region, what are your top issues,
they answered health and transportation. Crime is
third, and it's a long way behind the first two.
What we're really trying to look at in this
submission today is to acknowledge some of the issues
we're facing and try to find some way to redirect
these taxes in a way that people acknowledge. What
they keep telling us is, we're already
paying. It all comes out of one pocket, whether it's
local, provincial, or federal. We don't see our money
coming back. That's one of the things we're hearing.
The other thing is, and I have some comments on the
other questions, even though the United States has
wavered and changed its perspective on Kyoto, the
United States still continues to invest in
transportation. This coming year $6.3 billion in U.S.
federal funds will go into urban transit. In the
United States 80% of every bus purchased by a city is
paid for by the federal government.
We're now looking at a situation in this region where
a bicycle trail to connect from Point Roberts into
Blaine, going mostly through Canada, will be
funded by U.S. federal funding, because we can't access
Canadian funds for this type of transportation
We have a situation where Amtrak is spending
hundreds of millions to move Americans up the west
coast. We'd like to see some investment in the small
stretch from White Rock into Vancouver. We hear from
the Americans constantly that they want to move in.
The president of Amtrak was here two months ago to say,
“We can make this work.”
We're really hopeful that we'll see taxes
already collected being put into those areas people in
this region think are the real priorities.
Mrs. Sue Barnes: You're not talking about
Mr. Bob Paddon: We have in the past talked about
dedicated taxes. We're not sure that's going to be
viable, but we'd like to see the direction of taxes to
Mrs. Sue Barnes: Does somebody else want to
comment on the issue? Do I have time?
The Chair: Yes.
Mr. James Balderson: On the matter of taxes, the
owners of leaky, rotten, mouldy condos who bought
brand-new homes paid taxes. Many of them paid GST as
well. On the repair bill, the government is still
sucking money from us via the GST. We call it a tax on
our misery. The provincial government came up with a
scheme to provide a provincial sales tax relief grant.
We think it atrocious that governments want to move
forward without cleaning up the mess they've left
behind. I refer you to hepatitis C, the bad blood
situation, all the struggles, etc., those people had
before they got some sort of compensation. We, the
owners of leaky, rotten condos, are in the same
situation. We are in a negative equity, deficit
situation. We think the provincial and federal
governments can help bail us out of a problem that
should never have landed in our laps.
We think it atrocious and idiotic that CMHC can send
task forces to Europe and Japan to tell those people
how to build houses that are safe, warm, and dry, and
yet when I requested that the task force come to
British Columbia, it never even replied.
Although it's essential for you to have budgets and
visions of a future, you also need to look after the
messes that have been created in the past. This is
what the environmentalists are telling you as well.
The Chair: Thank you.
There is time for a last comment.
Prof. Martha Salcudean: Yes, you are absolutely
right. It's a difficult dilemma of deficits versus
the other parts of the question.
The way in which we can help this the most is to
assure that growth in the economy takes place. I
believe this growth in the economy can be had to an
enormous extent by a relatively small infusion of tens
of millions of dollars into NSERC, because it aids in a
very rapid input of our graduate students to the
economy and that produces significant growth. This is
the raw material of these industries—the people we are
producing. It's an expenditure with a very quick
The Chair: Now to Mr. Cullen. We are in a
Mr. Roy Cullen (Etobicoke North, Lib.): Thank you,
A lot has been covered here today. Frankly, I don't
know what Mr. Gagliano said, but I'm sure the owners of
leaky, rotten, mouldy condos would also.... I'm sure
you're not saying it's a federal government problem
exclusively, but I'm sure he'd be looking for some
participation from the provincial government as well.
We talk a lot about externalities, external costs. I'm
always amazed at how municipalities and the
environmental movement don't talk much about the
external costs of landfills spewing methane gas into
the environment. I'm not an environmentalist, but I
understand that methane is 20 times more damaging to
the environment in terms of greenhouse gases than
carbon, CO2. When we have technologies in Canada that
will convert municipal solid waste—forgetting
recyclables, just the rest—into methane and
electricity, obviating the need for landfills, we need
to get on with this job big time.
If we converted major centres using these
technologies—obviating landfills, going right into
methane and electricity closed-loop systems—we could
get to about 30% of our greenhouse gas reduction
targets. So maybe in a moment...I just wanted to cover
off a couple of things.
Perhaps you'd like to comment on this, Ms. Sparkes and
Lorne and Sue were touching on a point I'd like to
pick up. Because of our major trading partner, the
United States, when we talk about external costs—yes,
we could scope in all the external costs of trucking,
but the reality is that unless the Americans were also
doing it, we'd price ourselves right out of the market.
As you pointed out, Mr. Scott, warehouses are
on the roads right now, and maybe that's a
wrong-footed thing to happen, but the reality is,
that's what's happening in North America. So if we
fully cost in those externalities, and if the Americans
don't do it, then there will be an external cost of
It's the same with Kyoto. I was totally disappointed,
as I'm sure most of us were, when President Bush pulled
the plug, and I hope we can get back on track. But the
point is, if we get too far ahead of the Americans,
there's an external cost of losing competitiveness. We
need to be mindful of that as well.
I'm not proposing we go to the lowest common
denominator, but if we're not mindful of our huge
trading relationship with the United States, then we're
all headed for trouble. I'll leave it at that, and
maybe, Ms. Sparkes, Mr. Fulton, and Mr. Scott, you'd
like to chirp in.
Ms. Helen Sparkes: To respond to the comment on
methane, the GVRD has already met our 50%
reduction in waste going to the landfills. We met it a
few years back. We have very little methane, and what
we have we burn off. Also, we attempt to sell even
the exhaust steam and so on from our Burnaby
incinerator, so we've been going in that direction for
Mr. Roy Cullen: Good.
Mr. Gerry Scott: Yes, there is real potential
We wouldn't meet 30% of our target with methane
treatment, but I will provide you with this report,
which we published a couple of years ago, for federal
consideration. Certainly we've been advocates of the
various methane treatment possibilities, including the
production of electricity. Recycling has tremendous
potential for greenhouse gas reduction, of course,
because of the embedded energy questions. So if we're
reusing everything from beer bottles to resmelting
aluminum cans and so on, there are great energy savings
there as well.
On the question of competitiveness with the United
States, I would urge the committee members to look at
many of the compliance actions for Kyoto not as costs
but as benefits. We must all challenge the idea that
energy waste is somehow good for competitiveness. In
fact, if we reduce energy waste, and therefore reduce
air pollution and climate pollution, we're having an
economy that is more competitive, not less so.
In the materials we've provided to you, the top-drawer
analysis from the U.S. government—from some of the
best think tanks in the United States and Canada and
Europe—demonstrates time after time that as you cut
energy waste, you get more efficiency. So if we can
have policies that get freight back onto Canadian
railroads, that is efficiency.
We're seeing the major railroads now have eight-hour
turnaround from Montreal to Toronto in freight. They
weren't doing this five years ago; that's why the
truckers took over. They're doing it now, but to do
more of it, you have to look at the external costs and
the tax policies that have assisted trucking. The
efficiency question is how we get at competitiveness.
Secondly, the United States is taking action on these
emission levels. It is not saying it's going to meet
Kyoto. It's not saying it's going to ratify Kyoto, but
it's moving. We run certain risks in not keeping up
with innovations in areas such as wind power and many,
many others. Savings from cutting energy waste are
really how we meet Kyoto, put money in consumers
pockets, reduce federal expenditures in many cases
through the wrong subsidies, and at the same time
stimulate some innovation.
Mr. Roy Cullen: I have another question for the
professor, if I might cap that off; the time is so
I'm glad you mentioned the CCA adjustments the
government made on the rail. Maybe you're more
confident about this than I am, but I think the market
share rail can take—given that our inventories are in
trucks and just in time—is limited in scope. They are
pushing the envelope; they can push it more and we
should encourage them. When a truck outside your
warehouse can be loaded up and in Boston in 12 hours,
no matter how good the rails get, it will be tough to
take a lot of market share beyond what they have.
Flaring methane is better than letting it go up in the
air, but if you're converting it to electricity, you're
getting additional benefit.
Professor, we've had a lot of presentations about the
indirect costs of research. Our federal government has
responded in a sense with the chairs, with the
Canadian Foundation for Innovation, with more money for
the granting councils, etc. But they keep coming back
and saying, yes, but what about the indirect costs of
What would your advice to the committee be? Should we
be taking out of the money we give to the granting
councils? Maybe we can top them up, but there's no
room for accompanying a 41% overhead cost and topping
up research grant moneys as well. Would you favour
including something for the indirect costs of research,
or just keeping on track with our increases to the
Prof. Martha Salcudean: Your question raises a
difficult issue. It would be too big a responsibility
for me to be able to rank the priorities, as I don't
have the knowledge of the whole that the university
The Canadian government has very strongly said that
its decision is to bring us to a level that is among
the five most competitive and best funded R and D countries
in the world. For that the CFI and the chairs have
done wonders. I can attest to you that universities
have changed around, and I have never seen anything as
dramatic in my rather long career as I have seen over
the last few years.
When I was a vice-president of research, I remember
the paradox was that somehow basically the more
successful you were, the poorer you became, because
there was no funding of the huge indirect costs of the
research. I understand it and I know it is a huge
I would like to suggest that we shouldn't take an
either/or approach with the increases to the granting
councils. We should go, within the limits of the
fiscal possibilities, towards achieving some funding of
indirect costs and some increases to the granting
councils, so the wonderful people we bring in as
the chairs and the new faculty we hire can produce what
this government expects the academic community to
I am not in a position to rank, but I don't think it's
rankable. There should be an approach in between. Of
course you are in the position to judge what your
fiscal possibilities are, but within this approach you
should address both issues to the limits to which you
can address them.
The Chair: Thank you, Mr. Cullen.
Ms. Helen Sparkes: I wanted to say a few more
things about what I've heard.
The lower mainland's transportation plan is quite
comprehensive. It's the only one in North America that
includes all modes of travel and transportation. We
are trying to give people choices. Our transportation
plan is geared to our “Liveable Region Strategic
Plan”, where we're trying to preserve the farmland and
get people living in a compact metropolitan area where
they can use alternate transportation other than the
Just for your information, we've had to cut our bus
service because we don't have the finances. I came on
SkyTrain this morning and there were people being left
at every station because they couldn't get on SkyTrain.
I was listening to the conversation and people were
saying, well, they cut the buses because they're saying
they don't have any money. People have to get around
our region and if they don't have cars.... Now they're
all trying to get on SkyTrain and so on. We already
put a lot of money into our transportation through a
variety of sources, whether it's property tax,
user-pay, or whatever.
We're asking for some help
from the federal government, because I know you've
indicated recently that the cities are very important
to Canada's economy, and so on, and without that money
and infrastructure to move goods, services, and people
around our region, our cities are going to suffer.
Maybe people will start moving out, and our farmland
will not be safe and we'll get these greenhouse gases
again. We have people travelling all the way from
Abbotsford, or even Chilliwack, which is a
long way up the valley.
So we need some help. In the lower mainland, I think
we've gone in the right direction—and rail is
important. In my comments I said we're looking at
multi-modal. We're looking at the whole transportation
I think it has been estimated that $300 million goes
out in gas taxes to the feds. We're only asking for
$100 million back—sustainable, though; we have to have
that annually. From the people we've heard, from
around the region, people don't mind even paying a
little more, possibly, in a gas tax, to provide that
money to get our transportation system functioning once
again, because if we don't get some kind of money,
we're going to be cutting even more and there are going
to be more cars on the road.
Going home now, the lineups are even longer. It's not
just the trucks; those single-occupancy vehicles are
also having a huge effect on our region. I'm sure it's
happening in other parts of Canada as well.
So we're looking for help. We'll do what we can, but
we want to make our city safe and reliable.
The Chair: Thank you.
Mr. Tony Tennessy: I have a couple of comments on
some of the issues raised, particularly on road
versus rail. Certainly as a representative of
thousands of workers who are involved in road
construction in this province, we have fairly good
knowledge of the conditions of the highways.
We have found that the railroads tend to dominate in
the movement of bulk commodities, and there is
difficulty with railroads competing with trucking on
the non-bulk commodities, particularly as you get into
problems going north and south. We think there is a
balance between both truck and rail.
Also, we should keep in mind that the travelling
public are also using these highways, and so it gets
back to the safety issue once again.
We think there is and will be a strong economic price
to pay by not having an efficient transportation
system, particularly as we view the lower mainland, as
mentioned by Mayor Sparkes. The lower mainland does
have a transportation plan, but that's all we have. You
can go out at any time of the day, particularly in the
area of New Westminister, where my office is located,
and you'll be tied up in truck traffic pretty well all
day. So we do have a plan, but the plan is not being
carried out efficiently.
We would certainly support a higher tax on trucks that
use the public system. There's no doubt that the wear
and tear on the highway system by trucks is
substantially more than that of the travelling public,
and the trucks should pay.
We would also support a stricter emission control on
trucks. It seems strange to me that, in this province,
where every time we license our vehicles we're required
to take our cars through an emission check system to
ensure we're not emitting inappropriate amounts of
emissions into the air, we see trucks and buses running
around belching black smoke all day. It just doesn't
make a lot of sense.
The Chair: Thank you, Mr. Tennessy.
Mrs. Sue Barnes: Thank you, Mr Chair. I have a
very quick question.
When I travel by car through major U.S. cities,
there's always a commuter lane. Essentially, that is a
fast-track lane. If you have one person in the car,
it's very illegal to be in that lane. It essentially
pulls at least two vehicles off the other lanes and
moves them forward. Have you looked at
something like that?
Ms. Helen Sparkes: We have high-occupancy vehicle
lanes on the freeways.
Mrs. Sue Barnes: Okay.
Ms. Helen Sparkes: I know we've been thinking
about it in our municipality also.
Mrs. Sue Barnes: It's amazing how that speeds
Ms. Helen Sparkes: Yes.
Mrs. Sue Barnes: I was going through some major
centres, like Atlanta, but I would never have been in a
single vehicle in that city. It just wouldn't make
sense. I would have found my neighbours.
Ms. Helen Sparkes: Yes.
Mrs. Sue Barnes: Thank you.
The Chair: I see Mr. Pankiw has a question.
Mr. Jim Pankiw (Saskatoon—Humboldt, PC/DR): Thank
you, Mr. Chair. I have a question for Mr. Balderson.
Let me preface my question by saying that I don't
think anybody would question or doubt how people were
victimized by this leaky condo fiasco. But you're
obviously here on behalf of the Coalition of Leaky
Condo Owners requesting that the federal
government participate financially in the compensation.
The enforcement of building codes is a municipal
responsibility, so why is your coalition asking that
the federal government participate in compensation, as
opposed to just going after the municipalities? Where
is their liability in this?
Mr. James Balderson: Let me address your question
this way. The building code starts at the national
level with the development of a model code, which is
then adopted in the provinces and territories and
modified as the provinces and territories so wish.
In the province of British Columbia, the enforcement
of the building code is the responsibility of the
municipalities via the
Municipal Act, except for
Vancouver, which has a special situation, its own
charter and its own building code, which is based on
the national model, the model that's adopted by the
province, and in some ways made more effective at the
City of Vancouver level.
In terms of liability, we have a recent case, RiverWest
Condominium versus the Municipality of Delta,
where it was found that the design or the architect
function for the condo was faulty and negligent, the
construction was faulty and negligent, and the
inspection service, which was supposed to be provided
by the Municipality of Delta, was missing entirely. So
the Municipality of Delta was found negligent, and the
judge ruled in favour of the owners of the leaky,
rotten condo and in essence awarded them 100%
compensation. Because more or less everybody else is
broke, the award will have to be paid by the
Municipality of Delta. That decision is presently
There are hundreds of lawsuits in process now. It has
been estimated that the cost of litigation will far
exceed the cost to repair the leaky, rotten condos. So
what we have in British Columbia is, and I agree with
you on this point, a failure at the provincial
government level that permitted a legislative framework
that allowed developers, builders, and architects to
put on the market homes that are supposed to be safe,
warm, and dry, but were full of holes—they leaked, they
rotted, and they became mouldy—without a balancing
system of accountability such as they have in many of
the states in the United States.
That's a provincial responsibility, but we have a
provincial government that has failed the citizens of
Canada in the province of British Columbia, failed to
provide compensation, failed to chase the developers,
failed to help, except with a loan program that
assists the banks and protects a government crown
agency, CMHC, from multiple foreclosures.
Another way to look at it is that it's wild
speculation in the real estate industry. By propping
up the housing market—leaky, rotten condos—with a
loan program financed in part now by the federal
government, the provincial government,
in order to prevent foreclosures, it's as if you're
pouring margin money into a Nortel stock that is headed
towards the tubes.
So one of the things we're saying is there has to be a
way in Canada that citizens who buy a house or condo
that is supposed to be safe, warm, and dry and find
it leaks, rots, and fills with mould, to the point of
uninhabitability, can receive compensation.
We have the participation of the federal government in
the housing industry big time. They make money in this
industry. The CMHC mortgage insurance unit charges fees
to owners who want to buy homes. So they're earning
money on this. Other people are saying, send us back
the gas tax; we're saying, send us money.
Now, if I may just conclude, please—
The Chair: Yes, you may conclude.
Mr. James Balderson: It was only last week that we
found out, face to face with Minister Gagliano, that he
is prepared to recommend to the caucus a 25%
compensation plan, but the provinces must come asking
for it. The provinces have never asked for it, so we
have been misled and deceived at the provincial level,
because at the provincial level we have been told the
problem was with the federal government.
We're very happy now that there's $500 million
there waiting for us. We're asking you people to help
find a way to get it over the Rockies to the owners of
The Chair: Thank you.
Ms. Helen Sparkes: I would like to respond to
that. Municipalities will be getting out of
inspections fairly quickly because of this. We don't
mind paying our share of the responsibility. I know in
New Westminster we've had lots of leaky condos and we
settled out of court. We paid our 20% or whatever.
But what Mr. Balderson has just said is very unfair to
municipalities. When the architects and developers go
broke and you can't find them because they've changed
their businesses to numbered companies and so on, who
has the deep pockets but municipalities? If this goes
on it could break small municipalities.
The only place we can go for our funds is to the
property tax base, so you'll see municipalities....
Even in this case now with the repairs, our staff do
not inspect them. They have to hire a consultant to
make sure the repairs are being done right. Even
though it's the building code they're inspecting, if we
were going to inspect every building and watch every
nail, we would have to have a supervisor on every site.
There's just no way we can hire that kind of staff to
Again, it goes back to what he says. There are
national and provincial building codes and then we
adopt them as bylaws and move them from there.
But I'm sure you'll see municipalities, in the very
near future, insist that these developers hire their
own consultants to check out the building codes.
The Chair: Thank you.
I have a final question. As you probably noticed, many
of the things people are proposing to the finance
committee to recommend to the Minister of Finance have
pretty hefty prices. Everything's pretty costly, and I
think you all understand that the resources are
limited. So we have to look for creative solutions to
Particularly as it relates to the issue of
transportation, what are your feelings about
Secondly, I was struck by a comment I think Mr. Paddon
made, in reference to Amtrak and the whole issue
of transportation in the United States. As this North
American economy takes hold and a North American
community actually evolves from it, I wonder if it's
time to start thinking—not just tomorrow, but down the
road in the future—about getting our heads around a
North American transportation system. What type of
joint U.S.-Canada efforts do you think might alleviate
some of the challenges we face as a country?
Mr. Bob Paddon: Mr. Chair, you've touched on a few
very key points. I have a few observations.
First, in this region we're certainly looking at
public-private partnerships. Just as an example, we're
looking at a new crossing of the Fraser River farther
up the valley.
To our minds, that will lend itself to tolling systems,
and when you move to tolls, you very much look at the
concept of bringing in private partners. There
certainly are issues around how you do that, how you
manage it, but we're going to have a look at it.
Furthermore, there's been a lot of discussion in the
public meetings we've attended over the last month.
People are interested, for example, in the toll highway
system in Toronto. That's certainly one thing the
transportation authority will be looking at.
In addition to that, rapid transit has become very
expensive. There are possibilities of looking at
public-private partnerships. The gateway council we
have in this region is a collection of the agencies and
organizations that are very interested in the movement
of goods and services by marine, rail, and highway.
One of the points they make is that in the United
States there's an opportunity for public systems to be
financed through public-private partnerships with
tax-free bonds. They point to an example in Las Vegas,
where I think Bombardier is the Canadian company that's
involved. That's being funded to a significant degree
by these tax-free bonds. I think there's some real
potential and opportunity in Canada to look at
public-private partnerships and move in that direction.
On a last point, and perhaps Mayor Sparkes may want to
comment further, here in this region we have worked
very closely with our neighbours. There's a concept we
call Cascadia, which essentially reaches from
Portland through to the Vancouver-Victoria area. We
have worked very closely with state and local
governments and other officials in the United States to
try to find ways to connect our economies and our
environments in a way that has the least impact on the
land, but maximizes the efficiencies of our systems.
One of the discussions that has come up recently is
this idea, with Amtrak's interest, of moving people and
using the corridor with other goods and services
movement. So we see a lot of potential to do the
The last point surfaces from some earlier questions we
had on the issues of rail versus road. Certainly in
the long haul, fundamental issues have been raised on
some key points. But one of the ways we're moving in
this region is to try to look not so much at the
competition between the various modes of
transportation, but at the integration and
We've been very pleased with the discussions we've
been having with all parties, including the Suzuki
Foundation and others, on how we can pull together and
maximize the infrastructure. Clearly there are places
where rail is the best way to go, in some cases road,
in other cases marine, but we're trying pull together
In closing, we haven't moved to advocate for new big
highway systems in Greater Vancouver. In fact, we'd
like to limit them because of the very impacts the
automobile and vehicles can have on the environment.
But we've looked at the issue that we certainly haven't
been able to maintain the system of connected roads
that would lead us to be able to move goods faster and
in a way that would have less of an environmental
We've been working with the community, and they've
recently come up with a commercial road system. In none
of that are they advocating new big highways, but they
are looking at other ways of connecting all of these
I think there's a lot of merit in looking at
transportation planning that is completely integrated,
looking at all of the modes, trying to find where we
can best spend our tax dollars that are being collected
to serve the objectives of all levels of government in
Canada. We're very hopeful about seeing more of that.
For example, in the fund system that was
talked about earlier where the Federation of Canadian
Municipalities is moving, we're starting to recognize
that pulling this all together, working toward common
objectives across all levels of government, may be the
way to really have some benefits for Canada.
The Chair: Thank you very much, Mr. Paddon.
On behalf of the committee, I want to thank you. This
has been a very good panel, and you have given us a lot
of insight on a number of issues. We need it as we get
ready to write the report to the Minister of Finance
and to the House of Commons.
I'm going to take a 10-minute break.
The Chair: I'd like to call the meeting to order
and welcome everyone here this morning.
We have the following representatives: from the
Canadian Association of Gift Planners, Janice Loomer
Margolis; from the Coalition of Child Care Advocates of
B.C., Susan Harney, chairperson;
from Parents for Child Care, Heather Northrup, member;
and from the Canadian Health Food Association, Donna
Herringer, president and CEO.
I believe some of you have appeared in front of a
committee before. You have five to seven minutes to
make your introductory remarks, and then we'll engage in a
question and answer session.
We'll begin with Susan Harney.
Ms. Susan Harney (Chairperson, Coalition of Child
Care Advocates of B.C.): Thanks for having me.
The Coalition of Child Care Advocates of B.C., the
organization I'm here representing today, has been
advocating for over twenty years for a child care system
that is high quality, affordable, accessible, publicly
funded, and accountable. We are a voluntary
organization of parents, child care providers,
community organizations, unions, and other interested
citizens. The coalition is also a founding and
participating member of the Child Care Advocacy Forum,
which brings together six provincial child care
organizations in B.C. and represents over four thousand
Two years ago the people of British Columbia responded
in unprecedented numbers to a provincial child care
discussion paper, “Building a Better Future for
British Columbia's Kids”. More than
10,000 responses from the public indicated that
over 94% of respondents supported an increase in public
funding for child care programs. Indeed, as you know,
the vast majority of Canadians believe that investing
in the early-years development of children is necessary
for the good of our country.
Since the change of government in our province in the
spring of 2001, British Columbians have again been
asked to contribute to yet another child care survey.
To date, the Minister of State for Women's Equality
has received more than 3,400
surveys, and more continue to arrive every day.
There is no reason to believe that these respondents
will not once again urge the government to spend more
money on child care.
Child care advocates are saying enough to surveys.
Time and time again, Canadians have responded with
overwhelming support for a coordinated range of
services for children and their families. Recent polls
indicate that 90% of Canadians believe high-quality
child care is important to help ensure Canada's social
and economic well-being; 81% of those polled think
governments should develop a plan for a comprehensive
child care system; another poll found that 76% of
Canadians believe child care should be available to all
families with costs shared by governments and families;
and 65% of Canadians are willing to pay more taxes in
order to ensure that children can access high-quality
child care programs.
If those statistics don't convince you, let me point
out a few more. More than three-quarters of mothers of
children aged 6 to 14 are in the workforce, as are 7
out of 10 mothers of children under the age of 6.
Economists from Statistics Canada project that the
labour participation of women aged 15 to 44 will rise
from the current rate of approximately 71% to about 80%
by the year 2011.
Almost 400,000 children are born each
year, and 86% of their mothers end up back in the
workplace within a year. The Vanier Institute of the
Family estimates that women in the labour force
contribute approximately $25.5 billion a year in
federal and provincial taxes. There has been a 400%
increase in the use of paid child care services by
pre-school children of families since 1967. I get
tired of saying the same things over and over, but we
know that for every dollar spent on child care there is
a two-dollar economic benefit to the country.
In 1998 the cost of raising a child from birth to 18
was estimated to be $160,000, up by $4,000 from 1995.
I think it's really interesting to note that the
largest proportion of this cost, 33%, was spent on
child care. Shelter was next at 23%, so there was 10%
less for shelter.
Between 1991 and 1998 the proportion of workers with
dependents who reported excess tension due to family
and work conflicts increased from 38% to 44%. A
child's brain development in the first six years of
life sets the foundation for lifelong learning,
behaviour, and health.
I really want to emphasize this last point.
Children's well-being and development suffer when they
have poor-quality child care. When Canada says that we
have child care, much of that child care is of poor
quality. Even the child coming from an advantaged
family can't make up the damage done by poor-quality
The message from the Coalition of Child Care Advocates
of B.C. and the Child Care Advocacy Forum is quite
simple and straightforward. The forecasted federal
surpluses far exceed the relatively small investment
the federal government has committed to the
agreement on early childhood development services
signed by federal, provincial, and
territorial governments in September
of last year.
To date, action stemming from this agreement clearly
demonstrates that the level of funding is inadequate to
meet the needs of Canada's children and families. As a
result, children and families across Canada still do
not have equitable access to child care services.
We therefore recommend that the next federal budget
include an allocation of $2 billion for early childhood
development initiatives in each of the next five years.
This will still leave the federal government with
sufficient budgetary surpluses to meet its other
objectives and will make a real difference in meeting
the objectives of the agreement on early childhood
We call for the dedication of two-thirds of these funds
to support provincial and territorial development of
quality child care systems, front line, within a
mutually negotiated child care strategy for all the
children of Canada.
The time for action is long overdue. The fragile
child care program that exists in Canada has resulted
in child care workers being paid poor wages, parents
being forced to settle for poor-quality child care
because they can't afford high quality, and other
parents scrambling to piece together ad hoc child care
arrangements because no spaces are available at any
price in their community.
Amidst it all, our children, who count on us to
protect and cherish them, are the losers. All Canada's
children deserve the very best start in life. Their
parents deserve the right to go to work or school
knowing that their children are safe and receiving
high-quality early childhood education and care. The
future of Canada depends on the right decisions being
The Chair: Thank you very much, Ms. Harney.
We'll now hear from Janice Loomer Margolis.
Ms. Janice Loomer Margolis (Canadian Association of
Gift Planners): Mr. Chairman and members of the
committee, thank you for providing the Canadian
Association of Gift Planners with the opportunity to
make these recommendations today.
I've provided an overview of my proposal, so I think
you should all have a copy of that.
First of all, I'll just describe the Canadian
Association of Gift Planners. I think we have
presented to you before.
We're an organization of over 1,200 members
from across Canada. We're people who are directly
involved with charities, and also we're a group of
professional advisers and people in sectors of law,
trusts, accounting, life underwriting, and financial
I'm first of all going to thank you very much for the
recent decision and consequent announcement made by the
minister on October 12, which made permanent the
incentive for publicly listed securities. You're
probably all aware there's a reduced capital gain.
This has been a phenomenal vehicle, and we really thank
you so much for the success of it because it certainly
does increase and enhance charitable gifts.
However, we're still concerned about the fact that
this vehicle and the incentives are not available to
private foundations. Private foundations are extremely
important in terms of philanthropy in this country.
They support smaller organizations and large
organizations and are probably the largest supporters
of community services in the country. We really urge
you to recommend to the minister that the rules that
discriminate against private foundations be adjusted
and that the private foundations come onto the same
footing as other public foundations and public
In addition, we have a recommendation with regard to
charitable remainder trusts. As you may know,
there is a committee, a volunteer task force, that is
chaired by CAGP. It is made up of people from various
sectors, including people from the Department of
Finance and from CCRA, and it is dealing with making a
framework for charitable remainder trusts. This is a
vehicle that is extremely popular in the United States
but has not been as popular in Canada because there's
so much uncertainty around it. We recommend that this
committee monitor the progress of this project and be
supportive of it because we clearly need the support in
order to put some legislation in effect.
We have three recommendations with regard to tax
credits for gifts made by estates. This is all in
number 4. Briefly, there are many examples where taxes
payable by an estate can't be offset by the tax receipt
for the gift the individual actually makes.
This occurs when there's a redemption of private
shares, when a spousal trust is created, or when
administering an estate takes a long time. Those of us
who have been involved in estates know that in many
cases it can take three years or more to actually
finalize the administration of an estate.
So we recommend that a rule be adopted whereby the
estate executor can elect what taxable entity will use
the tax receipt, whether it's the individual in the
terminal year or the estate tax return. We also
recommend a three-year carry-back opportunity and a
rule allowing the tax receipt to be used by a spousal
trust, if it hasn't been used otherwise.
An example of such a situation of creating a spousal
trust might be if an individual provides that when the
spouse dies, the gift should to go to charity. Because
there's a power of encroachment, there can be no tax
receipt at the inception of the trust, but then when
the spouse does die, the tax receipt can't be used then
either. I don't think that's the intention. The
intention is clearly that when a significant charitable
gift is made, the receipt can be used. There just need
to be some proper rules on how it can be used.
We have another recommendation with regard to
reinsured gift annuities. These are a very popular
vehicle: a person commits a large capital outlay and
then they get lifetime income; income is generated
through an annuity.
This is not available, or rather it's very unclear
whether it's available, to foundations. There's a
foundations holding debt, and so this vehicle is not
allowed to foundations because it's perceived as a
debt, for some bizarre reason—even when the annuity is
reinsured by a commercial entity. We recommend that an
annuity not count as debt, and it should be allowed to
Just for clarification, by the way, a lot of these
things we're talking about are just cleaning
up. They're matters we believe the government really
intends to have in place and just hasn't thought
We also have a recommendation with regard to
disbursement quotas—provisions that require
foundations to disburse 4.5% of their capital. This is
to ensure that foundations actually distribute their
funds and make gifts as they operate. As you can well
imagine, this fixed rate of disbursement does not
really reflect the reality of today's low-interest-rate
market. To actually distribute 4.5% of invested assets
requires charities to invest in things that may not be
conservative—and most foundations do want to invest
If they have to encroach on their capital to meet the
4.5% disbursement quota, it could mean they're actually
encroaching on their endowment funds, which by law
they're not allowed to do because the provision for
endowment funds is that the capital must not be
touched, only the income. So it's a real conundrum for
foundations to meet the disbursement quotas but not
encroach on capital. We recommend that the disbursement
quota rate be allowed to float within a range, and
we should discuss what that range should be.
We have one last recommendation, on advocacy for
charities. Basically, registered charities are not able
to get involved in public policy debates because of
administrative restrictions. In fact, the Income Tax
Act only prohibits charitable organizations and
registered charities from engaging in partisan
political activities. But CCRA—though not
Parliament—has imposed other existing restrictions
and doesn't allow advocacy by charities.
We suggest that this committee recommend to the
Minister of Finance that the Income Tax Act be amended
to include a definition of prohibited partisan
political activities by registered charities. We have a
definition in our submission.
That is a summary of our recommendations, and we thank
you very much for your consideration.
The Chair: Thank you very much.
We'll now hear from the Parents for Child Care,
Heather Northrup, member. Welcome.
Ms. Heather Northrup (Parents for Child Care):
Thank you, first of all, for coming and listening to
us. My goodness, you have an awful lot to listen to in
one day. Kudos to you. You have a lot of hard
decisions to make.
I'm here to echo my colleague Susan Harney's
submissions on behalf of the B.C. Coalition of Child
Care Advocacy. If I can just draw your memories back
to what she said, our submissions dovetail quite well.
Who are the Parents for Child Care? We are parents and
grandparents, we work in offices and at home, we're
employers and employees, business people and
professionals, and we are taxpayers. We believe in a child
care system that provides all Canadian children with
access to affordable, high-quality child care spaces.
Parents for Child Care believes that all levels of
government must take action now to foster financial
sustainability in the child care sector in order to
eliminate current waiting lists and the critical
shortage of quality child care spaces, and also to keep
up with the increasing demand for quality child care
We also believe it is time for public policy in Canada
to catch up with the increasing demand for quality
child care. The business community is increasingly
recognizing the importance of family, child rearing,
and early childhood education. Government must take a
leadership role in making child care a public policy
Most of what I'm going to tell you today will be not
statistics but stories from a distinctly parental
What is business doing? Leading Canadian businesses
provide flexible work arrangements that accommodate
their employees' child-rearing responsibilities while
allowing them to maintain an income to support their
families. Businesses provide child care referral
services to assist their employees in searching for and
identifying quality child care. Some businesses
provide annual corporate donations to fund non-profit
after-school child care programs.
Other businesses go even further and provide on-site
child care for their employees. For example, IBM is
investing $50 million worldwide in employee child care.
Of that, $5 million is allocated for Canada. Trade
organizations have gone on record as supporting the
need for comprehensive child care systems for all
families in B.C.—the Vancouver Board of Trade did so
in its Task Force on Early Childhood Education in 1999.
Clearly, business sees child care as giving a
But all the flex-time, job-sharing arrangements, and
child care referral services I just described are
useless if parents cannot find or afford a high-quality
child care arrangement for their child. If parents are
forced to choose between their jobs or careers and a
poor child care arrangement for their children, those
who can afford it will leave the workforce, and those
who can't afford it will be forced to make sometimes
unimaginable child care choices.
All of business' efforts to keep their qualified
employees working are for naught. The issue of employee
retention will become increasingly critical for
businesses as the workforce ages and we face the
increasing labour shortages predicted by the Conference
Board of Canada.
What is government not doing? I'm going to illustrate
that by bringing you down to a parent's perspective
and trying to give you a sense of what it's like for a
working parent to find child care.
Why are there not enough quality child care spaces to
meet demand? Quite simply, government has dropped the
ball. Here are the options. You can find licensed,
high-quality child care spaces in centres with highly
trained staff and little staff turnover, which is
critical in providing good-quality care, except that
the waiting lists for these places already have a
thousand names on them. We have two non-profit centres in
the lower mainland, where some of the largest
child care providers are, and both their waiting lists are
approaching 1,000. There's not much sense in putting
your name on a waiting list if you're number 1,001.
There are also babysitting alternatives. Parents use
relatives, aging grandparents, brothers and sisters,
university students. There is also nanny care, but at
$2,000 a month for a well-trained caregiver, or $800
for a housekeeper who might look after your child
during the day, that can be prohibitively expensive.
For the less fortunate in our economy, other options
are no child care at all. Children are left at home to
be cared for by an older sibling, or simply left alone.
There are also many preschool programs offered, but
they're usually only offered every other day, for two
hours between 9 a.m. and 11 a.m.
Each of those options can provide excellent care and
can give parents the flexibility to make choices.
However, parents know their
chances of getting excellent care for their children
increase when highly trained and well-paid child care
workers nurture their children in a safe environment
that must meet licensing standards designed to enhance
child care quality. As a result, parents increasingly
prefer a licensed child care environment. This is
demonstrated by the lengthy waiting lists for child care
space. However, the chances of getting such care are,
as one Vancouver Sun columnist recently
noted, about as good as winning the lottery.
Lengthy waiting lists at centres recognized for
providing high-quality care in Vancouver demonstrate
this. The most recent statistics for the Vancouver
Society of Children's Centres is 940 on the waiting
In the provision of quality care to children from all
socio-economic backgrounds, child care costs at what I
will refer to hereafter as VSOCC, the Vancouver Society
of Children's Centres, are barely affordable for
most families, including those low-income families who
receive a subsidy. The monthly cost of infant-toddler
child care at the Vancouver Society of Children's
Centres is $875 a month. For children aged three to
five, it goes down to $575. The only way this
non-profit organization can afford to charge the fees
it does is through tax-dollar funded grants, operating
and capital funds, and low-wage redress programs that
keep the cost of child care affordable for most Canadian
These commitments at present come from the municipal
and provincial governments. Some federal dollars are
available for child care too, but with no
accountability as to how these funds are spent by the
province, there is too great a chance that, as in
Ontario, none of these federal dollars will be spent on
creating or maintaining child care space availability.
In B.C. right now there are 73,000 licensed child care
spaces and they are all at risk of disappearing as this
provincial government performs a core review of
government service and delivery. Strangely enough,
child care and early childhood education did not merit
the protection of a funding freeze, as the public
education system did.
Parents are strongly opposed to the federal government
putting child care dollars at risk by allowing the
province's complete discretion to use federal dollars
for something that will not advance the children's
agenda and maintain and increase quality child care
spaces for all B.C. children.
The future for parents at child care centres like VSOCC
in the current political environment.... An increase
in fees for infant-toddler care from $875 a month to
$1,300 a month will clearly make it unaffordable for
the average Canadian family of four earning an income
of $40,000 a year. Keep in mind that many parents with
young children are still paying off their student loans
and have no room in their family budgets for such an
Another point of frustration for parents is, as it
stands right now, that there are 1,000-odd children on the
waiting lists for centres like the VSOCC. Many of the
parents on that list are working parents, and they're
wondering why their hard-earned tax dollars, which go
to support VSOCC, buy them nothing more than a spot on
a waiting list, a waiting-list spot that will likely
never turn into a child care space.
Quite simply, the system of child care delivery in this
country is unfair and inequitable, and it's just bad
business. Parents for Child Care is currently running
a campaign to gather child care stories from the front
lines. Here are some illustrative examples of what all
of the statistics you have heard today may not convey.
The waiting list for one aboriginal child care centre
in northern British Columbia is two years. Few
children on the list ever get into the preschool and
infant-toddler program there before they start
One parent writes of how her child of 30 months has
been through no less than five different child care
providers. Why? Two of them have moved away, two of
them went back to school, and one became ill.
This is what was offered to one parent who contacted a
private, unlicensed child care referral service: a
babysitter with a one-bedroom apartment with no toys, a
TV, and a VCR.
One parent commutes four hours a day from Kitsilano
to Coquitlam and back, twice, at rush hour,
to keep her child in a high-quality child care
Another parent, a woman lawyer running her own
downtown firm, faced only one option earlier this year
for her kindergarten-aged daughter. She had no
child care space available in her north Vancouver
community. Her only option was to send her child out
to Abbotsford, two hours away from here, to live
with her 70-year-old grandparents and enroll her in a
kindergarten out there so she could have child care.
Thankfully, a few days prior to her daughter starting,
a spot on the waiting list came free and her child got
access to child care.
The stress these parents go through on a day-to-day
basis, when their jobs are at stake, their livelihoods
are at stake, and more importantly, their children's
education and care is at stake, is unimaginable.
The above are a few stories that have come in from
parents around B.C., but here's my last and most
important story. It's about the first-time parents of
a very young child at a child care centre in Vancouver
and their child's caregivers.
Thanks to the caregiver's training, she spotted early
signs of autism in the child's behaviour. The parents
were able to get appropriate treatment and care for
their child at an early age, which is critical for
treatment in autism. The parents had no inkling their
child's behaviour and development showed such signs,
and without their caregiver's intervention, their child
would have gone undiagnosed until much later.
Parents and child care professionals work together in
partnership to meet a child's early development and
educational needs. In this day and age, when more and
more families are living far away from extended
families, young parents are learning more and more
critical parenting skills from early childhood
education professionals. This is another significant
benefit of quality child care. Unfortunately, it is a
benefit available only to those few who find quality
child care and win the child care lottery.
What must government do? My query to government is:
we accept collective responsibility for our children's
well-being and education once they turn five by
providing them with public education, so why do we
abandon them before that, at a time in their lives that
early-years academic research indicates is critical for
children's development? It simply defies common sense.
Parents and taxpayers demand leadership from the
federal government and urge you to give early childhood
education and care the priority it deserves on the
public policy agenda.
The Chair: Thank you very much.
We'll now hear from Donna Herringer from the Canadian
Health Food Association, president and CEO.
Ms. Donna Herringer (President and Chief Executive
Health Food Association): Thank you very much.
The Canadian Health Food Association is a non-profit
organization. We are Canada's largest trade
association, representing 1,200 retailers,
manufacturers, wholesalers, and importers of natural
health food products.
You're asking, what are natural health food products?
They include foods and beverages, traditional herbal
products, vitamins, minerals, traditional Chinese
medicines, and homoeopathic preparations.
I'm very pleased to have the opportunity to speak to
you because of the vital role natural health food
products play in the health of Canadians and in our
economy. Over 60% of Canadians consume natural health
food products. Conservative estimates place annual
sales of this category at about $950 million per year
in Canada. With an 80% growth in the use of these
products during the 1990s, there has been massive
investment in natural health food product manufacturing
facilities, sales forces, and retail outlets. Market
stimulation has also meant important job creation among
thousands of businesses, many of them located in
smaller cities and rural areas.
The growing importance of this sector in the late
1990s gave rise to a full-scale review of these
products by the Standing Committee on Health. In a
1998 report, the committee called for a new regulatory
framework and a governmental body dedicated exclusively
to natural health products. In response, the
government established the natural health products
directorate, a move that formally recognized the
important role these products play in promoting and
maintaining the health and well-being of Canadians.
Natural health products help Canadians take
responsibility for their own health, which in turn
takes the burden off our already overburdened health
care system. The issue I bring for you this morning
involves the GST classification of natural health
products. It is an issue that will need to be resolved
by the finance department and the Canada Customs and
Revenue Agency within the next six months.
Historically, natural health products have been
regulated as either a food or a drug under the Food and
Drugs Act. That means that under the current
zero-rated provisions for the Excise Tax Act, more
than half of all natural health food products are
considered to be zero-rated foods and/or beverages.
However, next spring Health Canada will introduce the
new regulations for natural health products. Under the
proposed framework, these products will no longer be
regulated as foods or drugs, but as a separate
Our association is really deeply concerned that the
proposed regulations may have a negative impact on the
GST status of the many natural health food products
that are currently zero-rated. Any extension of this
tax to the whole category would be inappropriate and
would be contrary to the Canadian government's
objective in establishing the new natural health
products directorate and regulations. In setting up
the directorate, the government has been clearly
committed to differentiating natural health food
products from over-the-counter drugs, which are GST-taxable.
Along with the new product licensing system,
regulations will also require natural health products
to disclose the health benefits of consuming the
product. This requirement is to meet consumer demands
for more information about the product, so they will be
able to make more informed choices.
As an industry, we welcome these changes. However,
given the current administrative practices of the
Canada Customs and Revenue Agency, these new
requirements could result in most natural health
products becoming GST-taxable. Currently, the tax
status of various natural health products is often
uncertain and subject to debate.
CCRA interprets the food provisions primarily
according to the manner in which the product is
marketed. It looks at where the product is sold—for
example, a grocery store versus a health food
store—and if there is a claim or a health benefit on
the label, the agency classes the product as a drug,
which is considered to be GST-taxable.
Were the CCRA to continue this interpretation, then
all natural health food products presenting a label
claim of health benefits could be subject to GST.
At worst, we could end up with the same confusion that
currently exists where some products are subject to tax
and some are not.
The possibility of this runs contrary to what the
government intended when it established the new Natural
Health Products Directorate. It seeks to provide
clear definition and more appropriate regulations to
the sector and to ensure that all Canadians have ready
access to natural health products that are safe,
effective, and of high quality.
Under current zero-rated provisions of the Excise Tax
Act, it is a generally accepted premise that food and
pharmaceutical prescription products should not be
taxed. Natural health food products fall between these
categories, and indeed many continue to be zero-rated.
As products intended for the nourishment and health
benefit of Canadians, this characterization should be
maintained from a public policy standpoint.
Many Canadians, including our Asian and first nations
people, consume natural health food products as a
natural part of their diet. Why? A major reason is
that foods that are conventionally grown and purchased
no longer have the nutritional content they once had
because of soil and mineral depletion. Natural health
food products supplement the foods we eat. They are a
low-cost means for millions of Canadians to take firmer
control of their health.
Natural health products provide Canadians with the
means to help prevent disease and promote wellness and
self care. In doing so they reduce their reliance on
Canada's already strained health care system.
In summary, the new regulations expected next spring
should not in any way negatively impact the GST status
of natural health products, irrespective of whether
they provide health benefits. Therefore, our
association is requesting this committee to recommend
that all natural health food products under the new
regulations be zero-rated for GST and that schedule 6
of the Excise Tax Act be amended accordingly.
Thank you very much.
The Chair: Thank you very much.
We'll now proceed quickly to the question and answer
session. We have time for a five-minute round for all
Mr. Ken Epp: Thank you very much, Mr. Chairman.
I'd like to begin my questioning with the Gift
Planners. Your presentation was very methodical, and
you have made some recommendations.
The question I had is with respect to the annuities
and the debt conflict. If you're holding in trust an
annuity, or you have a donation and you're paying out
an annuity—that's how I understand it; am I
right?—well, it is a financial obligation.
Ms. Janice Loomer Margolis: The kind of case where
we're not saying to apply it is when it's independently
done by the charity. In those cases we think it should
not be available to the foundations. We're saying it
should apply when they're reinsured by a commercial
company, where the charity actually purchases a
commercial annuity with a commercial entity that then
extends annuity payments to the individual.
Mr. Ken Epp: Okay. Then it really isn't a debt.
Ms. Janice Loomer Margolis: That's what we're
saying: it isn't a debt.
Mr. Ken Epp: But it's being treated as one.
Ms. Janice Loomer Margolis: It's being treated as
Mr. Ken Epp: Okay. That was the one question I
had with respect to clarifying your situation.
Ms. Janice Loomer Margolis: Thank you.
Mr. Ken Epp: Now, with these child care advocacy
groups I have a huge question. A recent survey done
about four or five years ago said that, given a choice,
two-thirds of mothers would actually choose to be at
home with their toddlers until they reach school
age—it was around two-thirds; I don't have the exact
numbers here. Yet in both your presentations, you
don't mention a thing about the value of having a
mother look after her own child, or a father look after
his own child, and that perhaps there should be a level
playing field for that.
Is that deliberate, or is it just because it's not part
of your advocacy plan?
Ms. Susan Harney: I would just ask the
question back: what would happen to Canada's economy if
two-thirds of the mothers and two-thirds of the fathers
stayed home with their children? Our economy would
If you ask me.... I'm a grandmother. Would I rather
go to work tomorrow or play with my grandchild? I
would absolutely rather spend the day with my
grandchild, but my family can't afford that.
I think the question that's sometimes put to parents
is a loaded question: would you rather stay home? The
answer is, sure, if we had the family income to
The coalitions I'm here to represent are not opposed
to any parent or grandparent staying home with a child.
Family resources are really important. But the truth
is Canada's economy depends on mothers and fathers
going to work.
Mr. Ken Epp: What you are asking me to do is to
get my head around the fact that things have changed in
Ms. Susan Harney: They have. They've changed in
Mr. Ken Epp: I accept that. Why do you think
primarily that has happened? For example, when I was a
young guy graduating from university in 1961.... That
was before the days of the technological on/off switch
on having babies, so our babies came right away. It
was right about that time this little switch was
So we had babies, we decided my wife would be a
full-time mom, and we did fine, thank you, until about
twenty years later when the taxes started going up so
high because the federal and provincial governments
wanted to fund this and that and everything. Then it
was really difficult to make ends meet.
But we stayed the course. We said: “We won't go on
a vacation, because we can't afford it; we'll do things
that are relatively inexpensive”—that type of
thing. We worked as volunteers at a camp, where
basically we got free room and board for a month for
our family in return for our work there.
So there were ways of doing this. And yet it seems to
me that the taxes increasing is what caused families to
no longer be able to live on a single income.
Ms. Susan Harney: Oh, no, I think you're wrong.
Mr. Ken Epp: Okay, tell me how I'm wrong.
Ms. Susan Harney: Well, the price of housing has
gone up disproportionately to the difference in wages. I
remember my father, when I was a young girl, telling me
he made $10,000 a year. Our home cost $12,000. That
is not proportionate to what people make now and what
they have to spend on a house.
It's not about the rise in taxes. A loaf of bread
used to cost 25¢. It doesn't any more.
Most of the parents we're talking about who are going
to work are not going to work for a luxury car or a
wonderful vacation in Mexico or Disneyland. They're
paying their bills; they're just paying their monthly
Times have changed, and those of us who are
grandparents need to step up and move up to the
changing times. Maybe we wish things could be the way
they were. They aren't.
Mr. Ken Epp: I recognize the fact that there are a
lot of single parents—which, by the way, is a
biological anomaly. I wish the guys who fathered these
children would step up to the plate and provide for
them; if they have enough energy to do that, they
should have enough energy to go out and make some money
and buy some food and shelter and clothing for those
Unfortunately, our society has done a real flip on
that, and now suddenly it has become the government's
prerogative to fund that—I think very
negative—activity: that we have children having
I noticed in one of your presentations you said women
from age 14 onward are working. That is true.
Fourteen-year-old women are not women; they're
children. I think in a way our society has enabled
this behaviour, and I would like to see us—and maybe
I'm too old-fashioned, but I'd like to see us go back
to the old days.
Interestingly, with respect to the mathematics of
this, in comparison to my salary over the years—and
I'm talking as if I had stayed in my profession, not as
an MP—gasoline has gone down in terms of how many
hours I would have to work to earn a litre or a gallon
of gasoline. When I was young, we bought it by the
gallon. Bread has gone down; so have most groceries.
and natural gas have gone up in the last couple of
years, but until then they were down. Communications
has gone down. The only thing that's gone up
disproportional to my income is income tax. When I was
a young guy making $6,500 a year and paying a mortgage on
a $20,000 house, my tax rate at that time was 15% of my
total income. Now it's closer to 25%, so that's gone up
Is my time up already?
The Chair: It is, yes.
Mr. Ken Epp: Oh, I'm sorry. Anyway, I hear what
you're saying. I'm just frustrated with it.
The Chair: Thank you.
Mr. Jim Pankiw: Thank you, Mr. Chairman.
I do have a question on this issue of child care. I
think you're missing the ball a little bit, and the
point is some parents do choose to stay at home and
care for their children. Increasingly we see the father
staying home. I've seen much more of that than I'm
sure happened in the past.
In any event, for parents who are in that
circumstance, for whatever reason, to have to pay taxes to subsidize
parents who work is unfair and inequitable, in your own
words, Heather. To come to the federal government and
say, give us a bunch of money, is the same as saying to
parents who care for their own children at home, not
only should you forego a second income, but you should
help me care for my kids so I can have a second income.
What you people should be doing is saying to the
federal government—think of the savings in
administration too—just provide a tax credit per
child. Done. We all have the goal of assisting
parents' care for their children, however that's done.
But that's not a role of government. Parents are
responsible to care for their own children. You
shouldn't be advocating a discriminatory policy, and
that's what you're doing. I don't know if you'd care
to comment on that or not.
Ms. Heather Northrup: I would like to comment on
First of all, you assume that the parents who are at
home and choose to be at home to look after their
children don't actually want to send their children to
a child care centre. There are parents who belong to
our group who are stay-at-home parents and they want
to send their child to a high-quality licensed child
care environment so that their child can learn, can
learn self-esteem and socialization, can be ready for
kindergarten—all kinds of things. Child care is not
just the purview of those parents who work outside the
home. Parents of all kinds want access to high-quality
As far as your response with respect to those who stay
at home—clearly a minority in this population, as the
statistic Ms. Harney used in her presentation. Seventy
parents of children under the age of six are in the
workforce; 30% are not. Does this mean that government
policy is driven by 30% of the population, so that 70%
of the population doesn't benefit? I'm having a bit of
difficulty with that discriminatory aspect when you
look at it that way.
Mr. Jim Pankiw: It's the 30% who are discriminated
Ms. Heather Northrup: Yes, but if we take your
route and leave it all up to stay-at-home parents, how
many of these parents would have to put their—
Mr. Jim Pankiw: I'm not saying that. I'm saying
that instead of funding it through taxes and
administering it through a bureaucracy, give a tax
credit to every—
Ms. Heather Northrup: Why do you not have that
same opinion for the education system or the health
system? If you use the same argument and you have your
children and you're responsible for them, when your
child breaks his leg, are you saying you should be
responsible for the full cost of that? Are you going to
provide the capital to create the space in the medical
Mr. Jim Pankiw: First of all, there's not a
comparison there. Certainly I would say I should
Ms. Heather Northrup: There certainly is. The
research shows that the most brain development happens
between zero and six years of age. We learn things as
human beings between those ages that you cannot learn
Mr. Jim Pankiw: You said even some parents who
don't work would choose to send their child to a
day care centre because they can learn social skills or
other things. Is that any different from saying, I
think I'm going to buy a computer for my home so my
child is exposed to computers? Should the government
pay for computers for homes? I think you people are
The Chair: We're going to have to move along here
because your time is up.
Mrs. Sue Barnes: Thank you.
You don't have to justify your positions to me. I
actually agree with you.
Society has many indications. For instance, childless
parents in our country support education for everyone;
they don't support it just when their kids get to go to
school. So it's not even worth wasting your breath on
I will tell you, though, when you do these
presentations...I've been around. I remember
seeing a letter from Lloyd Axworthy sent to all the
provincial premiers when he was HRDC minister saying
we'd like to implement a national child care program.
When you come to the table, I think we all have to
acknowledge that the federal government did offer that
to every province, and we had no take-up. It was
offered again under Doug Young when he was HRDC
minister—again, no take-up.
The reality of politics in a federal-provincial system
is that we have a social union agreement that says we
cannot go into new social programming without a
percentage of the provinces buying in—not complete
assent but a percentage. What they did agree to over a
year ago at the same time as they signed the health
accord was the early childhood development
agreement. In my home province that would have
allocated $800 million. We're having real problems on
I understood that B.C., along with some other
territories and provinces, was actually reallocating
more spaces into day care. The emphasis now has to go
more towards that accountability and flow-through,
because that is the mechanism we have and because
twice, through two ministers, the national day care
policy did get put on the table. Unfortunately, it was
probably bad timing, because many of the provincial
governments at the time were sourcing their own deficit
But I'm telling you, I've been through this. I was
self-employed, had three kids, and trucked them off to
the day care. Quite frankly, it wasn't because I
needed the paycheque at the time. It was because I
chose to work. That was a choice I feel very
comfortable with having made, and I believe other women
have the option of making. It might not work.
I really feel you have a valid point with respect to
trying to get the flow-through and the accountability
so you get more allocated spaces. I think there are
ways to help that.
I also want to say that the extended
paternity-maternity benefits were done to assist. I
think that has to be acknowledged, because again that
did do a lot of social engineering—if I can use that
term—and created some change in our system that is
very important to parents, because it did give
flexibility that no longer existed. That was something
we could do as a unilateral measure of the federal
government. It has been done and was received very
well—by my constituents anyway. If anything, I had
complaints that we couldn't implement it fast enough
for some pregnancies. Those were my letters then.
So as to the accountability, I really don't think
there are answers to that. I'm just putting it on the
table to say the pressure has to be on both the federal
and the provincial governments to have the
accountability mechanisms to see the deliverables on
these funds and potentially in future to have increased
dollars flowing through in this manner.
Ms. Susan Harney: May I make a very short comment
Granted we are working with a new government right now
in British Columbia, so we often get a line back that
they're new in the position and they're just learning.
Certainly some time has to be allowed for that. But
when we ask our provincial ministers where the ECDI
dollars were spent last year, they don't seem to
know. There hasn't been good tracking—at least within
our province. The intentions perhaps were good.
They'd throw it back on the fact that there is no
needed accountability through the funds from the
federal government. The way they describe it is that
when the funds come federally, as long as it's spent on
something to do with young children, that's okay.
I will say that our organizations have for years
called for increased maternity-paternity leave and do
applaud that step. What we're saying is that
if we can make child care the cornerstone of these new
ECDI dollars, if two-thirds was set aside, we could
build other family and child supports within the
child care community.
Clearly, there are not enough dollars. I
suppose everyone who comes to the table will tell you
that for each of their areas of interest. So we do
feel that we need to have more federal dollars.
But if we could see some federal leadership around the
accountability of those dollars and if the idea were to
create child care as the cornerstone, then I think we
could create a system. And it would force the
provinces into creating a system. I think we're going
to see some of that money tossed around in ways so
that children and their families are not going to
benefit, and that's a crying shame.
Mrs. Sue Barnes: I agree with you there. I have
had an experience in another province where it went that way.
I think the emphasis should now be placed on looking
at that framework agreement, which did call for
accountability mechanisms and report cards. That's the
type of thing we have to be talking about.
Ms Susan Harney: Yes.
The Chair: Thank you, Mrs. Barnes and Ms. Harney.
Mr. Cullen will be our final questioner on a five-minute
Mr. Roy Cullen: Thank you, Mr. Chairman.
I have some questions on the natural health
But with regard to the early childhood development
Ms. Donna Herringer: Couldn't you start with me? I
feel as if there's not a level playing field.
Mr. Roy Cullen: No, I just want to complete my
Ms. Donna Herringer: That's what he was going to
do and then he got cut off.
Mr. Roy Cullen: —on the early childhood
development agreement. It's a $2.2 billion agreement.
I don't know what the proportion is for British Columbia.
It seems to me that under that agreement there is an
opportunity for child care. I'm not sure that all of
the professionals like yourselves are really doing a
good job of convincing the provinces that child care
should be a priority. There are other programs, such
as prenatal, nutrition, and breakfast, that
kind of thing, but somehow you haven't done your job of
convincing the provinces that child care should be a
priority. Why are you coming to us? We've said that
if the provinces come forward and say that child care
is a priority, then that agreement will accommodate it.
Ms. Heather Northrop: I think we've done a very
good job of convincing the provinces that child care is
a priority. The previous government in this province
brought in Child Care BC, thanks to 10,000 responses
from parents around the province. That's an excellent
job, in my estimation.
Unfortunately, there was a change in government, and
that government does not see child care the way it is.
Thus all of those dollars in the federal agreement that
you're talking about have a very substantial risk of
not going to increasing, much less maintaining, child
care spaces. What is going to happen to 73,000
licensed child care spaces when the provincial
government decides it's going to take your money and
put it into other programs and general revenue to make
Mr. Roy Cullen: No. The early childhood
development agreement is targeted for early childhood
development programs, and it has to go into those kinds
of programs. It's your job to convince the provinces
that child care is a priority. If you're not doing
that, then you're coming to the wrong people, with
I'd like to get to natural health products because I
can see that Ms. Herringer is getting very frustrated.
Ms. Donna Herringer: I'd just like a level
playing field, that's all.
Mr. Roy Cullen: Actually, we can direct questions
to anybody we wish. There's no kind of protocol.
Ms. Donna Herringer: No, I'm not—
Mr. Roy Cullen: I would like to clarify
Ms. Donna Herringer: It's just that the other
gentleman got cut off.
Mr. Roy Cullen: If I were to go to a grocery store
right now and buy some vitamins, let's say, will I pay GST
Ms. Donna Herringer: Yes, you will.
Mr. Roy Cullen: If I wanted something to help me
sleep, I could go to a drug store and buy some
Sleep-Eze or go to a store carrying the natural
food product—my wife has bought this stuff—that helps
you to relax and sleep. Will I pay GST on both of
those or on neither of them?
Ms. Donna Herringer: It's a very confusing
situation. I know exactly what the regulation is,
but I also know what's going on in the field. The
inspectors are also having difficulties, and that's why
we're really looking for clarification with the new
The product called Sleep-Eze probably
contains valerian or camomile. If you buy a product
containing valerian and camomile that doesn't have
the name Sleep-Eze on it, you will not pay GST. It
just says valerian and camomile. Then you have a
brochure that tells you what those herbs are good for.
If you buy a product that has Sleep-Eze on it and
if the manufacturers are keeping to the current law of
the land, then they would have a drug identification
number to allow them to make that claim. However,
because we're changing the regulation right now,
nine-tenths of the products you see out there do not
contain drug identification numbers because most people
are waiting for the system.
A Sleep-Eze product that has been made in the
U.S.A. is classified as a dietary supplement under
their regulation. So when it comes into Canada, it's
classified as a food.
The straight answer is if your wife buys that product
and it says camomile and valerian on the package, which
she knows will help her sleep, because it is a
natural product, you will not pay GST. If you buy
exactly the same product and it says Sleep-Eze on
it, you should be paying GST. But you may or may not,
depending on whether the retailer knows what the
current regulation is.
Mr. Roy Cullen: But right now if it lists a health
benefit on the label, it's GST-HST taxable—
Ms. Donna Herringer: It should be.
Mr. Roy Cullen: —irrespective of whether it's a
With regard to this process that's underway to try to
put them in a separate category, are you
concerned, just by the way the discussions are going or
by what you see as the natural evolution of going in
that direction, that some of these items will become
GST-taxable? Has the revenue agency or the Department of
Finance actually indicated that to you?
Ms. Donna Herringer: No. That's a really good
question, Mr. Cullen.
Since 1997 I've been working with the Department of
Health. We really wanted new regulation because
Canadians wanted to buy natural products and they also
wanted to know what they're good for. They wanted to
have clear labelling, and the government regulation
didn't allow for clear labelling. We've been fighting
for new regulation. So we're really on side with that.
However, it's a matter of “be careful what you wish
for”. During the process of working on committees with
the government, we realized that as soon as we do
that.... Foods are over here and drugs are over there.
What they're doing is creating a new category
that comes somewhere in the middle. It is now called
natural health products. It'll be out in the spring.
Those products that are currently classified as a food
under the food regulation, such as the popular green
products, which might be in a powder form, or any
herbal product that doesn't have a claim on it, which
involves the majority of herb products.... You go in
and buy a herb, such as feverfew or St. John's
wort. If they don't have a claim on them, and
that's true for the majority of them on the shelf,
they're sold as a food. So the majority of the herbs,
the natural products, and the green products, now become
a natural health product, and they are forced by the
new regulation to put a claim on them because it's what
Canadians want. Now they become subject to the GST.
No, I shouldn't say that because there has been no
regulation on what's going to happen to natural health
We went to the finance committee and to the Department
of Finance and said this is....
Nobody brought that to our attention. We just know
that it's a very confusing situation right now. We
have CFIG people in our stores saying this product
is taxable and this is not. It's really confusing.
Retailers are suddenly phoning us in massive panic
because they haven't been paying GST on products
because there was no DIN number, which clearly
identifies the products on which they should be paying
GST. But the manufacturers haven't been applying for a
DIN because of the changing regulation. DIN numbers
will no longer be applied.
I'm sure I'm completely confusing you. But it's a
very difficult scenario that we're in right now.
I just met with Mr. Karl Littler in Ottawa, and I
brought this to his attention. I said this is what's
going on. We would like some clarification. Of
course, we would like the recommendation to
be...because we believe Canadians are wanting to take
more responsibility for their health. More and more
Canadians are helping themselves through a variety of
ways to stay healthier longer and not to get into a
disease state, and the use of natural products is one
of them. They also use these products for disease
states, which helps the health care system.
I'm not sure if I've answered your question or made
you more confused.
Mr. Roy Cullen: No, it helped put it in context.
So it's a moving target.
Ms. Donna Herringer: It is.
I just had a meeting at BCIT with Dr. Phil
Waddington, who is the director general of the
Natural Health Products Directorate, before I came
here. It was a recommendation of both the standing
committee and the transition team, which I was on, that
natural health products should have a tax incentive on
them to encourage Canadians to buy products in
order to be healthy or to stay healthy,
and so that people use fewer
There certainly is a place for
pharmaceutical drugs. We just would like some
recommendations made to help take the confusion out of
this whole scenario.
The Chair: Mr. Cullen and other members of the
committee, thank you very much for your questions.
On behalf of the committee, I want to thank you very
much. It has been a very interesting panel. We look
forward to reviewing the evidence you've presented to
us and to making recommendations accordingly. Thank
you very much.
The meeting is adjourned.