Committee Transcript 1991-Aug-15 | Legislative Assembly of Ontario

The Chair: Good morning. We will call this committee to order. This is the standing committee on finance and economic affairs on the budget hearing review.

TORONTO ENVIRONMENTAL ALLIANCE

The Chair: The first group we will call on is the Toronto Environmental Alliance. Would you come forward, please. Welcome to the committee. Would you please identify yourselves for Hansard when you begin. You have half an hour. In that half-hour make your presentation and leave some time at the end for questions and answers between the three parties, which will be divided equally. You may begin.

Mr Coffey: My name is Gerard Coffey. I am representing the Toronto Environmental Alliance.

Mr Hartmann: My name is Franz Hartmann. I am also with the Toronto Environmental Alliance. I guess we should say that at this stage we do not have a written submission. We are just going to read a few thoughts we put down and later on, once we get this typed up, we will submit it to the clerk.

First of all, the Toronto Environmental Alliance, or TEA, would like to thank the committee for giving us this opportunity to present our views on the Ontario budget. Before commenting on the budget itself, first of all we would like to congratulate the Treasurer and those involved in the budget process for producing the first budget in Ontario that consulted and listened to ordinary Ontarians. The Toronto Environmental Alliance was one of many grass-roots organizations given the opportunity to submit a pre-budget brief and meet with the parliamentary assistant, the Treasurer as well as Treasury officials. We welcome this new openness and hope the Treasurer will continue to turn the budget-making process away from a business-controlled process towards a democratic controlled process.

That said, it is not surprising the budget has received such negative criticism. Our assessment is that most of this criticism has come from those circles in society which are threatened by a more democratically produced budget. This, we believe, lies behind the obsession with the $9-billion deficit. To be blunt, we think that Canadian corporate interests have made such a stink over the deficit, even though the Tories in Ottawa and the Republicans in the US have created much higher deficits, because they do not like a government that really responds to the needs of its citizens.

We have been told by corporate leaders, over the last 10 years especially, that Keynesianism is dead and that monetarism is the only hope in fulfilling people's needs. The Tories have tried this approach federally. The result has been economic upheaval for an increasing number of Canadians, while US-controlled corporations flourish.

The people in Ontario voiced their opposition to this corporate approach, which was also essentially adopted by the previous Ontario Liberal government, and voted in a party that spoke about and promised a new approach. What we got was a different, better, but not quite new approach. While we acknowledge the necessity of resorting to a more traditional Keynesian approach in the short term, in the long term it will be as detrimental as monetarism.

Let me be clear on this point. We support the Treasurer's decision to increase government spending for necessary social programs; however, unless the NDP government is willing to combine this increased spending with a restructuring of the tax system so that large corporations pay their fair share, there will be no way of paying off the deficit. Working people cannot afford much higher tax burdens. Therefore, we support the budget as a positive step away from the failure of monetarism.

However, as environmentalists we must also note that there are some fundamental flaws in the budget as well as the underlying principles which were used to frame the budget. The most notable flaw is the notion that economic growth as defined by gross national product is a good thing. As any economist knows but rarely admits in practice, we live in a finite world with finite resources. If growth in the GNP continues, at some point we will destroy the very planet we depend on. Most people hope this point will not be reached in our lifetimes, but the reality of increasing environmental degradation, pollution levels and the greenhouse effect suggest we are closer to environmental collapse than we want to admit.

This said, we must kick the growth obsession. We must redefine what has economic value. This does not just mean incorporating environmental costs into price; it means fundamentally rethinking how to put value to various activities. For example, why is it that we put no value on ensuring the continued existence of an old-growth forest through labour-intensive management that most efficiently cleans the air we breathe, yet put high economic value on the creation of capital-intensive, as opposed to labour-intensive, automobiles that cause dangerous levels of pollution?

We understand there are no easy ways of redefining, let alone implementing, environmentally sensitive economic value. However, we are absolutely sure that it has to be done. The planet's health is deteriorating at a faster rate every day. We have no choice but to eventually stop the growth of all economic activity that causes the deterioration of the planet's health. We must move towards creating an environmentally and socially just economy.

How do we as a society go about this and how can the Treasurer of Ontario and the members of the Legislature contribute to this? The Treasurer has taken the first step in this direction with the 1991 budget. By rejecting monetarism and responding to the needs of Ontarians, he has also rejected the primacy of the market. The experience of working people throughout the province and the world has shown that while the market may be good at producing consumer goods, it is dismal at fulfilling more important health, social and environmental needs. With respect to the latter point, there is a fundamental contradiction between a market-driven economy that must perpetually expand to stay healthy and the needs of an environment that has finite resources.

The Treasurer must confront and rise above the failure of the market by moving in an alternative direction. He must resist in all ways possible the movement towards continental free trade. He must increase the prominence of social and environmental concerns in budgetary and economic decisions. Those who believe in the market and those who believe that only a US-dominated market can be the engine of the Ontario economy will obviously criticize and resist such a move by the Treasurer. They, of course, do not want to lose economic and political control, but we believe working people welcome an environmentally and socially just economy. By having workers intimately involved in the Ontario economy through, among other ways, community economic development and worker co-operatives, working people can not only create their own jobs, but ensure that their economic activity is good for the environment.

We therefore congratulate the Treasurer for tabling a more humane budget, but we also caution him not to be complacent. In the short term he must urge his colleagues to ensure the creation of a fair tax system. Meanwhile, he must begin the long-term process of restructuring the economy so that it is socially and environmentally just. Luckily for the Treasurer, there is no shortage of ideas out there about how to go about this. Ontarians have been putting them forward for years. The Treasurer has indicated he is willing to listen; now we are asking him to act. Thank you.

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Mr Kwinter: Thank you very much. I have a question for you. What gives you the idea this was the first budget that ever had some pre-budget consultation?

Mr Coffey: I do not think we said that. Let me just pull it out.

Mr Hartmann: There has obviously been pre-budget consultation in the past. I think this is the first budget, though, that has seriously canvassed and consulted and listened to ordinary Canadians and ordinary people in Ontario. I do not know when an environmental group has been asked in the past to submit a pre-budget document to the Treasurer, and TEA was asked.

Mr Kwinter: Mr Clerk, has that happened before? Have the environmentalists made submissions?

Clerk of the Committee: I believe to this committee they have, yes.

Mr Kwinter: I think virtually every time there has been a pre-budget consultation some environmental group has made a presentation.

Mr Coffey: Yes. Our understanding of this process was that it was much broader than previous consultation processes with many, many more people and many more organizations, including ours. We know we were not the only environmental group to make a pre-budget submission, but that was our understanding.

Mr Kwinter: For the record, I just want to tell you that the consultations were no more and no less than they have been with Liberals or Conservatives. It happens every year. In fact, this committee had consultation hearings. Unfortunately, I thought they were too late to affect the budget. I just want to correct that; I do not want to get into a great dispute with you. I just think you should know that this is the process, that environmentalists have made representations in the past and that it is nothing unique.

Mr Hartmann: I think there is a difference, though, between being invited to speak at this committee, and being more involved in actual consultation while the budget is being written up. I cannot comment on exactly what happened when the Liberals and the Conservatives formed the government. I do not have those details. My perception, and I think the perception of a lot of groups out there, is that this time around it was a bit more open. I think the government and the Treasurer, especially, should be given that credit.

Mr Coffey: Yes. I would also like to say that our information about the scope of the pre-budget hearings did not come from politicians, it came from people within the ministry bureaucracy itself. They told us that in fact these pre-budget hearings were much broader in scope than they had experienced before.

Mr Kwinter: I just wanted to tell you that, with all due respect, your perception is wrong.

I would also like to hear your explanation of -- I am quite amused at the double standard. I hear people decrying the fact that businesses are closing down, that companies are moving, and why does the government not do something about it, because it has to keep these companies going, and on the other side, people coming in and knocking business and saying this should be a worker-based economy, workers should control their destiny, they should be able to create jobs.

Just exactly how is this going to happen? Are you suggesting that we should encourage all industry to move out of the province so that the workers can take control and make sure that the economy is stimulated by workers themselves?

Mr Hartmann: First of all, I do not like getting caught up in kind of the ideological dichotomy of either having workers control it or private corporations.

Mr Kwinter: I am just repeating what you said.

Mr Hartmann: That is not what we said, not in quite the same way. What we have seen throughout the last 10 years especially in Ontario and in Canada is that this dependence on corporations is just not working. Some people may think it works. We think a lot of people in Ontario know it does not, and their personal experience says as much.

How many corporations have left Ontario in the last two years, since free trade has been here? Let's be real. The bottom line of a corporation, understandably so, is profit.

Mr Kwinter: And do you think that is wrong?

Mr Hartmann: I do not think it is wrong, but if it becomes the underlying motive of an entire society, I think it is wrong, because it means that the social needs of people and, as environmentalists, the environmental needs of this planet cannot be incorporated into the bottom line. Experience, situation after situation, has shown that to us.

What we are saying is that we know that corporations cannot fulfil these needs, which does not mean to say that they should not exist or that we should tell all corporations to leave, but we should realize that there are other ways of organizing an economy. One of those is by having the community control production and consumption decisions. I do not think that is anything very radical.

Mr Kwinter: Not if you are a socialist it is not.

Mr Hartmann: Not even a socialist. We say we live in a democracy, and I would think that part of everybody's democratic right is to have some say over economic decisions. That does not mean that they have to control every aspect of production and take over the means of production through the state. We are saying that people should have a lot more say over what gets made in their communities. That does not happen when corporate decisions are made in New York or in Tokyo or in Frankfurt or in London, that only happens when decisions are made in communities, and at this stage we do not think that is happening. If that is considered radical or socialism or whatever label you want to put to it, that is your definition. To us, we see that as a fundamental right of any democratic society.

Mr McLean: Let's clarify one thing. You said that the process has been different, that you were invited this time. Who invited you?

Mr Hartmann: We received a letter from the Treasurer of Ontario asking us to give a pre-budget submission.

Mr McLean: To this committee?

Mr Coffey: Not to this committee.

Mr Hartmann: Perhaps we should clarify this. We are talking about in February.

Mr McLean: But now who invited you here?

Mr Coffey: Nobody invited us here.

Mr McLean: I thought that was the indication.

Mr Hartmann: No, not at all. We are talking about in February. While the Treasurer and ministry officials were putting together the budget, they asked us to give a submission about what we thought should be contained in the budget.

Mr McLean: The question I have for you is, what is it, an hour after a rain now the beaches are closed for a day?

Mr Hartmann: Right.

Mr McLean: I would like your opinion on what is causing that and I would like your opinion on what we are going to do about it and I would like your opinion on the budget with regard to sewers. There is nothing in the budget for it, so let me hear your view on it.

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Mr Coffey: I see this as being somewhat off topic, because basically we are here --

Mr McLean: We are talking about the budget. There is no money in the budget and this is the budget process.

Mr Coffey: I understand that. We are not here to take apart the budget item by item and to criticize what is in it for sewage control, what is in it for waste management. I think those things have already been done fairly well. We are here to look at the macro implications of the kind of economic system that is being promoted by this and other budgets which have used different systems but, as we see, are moving towards the same basic end. That is uncontrolled growth, whether they are worker-controlled economies or whether they are corporate-controlled economies. We see that there are major problems with the kind of uncontrolled growth that is being stimulated in whatever fashion.

As far as your question about the beaches is concerned, it is obviously caused by flooding of sanitary sewers, and as far as we understand, it is not even going to be possible to totally separate sanitary sewers from storm sewage, although I think the city and Metro are working on it. To be perfectly honest, I do not have the figures in my head of what was allocated to that kind of thing within the budget, and it is not why we were here.

Mr McLean: That is not why you were here, to answer questions because of the budget?

Mr Coffey: No, we were here to make a submission and to tell you what we thought about the budget and about the major implications of the budget.

Mr Hartmann: Just on that point of what causes all the pollution in the lake, very simply, a lot of toxic pollutants are put into rivers and sewers that eventually flow into the lake. One of the reasons that is done is that it is usually a lot cheaper for manufacturers, and in some cases residents, to continue with practices that are polluting than it is to switch over to environmentally cleaner practices. The reason for that is often because they are forced to keep their costs down because they have to remain competitive. This gets back to the macro issue of, is the market an effective tool in incorporating environmental concerns? That to me is yet another example of where the market is not a successful tool.

Mr Sutherland: Welcome to the committee. As you have said, you met with Mr Christopherson and some Treasury officials in the pre-budget hearings.

You mentioned something about environment and economy in terms of the way the economy is established now and not working together. I am finding in my own riding, actually, that there are some businesses that are really finding that it is economically advantageous to be concerned about the environment.

One of my manufacturing firms did more or less a garbage audit. They watched their garbage bin dumpster for two weeks and figured out everything they were throwing out and then figured out what they could recycle. They also changed their paint shop. By putting on new nozzles and adjusting the angle, they were able to reduce the amount of paint. They found that not only have they cut down on their garbage by about 80% and their excess paint by about that much, they have also cut their costs significantly. This is making them more competitive in the current economic setup.

What is your sense of finding that out? Does that seem to be a growing trend in the manufacturing sector and people are realizing the economic benefits of being environmentally friendly?

Mr Coffey: Sure, I think it is true. I think we should make it clear that we are not here to bash business. We are not here to tell people that they should get out of the country or to stop doing what they are doing. Let's face it. We have an economic system; it is working at the moment. We are just trying to point out some of the disturbing long-range trends that we think will be exaggerated as we move down this path.

But yes, I have seen lots of examples of people cutting down waste, doing it profitably, cutting down on the amounts of toxics that they use, recycling them. I think Pollution Probe put out a document quite a number of years ago, called Profit from Pollution Prevention, which was very successful. It pointed out how major industries, major businesses, could in fact cut down on their environmental impact and still make a profit, and make more money from it in fact. I think that is a growing trend and it is a valuable one and I think it should be encouraged; there is absolutely no doubt about that.

But as I said, to look at specifically -- and I think this is taking a bit of a chance -- the automobile industry, we know that automobiles are much more energy-efficient, they are much less polluting than they ever were, and will continue to become less polluting. But as the automobile industry grows worldwide, we will find that the gains that are made on an individual basis are wiped out on a global basis, because I think now the projection is that the world automobile fleet will double within the next 30 years.

That is the problem that we see coming up on the horizon. No matter how efficient we make the individual units, the actual push towards production and growth throughout the world economy is going to wipe out whatever gains we make, and that ultimately is going to lead to some sort of environmental collapse. We think that we have to start looking now at what the alternatives are. We do not pretend to have all the answers.

Mr Hartmann: May I make one more comment based on that? With respect to these small businesses that are not only doing things that are environmentally good but also profitable, to us I think those are examples of what we are trying to promote. It is usually small businesses that are fulfilling the needs of their community that are also the ones that are successful, and we very much want to promote those. We believe that is the future path.

But on the other hand, we also know that the market as a system is really problematic when it is used in a larger sense. I do not want to name particular corporations, but there are some big ones out there that are known polluters and they are going to say, "Hey, we would love to be more environmentally friendly, but we've got to remain competitive and that means we can't put this huge amount of money into pollution cleanup equipment." When you get into the large scale, that is when problems occur, and that is why we are saying promote those sorts of businesses.

The Chair: Thank you very much for appearing before this committee.

Mr Hartmann: Thank you.

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ONTARIO NON-PROFIT HOUSING ASSOCIATION

The Chair: Would the Ontario Non-Profit Housing Association please come forward. Welcome to the committee. You will have half an hour for your presentation, and if you can, leave some time at the end for questions and answers from the three parties, which will be divided equally. Would you please identify yourself for the purpose of Hansard.

Ms Kraus: I am Debbie Kraus, and I am the executive director of the Ontario Non-Profit Housing Association. With me today is our vice-president, Roger Maloney, and Mr Maloney is also the commissioner of housing and general manager of Peel Non-Profit Housing Corp.

The Ontario Non-Profit Housing Association was established by municipal and private non-profit housing corporations in 1988 to build a strong non-profit housing sector and promote the production and management of high-quality affordable housing in Ontario. We have about 400 members from across Ontario. These members own close to 50,000 units and represent more than half of all municipal and private non-profit housing under management. Our members include a full range of housing providers, including small, single, community-based, corporations in urban and rural areas and range to the large, multiproject producers in major urban centres in Ontario.

Our association made a presentation to the standing committee on finance and economic affairs prior to the budget, and the copy of our presentation is attached to our letter that you have received. At that time ONPHA stated that the lack of affordable housing is a major factor contributing to poverty in Ontario. We noted the insufficient supply of affordable housing for households with low and modest incomes, and we stated that it was essential for the 1991-92 provincial budget to provide funding for the development of new non-profit housing units. We also urged the government to recognize the need for an ongoing non-profit housing supply program and recommended that the 1991-92 budget be the beginning of a predictable and stable source of funding at a level appropriate to meeting housing needs.

I would like to ask Roger to provide our specific comments on the budget.

Mr Maloney: ONPHA wishes to take this opportunity to express our support for the provincial budget announced by the Treasurer of Ontario in April. The budget shows that the government recognizes the urgent need for more affordable housing. Households across Ontario who were depending on the government to cushion the effects of the recession were offered hope. ONPHA believes the budget took the right approach at the right time.

The need for 10,000 more non-profit housing units is clearly supported by the report entitled The State of Housing in Ontario, which was released in April of 1991 by ONPHA and the Co-operative Housing Association of Ontario. A synopsis of that report was handed out to you this morning. The report identified an immediate need for the construction of 27,000 new units to create a healthy vacancy rate of 3%, as well as the need for a consistent supply program of 14,000 to 16,000 rental units per year over the next two decades just to keep up with the projected population growth for Ontario. The report also stressed the need for more affordable rental units, as almost one third of all renters, approximately 477,000 households, spend more than 30% of their incomes on housing. In addition, more than 100,000 households were identified on waiting lists to live in non-profit, co-operative and public housing. The problem is evident throughout Ontario.

ONPHA believes that the government has shown leadership by committing itself to spending funds on housing at a time of financial constraint. The budget recognizes that timing is a critical factor in considering solutions to the province's housing problems in that the recession presents significant opportunities for the non-profit supply programs. It also recognizes that the development of new non-profit housing is critical in meeting the growing needs of people who have lost their jobs because of the economic downturn.

The development and construction of non-profit housing is effective in creating and sustaining jobs in the building industry. Each new unit produced has a multiplier effect on maintaining jobs in related manufacturing sectors. As an example, a report was put forward by the Canadian Home Builders' Association in January of 1983, which is generally accepted by the various sectors as being right on target, which indicated that each new apartment unit generates 1.7 person-years of employment. So, that is a very significant factor in working towards turning the economy around.

The economic decline also means greater efficiencies in the overall costs of building non-profit housing at this time because of more competitive pricing in terms of land and construction costs.

In conclusion, ONPHA wishes to express support for the provincial budget. The budget demonstrates the government's commitment to assisting the growing numbers of people hurt by the recession. In our view the government has taken the right approach in committing itself to spending funds on housing even though we are facing a deficit. The development of non-profit housing offers opportunities to create jobs in the building industry and related manufacturing sectors, and the economic decline means that more housing can be produced at this time at less cost. We look forward to working with the government to meet the housing challenges ahead. That is our presentation. We would certainly be prepared to answer questions.

Mr McLean: There are approximately 84,000 units in Ontario now?

Ms Kraus: There are 84,000 public housing units. In non-profit housing there are an additional probably about 120,000 units right now.

Mr McLean: What would be the average subsidy for those units last year, compared to -- has it increased? You may have the statistics on this. I am just curious.

Mr Maloney: I can give you an example based on Peel Non-Profit's portfolio. It really depends on the targeting plan for the project. Until 1986, the projects were 75% rented to market people and 25% per cent rented to subsidized people, and the subsidy in our portfolio for one of those projects is $307 a month.

Mr McLean: That is average.

Mr Maloney: Yes. The total economic cost of a particular project -- I will give you an example, a 153-unit town house project. To operate the project, the economic rent for each month is $927. The amount of rent we collect, on average, from the tenants is $620, including when you average the market and the subsidy, so that leaves $307 a month that is subsidized, and that particular project is subsidized totally by the federal government. Since then the approach has been to provide housing to people who need it more, so we provide more subsidies. I will give you an example of that. We have a project that we rented out about two years ago. It is 100 units and the economic rent without subsidies would be about $1,400 a month. The average rent paid is around $500 a month, so the subsidy is about $900 a month. But 80% of the people in that project are receiving some type of subsidy, whereas in the old program it is only 25%.

Mr McLean: Is that the trend today?

Mr Maloney: Yes, definitely.

Mr McLean: And is it going to increase more? When it first started, I thought it paid for itself more or less, did it not? It was evened out. There was not much subsidy from the government. The high end helped pay for the low end.

Mr Maloney: In the first example I gave, that happens, and over time the subsidy decreases. In the one example I gave you, we believe within the next four to five years there will be no subsidy needed for that particular project. But since the situation has changed where we are trying to subsidize a lot more people who need housing, the costs go up.

Mr McLean: So in Peel region, which you are familiar with, what would be the average subsidy per unit?

Mr Maloney: I am guesstimating the average subsidy in the portfolio as probably around $550 a month.

Mr McLean: I will pass for now.

Mr B. Ward: Our government has been criticized for the economic direction that we have taken during these tough economic times. We have been criticized by some groups and organizations and individuals that we should have paid attention to the bottom line and the sheets should have balanced out, that in fact we should have had a balanced budget or a massively reduced deficit rather than what we have incurred. They do not seem to put faces to the statistics. Part of our initiative was in housing, and we said we are going to maintain or attempt to maintain the health standards, the social programs.

You alluded to the fact land costs are cheaper and construction costs, because private sector contractors have sharper pencils during tough times. From your experience in your organization, can you perhaps expand on that? We have heard from other organizations that now is the time to move ahead in social housing, because of these factors. Is that a fair statement in your experience, or is it just isolated in certain areas?

Mr Maloney: Maybe I will tackle it first. From a Peel experience, it is very true. The situation now is that we have developers knocking on our door with potential sites who would never talk to us before, and every day we have new people coming in saying, "I have a tract of land here that I would like to build non-profit housing on and work with you."

To give you a prime example of the cost, we were allocated some provincial land at Highway 10 and Highway 403 about three years ago. That is now coming forward for construction. We just tendered the project. The initial estimates were, just for the construction site, about $50 million, because it is 500 units in four projects. We are working with the co-ops and Peel Non-Profit. We tendered that and the tender came in at $38 million, rather than $50 million, so that in itself shows how low the costs have come in, and it is related to the construction. The land is government land, so that does not take the land into consideration. So the construction costs are considerably down.

In the past we were having a very difficult time getting projects in at 100% of MUP, which is the maximum unit price set by the provincial government. Now projects are coming in the 90 per cent range consistently. So costs are definitely down.

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Ms Kraus: And that is consistent across the province as well. Sometimes it is even lower, maybe 80% of the maximum unit price. So it means that we can produce more housing at less cost.

Mr B. Ward: One other question. What would you say to the critics of the budget who say we moved in the wrong direction? How would you answer that criticism from your organization's standpoint?

Mr Maloney: From our organization's standpoint, we have to look at the demands, the need for affordable housing, which is very significant. Some of the points in our report definitely show the tremendous need. Also, we can provide data that show the costs have gone down significantly. Your own provincial staff have that, because they approve each project. They can easily look and see that it is consistently low, that land prices have gone down and that construction costs have gone down. So that type of concrete data as part of the situation that you put forward is saying now is the time to build non-profit housing, because when the condominium industry is booming all the good sites go to condominiums and we really get the residual sites that they do not want; those groups will not even approach us because they can sell their condominiums. But that situation and scenario has turned totally, and now is the time to take advantage of that because the costs will go back up. They are cyclical, and you get more bang for your buck now and produce the units now while the opportunities are there.

Mr B. Ward: And it fills the gap in the construction industry.

Mr Maloney: Oh, for sure.

Ms Kraus: If I can just add something: There are greater problems now and more demand for housing as growing numbers of people are losing their jobs. The demand is certainly increasing, and the fact that it provides jobs when a lot of people are losing their jobs is another important point for why we need the housing now.

The Chair: From the opposition party, Mr Phillips.

Mr Phillips: Just a comment on the previous comment: The debate around the budget is very difficult because it is like forecasting the weather. What we have been saying is we think the problem with the budget is it is not going to stimulate economic activity. We will only know that in a year or two, so you will probably be back here in a year. Maybe they are right, maybe they are not. But when you put the human face on it, and the unemployment rate now is 10%; it is probably going to stay at 10%, according to the budget, next year. So those are our concerns.

But my question to you, two of them to get an idea of what we should be thinking about providing in budgets: in terms of the numbers of units per year -- I was not sure from your brief what you would estimate we will need per year each year -- I would say, over the next two decades 15,000 rental units. But how many non-profit co-op would be required?

My second part is, the budget document on page 12 says, "In addition, we are announcing the provision of another 10,000 non-profit units, which will cost the province approximately $150 million in annual operating subsidies when completed." I am just wondering what that means? Is that each year we should be providing about $150 million per 10,000 non-profit units in our budget each and every year?

Ms Kraus: That is what that does mean. Those are annual operating costs.

Mr Phillips: How long does that go on?

Ms Kraus: Well, theoretically, it can go on for the life of the mortgage, which would be 35 years. But the costs go down over time as costs get paid off, the cost would be reduced over time.

Mr Phillips: But over a 10-year period should we be thinking about $150 million per year per 10,000 units?

Mr Maloney: I think that is probably a reasonable estimate if the mortgage costs go down, and you have to remember that rents go up as well. It depends on the economy. If people are getting a lot of jobs, they will be able to pay more rent too, so the costs can come down considerably based on that. That is what my example earlier was trying to indicate. But when there is a higher level of subsidy, the costs cannot come down as quickly.

Mr Phillips: I am just trying to figure out how much money we should be thinking about. So each 10,000 units, $150 million per year, and that is reasonable for maybe 30 years, but let's just say for the next 10 years?

Mr Maloney: Yes.

Mr Phillips: And how many units a year do we need to be providing?

Mr Maloney: We are saying 14,000 to 16,000 rental units. For non-profit, that issue depends partially on what the private sector is doing. Right now, they are not really building rental units other than that you have some high-end condominiums.

Mr Phillips: I am told it is not affordable for them to build right now.

Mr Maloney: That is exactly the situation. That is what they are saying.

Mr Phillips: What would be your guess, maybe 10,000 per year?

Ms Kraus: That is probably about a reasonable amount to plan for, 10,000 units per year. The other thing that is very important is that there be some predictability and stability so that groups can plan to develop 10,000 units per year, because it takes a while before the housing can actually come on stream. There is a great deal of planning that is involved. The more groups can plan ahead, the more they can take advantage of maybe good buys and we have a steady stream of housing coming on.

Mr Phillips: What I have in my mind right now is that we should be thinking about annual subsidies, each year, of $15,000 a unit and, once the unit is built, for a considerable period of time, it is that amount of money. So if we build 10,000, we have to provide $15,000 a year in subsidies each year.

Mr Sutherland: I just want to get an issue clear here. The non-profit housing sector, co-ops, low-income, a lot of planning has gone into not getting them into the ghettoization of low-income people, yet there seems to be some controversy in terms of the fact that government money is going to subsidize these units but you want to have a reflective housing development, a co-op housing development reflective of the community. You do not want it to be just low-income in and of itself.

I get people in my riding coming up to me and saying, "The government shouldn't be subsidizing people who can afford to pay." How do you defend against that argument? What do you say to people who come to you with that argument in terms of trying to have a mixed housing development?

Mr Maloney: I can assure you we face that kind of situation every time we build a project. Often we have to go through rezoning. I have been to meetings where we have 600 people in opposition to us and that is exactly what they say. It is land values and it is, "Why are we spending money in this area?" First of all, they are concerned about the standards of our projects. We say, "Come and see our standards, see our projects." None of them is identified as social housing. They all blend into the community. We try to build small projects and integrate them.

The other aspect of what we say is: "These people you are talking about are often your wife, if your family splits up, or your mother or your child. Where are your children going to live in Mississauga if the rents are $800 a month?" Those kinds of statements bring them down to earth. Often what happens is that the very people who are in opposition to us six months later are calling me saying, "Can you get so-and-so a unit for me?"

The other thing we do when we go out to those meetings is we try to take people with us who were either in opposition prior to that or else people who are going to live in the project, saying: "What's wrong with me? I'm working, I have two kids. My husband left me. I have no choice. I need a place to live." That is very effective.

Those are the types of things that we say to people. We spend a lot of time anticipating what is going to come to us. We get school problems, so we do the research to show what impact it will have on schools. We do property value studies. We provide that kind of information. What we have to do is anticipate their questions and deal with them effectively in a public forum. Those are the types of things that I think would be useful to you in speaking to someone about it.

Mr Phillips: Again, I am anxious on the numbers. Right now there are about 50,000 units in the province, I gather, of non-profit co-op housing.

Ms Kraus: It is closer to 100,000.

Mr Phillips: I just added up your numbers here. So as we add 10,000 a year, we are adding $150 million a year to the budget. I guess that is another reason why your success depends, in our opinion, on strong economic growth, because those are substantial amounts of money. A year from now, I guess, we will be meeting again and hearing how successful the budget has been, not just at spending the money but at creating activity. As I say, your success hinges on both of them, the government's intention of spending but also the government's intention of raising money. At an incremental $150 million each year, that is a big chunk, I think you would admit.

Ms Kraus: Although the amount that has been spent on housing is only 1.5% of the total provincial budget. I think this year it went up slightly to 1.7%. As part of the whole budget picture, it is quite a small percentage.

Mr McLean: In 10 years then, what would be the cost to the budget of subsidizing 200,000 units, in your estimation? You are running at $15,000 a unit now.

Mr Maloney: Our view is that the cost will go down in 15 years. Our portfolio shows that because of a couple of factors. First, rents go up, because people's incomes go up and our market rents go up each year. If we can maintain our costs at a reasonable level, over time the cost should go down and the amount that comes from the federal government and the provincial government goes down. Certainly under the old programs, which we have a lot of experience with, we can show that dramatically. Under the new programs, they are so new that we have not had the 10 years' experience; we have had only about three years' experience. But our view is that they will go down over time. They certainly will not go up.

Mr McLean: But you are bringing more units on stream.

Mr Maloney: Yes, bringing more units on stream. They will not go up because it is a permanent supply of affordable housing. There is no profit margin in there to have to jack the costs up further, from that perspective. We are creating a permanent supply and the cost will go down over time.

The Chair: Thank you very much for your submission to the standing committee on finance and economics on the budget review.

This committee will recess for five minutes because we are ahead a little bit.

The committee recessed at 0953.

1000

PROVINCIAL BUILDING AND CONSTRUCTION TRADES COUNCIL OF ONTARIO

The Chair: I call the committee to order again. We are going to call on the Provincial Building and Construction Trades Council of Ontario to come forward, please. Welcome to the committee. You have a half an hour totally, for a presentation and a question and answer period in that time, if you can leave some time at the end. Would you please identify yourselves for Hansard. You can begin.

Mr Duffy: My name is Joe Duffy. I am business manager and secretary-treasurer of the Provincial Building and Construction Trades Council of Ontario.

Mr Majesky: My name is Wally Majesky. I am doing some work with the building trades council.

The brief is 16 pages. We are going to read some of it, some of it we are going to skip over and with some of it we are going to do ad hoc stuff. It is fairly obvious some of the things in the brief -- probably most of them -- were in fact covered by the Toronto-Central Ontario Building and Construction Trades Council. The difference is that this provincial building trades council represents 100,000 construction workers across Ontario. This is in the industrial, commercial and institutional sector and the residential construction sector, so this building trades council is substantially bigger and is the provincial one.

The building trades in Ontario have faced a devastating economic climate which is worse than the recession in 1982. In fact, there is a very stark difference in terms of how the federal government has responded to the recession. In 1982, the federal government took a very proactive role, through government-sponsored projects, which, compared with the present Mulroney Tories, demonstrates a very glaring insensitivity to the needs of construction workers in 1991. The sad fact is that although many critics are claiming that social assistance is being abused, we can proudly point to our members and claim they would rather work than collect social assistance.

Just digressing for a point -- I think I talked to some of the members, and many I know personally -- the building trades are really in a situation they have never been in before. We are seeing in the Toronto area people who have probably never been on social assistance -- the labourers, the people who do not have the kind of cultural thing, Portuguese Canadian and Italian Canadian workers. So aside from not wanting to be on social assistance, the political reality is there are hundreds of people on social assistance for the very first time, which quite frankly is a very frightening aspect.

Our council has strongly endorsed the budgetary measures undertaken by the NDP government and can say very positive things about how some of our members have been put back to work through various capital programs announced by this government.

Quite frankly, we are very disturbed by the chorus of criticisms which are intended to spook the public into believing that the NDP is unable to govern the finances of this province. These criticisms are being levelled by industrialists like Conrad Black and others, decrying the perils of an NDP government.

Second, we are disturbed by the psychology of fear being manufactured about the deficit. It is kind of ironic that business heroes like Bob Campeau were seen as visionaries by the business élite when in fact Bob Campeau was a foolish entrepreneur who blew his brains out trying to go on to the American market and show how well he knew things.

We are very sceptical about the current criticism led by certain segments of the media and federal and provincial opposition parties. The sad fact is that the NDP government came into office when the economy was sliding into a recession; in fact when the revenue side of the fiscal picture in Ontario was depending on the bookkeeping assumptions of the previous government, in the order of somewhere around $2 billion. In addition, the economy has been on a further slide, which has been compounded by the federal government's high interest policy, the GST and the disastrous free trade agreement, which has caused more havoc in the economy than in recent memory.

The NDP has been derided for making budgetary decisions in favour of working people, just people in general. Clearly, this government could have cut back on government funding and plunged the province even further into the recession, which already is in a disastrous state, or could do the responsible thing and try to kickstart the economy with some badly needed infusion of government money to crucial segments of the Ontario economy, which is exactly how previous Conservative governments, like Bill Davis's, responded to the recession in the early 1980s.

We, as building trades people, are proud to support the $700-million anti-recession program which, when combined with local municipal government agencies, will total somewhere in the vicinity of $900 million. For your information, the $700-million program is presently being implemented, resulting in the creation of thousands of unionized jobs: water, sewer mains, a whole bunch of things. The fact of the matter is this translates into real, live jobs. Whether it is this government or any other government, these kinds of measures are important for building trades people in Ontario.

It is fairly obvious that 57 economists, led by Mel Watkins, have clearly endorsed the economic initiatives of the current government. There is no question that someone is going to say, "Well, what the hell, these are left-wingers and NDP activists and we want to be clear." But these 57 people are economists, and they in fact have credentials that belong to their own selves. We have had some corporate spokespersons being very critical of the budget, whereas the Conference Board of Canada, not exactly prone to the postulating or fawning over the left-of-centre economic policy, was at least positive about the 1991 budget, and Monte can come after us again in terms of whatever. But there are people on the left and on the right who think there are some very positive things about the budget. We are not going to get into that. We are here to talk about what the positive things are and what it does for construction workers in terms of real jobs.

When we look at the specifics of the Ontario government, we believe that it is both appropriate and timely to discuss the role of the federal government, because we feel that some of the major problems in Ontario are as a direct result of federal fiscal and monetary policy. The Ontario Home Builders' Association, when they were here last week and the question was put to them, "What are some of the problems of the home building industry of Ontario?" even surprised me, quite frankly, and said very clearly that probably the fault does not lie at the doorstep of provincial governments but at the doorstep of the federal government. They said high interest rates, the GST and lot levies.

When Mr Mulroney lectures Ontario on its fiscal imprudence, we are left with a half-truth regarding the budget deficit. The Tories cut back on health and education and capped social benefit contributions at 3% at a time when welfare rolls have soared. The Tories neatly eliminated about $4.5 billion from the Ontario Treasury. That kind of politics is both perverse and a gross distortion of the true fiscal situation. In an abstract sense it is part of the blame-the-victim psychology, and it is certainly an odd sort of political hyperbole.

Without going into the thing, what we find kind of odd is that the Ontario government had two choices: You could either try to inflict pain on Ontario citizens in the name of fiscal necessity, or you could attempt to act as a buffer and alleviate some of the hardships during a grim period of our economy. We believe the government acted in the interests of Ontario citizens, who have already borne an excessive burden of hardships by maintaining funding to essential services while at the same time aggressively financing necessary infrastructure, this being immediately tangible to the building trades people.

At the same time when Ontario has lost its revenue base, the Canada-US free trade agreement has virtually decimated the manufacturing sector in Ontario at a loss of approximately 240,000 jobs. This was further compounded by the feds' slavish adherence to high interest rates and the infamous revenue-neutral goods and services tax. Sadly, the federal government's policies have virtually stalled the Ontario economy.

Ironically, the feds have generated more revenue with the GST than the manufacturers' sales tax, all this within the context that the consumption tax -- GST -- is paying off handsomely for Mr Mulroney and will provide further windfall revenues once consumer consumption rebounds.

That is the cruel reality in Ontario. Mr Mulroney and company are literally sucking more money out of a depressed consumer market and are contributing even less in fiscal transfer payments. The bottom line is that the feds have lined their pockets with surplus GST revenues at a time when the economy would benefit from additional consumer purchasing power and confidence.

I guess these are the kinds of things we find kind of ironic in that here you have a provincial government and the federal government doing things which, in fact, do not particularly benefit the provincial economy. We are going to talk about some things which we think are important. The co-op non-profit housing has created jobs, quite clearly, and we, as building trades, support that because, ironically, not only does the co-op and non-profit sector create jobs, it also creates jobs for entrepreneurs. When I heard the previous presentation, these are private contractors who build it, so they in fact have business, and the construction workers have business, so we find that is a very positive thing. We can get into the whole question about the subsidies or whatever, and I spent 15 years of my life in the co-op housing sector, so I am quite willing to argue why the co-op housing sector ideologically is a good thing.

The private housing sector also is very important, because one does not want to put the eggs in the basket of just social housing and whatever. So the private market has a very important role to play, and we clearly recognize that. This government should look at the whole question of a mixed economy. It is very important.

1010

When we were here last time we also heard the whole thing about the land approval process. Quite clearly, that has to be straightened out, because what is happening is that the land approval process is stalling it; it is taking land a hell of a long time to get on stream. It does not help social housing; it does not help the private sector. It is fairly obvious that that is something that has to be addressed. It seems to me that by the appointment of John Sewell there is going to be some attempt -- and it is not an ideological argument; is it just a straight thing that is very important in terms of being looked at.

We want to talk about something very briefly, which is that we have long advocated something called a provincial fair wage policy. Gerry Phillips knows exactly what it is. It has been five years in the making. I do not want to belabour the point about a fair wage policy. Clearly a provincial fair wage policy is giving a level playing field to everyone bidding on it. It has been five years in the review process, started by the previous government and picked up. All we are saying is that somewhere there should be some light of day on a provincial fair wage policy, and we think it is very important.

We urge this government to make sure that the provincial fair wage policy is not only looked at -- this is my standard speech -- but implemented and enforced. We think it is very important. We think the wage protection fund in fact will help the construction workers. Whether you know it or not, many times people go bankrupt and people are left holding the bag. So we think that is very much a fair, innovative approach.

We just touch on the school boards because what we find, ironically, is that there is a mentality out there where local municipalities, boards of education and public utilities think that because they have the right to award contracts, the rationale is, "What the hell; low bidder." The fact of the matter is that this government funds many of these projects. Even in the private sector the water and sewer main associations want a level playing field because, quite frankly, people use a labour component to make a profit. So once again, this awarding of non-union contracts is very important, and the provincial fair wage would address that. The low-bid deposit thing is in there too, and that is related to the provincial fair wage policy.

It is very fashionable, by the way, to say that Canada and Ontario are into the information society and information-sharing and are on the leading edge of technology. One of the things that never fails to amaze me is that I never hear the Japanese and the Germans talking about being on the leading edge. They make things like cars and they make a lot of other things, but we somehow cannot make manufacturing. If you take a look at the underpinnings of the two major powers in the world, it is not information-sharing; it is cars, heavy equipment and manufacturing.

So one should not cut adrift the manufacturing sector and get into this simplistic ideology that there are all those buildings downtown, there is information-sharing and we are into a service sector. Yeah, we may be. I will tell you, the Japanese and the Germans are also into some heavy equipment things. It is just an ideological pitch; one should not cut adrift the manufacturing sector jobs that pay $14 an hour to serve hamburgers at $4 an hour, if someone thinks that serving hamburgers in the service sector is that great.

That, in essence, is it. It is fairly obvious there are other things in there, but I think the brief attaches it. It affords an opportunity for you to ask Joe something.

Mr Christopherson: I would like to thank Mr Duffy and Mr Majesky for your very articulate presentation this morning. It is interesting that many of the people who come in to offer support for the philosophical direction and economic reasons for the budget we presented talk a lot about the federal Tories. I think it is impossible not to when we look at causes of the recession and what has complicated matters for the provincial government as a whole.

I think it is also interesting to note that in yesterday's papers it was reported that the federal government's projected deficit may be wrong by more money than our entire deficit. So their miscalculation alone could be greater than the entire deficit we have budgeted for, and what are we getting out of that as Canadians? They have cut back on the social programs. They have gone in exactly the wrong direction than we have. Now it looks like they are going to have a deficit that is out of control.

We, on the other hand, are presenting a deficit that is meant to stimulate the economy, invest in the infrastructure, support people who need some help during a recession. We have a manageable deficit that so far is on target. I think that is the kind of message that these hearings are showing us. At least they certainly showed us that in the north, and they seem to be continuing that today.

In terms of the investment in the infrastructure, as people who are out there working in the communities across the province, you see more than anyone the actual construction activities that are happening in the real world. I would ask you, from your point of view, representing your members, how do you see the investment in the infrastructure as putting Ontario on a firmer footing to respond to the changes in the global economy and our ability to compete?

Mr Majesky: It is fairly obvious, in response to the first question, that the infrastructure stuff is very important. It translates into very specific jobs. You drive around Toronto, to Orillia, to Thunder Bay, some of that stuff is very clear jobs. On the other hand, I am not fooling myself for a second that the infrastructure stuff puts us on some sound footing on a global basis. The infrastructure, $700 million, gives people an opportunity to do the sewers, water mains. In the brief we did not say that the $700 million is the be-all and end-all, but when you have 70% of your members out of work, that puts people back to work. I do not want to dodge it. I do not think I want to tie in the $700-million infrastructure to what it does for our competitiveness on a world market, but in today's market, that puts people to work, and that is part of the thing that Joe has with his members. People are going and putting in this kind of stuff.

That is dodging it, and I am not quite sure how to address it. I do not think we have the time to tie that into the competitiveness and the global stuff, David.

Mr Christopherson: No, that is fine. Other people have responded that way to other questions, and that is fine. I am no expert in all these things and I do not expect anybody to be. I raised it only because we think it is important, because part of our strategy was that in the economy we are a part of, if we are not successful in the high value added -- skills training, adding all those things that other countries cannot -- then we are going to be in big trouble on the competition issue because then it is going to be a question of competing for the lowest standard of living.

Mr Majesky: You had better have another hearing, because our track record collectively on skills training in this province and this country stinks. Probably one of the few which have any kind of credentials happens to be the building trades because of an apprenticeship program and a clearly defined program. If we had a nickel for every bunch of people who had talked about how uncompetitive we are because our workforce is not skilled -- but that is another hearing and another time. At least these guys have the credentials to say they are not the ones; they are trained. You know what they are. They have an apprenticeship program. That is another hearing for another time, because I have some views on how well we are trained in terms of competitiveness. I do not think we do a great job, period.

Mr Christopherson: "A lousy job" would be a good description.

Mr Majesky: Any time you have to import bricklayers from Portugal, you must know that we have some problems. That is another thing that Joe wants, but that is manpower policy and that is something else entirely.

Mr Duffy: The importing of tradesmen does not need to be done for our industry. That is only -- what do you call it -- an economic problem that exists in this province where people who are unemployed in one part of the province cannot come to an area where there is employment because of the high cost of living. You cannot convince a carpenter or a plumber or a steamfitter or a bricklayer to come from Thunder Bay to take a job in Toronto and pay the high cost of living in Toronto out of his daily wage and keep two homes. He is better off -- and I state this emphatically -- to stay on unemployment insurance, if he has enough stamps to get it.

Mr Jamison: A very interesting presentation. You talked about the effect on the employment of the members your organization represents. What kind of effect have you seen in numbers? Do you have numbers attached to what it has meant to your membership?

Mr Duffy: I do not have numbers, but you had a presentation from the Labourers' International Union, Local 183. I believe they stated numbers to you. That is an organization that I believe six months ago had something like 11,000 people out of work, and now they tell me they have reduced that by about 20%.

1020

Mr Kwinter: Mr Majesky, I enjoyed your presentation, as I always do. It is always very thoughtful, very provoking. There seems to be a dichotomy and I would like to get your reaction to it. It is not your dichotomy; it is a fact. On page 14 of your presentation you say, "And more often than not, these are countries who have extremely cheap non-unionized labour which makes it virtually impossible for Canadian manufacturers to compete, and one only has to look at the current state of the Canadian textile and garment industry as well as the electronics and furniture industry, etc."

So on the one hand you are saying these cheap-labour countries make it impossible for Canadian manufacturers to compete, and then further on the same page you say: "painfully silent on what the successful key economic factors have been in places like Germany and Japan. The political reality is that these countries are major players in manufacturing ranging from electronics to heavy equipment, to steel fabrication, to car manufacturing; in other words, all key manufacturing sectors." Now, by no stretch of the imagination can Germany or Japan be considered low-wage countries. They are highly unionized and highly competitive.

As I say, I just want to get your comments on it.

Mr Majesky: It is pretty obvious, Monte, we are not talking about the Germanys and Japan. Second, we probably have something in Germany and Japan we do not have in this country in terms of co-operation between the private sector, unionized sector and what have you. The reference there is to low-wage countries like Mexico, Malaysia or Singapore. Quite frankly, I do not think we will ever compete with those kinds of people. The only point we made in this is some sort of procurement policy to at least encourage buying of Canadian goods, which I gather under the free trade agreement makes it a lot tougher because that is, whatever.

I am the first one to admit that the Japanese and the Germans compete very well in terms of high wages, but on the other hand they have a whole different set of circumstances that we do not have. I am one who leans to the German model. But in Germany if I am a union person, I am a part of the decision-making process -- not that I think you can import the German model for Canada. I think we should look at it.

I do not know how to answer that, Monte. This is in reference to those low-wage countries, and quite frankly I am one who thinks that the Mexico free trade agreement is a God-damned disaster. I am sick and tired of people telling me that a Mexico free trade agreement is in our best interest. In the first-flush results of the US free trade, my friend, I have not seen it. All I have seen is the going south, I have not seen anything coming north. So if someone says to me or to the construction workers that we have to compete with -- I do not think we will ever compete, Monte. You were the Minister of Industry, Trade and Technology, and I just think it is very tough. I do not think we will ever compete, so I am not an advocate. I am not dodging it.

Mr Duffy: We in the provincial building trade have seen things coming north, American construction workers coming across the border under the free trade. We recently got it stopped through a change in the free trade agreement, where American construction workers were allowed to come into all parts of Canada and do work under what they considered maintenance and manufacturer warranty work, which was actually downright construction work. We had to go as far as putting a protest on in Windsor and also close down the Fort Erie Peace Bridge to get our point across to the federal government.

One of the problems with it was that the description of the work was not passed down from the government to the border-crossing people who work there checking immigration visas and stuff like that. We have recently got that changed, but what we have seen through the free trade agreement was American workers coming in. Specifically in the free trade agreement it was spelled out that Canadian construction workers could not go in under any circumstances to the United States. It was a deliberate loophole left in that agreement.

The Chair: One short question, Mr Kwinter or Mr Phillips.

Mr Phillips: I never thought I would see the day the labour council would be supporting a budget that calls for essentially 10% unemployment each year over the next four years. I guess my question really is around that --

Mr Duffy: Could I just answer that point?

Mr Majesky: Let him finish his question.

Mr Phillips: Thanks, Wally. I think that is what worries the critics of the budget, that we are going to see economic activity, not this year, but in the future in Ontario that will get people, as you call it, jobs, jobs, jobs. Is the council supportive of this budget in terms of getting economic activity going that will -- or are you accepting that we are going to have to look at unemployment rates of 9% to 10% each and every year for the next four years?

Mr Duffy: To touch on your first point in regard to the 10% unemployment, I am afraid to say that if this budget was not brought in the unemployment would probably be a lot higher in the construction industry. And no, we certainly are not supportive of any kind of system that gives us high unemployment. One of the main points in supporting this budget is that we see a situation where we have gone to every government in this country, federal, provincial, municipalities, asking these governments not to jump on stream when our economy is going up through the sky. We have asked them to get out of the business of jumping into putting on public work programs, to back off and wait until our -- to eliminate the ups and valleys in the construction industry.

That is one of our major points of coming here today to praise this government. Another point, I would say, is that the construction workers know there is probably going to be a tax on all the people of Ontario. I am here to tell you for the construction workers, when we are working we do not mind paying taxes. We have never objected to the fact of paying taxes to support the governments that have been in power. But certainly we cannot sit back and see the unemployment go higher. And I can tell you right now, if Gerry Phillips is telling me that it is 10%, and I have seen it in the paper that it is 10%, I can tell you that by next year when the budget comes out we are probably going to be talking about 20% and maybe 30% in the construction industry. This is going to help. It is putting our workers back to work, but it is not going to solve all the construction industry's problems. The recession has affected the plants and situations like that. We, as construction workers, have not seen the recession yet.

The Chair: Thank you very much for your presentation.

1030

BOARD OF TRADE OF METROPOLITAN TORONTO

The Chair: The next group we have here is the Board of Trade of Metropolitan Toronto. Are they ready to proceed? I know we are a few minutes early.

Mr Meinzer: We are actually 20 minutes late.

The Chair: Welcome to the standing committee on finance and economic affairs on the budget review. You will have one half-hour totally, if you can save some time at the end of your presentation for question and answer period. Would you please identify yourselves for Hansard.

Mr Meinzer: I am Gerry Meinzer. I am the vice-president of the board of trade. Health and everything else permitting, I am its next president. With me also I have Don McIver, chairman of the board's economic policy committee, and Kate Phillips, its vice-chair. We will be pleased to respond to any questions the committee may have afterwards. Let me tell you at the outset, though, I appreciate the opportunity on behalf of the board to make our case.

Just by way of background, the Board of Trade of Metropolitan Toronto has approximately 15,000 members. It is the largest community chamber of commerce in North America. We represent a broad cross-section of the Metropolitan Toronto business community from self-employed business persons to major corporations. Our membership encompasses manufacturing, service and financial sectors.

We have reviewed the 1991 budget and, as you can well imagine, we are greatly concerned about the $10-billion deficit and the projected four-year $35-billion debt increase it contains. While it is true that the government can blame much of this year's deficits on shrinking revenues, soaring welfare rolls and cutbacks in federal transfers, where is the long-term deficit reduction strategy? This government acts as if it had no power to roll back programs or civil service staff increases initiated by its predecessors. Its only concession to the concept of cost control is to "ask the people who work in the public service to help us meet the targets of our fiscal plan." Talk about putting the foxes in charge of the hen-house.

However, the budget has been come at from all kinds of different angles and we want to pick a new one that perhaps goes somewhat in line with the previous presentation. Rather than dwell on debts and deficits we want to confine our remarks to budget paper E, the discussion paper on structural change and competitiveness -- for your reference, it is beginning on page 85 of the budget -- for it is in the pursuit of competitiveness that the 1991 budget will have its most negative impact. I listened with quite some interest in the previous presentation on the German and Japanese example, and I know both of them very well. One key difference in their position is that they take preventive positions rather than reactive positions, both in labour management and in industrial strategy.

I also operate in the field of high technology, one of the very successful Canadian corporations in that field, and I know that the best technology in the world is not going to buy you a thing unless there is somebody at the other end who, for your price, wants to buy it. So in terms of our presentation, one needs to keep in mind that unless you can compete for a price somebody else cannot match or you are so much better in a cost-benefit analysis, you are not going to succeed. In our view the budget discussion paper is somewhat of an offensive attempt to blame Ontario's current industrial crisis on the policies of the federal government and on industry itself.

It expresses no vision about Ontario's industrial future and contains no ideas for addressing the current crisis beyond urging business to "invest" in Ontario and talking about strategic partnerships. It ignores high unit labour costs, rising taxes and payroll levies, labour and environmental legislation as the chief causes of the flight of industry from this province. In an appalling omission, it makes no mention whatsoever of the Ontario tax burden, which only shows the government's total indifference about its own responsibility in turning Ontario into what we are looking to head for, a fourth-rate industrial economy.

It proclaims that Ontario's low crime rate, low infant mortality and long average life expectancy are somewhat sufficient to make firms increasingly interested in locating here. Why are they locating in Mexico and in Tennessee if there was any truth to this? It implies that Ontario employers have somehow exploited their workers since it says, "Ontario workers have seen their weekly earnings decline by 1.1% in real terms from 1979 to 1989." But this is almost entirely due to the inflationary effects of government taxes, payroll levies and government-regulated prices and I can cite you examples and you can bring them under questions after.

It proclaims that federal policies of high interest rates and unrealistically high value of the Canadian dollar are impeding investments. In doing so, it conveniently ignores the provincial government's own role in maintaining high interest rates and inflation by proposing to nearly double the provincial debt over the next four years. It preaches partnerships between business, labour and government at a time when the government refuses to consult meaningfully with business on a wide variety of policy issues ranging from employment standards to rent controls, from minimum wages to labour laws. In fact, it pronounces that greater commitment from employers to invest will be won by introducing such measures as pay equity, employment equity and a fairer minimum wage. Can the government provide us with a single example, just one, of a company which has decided to invest more in Ontario specifically because of these policies?

In makes the heroic assumption that Ontario will somehow gain a competitive advantage in marketing the products and services of environmental industries by imposing stricter standards, which will act as a spur to technological innovation. At the same time the government bans the movement of garbage in the province, eliminating any prospects of developing a viable recycling industry. It attempts to defend the role of the civil service by pronouncing that Ontario cannot afford the rigidity induced by policies which focus on cutting wages and eroding public sector contributions, an attitude which proclaims that not one penny of government money is misspent and every penny of expenditure is fully justified. But do Ontarians have grounds for anything other than cynicism in view of the 5.8% civil service pay settlement earlier this year and pay increases of up to 11%, costing $17 million, for 2,200 senior civil servants?

The budget discussion paper clearly demonstrates that the government's idea of industrial strategy is to load as much tax, with as much burden, on to business in what is already North America's highest-cost jurisdiction and wait to see who will survive, let alone remain in the province. Its entire orientation, in our view, is perverse and retrograde. How much proof does the government need to demonstrate that both its and the federal government's policies -- and I include both -- are driving industry out of the province to the tune of 250,000 jobs last year? Free trade cannot be blamed for the flight of Canadian-owned industries, since Ontario employers were both actively courted by US jurisdictions and were quite free to leave long before the free trade agreement was signed. In fact, the reduction of tariffs on exports to the US can only have prevented an even more rapid pace of deindustrialization.

One thing we can agree with in the discussion paper is the statement that there is a clear distinction between federal policies on competitiveness and the alternative approach supported by the Ontario government. We submit that both have indeed been extremely harmful to the economy: the federal government by letting deficits and hence interest and exchange rates get out of hand; the Ontario government by proceeding with a social agenda that takes absolutely no account of the plight of industry in the provinces, presents no coherent policy for preserving our industrial competitiveness, and by tabling a multi-year deficit plan that promises to repeat every mistake made by the federal government in recent years.

Where, I ask you, are Ontario's manufacturers going to find the resources to invest in retraining, in new technology and in R&D and innovation when the government brings down a four-year fiscal plan that the Treasurer says will require at least $500 million in new taxes just to meet future deficit targets? In fact, we think it is going to be substantially higher. And how will $35 billion in new debt result in government investments which will spur the private sector's ability to create wealth? The discussion paper provides no clues in this regard. The discussion paper shows that the government has no conception of Ontario's place in the global economic firmament and inescapable reality of integrated markets and free international movement of the factors of production.

If the government really believes that unit labour costs are unimportant, that taxes do not even merit a mention in a serious discussion paper on competitiveness, that environmental legislation is a spur to industry and that commitment to invest in the province will be won by introducing burdensome labour and minimum-wage legislation, then one can only conclude that the government has formulated an industrial strategy based on ideology but certainly not international reality. This apparently being the case, there is probably little point in our presenting detailed recommendations to the goverment until we see some clear sign of its willingness to engage in a serious debate on competitiveness. We have seen nothing yet emerge from the new Premier's Council on the Economy and Quality of Life in this regard.

I do want to quote from the Premier's speech on that, where he says: "My message is simply this. This government recognizes the fact that there must be a marriage and an understanding between those who are involved in the creation of wealth and those who are preoccupied with the issues of social justice." We agree with that. It is a two-way street, and we are suggesting to you that in our belief it has so far been a one-way street. We believe that a strong and viable economy may be achieved in a high-cost economy if all parties will co-operate in pursuit of this goal, but it will not be achieved if the government continues to focus obsessively on its labour and social agenda to the detriment of the wealth-creating capacity of the province.

This is where the German and Japanese models differ substantially. They do get together. They do it together. Unless we get ourselves into that same position, the direction we are going in will lead us straight downhill. With that, Mr Chairman, I am open to questions, together with my two colleagues.

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Mr Kwinter: Mr Meinzer, I was interested in your comments and I would like to get a reaction from you. Unfortunately we did not have enough time to talk to the previous presenters, but I was a little disturbed to hear Wally Majesky say, "Yes, I understand about Japan and Germany but unfortunately we can't compete with them, so let's worry about these other things."

At the present time, the trade between Canada and Mexico is negligible. It is of no impact whatsoever on our economy. As I say, all these people who are really getting quite excited about it are worrying about something that is statistically unmeasurable. The trade between Canada and Mexico is less than $2 billion, which is absolutely nothing, whereas our major competitors are really Germany and Japan. To listen to Wally Majesky, we should just go home, pull the covers over our heads and say, "Forget it, we can't compete with them." Do you have any reaction to that?

Mr Meinzer: I was tempted to react while he spoke, because there is absolutely no point building buildings if we do not have any use for them. Unless industry is competitive worldwide and within the province of Ontario, we cannot just bury our heads in the sand and say, "Let's ignore them." Germany and Japan -- and I am somewhat more familiar with Germany -- are two of the highest social-cost countries I have ever been in, but what they do have is a sense of co-operation between labour and management, where they settle things in a preventive way, as I said at the outset. In the computer industry you have preventive maintenance so the thing does not break, rather than our model where we react once it is broken. So there is labour peace. There is no loss in their time. When they work, they work. They do not walk around on picket lines. We cannot ignore that.

Mr Phillips: You did not talk of a capital fund today. I would really like the board's opinion on the capital fund. There is no question that this government is going to try to bury capital and say, "We've got a deficit next year of $4.5 billion instead of $9.5 billion." I would like your opinion on it if you have it today.

The other thing I had is just because it is the Toronto board of trade. Unemployment in Toronto has worsened and is the worst of any place in Canada, I think. A year ago it was less than 5%; today it is over 10%. That is what worries me about the budget, personally. It is not so much the spending side as it is the revenue side and the job side of it. I am wondering whether the board has any analysis of what the cause of this is. There is a lot of talk about moving to other jurisdictions. Have you actually seen any of that? Just your thoughts on the cause of the high growth in unemployment. Also, you have touched on some solutions, but what are the things we might look at fairly quickly?

Mr Meinzer: We have done some extensive research and I would defer to my colleague, Don McIver, who is the chairman of the economic policy committee, to answer your questions.

Mr McIver: In answer to the first question, the issue of dividing the budget of the province into capital and operating, philosophically one can make a fairly straightforward case that any business organization has a capital budget which in essence is not intended to be funded within any one given period within the calendar year or fiscal year. There is some underlying sense behind that, but what worries me to a considerable extent are two things really: one, the sense that the capital budget is comparable to that in a corporation, which I would argue is not the case; and two, that you can continually run a capital budget in deficit. I say it is not comparable to that in a corporation because the reason you have a capital budget in a company is that you are investing in some production-generating equipment, machinery, a plant or whatever, which is going to give you a revenue stream over time.

Mr Phillips: Plus depreciation cost, and there is no depreciation cost.

Mr McIver: Exactly. I think the difficulty with applying that to the province is where you say that hospitals and schools, particularly hospitals, to use a very good example -- when you consider that to be a capital cost, patently, there is not going to be a revenue stream generated within the hospital against which you can offset the carrying costs of capital over time. Conceptually the idea is reasonable, but when you start to pull it apart I think it becomes quite questionable. Then you are left with the implication, at least in the budget, that you can continue to run a capital deficit. Somehow a capital budget deficit is okay and you can run that continually without any constraint. I find that objectionable. I simply ask, at what point in time can one envision a situation, under this type of accounting, where the capital budget could possibly be in surplus? If not, then you are going to continually run in deficit.

Mr McLean: I have a couple of questions. For your information, we have been meeting for three days this week. We have met approximately 25 or 26 delegations. Of those 26 delegations, we probably had 2 that were opposed to the budget. The rest of them were all in favour of the budget and perhaps spending more. That shows you what kinds of hearings we have been having and the balance that has been arranged to make good input into the budget.

I want to talk about the commercial occupancy rate in Metropolitan Toronto a bit. The other issue I want to talk about is whether the Minister of Labour or anybody from the ministry met with your group to discuss the government co-operating with business.

Mr Meinzer: I will answer the second question first, and the answer is yes. I am not convinced we got a hearing, but we have met. The first part maybe Kate will --

Mr McLean: Is the commercial occupancy rate increasing or what is happening with regard to that?

Mr Meinzer: Don, you are more on that side of the world, I suppose.

Mr McIver: Yes. Can you just refresh me on the question?

Mr McLean: Is the vacancy rate of commercial buildings, commercial businesses and space that are rented out in downtown Toronto, continually increasing? You see all kinds of signs.

Mr McIver: Yes, but I think you have to put that in the context of the recession. Certainly Toronto, unless I am mistaken, of the major financial capitals or centres in major business sectors in North America, has one of the lowest vacancy rates in the central core. I am not familiar with the city as a whole, but I think the centre of the city is not as severe as many others and it is very definitely recession-related.

Ms K. Phillips: Maybe I could respond simply by saying that the recent study done of major business centres around the world shows Toronto to have the third highest cost of occupancy rates anywhere in the world. We are a very expensive city to walk right in. When you compound that with things like the corporate concentration tax and the occupancy tax, you are forcing firms to find other homes outside of the major business cores. It is creating many business cores, if you wish, as people spread out and find new homes. That is simply a factor of economics.

Mr McLean: Then are some of the ones who are finding new homes moving elsewhere in Ontario, or are they going south of the border?

Ms K. Phillips: Quite often because of the number of other factors, typically taxes, they are being driven south of the border or to other jurisdictions. Simply to take the case of companies finding other homes, we will see that even Quebec firms are finding they are moving some of their taxes to homes such as Alberta, where they can take advantage of some tax holidays.

Mr McLean: So we are not going to see a reversal. The vacancy rate is going to increase.

Ms K. Phillips: That is correct. That is again compounded with the number of firms that are being forced out of business or merging for competitive reasons, and therefore that is decreasing the number of head offices that need to be located in the downtown core.

Mr McLean: So the recession is going to get worse in Toronto before it gets better.

Ms K. Phillips: That is correct.

Mr B. Murdoch: At first you mentioned how many members and I missed that. How many members are in your organization?

Mr Meinzer: There are 15,000 members.

Mr B. Murdoch: I wanted that on the record so that we know there are quite a few people out there who agree with you. As Al said, we have had hearings for the last three days and it looks as if everyone wants more rather than less money in the budget. I do not think we are getting a clear picture here. Maybe today we will get one that is a little clearer.

Ms K. Phillips: I guess we really cannot stress enough the fact that has to underline any budget or fiscal decision made here in this province. If you do not have revenue-creating positions, whether that is companies or jobs in one form or another, you have nothing to support your social policies with.

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Mr B. Murdoch: I think somebody has missed that point and I am glad you pointed it out.

Mr Jamison: As you have been made aware, we have not heard many opposing presentations. Thank you for taking the time to come in.

Of course, being opposed to the budget, as you obviously are, and the level of deficit that is there, is understandable in some cases. No one likes a deficit. I would pose a question to you, because when I was brought up, my father used to say, "If you don't agree with something, then be specific about what you don't agree with and be able to point out very clearly what you would have done instead."

I think it is very important, and I will give you an example. Would you be opposed to the transfers to municipalities, in relationship to the Conservative theory from Ottawa that really froze and capped those funds? How would that affect your membership, in fact, in a municipal base and so on? Really, I guess my question would be, if you were going to limit the deficit, have you done your own personal homework in coming here today? Are you able to point out clearly the areas where you would have restrained your spending and by how much? Would you identify clearly the areas and the amounts in which you would have restrained spending, keeping in mind of course that by standing still, by not doing anything, there was a potential of an $8-billion deficit in this province.

Mr Meinzer: To us, a deficit is a deficit; it does not matter what political stripe it came from. But I want to answer also philosophically that we represent the business community, and in corporate life you just cannot keep operating on a deficit. You would just simply go bankrupt.

Mr Jamison: I am asking you for specifics.

Mr Meinzer: We have a philosophical issue, but we also have some specifics to answer your questions.

Mr McIver: I am going to try and avoid naming too many specifics, because this is an oft-asked question in sections such as this.

Mr Jamison: I think this is the crux of the debate, really, though.

Mr McIver: Give me a minute, please, because the difficulty in responding to that type of question is that in general the person responding simply does not have the full agenda, the full figures, the full costs, the understanding. It takes not just one individual but many individuals and various treasury boards or various levels of government. It requires a full understanding of the programs and how they are funded, and in many cases there are expenditures which obviously seem capable of being cut tomorrow, but it turns out that there are contracts written around them which would take a long time to unwind.

Again, I am trying to avoid giving specifics, because I will claim, and I think most people in this position would claim that they simply do not have the competence to do so. However, I would echo Gerry's philosophical comment that says: "Look, if you're running a company, it doesn't matter. It's not sufficient to say: `Hey, listen, I don't know who we can fire. I don't know where we can cut the costs, which contract we can cancel.'" I know we cannot continue to run a business if we continue to do this.

The one specific I would suggest to you right off the top, because it is in marked contrast to what has gone on at the federal level and with many of the provinces, is an effort to constrain wages at the provincial public sector level. That is in very marked contrast.

Mr Jamison: How much would that have saved?

Mr McIver: I cannot give you a number. That is the difficulty you put me in, "But how much would it save?" At a guess, a couple of billion.

Mr Jamison: No.

Mr McIver: No? How much?

Mr Jamison: It was much less than that.

Mr McIver: You could be right.

Mr Kwinter: What about the private sector, which gauges its wages on the public sector?

Mr Meinzer: Can I just quote you one example? The senior civil service level that we quoted was $17 million. That is just for 2,200 people. Let's say we would have kept them at zero; there is $17 million right there.

Mr McIver: This is public sector, parapublic sector, all different levels of government, where there is a demonstration effect, and indeed the private sector, where there is a tremendous demonstration effect.

Mr Sutherland: You commented earlier about governments causing inflation and that leading to high interest rates and the recession. Yet if I look at what John Crow said -- and with me not being from Toronto, John Crow used to bug the hell out of me -- he would say the inflation rate was 6.5%. Here in Metro it was 6.5%; in the rest of the province it was 4%. He is sitting there saying, "The economy's taking off in Ontario, so we've got to try to control the inflation rate before it gets out of hand."

You are saying here that the government is causing it. What he was saying at that stage of the game was that your members, who were probably benefiting from the economic boom that occurred here, the end result -- what was going on in Toronto was actually causing him to force up the high interest rates.

I guess I am trying to put that all together, why we had a high interest rate policy that dealt with one specific area of the entire country, but seemed to create a recession across the entire province, put people out of work, and now, when a government tries to deal with that in terms of maintaining levels of service and in terms of trying to provide some stimulus -- not enough to make up for the losses, no doubt about it -- to get people back to work, we are receiving a great deal of criticism for that.

Mr Meinzer: From a deficit point of view, the deficit was not a Toronto deficit and it was not an Ontario deficit. Ontario has been a net contributor to equalization for I do not know how many years, if not for ever. What John Crow is coming after with a high interest rate policy is a national issue, because we pump money into regional development and all kinds of things.

We have just done some very recent studies. In Hibernia, with the amount of money that is going in there for regional development, it would probably be easier to triple unemployment for any Newfoundlander and still be less than half the cost -- if you tripled the unemployment insurance benefits. That is where a lot of the deficit comes from, but Kate may want to add to that.

The Chair: Make it very short because we are running out of time.

Ms K. Phillips: I think maybe we will just want to wrap up by saying we want to focus this government back on the issue of competitiveness. You cannot expect industry to compete with the burden you are placing on us with this budget and this deficit. You have increased the social costs through new payroll taxes. You are talking in a variety of other areas.

Mr Sutherland: Sorry, there are no new payroll taxes in this budget.

Ms K. Phillips: There are things on the table right now that are going to influence in the next very short --

Mr Sutherland: Okay, but nothing has come in as yet.

Ms K. Phillips: You have enough new taxes, listed either in your proposed plan or in your budget, that are going to cripple industry and are going to influence any competitive position that we take here. We are not disputing the fact that we have been knocked by the recession as manufacturers, but we are simply saying: "Let's fight to get our heads above water. Don't hamper us further with any new taxes you might come up with." You are putting in place policies, whether they be environmental, whether they be employment equity, whatever factor you wish to look at, that are going to make us uncompetitive, and that is going to drive us to other jurisdictions.

The Chair: I would like to thank you very much for your presentation.

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ONTARIO SECONDARY SCHOOL TEACHERS' FEDERATION

The Chair: The next group to come forward is the Ontario Secondary School Teachers' Federation. Would you please come forward? Welcome to the standing committee on finance and economic affairs on the budget review. You will have one half-hour for your presentation. Included in that time, try to save some time at the end for some questions and answers. Would you identify yourselves for Hansard, and you can start with your brief.

Ms Barkley: First of all, I would like to say we are very happy to be here and that we represent 42,000 members. We are not just teachers. We are secretaries, custodians, psychologists and psychometrists, among others, within the educational community, so it is not just the teaching staff itself. Certainly they encouraged us to make this presentation.

I would also like to indicate to you that this particular brief has had a very wide distribution. We were at the Canadian Teachers' Federation convention last week, representing the teachers across Canada, and they all wanted this brief to take back to their own provinces, particularly those, I might underline, in British Columbia and Saskatchewan.

I will start the presentation. I will read some to you and then I will try to highlight other parts that I think might be relevant for you. If I go on too long, please stop me. I tend to do that, but I would rather save time for questions because I know you can all read.

When the Ontario budget plan for 1991 was unveiled, the reaction of the Ontario Secondary School Teachers' Federation was gently favourable. Our support for the social and economic measures unveiled in the plan was somewhat diluted by our inability to perceive any move to increase the provincial share of the financing of local education. The transfers to school boards were set at an 8.1% increase over 1990, while the previous government had increased it, as you can see, by 8.3%.

However, now that we have seen the budgets from other provinces, ours shines by comparison, and we are told that continually. It is virtually the only responsible counterattack by a province on the federal government's scorched-earth social and economic policies.

We have already commented that it is the height of irony that the Ontario budget has been energetically attacked for having rejected the approach of Wilson and Mulroney, whose policies themselves had been discredited by the majority of commentators and people prior to the release of the Ontario budget. The source of the storm of protest surrounding the Ontario budget, its acceptance of the necessity for a recession-fighting deficit, was itself caused in major part by the cut in transfers to this province by the federal government -- downloading.

Since 1989, in effect, the government of Canada has deliberately implemented policies made outside of this nation by the International Monetary Fund and the World Bank. These international bankers' monetarist policies deliberately aim at destroying our social and health care safety net through the reduction of transfer payments for the targeted programs.

We are in total agreement with the approach of the provincial government in budgeting for a made-in-Ontario program that will maintain and strengthen our system of social justice and equity.

I will not read this next part on downloading, except to say that last week I had a confrontation with the tax coalition people and they do not understand the downloading. It is very important that this be stressed; for example, the fact of what the transfer payments do to provincial governments and to municipal governments and of course, finally, to the property taxpayer.

I will turn now to page 4. Again, we were always opposed to the downloading of the provincial government, and I think the past Liberal government can tell you that. We spoke very strongly against that. But now, faced with a massive downloading of the federal government, we are really in dismay and our concern is much more with what is happening federally, affecting us all. The Ontario budget, with that in mind, is a beacon of light.

In 1991, the cap on transfer payments to Ontario in established programs financing (post-secondary education and health) and the Canada assistance plan (social assistance) will result in a cumulative shortfall of $3.6 billion. That goes back to 1986. This shortfall alone makes up nearly one half of the notorious Ontario budget deficit.

Over the next five years, it is estimated that the total accumulated shortfall for Ontario will be an astounding $15,066,000,000: established programs financing, $11,209,000,000, and Canadian assistance plan, $3,857,000,000. See figure 1. This is an unconscionably heavy burden to settle on the shoulders of the beleaguered Ontario taxpayer, and future Ontario budgets will have to cope with its impact.

There is little likelihood that the needs met by these programs, especially in the area of social assistance, will diminish as long as the federal Conservative government is in power. The unilateral cap placed on these transfers by the federal government is an irresponsible violation of the federal-provincial social contract that helps hold this country together. When one considers that unemployment insurance benefits have been cut at the same time, the federal government is indeed abandoning those Canadians least able to protect themselves in hard economic times. The government of Ontario had little choice but to make up the shortfall to sustain the victims of the same federal government policies, and its budgetary deficit, in light of this, became inevitable.

What we have on the next page, page 5, as you can see, are the transfer payments for all the provinces. You may want to take a look at that later. I think that is very pertinent and something we should publicize much more, because it has created so many of the problems we face.

If you turn to page 6, it is interesting. I think you all remember that when the Quebec budget came down, it was lauded by papers such as the Globe and Mail. We all read that. So we researched that and we talked to our colleagues in Quebec as well. If you take a look at Quebec, and if you go to the second paragraph there and read through that, in terms of social health and education vitality, Quebec is not doing at all well. Restraints have been imposed on school boards since the early 1980s. Unemployment and poverty levels have increased -- and now look at this one -- at a dismaying rate. At this moment, Montreal has a higher rate of unemployment than St John's, Newfoundland, and you know how high that is. School dropout rates have risen dramatically. Between 1979 and 1991, the dropout rate in Quebec increased from 26% to 39%. In Ontario, retention rates continued to improve. Between 1975 and 1986, our graduation rate increased from 62.4% to 75%. Clearly, any proposal that Quebec be the model Ontario should emulate must be viewed indeed with scepticism.

I think we should read this too, because it brings some compassion into the debate, which I think the NDP government has shown. That paragraph at the end says, and it is a quote, as you see: "Educators have become increasingly aware of the effects of poverty and the associated problems affecting school performance: lower attention span, truancy, poor attendance, erratic behaviour, hyperactivity, aggression," etc.

If you look at the top of the page, an article from the Globe and Mail, and you read about the second sentence there, the effects of poverty in east end Montreal, they did 37 schools where there are nutrition programs and they can do no testing after the 15th of any month. The children just cannot cope with it because they are not properly nourished. That is astounding. And this is an ideal budget, helping the people? Hardly.

If you look at the bottom of page 6, again we are talking of transfers to school boards, which we think is an investment in people and an investment in our future. As indicated above, despite the fiscal squeeze exerted on Ontario by federal government cutbacks, the provincial government made the courageous decision not to reduce its transfers to its junior agencies. Colleges and universities received a 7.3% increase, health care 9.5%, municipalities 5% and school boards 8.1%. For purposes of comparison, we outline the latter transfers across Canada.

Take a look at that graph on the next page. That says it all, really. If you value education and you think it is something that is one of the cornerstones of your community, just take a look at that graph. Look at Quebec. Look at Ontario. I think Ontario did the best it could to retain an excellent education system in comparison, and as has been outlined to us, right across Canada, from all the teachers whom we have met recently. Again, Ontario is a shining example of fiscal responsibility compared to the other provinces.

If you will look at the next paragraph, there has been little mention of this, but the provincial government has also inaugurated a $100-million pay equity fund that will help school boards and other agencies meet this important -- contrary to what the last presentation said -- social priority. In addition, it has followed the example of the previous government and extended the approximately $300-million capital grant to school boards. The Minister of Education, Marion Boyd, has on more than one occasion assured school boards and teachers that the future cost of new mandated innovations like curricular restructuring will be paid for from provincial coffers. This is good news and signals a potential end to the practice of downloading that has been widely rejected.

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Choosing a path for Ontario: a high-wage or a low-wage society? I think you know that is a discussion that is now global. In fact, the International Monetary Fund and the World Bank are discussing which route to go. What we are doing now is that we are entering a free trade and global economy. We have choices of which way we go, and budget paper E indicates the route Ontario is going to go. I will not read it; you know it. We agree with budget paper E in that direction.

If you turn to page 8 and go to the very bottom paragraph in the first column, we had an opportunity to go to a transborder conference in Halifax with our colleagues from the United States, and we had a presentation from Jeff Faux, president of the Economic Policy Institute in Washington, DC. It was chilling. It was fascinating, but it was frightening. In any case, I would like to read a little bit of it, because I think this is something we are all going to face.

Faux outlines a choice that is referred to in paper E: "Under these conditions, high-wage nations such as Canada and the United States face a choice. One option is to compete in the global economy by lowering wages, and therefore lowering the living standards of the majority of the population. The alternative is to compete on the basis of higher productivity and innovation, which will improve living standards" -- which they have done in Germany, for example.

"But prevailing laissez-faire economic ideology has been moving both nations down the low wage path by defining competitiveness in terms of low labour costs; ignoring the economic value of the public sector. There is a catch-22 at work; we're not competing so we cut back on public investments in people, and because we cut back on investments we can't compete.

"The proposed North American free trade agreement between Canada, the US and Mexico is an example of the low-wage path.

"Continuing to follow this low-wage path will produce prosperity for the top 30% of the population and falling living standards for the bottom 70%. In the long run, the gap between the very rich and the rest of society will grow.

"The new global economy requires a new economics for North America, one in which nations compete against each other not on the basis of cheap labour but on the basis of expensive labour, ie, labour that produces innovative products and services.

"A high-wage strategy involves a transformation of the organization of work from traditional `top-down' management to management by teamwork. This in turn requires a new emphasis on a high-quality general education for all."

Then there is something Bob Rae has mentioned, human capital, the importance of it:

"Investment in people is the key to a high-income strategy. People are now less mobile than technology and capital. People are the source of national adaptability and flexibility. Education and training shapes job content and the organization of work" -- and shapes people.

"A high-skill, high-wage strategy transforms the problem of educating the disadvantaged. It is no longer a question of charity; everyone's lives are diminished when the education system loses a child.

"...or loses an adult. The accelerating pace of economic change requires opportunities for learning throughout life.

"Money does matter. So does the capacity of public education to change, which is essential if it is to be an engine for the further social and economic development of North America."

Now we are facing that choice: to maintain our present standard of living, the high-wage standard of living, or to move to a low-wage society on a Mexican model. Of course we support the first direction as outlined, again, in budget paper E.

Again on that page -- I will not read it to you; I will just try to highlight it -- when we talk about taming the recession, we certainly agree with the 58 wise persons, the economists who made the presentation and should have been much more highly, I think, highlighted in the press. Of course we agree with Galbraith's analysis and his approach to how you tame the recession and how you economically deal with it. I would suggest to you too that this is the only place where there has been any kind of humanity shown to the vast majority of the populace by this government.

If you turn to the very last page, page 10, you do have to read that. Galbraith makes one more intriguing suggestion regarding the financing of this public investment, "As a bow to fiscal conservatism, perhaps we should finance the process with a tax increase in higher brackets." In other words, we have to revamp the tax system. I did not read all that out to you, but I am sure you have heard that before. We have to tax the higher earners. We have to look at the whole tax structure, because it has been very clear since about 1985 and before that the loopholes for the rich have increased and the taxing of the middle class has increased as well. We think the whole tax structure has to be looked at, and we think that is one of the major problems and one of the major difficulties of getting out of this recession, if it is not highlighted.

As with probably everybody in this room, we fought very hard against the fiscal policies of the Tory government, particularly the GST. When the government says it has no money and has to form a committee, for example, to find out how to dispose of an income that is now being generated by the GST, we think the massive part of the problem of this recession lies in the fiscal policies of the federal government, and again, that is what should be attacked, not this very fair budget the NDP has put in place.

I will read the conclusion for the record. The Ontario government has chosen to maintain its investment in its institutions, and most important, in its people. In light of the commitments that the New Democratic Party has made in its Agenda for People, it would have been difficult, if not impossible, to do otherwise. The Ontario Secondary School Teachers' Federation supports this direction. Furthermore, we are convinced that there is broad public support for the budget's responsible anti-recessionary strategy that will nurture the long-term strength of this province.

The Ontario Institute for Studies in Education poll on attitudes to education was released in April. A significant majority, over 90%, thought that the spending on local education, job retraining and adult literacy should be increased, even in this recession. Post-election polls conducted by Environics and Insight Canada also indicated the same broad support for increased spending on education and other social programs: health, social assistance, etc.

The taxpayers of Ontario will support a government that invests in socially valuable programs, as they are the key to Ontario's economic future. However, the government must aggressively explain -- if there is any fault that I would give it would be the following: It is that we did not explain this budget well enough when it came out. We did not defend it well enough and we were not aggressive enough in indicating to the populace that big business does not like anything that does not feed its coffers. It does not care about the people and the community needs. We do, and this government does, and I know we have to work with business, but it has to take a lesson that it has to be socially responsible as well.

I say in conclusion to you that across this province -- it is not just the OSSTF, by the way. The Ontario Teachers' Federation, which represents 135,000 teachers, was going to make a presentation. I do not know if they are on your agenda, but they were going to try to make one in Kingston. The Ontario English Catholic Teachers' Association, which represents the Catholic teachers, wanted to make one, I believe, in Ottawa, or I have it reversed, but I know that was the plan. So when I make this presentation on behalf of OSSTF, I know that I am talking in a much broader context about the educational community and its allies.

We thank you for allowing us to make this presentation and we certainly hope the government continues on its pathway.

The Chair: Thank you. We have about four minutes for each party, starting off with Mr McLean.

Mr McLean: The question that I have for you, the long-range budgetary policies of the government to increase the debt to about $76 billion by the year 1995, what is your answer to that? Do you agree with that policy?

Mr French: Actually, I think the government is in a real bind, and the debt it is incurring through the cumulative deficit is serious and has to be addressed very seriously. One prays that the recession will diminish as quickly as it can. We think the Ontario government will help that, so that the cost of the debt servicing does not become a straitjacket for the Ontario government the way it has become federally. We think it is still under control. It is about 12% of the Ontario expenditure. The federal government is around 34%. So there is a little room there, but I think we would have to agree that the faster the deficit is whittled down, the better.

Mr McLean: Do you think that the federal government should continue to increase its debt? It is $400 billion now.

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Ms Barkley: No, I think there has to be a total restructuring of the tax system, a total restructuring of who is taxed, how they are taxed and what is taxed. Look at how corporations are taxed in Canada; there are less taxes paid by our corporations here than in the United States, which is astounding to me. I think it was something like one third of our corporations here in Canada, through loopholes and other things, end up paying no taxes at all -- some of the most powerful ones, like the Power Corp, and that should be addressed, for example.

Mr McLean: Have you met with the Fair Tax Commission?

Ms Barkley: No, I have not.

Mr McLean: I thought I had heard something. I guess they are operating now and I am sure you will be making a presentation to them once they get in operation.

Mr French: Ms Barkley is chairing a very high-level task force of our federation to prepare a submission on property tax reform. We will have that ready by the end of the summer so that, when the Fair Tax Commission meets, we hope to make a major presentation.

Mr Christopherson: I want to thank Mr French and also Ms Barkley for what is always an interesting and stimulating presentation. I would like to focus on one area in particular that you referenced twice in your presentation, and it also ties into comments made by the previous presenters; that is your heading Transfer to School Boards: Investment in People. When you read it out, you added, "and investment in the future." Then also, in your conclusion, the first sentence of your last paragraph is, "The taxpayers of Ontario will support a government that invests in socially valuable programs as they are the key to Ontario's economic future."

Obviously, our decision to provide the money that we did to the transfer partners was twofold. One was not to lead to the regressive property tax system which you have already very thoroughly addressed. The second was the whole issue of investment in the future. We believe that fundamentally. The previous presenter, when talking in answer to a question from Mr Kwinter, I believe, on the capital budget, said that "Government investments in capital, per se, are unlike that of business, because when business does it, there is something that is produced positively at the end." I am paraphrasing and I hope I am not wronging him in doing so.

Mr Kwinter: Just for the record, it was Mr Phillips who said that.

Mr Christopherson: It was Mr Phillips? Thank you. It was a good question.

Now, if we invest in capital structures -- for instance, schools or hospitals -- we believe there is an economic return in that investment. I would like to hear in your own words, for Hansard, for the record, in as plain language as possible, taking that rather esoteric thinking and telling us how you believe that an investment in the school system -- the capital part of it and, if you can relate that to hospitals also -- is truly an investment that will give a return to the people of Ontario.

Ms Barkley: I think there is no more powerful investment, no more important investment -- being a teacher all my life -- than the human investment. I would call that human capital. The best example we have is in Germany where retraining programs have resulted in the most highly trained workforce in the world; and they are among those with the highest wages in the world, the shortest workweek, and the most competitive, because what they have done is invest in the thing that makes the gidgets. They have trained their people to deal with the new technology. They have become more competitive than we have become, because we have not got the workforce -- and we have a better workforce than many -- that the Germans do, because they invent much of the new technology because of their investment in human capital. The Japanese do much the same, but I know the German experience better. I think that investment in human capital is the most important investment that any government can ever make.

Mr French: Could I add one thing? We have added, for your information, in case you had not seen it before, and I think maybe some of you had, the earning power study from Princeton that came out last year. It is very revealing. This was before the knowledge-based economy, where investment in human capital is the critical factor, and a longitudinal study. They studied a generation of students and compared earning power after their school treatment. The variables were teachers' salaries, the amount of expenditure on instructional salaries and class size, and they did it in increments of five in the classroom: a class of 30, a class of 25, class of 20. And then they did the long-term earning power.

The people who had the best educational investment out-earned their peers, who were at the other end, by 3.6% over their lifetime. This is significant enough so that their federal income tax in US terms, which is not onerous, will more than pay back the original investment in improving the learning conditions.

I would think that kind of investment is now going to be more critical as our industries move into the knowledge-based industries. Our lifeline, our hope will be that our education system can cope and produce citizens capable of competing in the global economy the way Germany and some of the Asian countries are succeeding.

The Chair: We go on to Mr Kwinter.

Mr Kwinter: I assume the OSSTF has finished its salary negotiations for next year in most school boards.

Ms Barkley: In most school boards, yes.

Mr Kwinter: Let us take, for example, Scarborough. What kind of wage increase did you get for this year?

Ms Barkley: It was a two-year contract. I believe for last year it was what, 5.5? That is right.

Mr Kwinter: But for the two years coming up, it is my --

Ms Barkley: No, we have not got a contract. We are still negotiating.

Mr Kwinter: It is my understanding that the settlement in the next two years is going to be considerably less than what you are talking about now.

Ms Barkley: Well, we are in negotiations and we never predict what the conclusion is going to be. You have a problem in Metro because of the cost of living. If we pay very low salaries we cannot draw teachers because of the cost of housing and the cost of living here. We have a major problem within that context which I think our school boards understand. For example, in North York where I come from, the director tried to have some of the schools turned into dorms because we could not draw the teachers because they could not afford to live, particularly on a beginning teacher's salary.

I would hope they are not considerably less or we are not going to be able to maintain the excellent teaching staff we have.

Mr Kwinter: I have a vested interest in this; my wife is a school teacher, so I am very current as to what has been going on. I can tell you that the teachers in her particular school were quite upset, and she said that for the first time since the last strike there are people talking strike because the feeling is that, while the government gave the civil servants an increase of 5.8%, the indication they have been getting from the OSSTF representatives is that the increase for teachers is not going to be anywhere close to that.

Ms Barkley: I would say that the negotiations that I know of, because I am the Metro liaison for the provincial executive, have not even touched on salary yet. We are now at fringe benefits and we are dealing with working conditions but we have not even touched the question of salary. It is not on the table. If you know anything, and you do, about Metro negotiations, it will probably be well into January before we even touch on what the salary is going to be.

I have not heard strike. I was in the Metro strike and worked to rule in North York twice, and I do not think there is anything the teachers would try to avoid more than a strike.

The Chair: Mr Phillips, for about two minutes.

Mr Phillips: I was, I guess, disappointed to hear the OSSTF say -- just because it causes me an uneasy feeling -- that business people do not care about anything that does not line their pockets. I do not lump people like that, because business people are no different than any other people; you have good people and you have bad people. But if OSSTF feels that way, I am afraid we are starting to really polarize things in our society. This is what we are worried about in the budget, frankly, not the spending side, but the revenue side. How are we going to generate?

When you talk about German jobs, they are there for two reasons. One is that the workforce is very talented, but job creation and investment have been made in those plants that take advantage of those skills. Both things, believe me, had to happen.

My worry from your comment is, if the OSSTF really believes that business people care only about lining their pockets, we have some real problems, because if that is the attitude we are not going to build the consensus we need. Is that really what you believe?

Ms Barkley: I overstated it a bit -- he is a business person and I would not say it is him -- but I certainly feel that way about many of the multinationals. I do not feel they have a personality, and within the Canadian context we have been somewhat disappointed that they have not walked hand in hand and become partners in retraining to the extent that we think they should and could, in trying to give a helping hand to the problems created by this particular recession.

Mr Phillips: Are not some of the best models in these things like General Motors?

Ms Barkley: I said I did overstate it, but still, with the free trade agreement, I think my fear is that the personalities go, the multinationals take over and they do not have a personality and you tend to have a feeling that they are not really concerned about the social equity of the society. It is not true of all, that is true.

The Chair: I would like to thank you for appearing before the standing committee on finance and economics. We have exactly one half hour for each brief.

Ms Barkley: Thank you for the opportunity.

The Chair: The Chiefs of Ontario are not here yet. Maybe we will take a five-minute recess and come back at 11:35.

The committee recessed at 11:30.

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CHIEFS OF ONTARIO

The Chair: We would like to welcome the Chiefs of Ontario, Mr Gordon Peters, for your submission before the standing committee on finance and economic affairs on this budget review. You have one half-hour. In that half-hour, try to leave some time at the end of your presentation for questions and answers from the three parties. You may proceed. Identify yourself for Hansard's purposes, please.

Mr Peters: My name is Gordon Peters. I am the regional chief of the first nations in Ontario.

This morning I come here in a lot of ways thinking about how we fight as a people to continue to survive. We are constantly in a mix of emotions dealing with specific issues. This morning I find myself in the same situation in dealing with how we survive as a people and talking about the rights that we have and about how we deal with each other as a people within the province of Ontario and knowing what those impacts mean to us in terms of our lifestyles.

As you may be aware, we have just been handed a decision this morning by the Supreme Court of Canada dealing with the Bear Island situation. The response is not a positive one in the least for the aboriginal people in Ontario.

Right now we are talking in terms of finances and economics. I think this is at the heart of the problems that we face in dealing with all of these matters. I know people are concerned about the high deficit of government and about the rate of unemployment in Ontario, and people are concerned that there is not enough money being allocated to specific areas of programs for certain interest groups.

We look at those things and we think that if our unemployment was only 10%, we would be happy. We are consistently having to deal with unemployment that runs at, right now, the current rate of 61%. We experience that in terms of seasonal work. When we are talking about those conditions where that seasonal work is unavailable, our unemployment figures run as high as 95%. That is something we have to deal with, and we have to understand why our unemployment runs at those kinds of levels.

I think the major issue we deal with in those particular areas is the fact that we do not have sufficient land within our midst to be able to deal with the economics that we need in order to provide for our people, nor do we have access to our own resources to be able to provide sufficient development for our people. In terms of how we deal with ourselves and what that means to us, this is found in the kind of decisions that we are faced with this morning, that we are restricted to dealing with only where we live, the province of Ontario. Right now, in terms of the figures that we derived from your own people, we currently occupy about one tenth of 1% of the land base in Ontario. As a means for economic survival for our people, it is virtually impossible.

At the same time, we know the necessity of having to survive by other means. Those other means currently have been through programs and program initiatives that have been sponsored by both the federal and provincial governments. Our dealings with those program initiatives leave us in quite a lurch as well in terms of our accessibility to those particular areas.

We find ourselves in a situation where we are trying to deal with the government of Ontario on a government-to-government basis, and yet we are disadvantaged in all the areas that we need to deal with. We are disadvantaged because we do not have the kind of human resources available to us to be able to come to the table to negotiate. We are disadvantaged because we do not have the financial resources to be able to come to the table to negotiate. We are disadvantaged because the legal system in this country decides what and how the interpretation of our treaties and of our land issues are.

We are disadvantaged in this process now because of the climate that surrounds the activities that we are involved in -- from our own people. By that I mean that because of our past history and because of the surrounding society, it is very difficult for us as a people to continue to struggle with our relationship. Because of the high influx of thinking that has been brought to us by another society, those things that we have as a value do not exist. We have become subsumed under federal and provincial laws and citizenships. The only thing available to us as a means of survival is being able to utilize the programs that are available. So in terms of our capacity to be able to deal, we are limited.

The limitation is further expounded upon us as a people because that leverage for us to be able to negotiate the things we need in order to adequately deal with the situation does not exist. So I wonder how we can talk about a government-to-government relationship in this province. I wonder how those things are going to be dealt with as we move down the road. I wonder when things are going to change in terms of our existence in the very short term in dealing with programs, our accessibility.

There are many times that we come before a variety of committees to express our concerns. A lot of times we come to crunch numbers on what is actually being allocated within a provincial government budget towards aboriginal people. I do not think I come here this time to crunch numbers with anybody about what is being allocated under a budget. I come here to talk about what we need, what is at the heart of the issue for our survival. Only when we begin to talk about lands and resources and resource sharing will there be any equality in our relationship as a people.

I know that right now, initiatives are being undertaken by the provincial government in trying to resolve some of these issues that are outstanding, and I recognize that those things will not change overnight. But I guess it is difficult -- I do not guess; I know it is difficult -- to come here today to talk about changing the system. I know it is very, very difficult to understand where things go from this point.

I know clearly in my own mind that the status quo is changing somewhat in Ontario, and I guess that changing status quo still has to be fuelled somehow. It still has to be fuelled in terms of human resources by our own, and somehow or other we are going to need the capacity to be able to finance those human resources in order to continue the struggles that we have. So I can sympathize with the fact that this government does have a deficit that it has to deal with, because we know what those deficits are every day in our lives. And I know that initiatives are there to try to make some changes.

That is all I can say at this particular time. I think we can better spend our time in a dialogue discussing what kind of changes we think are possible, where we think we can meet some of the objectives that we have, and what those mean in terms of a government and the kinds of relationships that are being expounded at this particular time in relation to your financial status.

Mr Chairman, that is the end of my remarks this morning.

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The Chair: Okay, Mr Peters. We go on to the government. Mr Christopherson.

Mr Christopherson: I thank you very much, Mr Peters, for your presentation. I apologize for missing the beginning; I was attending to another matter.

I certainly heard the last half of your presentation, and I think, just from the quiet in the room and the complete attention that you had of everyone here, that it underscores the importance to us of the issues you raise. I do not profess to have any of the quick answers that you acknowledge you do not have. I do not think anyone does. But I would like as a member of the government to express to you personally that the initiatives and the desire of the Premier of this province are supported by each and every member of our caucus. The desire to reach out and find those solutions is heartfelt and sincere. I can only truly hope that at the end of this term we will have made some of the concrete changes that you rightly deserve, as opposed to just words.

In terms of a practical question, I would ask if, to relate this to the budget directly, you mentioned some of the funding needs you have in order to talk to the government of Ontario on a government-to-government basis. Could I ask you what kinds of programs in practical terms and the dollar figure attached would you have in mind? I am not asking for a specific detailed run-down, but an example and some idea of what that might cost, a couple of the priorities that we ought to be looking at, of things that need some financial addressing.

Mr Peters: In our discussions of the past, we have two major items on the table at this point in time. One, we have the statement of political relationships that needs an implementation process -- how we move from signing the document to implementing the document that we are just beginning to deal with now. We are trying to put some cost-related figures to those. We do not have any actual costs that are related at this point, but we know that the costs will be substantial.

That is one facet of that statement of relationships. The second facet we have to acknowledge is there are a number of things in the implementation process that must be dealt with if it is going to become a reality, besides the cost that is associated with processes of negotiation.

One thing I think we will have to be cognizant of is that the same process you just went through with the rescue of Kapuskasing as a town is the same kind of thing that we are talking about as a rescue of our people and the same kind of economic conditions that we are surrounded with. What it may mean is buyouts, and areas that we are talking about are fishing licences, for example. It may mean buyouts in terms of places where you have your timber permits, those particular areas. It may mean buyouts of lands that we are going to have to deal with, and it may mean in some ways those costs will be borne by the federal government in terms of the costing of market value of lands in relation to land settlements. It is difficult to put a figure to those.

If you look at the kind of work that is being done right now, there were somewhere in the neighbourhood of 68 claims that were filed against the provincial government in the past. Those 68 claims people filed simply as a method of starting the ball rolling. A lot of people would not file under the existing terms of the, federally, specific claims policy, and they would not file in Ontario because there was no claims policy in Ontario at all. There was an ad hoc policy that existed under previous governments, so that people would not apply. But in terms of the process that we are looking at as a beginning point, I think only one claim has been resolved. There are a number in the works, but there is only one claim in the history of the Ontario government that has been solved with aboriginal people in the province. If we are going to look at resolving some of those in short order, there is going to be an associated cost with that.

But something that we put on the table constantly is that there might be some areas of compensation that have to be paid in dealing with those lands. But we are looking for land enhancement, and that is something that the provincial government can bear in mind as we enter these discussions, that our preference would be to have our lands returned to us, as opposed to being compensated for those lands, so we would have access again to an enhanced land base in some particular areas.

As well, I think we are going to have to start dealing with, under that statement, not only some of those policy areas and dealing with those particular areas, but we are going to have to begin to come to terms with such things as the 1924 lands arrangement that is here, and as well, the 1986 legislation that provides for an ability to negotiate. Again, we are dealing with the whole underlying question of ownership of lands, whether, in fact, there is ownership of lands in this province of Ontario by aboriginal people.

Mr Christopherson: Thank you, Chief, I appreciate that.

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Mrs Sullivan: Thank you very much, Chief Peters, I know it is a difficult day for you to be coming before us in this kind of interview/discussion situation, but I wanted to talk about some of the issues relating to economic development. You have talked about some of the areas where you feel the capacity of people from the first nations is limited, one of them being on the economic and financial side, the other being on the human resources side.

I am interested in knowing what areas you specifically see through your own leadership as being the areas of the greatest potential for economic development, and the kinds of initiatives that could be taken by your people themselves to reach some of the goals that would be set, and where the government must take initiatives to work with you, whether it is a monetary or other kind of initiative.

I would also like your comments on the activities of the native business council, which I gather is a kind of economic development co-op, and if that kind of initiative would fit into some of your economic development priorities.

Mr Peters: It is a lot of questions. In terms of our human resources at this point, I guess one of the things we need to define is how we deal with each other as a people, and that is not trying to evade the issue. I am saying that we have human resources, but they are not recognized as human resources to the extent that you have human resources, and for us to be able to start discussing those things, we need to be able to come to some arrangement as to how those things work.

I will give you an example. Some of the areas that we deal with, for example, fishing, as an economic endeavour that we undertake: All of our people who live on the land understand fishing as a resource. They understand the stock; they understand the waters; they understand all of the things that are necessary, that surround the ecosystems of being able to fish, but they are not recognized in any capacity.

When we come to the table to talk about whether those areas can sustain fishing and what kind of levels, we hit head-on with the biologists and with every other person who has degrees in being able to determine whether we can fish in those waters. For the most part, those people come to study those waters, and they do not live with them; they do not function with them, and so our human resources do not interconnect, first of all. So because we have to come to the table under your rules and under your procedure, we lack those human resources. We do not have those kinds of biologists and all those kinds of people to meet your criteria of how we should negotiate.

Yes, we do need those human resources, but we also need to come to terms on our resources and what value our resources have, and that is something I mentioned before. Our value is not recognized, or what we contribute in terms of our own human resources to this end product that we need.

We need to be involved in a lot of those areas, but one of the things that our people have said very clearly to us is that we want to be involved in issues that do not take away from our responsibility to the land. In other words, we are saying, yes, we can be involved in some areas where we are talking about a small hydro development, as an area in the waters that surround our communities. As long as it is a renewable resource that does not damage the environment, yes, we can talk about that kind of development, and some of that development goes on within our communities at this particular time.

But, again, to deal with that same kind of process, we need resources, human resources, to be able to do that. The human resource question is a major one for us because every time we get involved in the discussions the first thing we come back to is the legal understanding, whether we have that capacity to enter those economic fields. We are brought back again to a system where we have to bring back in human resources, and those human resources are lawyers.

The Chair: You have one minute. Do you have another question?

Mr Phillips: Chief Peters, in your opening comments you said the finance and economics were at the heart of the issue. I have kind of a feeling that maybe there is an even bigger issue, which is just an understanding of the heritage of the first nations and that sort of thing. I wonder whether you feel there is an understanding of your issues by governments and whether that is an important issue, as I hypothesize it might be.

Mr Peters: There is an attempt to understand, but I do not believe there is any understanding. I think the answer I gave to Barbara Sullivan is one where you see the discrepancies in understanding about the human resources we have that we can bring to the table to deal with. I think the misunderstanding we have is that the whole system we evolved from, our responsibilities we have as a people to ensure our protection, none of the things we currently attempt to deal with are we able to deal with. If we could maintain a very strong political dialogue between us, we may come to an understanding that there is a need for those separate systems we are talking about.

Right now there is an understanding that there is a difference, but there is no acknowledgement of what that difference is. It is simply put that there is a difference in terms of us as a people, saying, "Yes, we can understand you were here before we got here and, yes, your rights flow not from our Constitution or our legislation but from the Creator". But what does that mean and how does that get translated in terms of our differences so that we are able to live together and those things can be respected?

Mr McLean: Chief Peters, I enjoyed your comments this morning. The issues you touched on certainly enlightened most of the people here with regard to some of the statements you have made and the values you indicate will not exist if things are not done. I guess when you speak about the buyout of the fishing rights, the timber rights and the land rights -- 68 claims filed against the government -- there is certainly a lot to be done to right some wrongs. But the one issue I want to talk about is the leverage to negotiate you indicate does not exist. Is there not some type of funding you require to do your negotiating available through the federal government?

Mr Peters: When I talk about the leverage not existing, there are dollars that we do receive from the federal government for negotiation purposes. But what I am talking about, a leverage to negotiate, comes back to some of the questions being asked by Barbara Sullivan and Gerry Phillips in regard to whether people understand what we are dealing with and how do these things relate.

When I am talking about leverage, what is the leverage you have when you are able to negotiate? You have the leverage of the power of the House, of being able to pass laws. You have the courts as a vehicle to deal with. You have the enforcement mechanism of the provincial police. You have the enforcement mechanism of your MNR officers, and as we saw and experienced last summer you are also a part of the Dominion of Canada which has the right to call in the army to resolve issues.

When I am talking about leverage, what leverage do I have as an aboriginal person in this country to be able to bring you to the table to have you resolve issues? If you do not want to resolve issues, what leverage is there for me to force you to do that? I am saying we have no leverage at this time. The only leverage we have in this country right now is civil disobedience as a method of being able to bring people to the table.

As I said earlier, the other thing we have had as some kind of leverage in the past is that we saw a changing attitude of the courts in dealing with our rights, but that is not necessarily a leverage we can utilize because we know leverage takes years and years. The process of Bear Island, for example, what has it taken; 17 years to this point. That is not a leverage we can count upon. That is what I am talking about in terms of any capacity we have to get people to conclude arrangements. People are willing to come to the table, but to conclude arrangements is a different thing and that is where we lack the leverage.

Mr McLean: So the statement of a political relationship is basically a statement, but how are you going to get them to the table?

Mr Peters: It is a statement to bring people to the table. We are depending absolutely on the trust of the Ontario government, again, to conclude some of those agreements with us. At the heart of the matter we are talking about is the jurisdiction for our communities, the jurisdiction of our people, that we continue to claim has never been taken from us in any form.

Mr McLean: Have you had a chance to determine what your priority would be once you get to the table?

Mr Peters: We have our own list of things that have to be worked on. Number one is lands and resources as an outstanding issue; two is treaties; three is jurisdiction and four is protection, whether it be through the Constitution or whatever vehicle you can provide as protection. We think those things combined will be the area we need to be able to deal with effectively and to be able to see some changes in that will signal a change in the status quo in Ontario, that we have a direct political relationship with the government of Ontario and that there is a willingness to resolve some of the outstanding issues.

Mr McLean: How long do you think it will take before the first discussion around the table will be?

Mr Peters: I think we are into discussions now. The preliminary discussions have started and I think we are at the point right now that we are starting to look at ourselves and to understand what those priorities are that we are going to have to deal with. It is clear to us that we are not looking at 130 arrangements for 130 communities in Ontario. We are saying that if there are areas we can deal with that we can break through on, particularly in the area of jurisdiction, those will become a priority. We will focus on those and we will deal with those.

Mr McLean: I appreciate your comments very much.

The Chair: I would like to thank you, Mr Peters, for coming before this committee. It has been very informative.

Mr Peters: Thank you for the opportunity. I say again, our struggle is one of survival now, and I hope people are able to come to terms with the fact that survival depends a lot more to us based on ourselves as a people, as opposed to what financial resources are available to us from the governments. That is a positive step we can both look forward to in the future. Thank you.

The Chair: Thank you for attending. Okay, we are going to be recessed until 1:30.

The committee recessed at 1214.

AFTERNOON SITTING

The committee resumed at 1334.

ONTARIO CHAMBER OF COMMERCE

The Chair: Would the Ontario Chamber of Commerce come forward, please. We will resume our hearings on the budget review. I would like to welcome you to the standing committee on finance and economic affairs. Before you start, would you identify yourself for the purposes of Hansard. You have one half-hour, and at the end of your presentation, within that one-half hour period, try to leave some time for questions from the three parties, and it will be starting off with the Liberals on the first set of questions.

Mrs Matthews: My name is Linda Matthews. I am chairman of the board of the Ontario Chamber of Commerce, and with me today is Mr Don Eastman, who chairs our economic policy committee. Once again, we would like to thank you for having the opportunity to meet with the committee this afternoon.

The Ontario Chamber of Commerce represents, as I believe most of the people here know, 65,000 businesses in this province through 165 local chambers of commerce and boards of trade, and our membership encompasses both the small entrepreneur and the large multinational corporation throughout this province.

I believe it will come as no surprise to this group to learn that the business community has been apprehensive of this government. We have a very deep concern that good intentions, without a fundamental appreciation of how the market economy works, will result in lower standards of living for all of us.

The Ontario chamber approached the budget process with a number of basic questions: Does the government understand that we live in a market-driven economy? Does it understand that it is the market-based side of the economy that generates the wealth that makes quality social programs possible? Does it understand that because this province's economy is based on manufacturing and services, it is far more mobile and therefore more fragile than the resource-based economies of most of the other provinces in this country? Does it understand that the province's economic success depends critically on business believing that this is a good place to do business? Is this government prepared to work towards developing a meaningful consultation process on the budget?

We were not able to find a positive answer to any of these questions in the April budget. Perhaps today we can make a start at finding at least one positive response.

I would like to ask Mr Eastman to carry on with our presentation with respect to some of our specific concerns.

Mr Eastman: Very early in his budget, the Treasurer wrote about ensuring that the costs of adjustment are shared fairly. He then presented a budget that placed all of the burden on the market economy while those in the public sector shared none of the pain.

This government was faced with a very difficult budget environment. It walked into a severe economic recession that was not of its creation. It also faced a situation where the business community's confidence in this province was already low as a result of a series of costly legislative initiatives, tax increases and new taxes at both the federal and provincial levels.

When we talked to the Treasurer in advance of the budget, we identified two major challenges for him: The first was to reduce the inflationary pressures in the province and help permit a sustainable economic growth and the employment opportunities generates, and second, to restore business confidence that Ontario is a good place to be in business. We did not, under the circumstances, call for a balanced budget.

In a recession, the government's social spending responsibilities increase at the same time that revenue shrinks. Balancing the budget would have required a damaging increase in taxes and a tragic cutback in social services. The circumstances did call for a large deficit. A good budget would have had a smaller deficit, but it still would have set a provincial record. That record should have been financed from the surpluses generated during the previous good years. Unfortunately, during the good period, we continued to add to our debt.

With the current budget, the deficit we get is not large; it is immense. We see no meaningful restraint in other areas to help free up the funds needed to alleviate recession-driven social hardship. We did not see priorities set and choices made consistent with the economic difficulties that we face. For example, we note that in other recent provincial budgets there were plans to curtail public sector wage settlements.

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One of the major messages that we tried to convey to the Treasurer was an understanding of the factors that lay behind this recession. Inflation has played a major role in the process, and much of that inflation arose with the provincial government. The provincial government has added to inflation with new and increased taxes that show up in higher prices for goods and services; it has added to inflation by increasing business costs; and it has added to inflation with relatively generous, high-profile settlements in the public sector.

Sustainable economic prosperity demands more government attention to how it impacts on costs and inflation. Those concerns were not reflected in this budget. Ontario has both deepened and lengthened the recession by aggravating the inflation problems that the recession should have cured. Recovery will be weaker and will not generate the number and quality of jobs that we would normally have expected.

The budget relies on the damaging myth that government spending creates jobs. If that were really true, given the federal deficit, where did this recession come from? Spending your way to prosperity does not work. If it did, we would not in this country have seen any recession. No government can continue to spend more than its taxpayers can afford. The lesson from the federal experience is that persistent large deficits result in a socially and economically depressing combination of higher taxes and reduced government services.

One of the additions in the budget was the addition of a three-year fiscal plan, and we welcome that. However, that addition is only useful if it becomes an active planning tool. There is minimal action on the deficit over the three-year fiscal plan. Deficits are projected of $8.9 billion in 1992-93, $8.4 billion in 1993-94 and $7.8 billion in 1994-95. For us, those deficit projections are even more disturbing than the size of the current $9.7-billion deficit, and we are not even sure about the $9.7 billion.

One of the major problems that we have with this and with previous budgets is our concern that we are not getting the full story on the government's financial position. For various reasons, the province does not use normal business accounting practices, but provides its accounts on a cash basis. On this basis, it is irrelevant when you get the bill; the only thing that counts is when you pay it. "Gee, honey, we've got a surplus this month. I didn't bother paying the mortgage." This cash approach provides a lot of room for window-dressing budgets by pre-paying or delaying bill paying. It also leaves some very major unfunded liabilities, such as pension obligations and Workers' Compensation Board shortfalls, out of the budget process.

The other major problem in looking at the budget numbers is the split between operating and capital expenditure. The concept is good, but unless it is done properly, it is terribly misleading.

The budget presents the capital expenditure numbers as though they represent a net increase in the province's capital assets. The implication that we are encouraged to read into the numbers is that it is only the operating deficit that we need to worry about. It invites the misinterpretation that if we actually did manage to have an operating surplus, we would be increasing our assets, and our children's assets, more rapidly than our debts. That is not true.

This particular presentation of operating and capital expenditure pretends that there is no obsolescence or deterioration of the existing capital stock. You count the bright new bridge, but forget that it simply replaces the one that fell in the water. Without the concept of depreciation, there is no way of knowing whether capital spending is even keeping pace with deterioration and obsolescence, let alone exceeding it. Until the government is willing to develop a meaningful measure of depreciation for its capital assets, it is irresponsible to present operating and capital numbers in this fashion.

The net result of the accounting practices is that we really do not know what the real budget deficit is. We suspect that it is probably larger than the $9.7 billion that is indicated. It is even possible it might be less. We simply cannot tell, based on the information available to us, and neither can you.

Mrs Matthews: Overall, this budget reinforces our concerns about the economic environment for business in this province and its long-term future, and aggravates the deterioration in business confidence that was unfortunately under way. This budget and its accompanying future fiscal plan are bad news for this province's taxpayers. Government deficits are merely a promise of future tax increases.

In his concluding remarks, the Treasurer wrote about finding a new consensus for the future. He went on to indicate that Ontario is prepared to play a constructive and positive role in this endeavour. We believe that consensus is desperately needed. I would like to read the quote we have included in our presentation as well because I believe it says it best:

"You cannot bring about prosperity by discouraging thrift. You cannot strengthen the weak by weakening the strong. You cannot help the wage earner by pulling down the wage payer. You cannot help the poor by destroying the rich. You cannot establish sound security on borrowed money. You cannot keep out of trouble by spending more than you earn. You cannot build character and courage by taking away man's initiative and independence. You cannot help men permanently by doing for them what they could and should do for themselves." Compliments of Abraham Lincoln.

Our recommendations are addressed to the development of future budgets. To foster a healthy economy, it is necessary to maintain business confidence in this province. To that end, we recommend:

1. Maintain a stable and predictable tax environment, which in part could be achieved by finding more ways of opening up the pre-budget dialogue. 2. Refrain from taxes that penalize job creation; when personal income taxes approach 50% marginal rates, they do become counterproductive because of their negative impact on the incentive system. 3. Ensure that public sector wage settlements are responsive to the anti-inflationary pressures that the private sector is subjected to; the current environment called for substantial restraint. 4. Do not undertake costly and unnecessary new programs. I certainly bring to your attention the rally that occurred at city hall today where 4,000 insurance industry employees were rallying against a government takeover of automobile insurance. 5. Provide the public with the province's full financial picture. Showing capital expenditures in the context of depreciation figures would assist.

That ends the formal part of our presentation. We are ready for questions.

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Mr Kwinter: Thank you for your presentation. I am really pleased with your comment at the top of page 5, because I think it is important that is put into the record and that everybody understands exactly that problem. A budget is a road map of where the government thinks it is going. Whether it is right or not no one will really know until the end of that road.

It is interesting when you say "by pre-paying or delaying bill-paying." In this budget there was a common feeling among economists that the magic figure for the New Democratic government was $10 billion. No matter what deficit they brought in, they were going to be in trouble, but if it went over $10 billion they would really be in trouble. That was sort of the brick wall that would bring everybody's wrath down, not just 90% of the community's.

As a result, you suddenly see on page 48 in the budget that they discharged the Urban Transportation Development Corp loan guarantee. No one was asking them to do it, but it had to become due in this next fiscal period. They paid $407 million. No one asked them; no one said they had to do it; they decided to do it. They decided to write down Stadium Corp, the dome. Nobody was pushing them on that. But they knew it was an obligation they would have to carry forward next year and that it would show up in the budget, so they wrote that down. They made a special payment to the teachers' pension fund that they would have had to make anyway, and they wound up by attributing $925 million to last year's budget. The main reason for that was strictly political. First of all, they thought they could get away with blaming it on the previous government; and second, if they did not include it in the budget, they would not go over the $10 billion, and that is the problem we have.

The budget allows for any kind of manipulating the economists in the Treasury department can come up with to try to put the best face they can on this, but this is what I think we have to do. You make a comment but you do not elaborate. You say the $9.7 billion is bad enough, but even worse are the other projections of the three years coming up. Could you just explain why you consider that to be worse than the $9.7 billion?

Mrs Matthews: Just from its cumulative impact, we are now looking at doubling the debt of the province in the space of four years. As we explained in our presentation, all that is going to do is further exacerbate business in being able to compete in this province. It is going to have a very bad impact on the business community from the standpoint of recognizing that future tax increases are the only way we are going to be able to pay for that debt.

Mr Phillips: I really appreciate the chamber's brief. As I said to many groups, the problem we are having here is that the groups are coming forward and it is almost like predicting the weather a year from now. One group says this is a great budget and another group says it is a terrible budget. The reality is that if it is lacking in something, and we certainly think it is, it is in the economic creation. Our party is deadly worried about the future economic growth of the province and, as you rightly point out, the deficit is going on for ever with the $7 to $8 billion we think is going to inhibit growth.

I really do appreciate your comments on the operating and the capital thing. I am of the opinion that the Treasurer will try to say next year, "We have a deficit of $4.5 billion," when they will be spending $5 billion, just like depreciation. If this were a business, you would show a depreciation cost of $5 billion every single year. I appreciate very much the chamber's position on this. I urge you to watch it because I think the budget next year will trumpet the $4.5-billion deficit, but we will spend $5 billion on capital every single year and maybe only show $200 million worth of costs. I think that is part of your window dressing on the budget.

I understand the recovery is well under way now; at least as I read the papers it is well under way. In terms of the kind of future investment in Ontario and what we are seeing from the chamber, are you seeing in your chamber members, if there are any, who may have been thinking of leaving the province? Are they reconsidering now? Are you starting to see that turnaround and therefore the light we are reading in the paper now?

Mrs Matthews: I think perhaps that is a two-pronged question: One relates to recovery from the recession; the other relates to business confidence in the province. I agree. I think the signs are there that the recession is abating and that we are coming out of it. I am not convinced that business confidence has been restored in the province of Ontario.

Unfortunately our members are still talking about some of their clients who have withdrawn capital from the province, some of their clients who are leaving the province and some of their clients who are not making the capital expenditure decisions we would hope they are making.

Mr McLean: I have sat for three or four days now listening to presentations. Of about 30 presentations we have had, about three have dealt with the budget in the manner you have, indicating your concerns with regard to the deficit. This morning we had the Ontario Secondary School Teachers' Federation in here. They think it is a super budget and they blame business for not paying their fair share. When I look at the empty buildings all over this province, when I talk to business people and their concern about all the deductions and all the payments they are making now -- and the reason some of them are leaving is that -- we are in a real problem here in Ontario. Business fears are very real. We read that in the paper. I think they are very real and the economy of this province is really in a problem. Everybody is saying business has to pay more taxes. I do not know where we are going to get off. I have not any specific questions. I appreciate your brief, but I am sitting here all week listening to these presentations. It is not a very good feeling.

Mrs Matthews: Could I make a response to the point? Certainly the business perception in this province is that Ontario's tax structure is already less competitive than that of Alberta, British Columbia, Quebec and the five bordering states. If that means business is not paying its fair share, I beg to differ.

Mr B. Murdoch: I was going to carry on with what Al was saying: With the deficit funding for the next four years, do you feel that business will be able to pay that? I do not know where else they are going to get the money. You basically answered that when you answered Al, so it is okay.

Mr Sutherland: Thank you for your presentation. I want to talk about point 5, particularly about a meaningful consultation process. It seems to me your organization was before this committee in the pre-budget hearings. I take it you also met with the Treasurer beforehand.

Mrs Matthews: Yes, we did.

Mr Sutherland: We are going to have to establish a definition of "consultation" in this province and with the government, because I do think that is a meaningful consultation process.

Mrs Matthews: Could I respond to that? We certainly have had discussions with the government about the meaning of consultation. It is not simply "meeting with." What we are trying to establish is a way, a model, and in fact we made representations on a model that did work in the past of how we could "consult with" as one of the participants -- not just business and government; business and the other interested stakeholders, if you want to use that term -- in a meaningful way where the input was more than just listened to and disregarded.

Mr Sutherland: You also talked about the reasons for the recession. You blamed it on government spending and talked about taxes. You must note that there are no increases in corporate taxes in this budget for this specific year. I see no mention in here of two other things: a free trade agreement which I believe your organization supported which has allowed capital to move that much more quickly to the United States; combined with what I would call a somewhat misguided policy by the Bank of Canada in terms of a high interest rate policy, that is to slow down the overheated Toronto area economy. The Bank of Canada governor has said that on several occasions.

That combination of factors has created the worst recession in over 50 years and called for the most significant adjustment in our economy in that much time. If we are going to carry out an adjustment in the economy and be in a good position to recover, I would like to know how people think we are going to do that when we cut the services people are going to rely on to get them through the toughest period in our history in 60 years.

Mrs Matthews: I guess we alluded to some of those suggestions in our presentation. We could go back over them again. I do not know whether you want to add some new material.

Mr Eastman: There are a couple of points I would like to make. The recession was well under way before this government took office. It had nothing to do with this budget; it had a lot to do with the things that happened previously to that, but they were largely related to what the governor of the Bank of Canada saw as a disturbing rise in inflation and his belief that he had to control it.

Whether that philosophy of tight monetary policy was appropriate is another topic. I personally think it was not, but in terms of his responsibility and what he was looking at, which was a dramatic increase in inflation, he had a legitimate concern. I think it is up to all of the rest of us to then have a look and try to understand where that inflation came from and if there is not some way we can help to keep it under better check than simply deciding that we have to increase unemployment. I think that is a fundamental issue and one we really need to address.

The Chair: Mr Jamison, you have one minute left.

Mr Jamison: In your public submission, you say: "The circumstances did call for a large deficit. A `good' budget would have had a smaller deficit." You go on from there to explain vaguely your case.

We are here to talk about more specific subjects in the budget: transfer payments to municipalities, which help your members, and so on. Most people who have been opposed to the budget and speak about a smaller level -- what should that level be and where should the cuts have taken place? Have you spent any time in figuring out what types of cuts there would have had to be to achieve the level you are talking about? Obviously you talk about a smaller level. What is it and how would you get there?

Mr Eastman: We deliberately did not quote a number, and that is not a surprise. I think that first you have to look at the areas where there were actual increases, and to the extent that you --

Mr Jamison: I had a reference here that you did have a smaller number in mind. You did not?

Mr Eastman: No, I am talking about increases in areas where the government spends money. I think that is the first place that you address. So you have increases to pay for increased wages for the public sector. Increases also flow through to help finance public sector wage increases at the other end of the transfer process. Do you know what I am saying? This is all occurring at the same time that we are in a recession and we have negative growth. There is actually a smaller pie.

Mr Jamison: So what you are saying --

The Chair: I am sorry, time has run out.

Mr Jamison: Just a clarification for my own understanding, because I am rather confused.

The Chair: You can talk to him out in the hallway, Mr Jamison. Time has run out. It is fair that between all three parties everybody has equal time.

Mr Jamison: You are saying that the reduction in numbers would have been --

The Chair: Mr Jamison.

Mr Jamison: -- that the public service wage increase would have been an acceptable --

Mrs Matthews: I do not believe that is what we were saying.

The Chair: You can ask them out in the hallway.

Thanks for coming to the standing committee on finance and economic affairs.

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PEOPLE AGAINST THE NDP BUDGET

The Chair: The next group we are to hear from is People Against the NDP Budget. Would you come forward, please? I would like to welcome you to the standing committee on finance and economic affairs on the budget review. You will have one half-hour. In that period of one half-hour, present your brief, and at the end of your brief save some time for questions and answers. The time left will be divided equally among the three parties to ask questions. We will be starting off with the third party, over to the government and then to the Liberals. That is the order in this particular session. Would you please identify yourself for the purposes of Hansard. You can begin.

Mr McBride: My name is John McBride. I am a co-organizer and spokesman for People Against the NDP Budget. I am chairman of Great Lakes Minerals, which is a mining company listed on the Toronto Stock Exchange. Beside me is John Slattery. He is also a co-organizer for People Against the NDP Budget and is a pension investment marketing officer with Great-West Life. He has an economics background.

People Against the NDP Budget: We wanted to first tell you who we are and then give you a brief overview of the way we see things. We are a group of ordinary Ontarians with no political affiliation. We believe we are unique in that regard. We do not represent a special interest group. We are not here asking for money. We basically formed to provide a forum for the vast majority of Ontario voters to speak out in dissent of this government's economic policies. As you may know, we conducted a poll through Environics, the results of which stated that 65% of Ontario voters favour a balanced budget over the next four years. So we believe we are representing the majority view.

We are people who want to remain in Canada and in the province. We conducted our first rally on May 16 because we wanted to create an opportunity for people opposing the budget to be heard. We are speaking out for ourselves, not the organizations we work for. Although many of us are self-employed, it is more a philosophical thrust. We are people who feel that in the April 29 budget, the bottom line is fiscally irresponsible. Our goal is for the Ontario government to rewrite the budget before it becomes law and to reduce its anticipated deficits. In our assessment, this budget is short-sighted and will lead to lost jobs, lost investor confidence and a corresponding exodus of talent and business from the province.

It is not our intent to instruct the government in detail on each and every issue. For government to ask that of us would be an abdication of its inherent responsibilities. We do believe, however, that we are entitled to provide government with parameters of acceptable behaviour. One such parameter is to manage the provincial economy in a prudent and responsible manner. A government intent on shaping society must recognize that the most effective social policy is intertwined with an industrial policy that encourages an economy to grow at its maximum non-inflationary rate. A prospering economy provides opportunities for individuals and resources for governments. The government has a role in achieving these goals; however, a government that overregulates, burdens its producing sector with excessive taxes and is inflationary will cause economic growth to fall well short of its full potential. We believe this is a failure for society and for the individuals who comprise it.

Again, at the core of our group, we believe the following: Government's role is more that of a facilitator than a provider; a prospering economy provides an opportunity for social change; individuals should have maximum choice and freedom; social support should be effectively targeted; efforts should be directed at the cause, not the results, of problems.

I think it is important to highlight our actions to date. We have held two successful rallies at Queen's Park. We have appeared on most public-interest shows on radio and television. We have logged over 2,500 names and numbers of people who have phoned in our support. We have received over 15,000 letters from people across the province. We have participated in all committee hearings to date on the budget and in roundtable discussions set up by the NDP. We have been generally active in the public press as advocates of fiscal responsibility. We have distributed information throughout Ontario to various supporting groups, and we have served as a liaison with other groups adversely affected by the budget. We have supported other groups at various rallies and discussion groups, and we have met a host of economists and experts in finance to discuss the budget.

Again, we have conducted two polls. One indicated that two thirds of those polled strongly agree that the provincial government should balance its budgets over its term. Some 80% of participants believe the foregoing should be included on the ballots for the forthcoming municipal elections.

That is just a brief overview of who we are, what our goals are, and some of our activities to date. I will now turn it over to John Slattery, who will go into a little more depth -- as I said, he has an economics background -- as to the direction we see the economic policy of this government should take.

Mr Slattery: I am going to make a number of points. I have six points on the next page that we are trying to address here. All the points are consistent with our core philosophy that John articulated: that government is a facilitator, not a provider; that individuals have as much choice and freedom as possible. We think the way in which that could be brought about is through controlled government spending resulting in a balanced budget over the term of a government. Running deficits that will burden future generations is, we think, irresponsible. We think it is unfair. We are basically ensuring a diminished lifestyle down the road for our children and grandchildren, and we think that is probably a little selfish. We think one way of achieving that is by reducing the tax burden, thereby enabling the producing sector to produce. 1410

A great deal of emphasis is placed on the expenditure side of the budget. Probably not enough emphasis is placed on the other side of the budget, the revenue side. We believe this budget will retard the ability of the economy to produce, thereby limiting the sources available for government programs and for individuals' own expenditure. We think that will frustrate the government's programs and social change. We think it will also limit their success in said programs.

We believe job creation and skills development should be emphasized to a much greater degree. There again, that is giving individuals the skills necessary to enter the workforce, thereby enabling the producing sector to do what it does best.

We believe the tax structure is, to a certain degree, prejudicial against small business and the development of that particular sector. Small business is responsible for the lion's share of job creation over the last 10 years. We think that is an area that probably is not getting enough support through government programs.

We sincerely believe that one of the best ways to ensure social equality is through promoting non-inflationary growth. Inflation steals from people and gives to other people. It distorts asset allocation. It is negative for all concerned, meaning excessive spending. Debts rising in real terms to GDP is inflationary, and as a consequence will limit the province's ability to produce and to live a lifestyle that we would like to live.

On the government spending side, we are somewhat sympathetic, I suppose, to this year's problems. Certainly the deficit is largely a result of adverse economic conditions. The total of $9.7 billion probably is higher than it needed to be. There is probably $500 million to $2.5 billion of additional spending, but we acknowledge that limiting the deficit to $3 billion would have been very difficult and probably unrealistic. However, not uncommon to others, our concern is the size of the deficits in the next three-year period, resulting in the doubling of our outstanding debt.

Government is forecasting a period of growth, yet there is no contraction in the amount of expenditures. The government, when it talks about expenditure cutbacks, is really saying, "Well, it'll grow less quickly." We are still talking about real growth over the next three years in expenditures, and we do not think that is responsive to the economy and to the future wellbeing of the province.

Getting on the revenue side, which is the other side of the equation, we are a little concerned about what the budget tells us. There are figures of an average real growth of about 3.7% and inflation of about the same, totalling 7.4%, in nominal terms, of growth over the next period. Revenues are expected to grow at 9.8%. There is a gap there. The government also acknowledged in the budget that revenues tend to grow at a rate of 90% of the underlying economy. That makes for a differential which will have to funded, we suspect, by taxes. In fact, the budget, I think, has an interesting quote: "Revenue moves may be required to achieve this [revenue] target." Simple translation: higher taxes.

We have a situation where we are in a recession. Taxes were raised this year, which is a little unusual in a recessionary environment. The prospect is for higher taxes in the future. Business and individuals already feel quite heavily taxed. We are at a disadvantage on a competitive basis versus our trading partners. We are not living in a vacuum or a closed economy. We have to be responsive. We have to be aware of how we can and cannot compete against our trading partners. This prospect of increasing taxes is very discouraging for all concerned.

It was certainly demonstrated in the early 1980s that an effort to try to spend yourself out of a recession -- and this is certainly the federal government's effort -- is very short-sighted. It is just delaying a day of pain. With the federal government's situation, almost one third of its revenues are going to interest payments. Continued deficits of this magnitude, as was talked about in this budget, will result in an increase in the share of our revenues going towards interest payments, largely to foreigners, thereby reducing the government's ability to exercise any kind of fiscal management on the economy, thereby frustrating any kind of effort the government may have in trying to direct economic growth and social change.

We think the budget was a little lax in trying to establish a tone for future deficit reductions. There were really no documents or discussions beyond the budget to make people aware that we are living beyond our means, that we are going to have to have an adjustment in our priorities. We are going to have to recognize that we cannot maintain an artificial lifestyle, as much as we may enjoy it. It is beyond our current means. We either have to produce more in order to justify our expenditures or we have to reduce our expenditures. You cannot really have it both ways. What we fear about this budget is, it is going to end up increasing the expenditures and retarding the production side of the equation, further distorting future policy.

I talked about the importance of small business and I think this really needs to be emphasized. The current structure is somewhat prejudicial against small business, as more and more taxes are being collected through payroll means. That is putting a disproportionate strain on small business. We would like to see greater effort made at stimulating that kind of activity.

Fiscal and monetary policy -- and of course, this is an interesting one. Everyone is blaming everybody else for high interest rates, inflation, GST, whatever you have. We would like to see a concerted effort between every level of government to bring down inflation, thereby enabling interest rates to come down. One of the ways, of course, is to spend less than you are earning. We believe that this budget, with its high deficit load, will be inflationary. Debt is going to rise to the share of GDP and that is going to increase rates in real terms. We are going to have higher inflation and higher real interest rates than we would have otherwise, and that is going to be painful to business and to the consumer alike. It is positive for nobody, other than the foreign lender of funds to this province.

We talked about productivity, and I think that has been sort of bantered around somewhat excessively -- productivity, competitive edge. Many of the people of our organization are spending a great deal of energy trying to improve their own competitive structure within their own activities and at whatever level of business they happen to be at. Increasing the competitive edge, as it were, does not necessitate a reduction in labour wages. Wages for labour is a major input in the cost of production, but it certainly is not the only one. Other major costs which the government does have direct control over, of course, are taxes and the cost of capital. We think a concerted effort made by every level of government to bring down these two components of production cost will enable business to grow, will enable the pie to be shared in a more effective manner, will do more to make the plight of the poor and unemployed more enjoyable. They will be in a position to enter the job market.

In conclusion, we are concerned about the future. We recognize the government has some difficult situations, that it inherited an economy that was somewhat burdened by debt already, that had social structures in place that were raising costs beyond any control it had. We are concerned that there is no long-term recognition of the structural changes that are ongoing in the economy at the moment, that little to no effort is made to address these. We seem to be spending as if we are just enjoying the 1970s when things were tremendous for us. They are not. We are in a different world today and I think we have to recognize that. I think policy has to be designed accordingly with that reality. That concludes our formal presentation.

The Chair: Mr McLean, about four minutes.

Mr McLean: I appreciate your input into the deliberations we are having on the budget. Of about 30-some, you are about the fourth who has given us a full review of what the deficit is going to mean in about four years' time. Today tax freedom day is about August 5. With doubling of the budget, do you have any idea when tax freedom day would be in four years' time?

Mr Slattery: Further down the road, of course. I suppose you have to make an assumption of interest rates and a variety of other factors. Certainly it will not be less. I think that is a given.

Mr McLean: Do you have any members in northern Ontario, in Thunder Bay, Sault Ste Marie or Sudbury?

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Mr McBride: Our core group is made up of about the 15 people here, but there is an effort in Sudbury that was organized during the summer. I went up to visit with some people up there who support us. I have had telephone conversations with supporters from Thunder Bay and many other areas across the province. I am not sure what the last count of letters is, but well over 10,000 letters have come in from across the province and certainly a lot of them are from those areas. We are not a well-funded group, so it is not like we can go to a lot of these outlying areas and mobilize.

Mr McLean: The chamber in three of the areas we were at were the only ones that gave much of an indication as you have with regard to the business aspect. This morning we had the OSSTF here praising the budget and how great it is and saying that perhaps they should have spent more money.

Mr McBride: I actually noticed when I looked at the list of those who requested to appear and those who are appearing, it is somewhat of a forgiving group that is smattered with a dose of people like ourselves, but I am not surprised.

Mr McLean: We got that from northern Ontario quite a bit. We even had spouses of NDP candidates telling us how good the budget was, so I would not really have expected much else from that type of indication. I really do not have any other questions for you at this time.

Mr McBride: It would be helpful for me to know, not being that politically astute or aligned, what parties you people are --

Mr Christopherson: Since my microphone is on --

You will know at the end of it, I can assure you.

Mr McBride: We can guess from your comments.

Mr Christopherson: Up to the middle here on this side is the government. My two colleagues who just asked the questions are PC and our three friends on the other side are the Liberal Party.

Thank you, gentlemen, for an interesting, well-presented point of view, one I do not, obviously, entirely agree with. However, you have obviously done your homework and you have brought forward a sincere concern you have and I respect that and appreciate you participating in these hearings.

A couple of things I would like to mention and then a direct question. One is that it is interesting, when one talks about tax increases, that this government's first piece of legislation was not to stack the GST on top of the provincial sales tax in the middle of a recession, keeping $500 million in the pockets of consumers. That was our first measure, and I just think that needs to be stated.

I will move on to an acknowledgement that in the paper yesterday there were reports that Mulroney's federal Tories, who are sort of juxtapositioned as the alternative to what we have done and are supposedly the fiscally responsible party in the political sphere, their projected deficit of $30 billion may now be miscalculated to the point where their miscalculation is greater than our entire deficit. They are projecting a possible $40-billion deficit, as opposed to $30 billion projected, over ours, which is $9.7 billion --

Interjection.

Mr Christopherson: Let me get my thing out and then you can respond, sir, and I hope you will.

I just think it needs to be pointed out that no one has a corner on sanctimony, nobody has a corner on fiscal responsibility, and I think we ought to be looking at that. Bear in mind that this economy is 40% of the Canadian economy, so there is a relevance there.

I would like to talk about a statement that one of you made, and I am sorry, I cannot remember which one, that there is this perception that people feel the government takes the approach that we are spending beyond our means, and that we need to recognize we are in a different world, not the spending 1970s.

There are some economists who are supporting what we have done. One of them has said that it is not so much the dollar deficit value that matters in a province but rather the ability of a province to pay it, and when it is only 12% of all the revenues collected to pay the debt, we are maintaining, and are supported by a number of economists, that it is not unreasonable for us during a time of recession to support that kind of debt payment.

My question to you is, when we talked about living beyond --

Mr McBride: I am sorry. Who is the economist you were referring to?

Mr Christopherson: Oh, I do not have the name. I can get you the name. We can get it, probably before you leave here.

My question is directly to you. If we are living beyond our means and you really believe we should not have spent the money we did and we should cut back, what would you say to the disabled in Ontario who have always felt that they lived in a different world? They were not getting support when there were boom times; to be told they cannot have them in recessionary times is very difficult for them to accept, many of them living below poverty level. What would you say to families that need housing; construction workers who came here this morning and said that if it were not for the measures in this budget, the $700-million anti-recession invested in capital projects which will return something to society, a lot of their members would have been out of work; to municipalities who, if we flatlined as the previous government did in good times, would be passing on higher property taxes to small business, which you are as concerned about as we are; to boards of education which would be in the same circumstances? What would you tell all those people, in the context that this debt is at least arguably manageable, who are in need and who look to the provincial government to be there?

Mr Slattery: Before I address those point by point, I am curious. For example, your case of the handicapped: when they were making their presentation to you and were asking for more money for a variety of reasons -- and I think they are legitimate -- did you ask them where they thought the money would come from?

The Chair: Excuse me, but we are running out of time here. I would appreciate if you wound up.

Mr Slattery: Certainly I think it is a little unfair to place that responsibility on us.

Mr Christopherson: But we have that responsibility and we think it is unfair to ignore that. I am sorry, Mr Chair.

Mr Phillips: He did not say to cut the spending.

Mr Slattery: I did not say that. I did not say to cut the spending. I was wondering whether you asked those people who were requesting additional funds where they thought those funds were going to come from. I suspect not. So you are putting that burden on us, and not necessarily asking other people to make that allocation choice.

Mr Sutherland: You mentioned your Environics poll and you said that 65% wanted a balanced budget by four years. Did you also ask the question, would they want a balanced budget in four years if it meant a drastic cutback in social services? Because I think that is the crux of the issue. People say they oppose a deficit, but they also want the services.

Mr McBride: Listen, there is no question that everyone says, "Well, yes, we'd love a balanced budget," and then when everyone says, "Well, we're going to cut you and cut you," everyone starts to backpedal a bit. But the whole point is that someone has to make these tough decisions and you are not making them.

Mr Kwinter: I have three observations I would like to get your comment on. One borders on the last question. The NDP claims that most people, and we have certainly seen it in our travels in the north, are supporting this budget. They say, "The people who've been appearing before us all support the budget." If you take a look at who they are, you can tell before they even say anything where they are going to be. Your poll shows something different, and I would like to get your comment on that.

Second, we have had many people who are supporting the budget claim that business and the wealthy are not paying enough and that they should be paying more. I would like your comments on that.

Mr McBride: Well, that is misguided.

Mr Kwinter: Finally, I would like your comments where in the very first line you say your goal is to rewrite the budget. What do you think your chances are?

Mr McBride: I will just address the goal. All you can do is give it your best shot. It is not law yet. We have to keep hammering away, we have to keep showing up at these things, we have to keep in front of the press, we have to harness that support that is out there, just keep hammering away at them.

The poll suggests, and the less scientific demonstration of that is these letters that we are receiving from across the province, thousands of letters, that we touched a raw nerve. People out there are upset. All we can do is try to appeal to the government to adhere to what the majority of Ontarians are telling them.

We are hoping that as a result of the backlash they receive they will be more responsible in years 2, 3 and 4. So we think there is an opportunity for them to rewrite. We do not necessarily have great hopes for this year, but for the future years. All you can do is give it your best shot, keep hammering away, try to effect damage control at the very least, make people aware so that they do not get in again.

Mr Slattery: I enjoy the concept that business and the rich should pay more. It has in it the idea, "I shouldn't pay more, it should be somebody else, somebody else's responsibility." "We need prisons, but not in my back yard; somebody else's." Dumps -- the same sort of thing: everyone else is going to have to carry the load for this individual. Unfortunately, that is not the reality. It is a collective cause we are supposed to be working towards.

In that whole idea that business should pay, there seems to be a belief that business is some third party that is unrelated to the population at large. People invest in business. It is people who own business. It is people who are employed at business. Business is just made up of a collection of people. I do not really think that you should be discouraging your producing sector with excessive taxes, because if it cannot produce competitively, it will not be producing. That means those people who invested will lose money, those people who had jobs will no longer have jobs, and they will have much less.

So I think you should be encouraging your productive sector to produce, not disadvantaging it with heavy tax burdens. Ontario is already one of the most taxed jurisdictions in North America. To further burden them with tax, you further reduce their ability to maintain wages and all those other things. I would rather see production less burdened and maybe more taxes collected in a fairer, user-charge kind of manner.

Mr McBride: I just wanted to address that quickly.

The Chair: I am just going to give them one more minute for a quick question.

Mr Phillips: I appreciate many of the comments and do not necessarily totally agree with all of them, but I think you present a good view and I would agree with you that there is at least $10 billion worth of new taxes built in here in order to hit numbers of $8-billion to $9-billion deficits. So I think you are right in those respects. I think you focused on the next three years as a big problem.

One way I think the government is going to try and gloss over the deficit is with the capital account fund -- I do not know whether your group has had a chance to look at it or not -- but essentially put all that into debt. If you are a business, you have $5 billion worth a year of what I would call depreciation. They are going to hide all that in debt, and next year they are going to say, "The deficit is $4.2 billion." Have you had a chance to look at the capital fund?

Mr Slattery: We have looked at it and we tend to agree with you, but whenever you are looking at government documents it really is a frustrating process because you are never certain as to what the numbers are really telling you. They all add up and that looks pretty sharp, but what is the meaning behind the numbers? Because of the process, because of the secrecy, because of the way they do their accounting on a cost basis, there are all sorts of possibilities for some smoke and mirrors games. Mr Phillips: I would welcome your comments on that.

The Chair: I would like to thank you for appearing before the committee. Have a good day.

The group that was coming on at 2:30 was unable to make it, so the next group, which will be the Ontario Nurses' Association, will be coming on at 3 o'clock. This committee will recess for 25 minutes.

The committee recessed at 1433.

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ONTARIO NURSES' ASSOCIATION

The Chair: We will call on the Ontario Nurses' Association. I would like to welcome you here to the standing committee on finance and economic affairs on the budget review. You will have half an hour for your presentation. In that half an hour, try to save some time for a question and answer period which will be divided equally among the three parties. Would you please identify yourself for Hansard and you can begin.

Ms O'Neill: Good afternoon. My name is Shelley O'Neill and I am a registered nurse employed at Women's College Hospital. I am the president of Local 80 of the Ontario Nurses' Association for Women's College Hospital. The Ontario Nurses' Association has established a legislative committee and I represent Toronto.

I am here today to discuss my views of the current budget. I intend to show you documentation which will demonstrate clearly that nurses in this province were on the leading edge of cutting health care costs. When Michael Wilson brought down his federal budget, he prided himself on saving $5 billion because of his reduced transfer payments to the provinces. This strategy of divide and conquer and putting the responsibility on to the provinces is at its finest. The federal government gets off the hook for fiscal mismanagement and the province is left holding the bag. On closer examination, there are no savings to the people of this province. Five billion dollars of our current debt is directly related to a decrease in revenues -- you cannot collect income tax when 250,000 people are out of work -- and federal savings as they cut back dollars from health care, education and social assistance.

In Ontario, the health care budget consumes one third of the total provincial budget. So when the media and opposition parties demand that we cut government spending, are you saying to the 55,000 nurses that once again we should have been patient, that it is a recession and we should be grateful that we even have a job? Nurses heard this song and dance back in the early 1980s. My compliments to the current government for recognizing my worth.

There are no stories about a nursing shortage now, and in fact there never was a shortage -- only a shortage of nurses working. When the Ontario Hospital Association comes up with 103 ways to improve my work life, you know something is dreadfully wrong.

My expertise is health and I have brought a 1977 newsletter that the Ontario Nurses' Association produced in response to the government's determination to introduce a constraint program. The Minister of Health was Dennis Timbrell. He now heads the Ontario Hospital Association. He did not listen to the nurses in the province in 1977, so I doubt that relations with the OHA are going to improve in the near future.

When you look at the recommendations, it will be déjà vu for some of you. For some, it will be in a speech you read last week, and free of charge to those of you who wish to use it in upcoming speeches. I had considered selling these recommendations to the Honourable Mr Bouchard for a nominal fee. You have a copy of the recommendations in the brief that I gave you and I just want you to look at a few of them.

In 1977, we recommended funding for a nurse practitioner. It is well documented that nurses can do 60% of what a doctor does. According to the College of Nurses of Ontario, we do not have a nurse practitioner program. We recommended increased funding of the home care program and establishing long-term home care programs throughout the province. That was in 1977, and we seem to be close to implementing some of that now. We recommended that the government commission and finance a comprehensive study into manpower and productivity in nursing services. I believe the ministry is now planning to establish a health planning/resource planning agency. We also recommended that we look at communities managing their own health care and that we look closely at Quebec and the way it does it. Quebec has decentralized its health care system by making 11 regional authorities and 160 community health and social services centres. I caution you not to have another layer of bureaucracy.

In conclusion, it said that we should be a part of the planning process. In 1989, regulation 581/88 was introduced whereby nurses were to be involved in hospital planning. It is now 1991. The success is moderate, but I would not say completely successful.

There is something very wrong when constraints are brought in and costs still keep rising. I would suggest that a public inquiry be done into hospital spending and, failing that, the Provincial Auditor should have greater access to how hospitals spend their money. For example, in a March 1986 article in Hospital News, Vickery Stoughton said that the merging of the Toronto Western Hospital and the Toronto General Hospital would save approximately $10 million: "We know this merger can save both institutions money. That money can be redirected to the programs doctors want for the patients they serve."

The operation budget in 1986 was $230 million, and four years later their budget is $323 million. That is an increase in spending of 50%. You do not blame this on salaries, because there were no significant wage increases in that time frame. The media have been reporting that hospitals are crying the blues and closing beds as a result of the nurses' contract. Bed closures are too easy and hospital administrators refuse to look at what is going on internally. Do any of you remember the ad that the Ontario Nurses' Association had in the paper when it found that hospitals were paying $37.50 an hour for agency nurses? Are you aware that hospitals in Metropolitan Toronto have their own nursing agency? The company is known as Carecor Health Services Inc and it charges $28.95 a hour, but it pays the nurse only $18.40. This company is operating on taxpayers' money. There is more to this company than just a nursing agency. They purchase bulk equipment, among various other things. The concern I have now is that this company is facing financial difficulties.

Nurses worked for agencies because the salaries were slightly better. They could work shifts according to their lifestyle and could work more hours than the hospital would allow them. How many dollars did hospitals waste when all they had to do was treat their staff with respect and understanding? I would recommend that the Ministry of Health audit this company and find out exactly what is going on.

As president of a local, I can remember that a member was refused steady evenings, and then I found out the administrator was on the nursing committee of Carecor. I was not a happy camper. There is a new nursing theory out there called case management; that is, we manage patient care from start to finish. Pretty novel. The previous government gave the Toronto Hospital a $500,000 funding grant to implement this program. Their current vice-president of nursing was the consultant brought in to implement the program, and as of the end of 1990 she was still listed as the president of the Center for Case Management in the United States.

Think back to our recommendations in 1977. Nurses have always had the capability and knowledge, but hospitals have done little to recognize or build on our cost-effectiveness. This government, despite what the media have portrayed, has taken some very positive initiatives: taking away perks of judges, giving native people the right to discipline their own, the OMA agreement; looking at out-of-country health spending; and laying a timetable for social reform. The setting up of the Fair Tax Commission and the Treasury Board are long overdue. The real challenge is how to spend the public's money in the most effective way.

Does the debt make me nervous? Sure it does. But cutting government spending has not worked to cut the federal debt, so why is it assumed that it would work in Ontario?

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The Chair: We will start off with the government, a question from Mr Sutherland.

Mr Sutherland: I have a couple of questions. There has been a new agreement with the nurses in terms of salary, and I think the general consensus, at least I hear, is that it has gone a long way to rectifying some past injustices in terms of what nurses feel they should be paid.

I was wondering if you could give us some comment in terms of overall participation in the health care process, in the decision-making process, in the process of planning and priorities, whether you are seeing progress in that area as well, for nurses being at the table.

Ms O'Neill: I would not say that the progress has been satisfying. I can speak from experience for Women's College Hospital where we went through a major shift in management. The management is beginning to recognize what I can do, and we are involved in committees. I know that in the States they have nursing community centres and we do a lot of things that are done in a general GP's office. I still think we are a long way off. I think it has to be legislated.

I think hospitals can service their communities from within. When you say community-based programs, it is so airy-fairy, with all due respect. You do not say what it is you want to do in the community, and when I think of northern Ontario where the hospital is the hub of the community, there is nothing wrong with that hospital providing programs within its institution, and I think institutions have to change their mindsets.

Mr Sutherland: Maybe we could pick up on that. You talked about community-based health care, and it was quite interesting looking through your publication from 1977.

Ms O'Neill: You should be shocked.

Mr Sutherland: They seem to be all the same issues. This committee and governments as a whole hear a lot of ideas of how we can save money, and there seems to be consensus that we can save lots of money in the health care system. But it is the process of getting there, because you cannot tear down the current system one day and go to the new system the next. The process of getting there can be very costly in the meantime and the government's resources are limited. Do you have any thoughts on that? Do you think the process of getting to where we can save money can be done more effectively and cheaper?

Ms O'Neill: I am going to pull you back to 1977. There was an opportunity then to start the process, and it was not. You have to start somewhere and I think short-term pain is long-term gain. You have to start. When you want hospitals to get funding for expanded programs, then those expanded programs should spell out exactly what this government or any government wants, and hospitals have to comply. Give them an inch and they will take a mile. You have to set it out clearly.

Ms M. Ward: You work in a hospital setting but I am sure you are fairly familiar with what is going on in the clinics and doctors' offices too. A woman in my riding who works in a medical clinic was speaking to me a few weeks ago about the lack of movement towards preventive care rather than treatment. Do you have any comments on that yourself, that there has not been much movement towards that? It is something that she is very interested in. Do you think there has been any change in emphasis towards preventive programs in the community clinics and so on?

Ms O'Neill: We are starting. I think the boards of health in the municipalities have a large role to play in that. When I say expanded programs, hospitals have to get on board the preventive. Nothing stops hospitals from doing it as well.

Ms M. Ward: It does not have to be in a clinic or that type of thing. We tend to think of the hospital for the treatment of serious --

Ms O'Neill: I know you do.

Ms M. Ward: That is probably the wrong mode of thought, though.

Ms O'Neill: That is what they traditionally have been. I know at Women's College Hospital and other hospitals they are doing well-baby clinics, and that is preventive health care. That is just a start. So there is some role for hospitals and there is some role for programs in the community.

Mr Jamison: We have had a number of presenters indicate that they would have liked to have seen a broad freeze on public service wages, including nursing. Could you tell me what you would have seen as the effect of a wage freeze in the nursing sector, beyond of course a labour disruption?

Ms O'Neill: I think we would have continued to service Carecor and expanded its budget. I put in another bill for SRT, where they were charging $37.50 an hour. So I think we would have seen their revenues expanded and I think you would have seen more nurses leave and not stay. So then what do you do? It would not have been cost-effective to say to me "Five per cent, that is all you get, and you have to live with that."

Mr B. Ward: As in a wage freeze.

Ms O'Neill: Yes. I would have been gone.

Mr Phillips: I was interested in ONA's feeling that one of the good things that has happened is the Ontario Medical Association agreement. I gather that ONA thinks that is a good step forward.

Ms O'Neill: It is a start.

Mr Phillips: What elements of it particularly pleased you?

Ms O'Neill: They were back at the table. When extra billing was stopped, I think you can look at the figures and see that fee-for-service costs for the Ministry of Health went up considerably. I think you had to have the doctors back at the table, because they do control to such a large extent. So in that sense, ONA was happy that at least somebody is talking, and that is a start.

Mr Phillips: The joint management committee you support?

Ms O'Neill: Yes.

Mr Phillips: The thing you mention in your brief that does seem to be happening -- and I will be interested in seeing the final numbers -- is that quite a number of beds are closing around the province, many of them permanently. Maybe many of them should close. Maybe we have too many hospital beds.

Ms O'Neill: Possibly.

Mr Phillips: Does ONA have a point of view on the real impact of those bed closures?

Ms O'Neill: Not a position paper or a statement. When we talk about it at the legislative committee of ONA, it is: "Yes, maybe we do have too many beds out there. How can we use them more effectively?" I know we are starting to see a very fast turnaround in surgery beds. We are doing laparoscopic gall bladder surgery and patients are in and out in two days rather than five or six. That is an improvement. We still feel there are too many chronic care beds in acute institutions, that acute beds are being used by too many chronic care patients, and that is a concern. We support long-term care reform. It has got to get going.

Mr Phillips: So, as we see in the fall more beds closing, ONA's feeling is that is --

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Ms O'Neill: I did not say it was okay. I think ONA's position is that we will be monitoring the bed closures themselves and take each situation on its own merit. The Wellesley Hospital cut back on a large deficit and did not have to close a great number of beds. Women's College came through with a deficit and did not have to close a great number of beds. Toronto East General has decided to go the route of shutting down 70 beds and that takes care of its deficit. ONA is saying, if you are going to close the beds, make sure you are doing it for the right reasons.

Mr Phillips: Is it monitoring it?

Ms O'Neill: Yes, we are watching it.

Mr Phillips: In a formal sense?

Ms O'Neill: Yes. I, as the local president, send in reports to ONA when I have notification of layoff. I have had one layoff at Women's College.

The Chair: You still have about two minutes left, Mr Phillips.

Mr Phillips: I appreciate your thinking in terms of how we manage the health care budget, because it probably will not get any easier. I know the feeling is the feds should give more money, but frankly, the feds are broke. They are bankrupt; they have no money. It would be nice to try and get it out of them, but --

Ms O'Neill: Yes, but then Michael Wilson listed it as a saving. As much as this government has to look at how it spends its resources, so does the federal government. I do not think spending $100,000 on a speechwriter is appropriate. Everybody has to look to themselves.

Mr Phillips: Sure. I just wanted any thoughts you have for us. I realize your suggestion here is a more formal investigation of hospital spending.

Ms O'Neill: I do not know whether ONA would like to see a public inquiry into how hospitals spend their money. My personal view is I would like to see a public inquiry into Carecor.

Mr Phillips: My last question is: the nurses were supposed to be represented on hospital committees across the province. How well has that happened?

Ms O'Neill: Until the former Minister of Health, Elinor Caplan, threatened the issue of money, "If you do not behave, I won't give you any money." That is when things started to move, but until then, there was not much movement.

Mr Phillips: Has it happened now?

Ms O'Neill: To some extent. There are still the odd occasions when you have people called up for a meeting and the meeting date has been changed and no one has been notified.

The Chair: I will have to go on to Mr McLean.

Mr McLean: I have how many minutes?

The Chair: Six minutes.

Mr McLean: That will give me more than enough time. The first question I have is the fact of chronic care wards. Almost every hospital in Ontario has a ward full of chronic care patients.

Ms O'Neill: You are correct.

Mr McLean: For many years I have been advocating to get those people out into a homey setting, into a nursing home or some type of place where they feel more like living.

Ms O'Neill: So is ONA.

Mr McLean: I have been at that since Dennis Timbrell was minister, and I did not get any further than you have, I guess.

Ms O'Neill: Or Dennis.

Mr McLean: It disturbs me to see those people lying there looking at a roof and not seeing a green tree or anything. I cannot, for the life of me, understand why the Ministry of Health is not saying we have to have more homes for these people. Do you know why? I do not.

Ms O'Neill: ONA came out with that position in 1977. It is now 14 years later, and we have had a number of ministers of Health, so to turn around and say this current one or even the Minister of Community and Social Services -- it has been there and everybody knows it is there. Let's just get off, start doing it; stop whining and do it.

Mr McLean: I do not know why they do not. I wish they would.

The other question I had, and I have been for some years indicating the same thing, people go to the medical profession whether it is an office call or wherever and they have a health card, which they have now, that they could get a receipt for what the cost of that visit was. Do you think that would be an advantage if the patient knew what their services were costing them? You might say, "Well, why?"

Ms O'Neill: I can tell you a personal story. I dropped a window on my hand and I went into emergency and I knew, from my background, there was not going to be anything wrong with my hand, but I thought I would check it out. I got a bill and it was $80, and I will never, ever waste an emergency visit again. I do not think you have to send it to each person personally. We do not have to treat people like they are children, but I think that if we let the public know exactly what the costs are, then that would be appropriate. That is another layer of bureaucracy. I think it is a waste of money.

Mr McLean: Yes, if people knew.

Ms O'Neill: If you gave the general public an indication what emergency services cost, that would be to some degree appropriate.

Mr McLean: Right. I meet people in my area, so I am pretty well up on what you are talking about. I appreciate your brief today.

The Chair: I would like to thank you for coming forward to the standing committee on finance and economic affairs representing your organization.

ONTARIO MEDICAL ASSOCIATION

The Chair: I will call on the Ontario Medical Association. Welcome to the standing committee on finance and economic affairs on the budget review. You will have one half-hour for your presentation. In that one half-hour, try to save some time near the end for a question and answer period which will be divided equally among the three parties. If you would not mind identifying yourself for Hansard, then you can begin.

Dr Linton: Thank you for allowing us to appear. My name is Adam Linton. I am a professor of medicine at the University of Western Ontario and I am the president of the Ontario Medical Association.

Analysis of government's fiscal policy is, thank goodness, not generally within the mandate of the OMA. Comments therefore do not address the general economic issues this committee is addressing, but only those we believe are pertinent to health care funding. The OMA has, of necessity, focused much of its attention on this topic for some years because we believe previous constraint measures have begun to impinge upon the delivery and quality of health care. We therefore commend government's commitment to the maintenance of our health care system and the tacit recognition that this will call for continuing fiscal support.

The background to this is that Ontario, in common with all the other provinces and indeed with all industrialized nations, faces the intractable difficulty of health care costs which are rising faster than most other economic indicators. Health care, as I am sure you all know well, accounts for about one third of Ontario's budget and over the past decade spending has increased by an average of 12% a year.

The principal driving forces, not only in Ontario but in all other provinces and all other developed countries, appear to be the rapid expansion of technology, which seems to be unrestrainable, and the increased demand for services, both of which promote continuing increase in the utilization of the system. Clearly the resulting fiscal problems have been exacerbated by the recession.

Although these upward pressures on cost have been operating for some years, I believe the Canadian provinces have been relatively successful in sustaining a very high quality of health care system which is much prized by the public. Indeed, I selected it to practise in myself and I think it is much appreciated both here and abroad. The aspects of its universality and accessibility attract international attention, and in the United States many authorities use this system as something at which they should be aiming.

There is, however, now increasing doubt whether the standards we presently maintain can still be maintained in the face of the mounting fiscal pressures. We have estimated that in Ontario the combined effects of increased utilization, lower provincial revenue and cuts in federal transfer payments would have resulted in a health care funding deficit of close to $1.8 billion in the current fiscal year.

If such a deficit were passed on to the health care system, the consequences would obviously be devastating. We have provided you with some examples of manipulations to the system which would result in savings of $1.8 billion. For example, you could save that by closing 1,600 hospital beds, which would be more than one one fifth of the province's total. You could achieve the same saving by closing 130 of the acute-care hospitals in smaller communities or you could save the same amount by reducing medical services by one half.

Obviously none of these options is acceptable or likely, but they illustrate the fact that the degree of reduction in funding could be achieved only by very significant reductions in the level of service and likely the withholding of some needed medical care.

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Government has a responsibility to manage its resources effectively and health care costs require special attention because of their magnitude and sustained growth. Although we still spend less than the US on health care -- 8.2% of goods and services produced in the province versus about 11.1% in the US -- we now spend per capita on health more than all other countries which have comprehensive health care systems. We spend about $1,680 per capita, more than anyone else with the exception of the US, which of course does not have a comprehensive system.

We do not believe that support of the health care system, or lack of support, has yet produced a fiscal crisis in the province. We believe society will eventually have to determine the share of resources it wishes to devote to health care. Before that happens, government and the medical profession have a shared responsibility to ensure that the right care is provided to the right people in the most effective way possible. I have no doubt that increased effectiveness in the delivery of health care has considerable potential to reduce the rate of growth of costs, and at the same time to maintain or improve accessibility and quality.

The recent milestone agreement between government and the OMA offers an opportunity for a co-operative approach to promoting the effective use of scarce resources. We believe we are now in one of the few jurisdictions where the medical profession and government are in a position to collaborate over these very tricky issues, and collaboration is certainly more likely to succeed than was the adversarial and confrontational mode we previously saw.

You should not, however, be unaware of the difficulties which will have to be overcome if we are to do this. The large savings which can be achieved are undoubted and the primary areas to target, in our opinion, will be physician resources, technology control and the development of optimal practice policies.

The issue of the number of doctors, as you know, is a very complex one. It is confounded by a lack of knowledge of what the need is and by the issue of maldistribution both by specialty and by geography. For example, in my own region in London, in the city there is one physician to 350 people, whereas in Huron county there is one physician to 1,300 people. That was the subject of a recent large piece in the London Free Press, finding out the difficulty which the people in the rural areas are having in finding family doctors and specialists.

The issue of addressing this is a difficult one and I believe it will require input not only from the medical profession, but also from other health care groups and from the public in general.

Control of technology is also required and it may be even more difficult because we have no system to control it at all at the moment. New technology, if you include new drugs as technology, simply sweeps on to the market driven by the usual market forces, by the manufacturers, by researchers and by the increasingly sophisticated public, and we have no system of trying to decide before a new technology hits the street whether it is in fact an improvement or even as good as previous technology.

Finally we have now begun to recognize that much of what we do in medical practice is not supported by solid proof of benefit. This is in large part due to the lack of strong data on outcomes of medical treatment, and also from the increasing and really quite severe complexity of modern medical decision-making.

I think these things have made it clear to the medical profession that we must now try to rein in these expenditures, preferably by the profession itself developing and promulgating practice policies aimed at the cost-conscious provision of high quality care. We can only do this if we are in a co-operative situation with government in order to devise methods of controlling the diffusion of technology. Only by mutual effort can we hope to promote mechanisms that will steer medical practice into patterns which will be both frugal and effective and of high quality.

We are aware that medicare remains the most cherished of all our social programs and that the challenge we all face is to keep it working. The Ontario Medical Association would like to work with government in pursuit of this end.

Mr Phillips: Thank you for the thoughtful presentation. I think you identified some of the really thorny issues we are all going to have to wrestle with, such as technology, even at what stage one continues to apply all the technological advantages we have.

The one I want to chat a little bit about is the OMA agreement because it is a milestone and I want to make sure I am clear on it. The first part is on the financial side: My understanding is that after two years -- it is a seven-year financial agreement -- everything is subject to arbitration, the threshold not in the fee schedule, but in the size of the fee pod. Is that correct?

Dr Linton: Yes, that is essentially correct. I do not have the agreement with me. I did not realize it was a topic for discussion.

Mr Phillips: I think it is important because two or three years from now there perhaps could be arbitration and it is the arbitrator who will make that decision.

The joint management committee, which I think is the other big thing in it: What issues do you see being taken there? My understanding is that it requires three of the five OMA representatives to agree to things before they can be passed; that is the way I read the agreement. What items would you see being resolved at the joint management committee?

Dr Linton: We have discussed it in some detail in the light of what we hope will go there and also in the light of the experience we had on the Scott task force, because that was in a sense a kind of mini joint management committee which did not work too well but taught us some lessons. I think the joint management committee will have to operate in four domains.

The first of these domains is that it will have to supervise the care and maintenance of the agreement. We hope that can be done, the nitty-gritty of the funding and the implementation of the agreement over the years, by a small, technically qualified committee without perhaps too much intervention by the JMC itself.

The second topic it will have to address is physician resources. This is a prime concern of government and it is a prime concern of ours. Up until now we have all pussyfooted around it but never produced any satisfactory solution. I think that is domain number two.

The third one is technology control. As I have mentioned, we have no system. It has been advocated for years that a system be developed, but no one has ever done it because the difficulties which surround the development of a system to control technology are substantial. Just as one example, clearly if you develop a system which inhibits the fusion of a new technology, then you are going to be interfering with a pharmaceutical company or something which is engaged in the legitimate pursuit of trade and all sorts of complications of that nature. But it has to be addressed. We think technology control is number three.

Number four, we think, is the development of optimal practice patterns, because there is no doubt we spend a lot of money at the moment on procedures which are unproven and maybe being provided to the wrong people at the wrong time. That is perhaps where the biggest potential for savings exists and optimal practice patterns simply have to be developed.

Mr Phillips: I happen to think one of our big challenges is how we are going to manage the health care field. In terms of your best cut at where the opportunities are for being more economical and more efficient -- I do not want to quibble about the definition of that -- do you have any intuition of where that may be?

Dr Linton: Yes. I think it is in technology control and practice patterns because that is where most of the money goes. As simple examples, with collaboration between the profession and the government on the joint management committee, you might decide to produce a list of drugs which were approved. Britain has a thing called "the national formula" which identifies those drugs that are of proven efficacy, lists their prices, recommends them and so on.

There are a lot of drugs used at the moment that are more expensive than equally valid alternatives, but you do not have a system to promote the use of the cheapest drugs, as just a simple example. There are hundreds of these in the practice of medicine.

Mr Phillips: The thrust for many of us is to more community-based care. I realize that is tough to define, but it is to move away from as much institutionalization as we can. Is that something the OMA has a point of view on? Are we on the right track there?

Dr. Linton: Yes. We agree with that entirely. I think it has to be modified a little bit by the fact that as beds are cut, the severity of illness of the people who are occupying the remaining beds increases, and the extent to which one can move these patients out into the community is restricted. But as was said in a previous presentation, there are a whole lot of patients at the moment who are, in our view, in inappropriate accommodation for their degree of illness.

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Mr McLean: Northern Ontario, my understanding is, has a hot pilot project in place.

Dr Linton: I am sorry. I missed that.

Mr McLean: The Ministry of Health has a pilot project in place. Can you give me a little detail on that?

Dr Linton: A pilot project on what?

Mr McLean: I understand there is a community in the Fort Frances area where they want to use a form of card whereby the people know exactly what the services cost them.

Dr Linton: In Fort Frances, there are the beginnings of what is called a comprehensive health organization, which is simply a different way of funding the entire provision of health care within a region. It appears to be something that might be suitable for small areas in the north. That is the basic structure. Within that, I believe -- I do not know very much about this -- there is a pilot project of a smart card, which contains more information than the average health card and with which it is hoped to improve, prescribing habits and documentation of drugs taken and so on. I have seen no preliminary report on the effectiveness of this in Fort Frances.

There are a raft of these projects which have been done in other countries. I do not think there is any doubt that you can improve the delivery of health care by this kind of data collection, and if there is one thing I have not mentioned up to now, which is critical to improving the health care system, it is better data.

Mr McLean: The last witness we had here very clearly indicated that if the same thing had happened to her again, she would not have gone to the emergency, which cost some $80. Do you believe in the theory that if a person knew what the charges were and what the costs were for health care, he would be more susceptible to using it in a manner that he felt the need was most important to him.

Dr Linton: Unfortunately it does not seem to last long. Five or six hospitals in southwestern Ontario tried for a while to send out dummy bills, as it were, to patients that had received care, but we were never able to prove that we had done anything to change the demand. I think people look at the bill and say, "My God, it's expensive," and then in a couple of weeks' time, they have forgotten about it.

Mr McLean: Teaching hospitals: I have a niece who is going to specialize in skin cancer. What percentage of a hospital's administration or cost would be for teaching doctors a specific specialty -- ears, nose and throat or whatever? What percentage of the hospital's budget would go towards that?

Dr Linton: I have not the faintest idea because the funding of academic medicine is another aspect of the whole system which badly needs to be re-examined. It is a mishmash of sources of funds and often they can hardly even be identified. In my university, the medical school receives funds from the Ministry of Health, Ministry of Colleges and Universities, the hospitals, funds generated by the doctors themselves, the Medical Research Council of Canada, all sorts of research agencies, the community, you name it. There is a list as long as your arm.

The source of funding for teaching is really hard to identify, but it is another major problem for the health care system because as the funds generated by physicians from fee for service have diminished, as they did in the university centres at least, the money available for these teachers to pass on to support the schools has diminished. In fact, we had two departments that went bankrupt this year as a result, so academic medicine is in a state of potential collapse at the moment as a result of this completely incomprehensible funding system.

Mr McLean: What would you believe to be the area of health care that could be the most helpful in trying to solve some of our budgetary problems, and what category would you put hospital administrators in?

Dr Linton: That is a tremendous opportunity.

The area in which I think the biggest realistic savings are to be made is in the hospitals, and it is in the control of technology and drugs. I believe that is something the JMC could begin to do now which could produce significant benefit. One of the few things the Scott task force did was produce recommendations about who should be tested for cholesterol and who should be treated. Had we been able to get those recommendations accepted, and they were scientifically accepted around the world, we would have saved something like $1.6 billion dollars; some enormous sum, I cannot remember how much it was, but a large sum. Where that failed was trying to get it actually incorporated into clinical practice, and that is something we have to get at.

Hospital administrators are obviously very important people. I hope the government remembers that physicians have to have some input into hospitals as well. Hospital administrators seem to be gaining in numbers and strength all the time. There is no doubt we need management of the system because the Canadian health care system, and in Ontario in particular perhaps, is almost unmanaged.

Mr Sutherland: It is a pleasure to see you here, Dr Linton, coming from such a fine medical school as the University of Western Ontario; it certainly has a good international reputation.

I wanted to ask you several questions. You heard the presentation by the nurses, and they were supportive of the OMA agreement. Mr Phillips asked them about the joint management committee and I just wanted to ask you this: I have had a few people come to me and indicate that somehow this joint management committee will mean that doctors will take the leading role, or for some people who feel they already have the leading role, will continue to have the leading role in decision-making and planning. What is your sense of how this will bring in some of the other people who are health care providers?

Dr Linton: I agree with you entirely. Indeed, I have been severely assaulted by my daughters, who are strong and powerful nurses, about the whole thing. We are very well aware that not only the nurses, but many other health care professionals are anxious about the fact that doctors appear to have regained the position of pre-eminence in the system. We are in the process of developing a system of advisory committees which, we hope, we will be able to build into the system, either on our side or perhaps even in a combined way with the government's side. The JMC has not met and the government members are not identified, at least not to us as yet. So we have not been able to discuss that, but we already have had preliminary talks with some people about advisory committees which will, we hope, give these people the feeling that they are involved. The JMC allows each side to take anyone it likes to meetings, so it would not simply be a case of sitting in a back room and advising. With relevant issues, these people could go to the meeting.

Mr Sutherland: I have another question regarding hospitals and transfers. I have talked to some of the people who work in my local hospital -- there are three in my county, actually two in my riding -- and through their professional groups they interact quite a bit with some of the people in the community of London. They have indicated to me that in some cases there are certain pieces of equipment the small hospitals have that are not fully utilized, yet in hospitals in the larger communities they have waiting lists.

It would seem, in some cases, that it may be cheaper to even have a shuttle to transfer them to the smaller hospitals to have routine-type testing done rather than purchase new pieces of equipment. Is that something you are familiar with, or you have heard a great deal about? I am just wondering if this is, in effect, one of the ways we can look at better management of the system and of the resources already allocated.

Dr Linton: I cannot comment on specific instances since I am not entirely certain what kind of equipment you are talking about. But there is no doubt that across the system in general, in the small hospitals, medium size hospitals and large hospitals there is far too little co-ordination of activity. There is no doubt that by moving people around you could improve efficiency.

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Mr Jamison: Welcome and thank you for your presentation. It has been a major theme of the government to try to consult and build partnerships. I wonder, in your own opinion, do you consider this step as a good beginning point? Considering what you have said today, in as far as tracking and accounting for the moneys that come from the province is really a tremendously difficult thing to do, do you see that being beneficial both in the short and the long term?

Dr Linton: Yes. I have worked in health care systems in the United Kingdom, the United States and here. I have studied health care systems in many other countries, and I do not have any doubt that the situation we have in this province at this moment has the greatest potential for a sensible solution -- perhaps not the solution, but a sensible beginning of the solution -- to these problems. Hopefully, if we can continue to work together in a collaborative sense, we will get better data. Once we get better data, we get better tracking. Once we get better tracking, we get better planning. Once we get better planning, we get better health care.

Mr Phillips: My question is on the joint management committee. You answered part of it when you said it has not yet met. I gather the government's side has five members, one being the deputy or his or her designate. What kind of budget do you see the joint management committee needing to operate?

Dr Linton: I make it clear, once again, that this is our view; we have not had a chance to discuss it with the government. I can tell you that one of the lessons we learned from the Scott task force, and one of the reasons it was less effective than it might have been, was the lack of a significant supporting structure to do the work that was required. It is our belief that if the JMC is to realize its full potential, it will require a large supporting structure which will encompass the people who have the specific expertise to produce the kind of recommendations that are required.

I told you at the beginning that none of this is going to be easy. It is not easy to write guidelines for medical practice, and it is not easy to write guidelines for technology control. That is what McMaster and the Centre for Health Economics and Policy Analysis do all the time. The difficulties are substantial, so there is no doubt that it will require a supporting body of significant size. I am no expert at gauging how much that might be, but I am quite certain that it is in the millions, and perhaps $10 million, $15 million or $20 million. I have no idea.

Mr McLean: Do you think Roger Sherman's policy is going to work with regard to the three basic principles he has for sources of money for hospitals?

Dr Linton: I am sorry, you have got me there. You will have to tell me more.

Mr McLean: Mr Sherman is the president of the hospital that puts in hips and knee joints. He has a contract with the Workers' Compensation Board to evaluate workers. You are not aware of that?

Dr Linton: No, I am not.

Mr McLean: Okay, thank you.

Mr Jamison: Where do you feel that there is potentially -- again I am not sure whether I have picked it up properly or not -- a major cost saving if we get our mutual acts together?

Dr Linton: I will give you three for example: number one, if we could stop people using inappropriate drugs for non-hazardous medical conditions. As you are probably aware, many people prescribe antibiotics for viral infections, which is of no value, and indeed is a clinically inappropriate practice. That is a lot of money. In the same category is the use of highly expensive third-generation antibiotics for simple conditions. So that is one group of things where there are substantial savings to be made.

Number two would be if you looked more carefully at new drugs and technology as they come down the pipe, and instead of just demanding, as we do now, that the manufacturers prove that these things are efficacious, ie, that they do what they are said to do, you must also ask the manufacturers to prove how they operate in practice, that not only do they work, but do they work better than the gadget we used before? Many times the answer to that will be no, but the price will often be higher.

The Chair: I would like to thank you for appearing before the standing committee on finance and economic affairs and the budget review.

CANADIAN FEDERATION OF INDEPENDENT BUSINESS

The Chair: The next group is the Canadian Federation of Independent Business. Would they come forward please. I believe you have a handout for the clerk to hand out. It looked like it took about three of you to carry that brief in. I would like to welcome you here to the standing committee on finance and economics affairs and the budget review. I hope it is in bold print there, because you have one half-hour for your presentation totally, and perhaps you can save some time at the end within that half-hour for a question and answer period between the three parties. Before you start, would you just identify yourself for the purpose of Hansard. You can begin.

Ms Ganong: My name is Linda Ganong. I am the director of provincial affairs for Ontario of the Canadian Federation of Independent Business. With me are Catherine Swift, our vice-president, research, and chief economist; and Judith Andrew, our director of provincial policy. We will do our best to keep our presentation to about 15 minutes and leave about 15 minutes for questions. Ms Swift: Hopefully we can keep it shorter than 15 minutes.

We appreciate the opportunity to present the views of the small business community on the Ontario budget to you today. As you probably know, the CFIB is a non-partisan political action organization representing about 88,000 small and medium-sized businesses across Canada. We have almost 40,000 of our members, almost half of our membership, in Ontario. We have members in all sectors, all regions, and represent firms from the single proprietorship right up to mid-sized firms with 400 or 500 employees.

As you are aware, small firms are major contributors to not only the national economy, but naturally to the Ontario economy. In 1989, for instance, the entire private sector in Ontario, about 97%, had less than 50 employees, and that is a pretty standard definition of small business. Small businesses in Ontario account for about one third of the labour force, and that compares favourably to national numbers as well. The most notable numbers, however, come in the job creation area. Over 80% of net new jobs, and that is even accounting for job losses and firms that go under and so on, over the last decade or so have come from small firms, so the job creation area is where the small firms really distinguish themselves. We find that even in recessions as well as in periods of relatively strong economic growth.

The 1991 budget was viewed very much as a watershed by small firms in this province. I think after the election of the new government last fall, small business and other groups, naturally, were watching the government's development, and the 1991 budget really was a very bad signal to the small and medium-sized business community. There were many elements in it that were perceived very negatively.

Naturally the deficit was a major one, but I think it was not even that so much. Everyone expected the deficit to increase this year. I think that was something everyone knew, because we were in recession. Small business owners are certainly well enough informed to realize that transfer payments and so on would have to increase considerably. The real concern was that these high deficits seemed to prevail for the duration of this government's term. That is a major concern.

I have heard a lot of justification of so-called Keynesian types of policies which involve spending in bad times, but of course what we have seen in Canada is governments that spend lots in good times and spend even more in bad times. Naturally, that is a recipe for fiscal disaster that we are seeing very profoundly at the federal level right now and we will arguably -- not even arguably -- see at the provincial level in Ontario if the projections in the budget do come to pass.

What is interesting, I guess, is that high deficits lead to high interest rates and the need to raise more capital. They lead to high taxation, of course, as well.

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The unfortunate result of these policies is that the very sectors they are trying to help, presumably, are the ones that end up getting hurt the most. I think this is something governments maybe do not see in the long-term sense; they just see short-term gains. Unfortunately it is the middle class and the lower-income people who end up paying for large deficits. The people who have investments benefit, and they are the well-off. So these kinds of policies have very perverse social impacts, even though they may seem to create some short-term jobs in a tough time like now. Naturally the small business sector, as one that pays a great deal of taxes. It also has a major punitive impact on that sector.

I think one thing we have seen on the part of many provincial governments, and Ontario has been no exception, is that things like high interest rates and the value of our dollar, which are very unfavourable right now, are pointed to as federal policies that have nothing to do with provincial policy. Of course this is absolutely false. Ontario, representing almost half of the national economy, cannot assume that it is not a part of the greater problem of higher national interest rates and as a result the requirement for a higher dollar to finance capital and so on. I think all provincial governments, and of course notably Ontario, being the largest, have to take a share of responsibility for monetary policy nationally, and things like high deficits at the provincial level in any province do not favourably impact on our national picture.

We have done a lot of surveying on these types of issues, of course, and we recently surveyed about 6,000 of our Ontario members for their views on government deficits. A full 97% believe that the elimination of deficits should be a major priority of government. More than 70% indicated that spending cuts are the measure of choice to eliminate the deficit. There of course is no support for tax increases, partly because we have just come through a decade of massive tax increases at all levels: personal, corporate and payroll taxes. We see that over half of the members surveyed favour eliminating government deficits with quick and drastic cuts, whereas a smaller proportion opt for a slower rate of deficit elimination. The highest priority area for spending cuts that we get in all our surveys is government funding of industry essentially, government funding of megaprojects, grants, subsidies for business and industry.

This may sound counterintuitive, coming from a business group, but what we typically find with our constituency is that these programs are set up and small firms rarely get the grants. They are the ones that effectively pay for them via taxation. It is the large firms that get the grants, and of course there are many firms where essentially their greatest expertise is the getting of government grants, not the conducting of their business. We have seen far too much of this, naturally, and I think some of the ones that are going down now, the Magnas, the Algomas and so on, are cases in point. There are more problems than that, but I think when you look at these firms that are having problems, most of their problem is that they should have faced reality a few years ago and it was forestalled by government grants.

One of the major deleterious impacts of the high deficit is that all this will mean is high taxes down the road. There is no question small businesses realize that they will be one of the major recipients of these tax increases, as has been the case in the last little while. We find the total tax burden of all the taxes small firms are faced with is an ever-growing concern, but in the past few years this has really been notably the case.

We have conducted quite a bit of research over the last year on various aspects of this. One of the studies is included in your package. It is called Taxing Ourselves to Death: The Small Business Tax Burden in Canada. We look at four different Canadian jurisdictions, Ontario being one of them, and we look at a number of US states as well to try to get a bit of a comparative picture. It used to be that Quebec was the high tax culprit for small businesses in Canada. It is not that way any more; it is Ontario now. What we find is that it is not simply that the level of taxes is so high in Ontario, but that the composition of those taxes is especially punitive on small firms.

One thing we did was compare the burden for a small, a medium and a large firm, just to see the differential impact, and what you find is that profit-insensitive taxes, notably payroll taxes, and local taxation such as property taxes, account for over 70% of a small Ontario firm's tax burden and just over 50% for a large firm. In other words, in a downturn, when those taxes do not move because they do not change when your revenue changes as a company, you are getting hit much harder than a large firm, so naturally there is quite a punitive effect. Things like the small business tax rate go some way to offsetting this, but they by no means completely offset this differential.

We did a survey last summer where members were asked which provincial and local taxes were the most harmful to the operation of their businesses. Number one was workers' compensation. This is something we have seen in a number of provinces. Again, it is not exclusive to Ontario, but in Ontario over half the members surveyed selected workers' compensation as the most harmful tax. The employer health tax was a close second, and almost half of the members chose that one. The third culprit, if you will, is municipal property and municipal business taxes, which over a third of members surveyed chose. The common factor of all these taxes is that they are fixed taxes that just do not vary in good times and bad. Naturally governments love them, because they are a nice constant cash flow stream, but if you are killing the small business community as a result, I do not think in the long run it is beneficial even to governments.

Workers comp is, as we said, a growing problem. We think it is high time this was looked at. It is not just our opinion. When you have unfunded liabilities in the $9-billion range and increasing, you know we have a very serious problem there. Ultimately everyone will suffer, workers and employers, if the policies continue.

One thing we recommend in this area is that a value-for-money audit be conducted provincially of the WCB system. This type of audit is designed to assess the system, how efficient it is, and effectively see how economic it is. This would ideally assist in achieving a higher standard of accountability on the part of WCB management. This is something the Ontario Legislature could request that the Provincial Auditor do, but the results of these findings hopefully would come out with some recommendations to improve the WCB burden on businesses in this province.

The employer health tax was a relatively recent tax that we found in our surveys nearly 60% of CFIB's Ontario members found has reduced their firm's profitability. Just under a third had to resort to changes in their staffing as a result of the employer health tax. These are things like layoffs, not hiring people they had otherwise planned to or shifting workers from full-time to part-time positions. Naturally another payroll tax is a disincentive to employment, and the employer health tax is a notable recent example that we have heard a great deal of negative feedback about from our members.

What is interesting is that if you look back at some of Premier Rae's previous quotes, when he was in opposition, he himself had very bad things to say about payroll taxes.

One thing we have recommended several times and will reiterate here is that we believe that the first $400,000 of all firms' annual payroll should be exempted entirely from the employer health tax. This kind of exemption has worked successfully in other provinces, and although it does not cost the Treasury an awful lot of money, it is a major burden relief on small firms.

The number three most damaging tax is personal income tax. Naturally this hits in a number of ways. We have done some studies, one of which is included in your package, on the income levels of small business owners. What you find is that they are basically the average income for any employee across the country. Of course, there are people who make a great deal of money and there are some who barely get by, but on average, the income of a small business owner is roughly the same as the income of your average employee, and as a rule they have a lot of personal assets up as well, so if their business goes down, they do not collect unemployment insurance or they lose their house.

What we have been paying quite close attention to recently is the federal government's discussion paper on reform of the personal income tax system. There is a clipping in your package by Leonard Shifrin of the Toronto Star which notes that this lays the groundwork, should it come to pass -- it is just a discussion paper at the moment, but it lays the groundwork -- for a massive tax grab for the provinces. We are keeping a very close eye on this, not just from a tax-grab perspective, although that is the major negative impact from the small-firm viewpoint, but also the incredible complexity that now we have the problem of having two sales tax systems in most provinces. This raises the spectre of possibly two personal income tax systems, which is absolutely unbelievable in the paperwork department.

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Finally we have come to view "competitiveness" as possibly a bad word these days. We economists have been using it for decades with nobody batting an eye, but now it seems to have all kinds of evil and weird things implied by it that really it does not mean at all. I think our problem, when we look at tax changes and other changes in standards and what not, is that basically if we as a province get dramatically out of whack, not only with other Canadian jurisdictions but with American states since they happen to be our geographic neighbours, we are in major trouble. We see our members seriously looking elsewhere right now. We have heard a lot about movements to the US, but one thing that has interested us is that we are getting a lot of anecdotal evidence about movements to other provinces as well because they are concerned about the future of Ontario.

There are a couple of charts in this brief which show some information on how many are thinking of moving elsewhere. I might note that the chart on page 10 was taken before the budget. We are actually conducting a study currently to try to get some post-budget reaction, because we realize the budget was a major watershed in the eyes of a lot of our Ontario members.

Something that we have seen in many jurisdictions, but notably in Ontario is the growth of the government sector. In the Ontario government's own The State of Small Business, 1990, publication, which came out fairly recently, there was talk about the "funded sector," which seems to be a new buzzword that people do not maybe read as government, but of course it is the government services sector. Its growth has been incredibly dramatic in Ontario over the last 1979-88 period. We are looking at almost twice as fast growth, and this kind of expansion of the public sector, which is not a productive sector in the competitiveness sense -- you do not survive by having big government as an economy, as we have seen elsewhere in the world these days in spades -- is naturally something where the more room government takes up, the less room is left for the private sector.

Finally, we have a number of recommendations here. The health tax one, which I already mentioned, is one that we feel would not cost an awful lot to government coffers, but in these times when small businesses are really struggling, every dollar means an awful lot to them. It would make a significant difference to them and would not be one that would be terribly difficult to absorb for the Treasury.

One that we made in our pre-budget submission which obviously was not really taken into account was basically no worsening of the burden. We reiterate that one here, notably in this provincial tax reorganization potential that we have seen coming out of this federal discussion paper. We know the small business community will have very strong negative views about that should it come to pass.

The deficit: The deficit in and of itself is not the important thing. The important thing is what it does in terms of financing costs, how it cuts into other programs, notably social programs, which are the largest part of the envelope, and what it means for taxation down the road. I think Ontarians are taxed to death right now, or so we keep hearing, and it is not just small businesses that are telling us that.

We would like to see a spending level freeze. All the economic data indicate we are over the worst of it. Hopefully we can see some control brought in on spending. We saw the federal government, through the 1980s, get us into the pickle we are into by spending like crazy when times were good. Now that we are re-entering a period, hopefully, of a little more stability in government revenues, we should be able to see some control over spending. We would like to see a long-term -- five years is one possibility -- financial plan adhered to -- the federal government has had quite a lot of them lately and it has not been able to stick to one yet -- something towards which we could see some kind of planning. I think that would give some kind of confidence, because right now there is a crisis of confidence in the business community. If we saw some types of objectives and some kind of plan laid out, it would go a long way towards that.

The highest priority areas as seen by the small business community for spending cuts should be things like government funding of megaprojects, bail-outs, which are usually just spending bad money now for more money later, and the very targeted stuff that we find benefits only one firm and disadvantages its neighbour or competitor.

We would like to see some pressure on the so-called funded sector to be more efficient in its delivery of services. Perhaps some rationalization there would be in order.

We have seen some major problems with municipal spending growth. We have seen some tax revolts at this level across the province lately. I suspect we are going to see more of them. We see that as a growing problem for our business. Provincial governments can have a hand there in keeping that under control. We also think that any windfall revenues that do come in should be used for deficit reduction and not additional spending.

Finally, there is the audit of the Workers' Compensation Board that was recommended earlier.

I have gone on a little longer than I thought, but I would be happy to take questions at this time.

Mr McLean: To date this week, we have had about 40 presentations. Yours is about the fifth one we have had that has recommended looking at the deficit over the long term. Most of the others have indicated that business is not paying enough and that they are not getting enough money. Most of the people who are before us -- we have had defeated candidates, NDP candidates, their spouses -- are all saying what a great budget it is. We have had about five who indicated the concern they have for the long-term debt. The long-term debt will be probably well over $70 billion by the time 1995 rolls around. August 5 now is taxation freedom day. When do you think it will be in 1995?

Ms Swift: Obviously it is not going to be any better.

Mr McLean: I appreciate your presentation.

Mr B. Ward: I appreciate your coming before us to present your views. I have trouble with your view that we should not be offering any assistance to any business in the province. I am sure that if that was followed through, the recommendation of the CFIB would lead to the destruction of the community of Kapuskasing and the community of Elliot Lake. As well, other businesses that have received financial assistance through loans or loan guarantees may or may not be in existence. I know of five in Brantford that have received some assistance through the Ontario Development Corp. I think the people of Kapuskasing and Elliot Lake would strongly disagree with that view.

I have a question about the benefits of the budget. I think if you talk to the private sector, which has received contracts through the $700-million anti-recession package for work of a capital nature, it would strongly support that aspect of the budget. My question to you would be, from the position of taxes and the fact that there was very little business tax increase in the budget as well as no increase in the provincial sales tax -- in fact, there was a tax cut for some low-income people, which may or may not have an effect on the CFIB membership -- what is your view pertaining to the fact that there were no new payroll taxes and that existing payroll taxes were not increased? You mentioned the employer health tax. I was just wondering if, when that was brought in by the previous government, the CFIB condemned the previous government at that time. I cannot recall.

Ms Swift: Oh, yes. Where were you?

Mr B. Ward: If they did, I just want to hear it again.

Ms Swift: Were you off this planet somewhere? Oh yes, there is no risk of that. We are very egalitarian in our criticism. We criticize everybody equally. That is our job. Our position on funding generally is that we probably do not think it is realistic that governments are never going to fund businesses, but the ones we are bailing out now are usually in trouble because of past policies. Our view is that you are benefiting one. There are other ways to help communities than to keep unviable businesses. We have seen the Atlantic region of Canada as a notable example of an absolute disaster. You are just forestalling the inevitable.

Our businesses feel that an overall reduction in taxation is much more equitable. Then all businesses start from the same jumping-off point. What we would prefer to see as opposed to the preferential types of policies which benefit one firm over another is, why do we not have a more egalitarian policy where we have lower tax levels for all business?

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Mr Jamison: The figures you put forward are interesting, because they prove to be almost increasing in nature in the numbers of jobs that small business is creating as compared to other sectors.

Ms Swift: We do not have the recession stuff in yet, mind you.

Mr Jamison: My figures were that 75% of all new jobs created are related to small business, and now your figures show 80% or better. I think it may be indicative of two things: the manufacturing decline, where there are hardly any jobs being created through the recession; and certainly the importance of small business. It is an area I have been given added responsibility for lately and I look forward to the challenge. It will be a challenge. I know that as far as you are concerned, the struggle goes on every day.

The Chair: Mr Jamison, I have to cut you off.

Mr Jamison: I would just like to make the statement that it is interesting to hear those figures.

Mr Kwinter: I want to commend the CFIB. I can tell you that in the years I have been in the Legislature, I have always looked forward to its reports because they are always very extensive and informative. I have had the benefit of talking to Judith over the years and getting input from her group.

Your report, and you talked about it when you talked about the tax problem, was in November 1990. You predict that if we go into a recession, things are going to get far worse. We are now into the recession. Some people think we are out of it. I predict we are not out of it, that we just are not getting any deeper, that it has sort of levelled off. How badly has the situation changed from the figures you have in your report? Do you have any idea of that?

Ms Swift: The only notable tax change has been the GST, and that has been a real whopper. If you had to choose one incredibly punitive tax change, that was it, and of course the associated problem in Ontario and some other provinces of administering two tax systems. Of course the fixed taxes always become worse when revenues are nowhere. We know now that many firms are operating at a major loss and hoping just to hang on, which you do in the trough of a recession.

We have not actually done any studies. We are currently collating some results from our first follow-up GST survey and they are incredibly depressing in terms of what this tax is costing business to administer. One of the problems provincially is that there are two taxes to administer and that just worsens it all the more.

It has got worse, I guess, though the Ontario government to date has not done a lot. There have been signals, but there really have not been an awful lot of developments. I guess we and other groups like us are looking at this fall for a lot of activity to take place. Really it is more in expecting things to worsen over the next few months that we present a case here today, because the Ontario government notably has not done a whole lot in the past year.

The budget was viewed as a very significant signal, and one in the wrong direction, by the business community. I guess we cannot make that point strongly enough.

Ms Andrew: If I could add something on the workers' compensation side, there are elements in the offing that promise to increase costs tremendously under workers' compensation. The whole definition of what is compensable under the act is being reviewed by the board. They are considering compensating for chronic occupational stress. Gerry Phillips will be familiar with these issues. All that will roll into a far bigger demand for financing for the Workers' Compensation Board, which is already under incredible strain with the $9-billion deficit, and that will exacerbate our members' number one payroll tax problem, which is workers' compensation. The signals are there. It is bad and it can only get worse, as far as we are see it.

Mr Phillips: I appreciate the thoughtful presentation. I assure the new members that when CFIB saw a wrong, it spoke out strongly against our government as well. The kind of problem with all this, as I have said to other groups, is like forecasting the weather a year or two from now. I think CFIB has some severe reservations about the budget. Mr McLean said a whole bunch of groups came and said it was great. We will not know probably for a year or a year and a half. But I agree with you; I think we face deficits for ever here. Sure there are no new taxes in here because the deficit went up; it did not raise any money to pay for the spending.

It seems almost like an anomaly that business is concerned about all these things and yet if you read the papers, it looks as if we are on the way to a strong economic recovery. How is this possible?

Ms Swift: I would not agree with the "strong"; that is for sure with all the data we have seen so far. I think certain forecasters have gotten more optimistic than others and have been proven wrong before, so you have to take that with a grain of salt. What we are seeing with our members is an incredibly mixed performance. I think this is where the role of confidence and expectations cannot be overstated. We hear from our members that there is a good sign for a couple of weeks and then things go down for a couple of weeks. It is very spotty. We have levelled, but we really have not seen a lot of improvement. It is not getting worse, that is for sure, and in some sectors we are seeing a bit of improvement. We are not seeing consumers spending a whole lot more, and when they do they are not spending it in Canada. That is a major problem. Border measures do not do anything. You have to make people want to shop in Canada. You do not rap them over the head. The stick approach never works except for a very short time.

I think what we are going to see is nothing like 1983, where the economy did pull out of the recession quite quickly, notably in Ontario. Ontario was way harder hit this time than in 1981-82, so we have a lot more recovering to do than we had then: things like the manufacturing sector, with 87-cent dollars, relatively high levels of taxation and all the other problems we are seeing. Naturally some of our core sectors are extremely badly hurt.

There is no doubt that this recovery will be harder and longer. I do not know if I subscribe to the double-dip recession theory where we are going to go up a bit and then down again. I do not think it is quite like that, but I think we are going to have a long, slow climb out of the trough of this recession. Whatever governments can do to improve peoples' confidence levels, consumers and business will go a long way because I think there is still money out there. People are contemplating investment and where to invest and right now Ontario is not at the top of their list. Anything that can change that would be very beneficial.

Mr McLean: I have spent $60,000 myself this year to help the economy. If people are in the mood to purchase, they will do it if they feel they have the confidence of the government behind them. There are many people out there who feel now is the time to make these purchases. If they do, I think you will see the economy change. But the attitudes of people have to change and the leadership has to make people feel they are comfortable. I think things are available to turn it around.

The Chair: I would like to thank you for appearing before this committee. This committee will resume in Windsor at 9 am sharp on Monday. We have next week's schedule. This committee is dismissed for today.

The committee adjourned at 1628.