Pre-budget
consultations
Ministry of Finance
Hon Jim Flaherty, minister
Dr Bob Christie, deputy minister
Mr Phil Howell, first assistant deputy minister, office of
economic policy
Mr Gabriel Sékaly, second assistant deputy minister, fiscal
and financial policy division
Mr Gadi Mayman, CEO and vice-chair, Ontario Financing
Authority
Ontario Chamber of
Commerce
Mr Douglas Robson
Ms Mary Webb
Mr Atul Sharma
Greater Toronto Home
Builders' Association
Mr Patrick O'Hanlon
Mr Jim Murphy
Canadian Mental Health Association, Ontario division;
Schizophrenia Society of Ontario
Dr Barbara Everett
Ms Janice Wiggins
Ms Brigette Hough
Mr John Trainor
Child Poverty Action
Group
Mr Colin Hughes
Dr Brigitte Kitchen
Council of Ontario
Construction Associations
Dr David Surplis
Mr Gary Robertson
Toronto Association for
Community Living
Ms June Chiu
Ms Agnes Samler
Mr Keith Powell
Wine Council of
Ontario
Ms Linda Franklin
Mr Bruce Walker
Centre for Equality
Rights in Accommodation
Mr John Fraser
STANDING COMMITTEE ON
FINANCE AND ECONOMIC AFFAIRS
Chair /
Président
Mr Marcel Beaubien (Lambton-Kent-Middlesex PC)
Mr Ted Arnott (Waterloo-Wellington PC)
Mr Marcel Beaubien (Lambton-Kent-Middlesex PC)
Mr David Christopherson (Hamilton West / -Ouest ND)
Mr Doug Galt (Northumberland PC)
Mr Monte Kwinter (York Centre / -Centre L)
Mrs Tina R. Molinari (Thornhill PC)
Mr Gerry Phillips (Scarborough-Agincourt L)
Mr David Young (Willowdale PC)
Substitutions / Membres remplaçants
Mr John O'Toole (Durham PC)
Also taking part / Autres participants et
participantes
Mrs Sandra Pupatello (Windsor West / -Ouest L)
Clerk / Greffière
Ms Susan Sourial
Staff / Personnel
Mr David Rampersad, research officer,
Research and Information Services
The committee met at
1000 in room 151.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Marcel
Beaubien): If I could get your attention for a moment,
please. I've just been informed that the minister is stuck on the
Don Valley Parkway. There will be about a 10-minute delay, so I
think we'll reconvene at around 10:15 this morning.
The committee recessed
from 1000 to 1010.
MINISTRY OF FINANCE
The Chair:
If I could get your attention, I'd like to bring this committee
to order. First of all, I would like to welcome the new Minister
of Finance. Welcome, Minister. It's a pleasure to have you here
this morning.
Hon Jim Flaherty
(Deputy Premier, Minister of Finance): Thank you.
The Chair:
There are a couple of announcements I would like to make for the
record. The standing committee on finance and economic affairs
will be meeting in Toronto today-February 13-February 14, 15, 21
and 22. Furthermore, the committee will be meeting in Thunder Bay
on February 16, in Ottawa on February 19 and in London on
February 20.
The last item I would like to
mention is that for those members or groups that have not been
successful in being able to make a personal presentation to the
committee, written submissions will be accepted until February
22.
With that, Minister, you have
one hour for your presentation.
Mr Gerry Phillips
(Scarborough-Agincourt): Mr Chair, just before he
begins, two things. One is, congratulations to the new minister,
and welcome. We look forward to your visit with us in the
pre-budget hearings.
I also submitted a list of
questions to the ministry staff. If those answers are ready now,
it would be useful, to us at least, perhaps to have them
distributed as the minister is answering, because they may lead
to some questions from our side.
Hon Mr
Flaherty: I think we have them.
Mr Phillips:
Thank you.
The Chair:
So the answers will be distributed? Thank you. Anything else, Mr
Phillips?
Mr Phillips:
That's fine. Thank you very much.
The Chair:
If there are no other comments from the members, Minister, you
have the floor.
Hon Mr
Flaherty: I am pleased to have this opportunity to
address the standing committee on finance and economic
affairs.
Today, I will be providing
the committee with updates on Ontario's third-quarter economic
accounts and third-quarter finances as well as information on how
the province is positioned to weather economic turbulence that
may result from the slowdown in the United States economy. This
information will clearly demonstrate that our economic and fiscal
plan is working and that our plan to continue to lower taxes and
cut red tape will help ensure that Ontario is better positioned
than ever before to withstand economic challenges.
The province is situated to
weather economic turbulence that may result from the slowdown in
the US economy. Ontario has experienced remarkably strong real
GDP growth over the past four years. In the past two years alone,
Ontario has had the best two years of growth since 1984-85, with
real GDP advancing about 12%. This is well ahead of growth of
about 9.5% in the US and 8.2% in the rest of Canada over the same
period.
In Ontario, this consists of
6.1% growth in 1999-the fastest of any province in Canada-and
5.5% growth estimated for 2000. This exceeds our cautious 2000
budget projection of 4.6% growth for 2000. Despite Ontario's
record growth, we must continue to lower taxes and cut red tape
to meet the needs of a changing economy.
Strong domestic consumer and
business spending, stimulated by tax cuts, has powered Ontario's
economic growth. Since our government came to office, about 80%
of our economic growth has been due to domestic spending by
businesses and consumers. The third-quarter economic accounts
confirm this trend. Net exports are actually lower than they were
at the end of 1998. In spite of this, Ontario had very strong
economic growth in 2000, driven entirely by domestic demand.
Business investment has been
a major component of domestic spending growth. In the third
quarter, machinery and equipment investment was more than 25%
higher than a year earlier, as high-capacity utilization rates
and growing business demand for high-technology equipment,
processes and services continued in many sectors. Consumer
spending has also been healthy, reflecting the steady rise in the real disposable income of
the people of Ontario.
By putting more money in the
hands of consumers and businesses and making it more attractive
for businesses to invest in Ontario, our economic and fiscal plan
is helping to create jobs in Ontario at a record pace. In July
2000, our government met our first mandate target of creating
725,000 net new jobs over five years. Since then, Ontario has
added a further 119,900 jobs, putting us well on our way to
meeting the Blueprint target of 825,000 jobs over the following
five years.
For the year 2000 alone,
Ontario created 184,000 net new jobs. The years from 1998 through
2000 were the strongest three years of job creation in our
history. During that time, we gained over 558,700 new jobs, with
employment growth rates well above those of the United States or
the rest of Canada. Ontario's unemployment rate in 2000 was the
lowest in a decade, at 5.7%. This was down sharply from 9.2% at
the time we began cutting taxes.
Our job creation policies are
also succeeding in giving people a hand up rather than a handout.
Since 1995, nearly 570,000 people have broken free from welfare
dependence.
In the first half of the
1990s, Ontarians suffered the worst drop in their standard of
living since the Great Depression of the 1930s. The real income
of the average Ontarian in 1995, as measured by GDP per person,
was lower than at the end of the 1980s. Our government's policies
have turned things around. From 1996 to 1999, real GDP per person
in Ontario jumped almost 12%, considerably more than in the rest
of Canada or the average in the industrialized countries.
The growth of Ontario's
economy over the past two years has been exceptional, but demand
in our key market, the United States, has slowed. This is leading
to slower economic growth in Ontario. This slowing of economic
growth was not unanticipated. In our budget last May, we
predicted strong growth in 2000, followed by a slowing of real
GDP growth in 2001 to a more sustainable 3.1%. As we enter 2001,
this projection is still close to what we expect. This is
consistent with expectations of private sector forecasters, whose
projections for 2001 average 2.8%.
I want to take this
opportunity to emphasize that this slower rate of growth is not
tantamount to recession. Even the most pessimistic private sector
forecast is for 2.2% growth for Ontario in 2001. The most
important element contributing to the slowdown is a pause in the
US economy. The overheated US economy was due for a slowdown, and
the US Federal Reserve raised interest rates in 2000 specifically
for that purpose.
Now that US growth has
slowed, the Fed is aggressively easing rates and a significant
recession in the US remains unlikely. Only 5% of leading US
private sector forecasters think the US economy has slipped into
a recession. Furthermore, the slowdown in the US is expected to
be short-lived. Interest rate cuts should boost US activity in
the second half of year, leading to a rebound in Ontario's
exports to the US.
1020
The growth momentum in
Ontario and Canada from domestic demand is very strong due to the
substantial tax cuts. This suggests that Ontario could outperform
the US in 2001. However, we recognize that there is still more to
do. We will continue with the agenda of the Common Sense
Revolution to make sure that Ontario is ready for whatever the
future brings.
The fact that our economy has
become increasingly diversified helps to buffer us from economic
shocks. When people think of Ontario's industry they usually
think of cars. In fact, the fastest area of growth in the past
two years has been in high-technology industries, such as
telecommunications, electronic manufacturing and computer
services.
Over the past two years
high-technology production has grown by a phenomenal 55%. The
third-quarter 2000 economic accounts show that growth in
high-tech output accounted for fully 34% of Ontario's real GDP
growth. High technology is particularly important to our economic
well-being because it leads to higher productivity growth and to
good jobs that fully utilize our highly educated workforce.
Even if the US goes into
recession, we are in a far better position than we were just a
decade ago to withstand the impact. When we followed the US into
recession in the early 1990s and ultimately suffered a longer,
deeper recession, this was as a result of our own doing. In the
early 1990s Ontario was raising taxes, not cutting them. We were
running deficits, not surpluses. Our debt was rising, not
falling. Government inefficiency and overspending were driving
businesses away from Ontario, not attracting new investment, as
we are today. Welfare rolls were climbing, not falling. Personal
debt levels were high, mainly as a result of the overheated
housing market. In the private sector, our companies were lagging
the US in undertaking the restructuring necessary to adjust to
technological change and global competitive pressures.
A decade ago all governments
in Canada were raising taxes and running deficits. This drove net
public debt as a ratio of national GDP to almost 104% in 1995-96.
Inflation was high and inflationary pressures were greater than
in the US. The Bank of Canada had raised interest rates to levels
far above those in the US. The Canadian dollar was overvalued,
pricing our exports out of the market.
The fact that we suffered a
more severe recession than the US in the early 1990s underscores
how inappropriate economic and fiscal policies can undermine our
competitiveness and economic performance. On the other hand, the
right mix of economic and fiscal policies provides the foundation
for a strong, competitive economy.
Our government came to power
with a clear plan to put Ontario back on track through our
long-term strategy for jobs and prosperity. We have implemented
this strategy in a decisive and consistent fashion through five
successive budgets. We
first outlined this strategy in the Common Sense Revolution. In
the CSR we said we would cut taxes, reduce red tape and balance
the budget while investing in innovation and infrastructure to
improve our competitiveness for the future.
In 1999, following extensive
consultations with Ontarians, the Ontario Jobs and Investment
Board provided us with more specific recommendations on
implementing our strategy for jobs and prosperity through its
report, A Road Map to Prosperity. In seeking our second mandate
we reiterated this strategy through the Blueprint document, where
we reaffirmed our commitment to creating jobs by cutting taxes
and eliminating barriers to growth.
In paper E of the 2000
budget, we once again confirmed and outlined our economic
strategy: lowering personal income taxes to encourage high levels
of domestic demand and to boost incentives for creativity and
hard work; lowering corporate income taxes to attract and retain
globally mobile investment; encouraging innovation and small
business entrepreneurship and attracting and retaining highly
skilled individuals; rebuilding and expanding strategic
provincial infrastructure such as highways, schools, colleges and
universities, and hospitals; restoring fiscal balance and
reducing provincial debt levels.
We knew from the outset that
our economic and fiscal plan would create good jobs and raise the
standard of living of all Ontarians. We never wavered in that
thinking. The results have proved us right. It is now clear to
all levels of government that cutting taxes is the best way to
foster growth, create good jobs and raise the standard of
living.
In our last provincial
budget, we challenged the federal government to follow Ontario's
lead and provide the Canadian economy with the fiscal and
economic stimulus to make Ontario the most competitive
jurisdiction in North America. Last year the federal finance
minister, Mr Martin, finally began to respond to our challenges
with tax reductions for Canadians. However, he could and should
have done more.
Now, Mr Martin is pointing to
tax cuts as providing just the buffer we need against economic
slowdown in the United States. As Mr Martin told an international
audience in New York recently, "A healthy mix of strong
fundamentals-fiscal surpluses, low inflation, tax cuts and
forward-looking policies-means that Canada is better positioned
than it has been in decades to manage economic turbulence."
Similar sentiments were
voiced recently by Gordon Thiessen, the recently retired governor
of the Bank of Canada, who said, "Because of these improvements,
our economy is now in a better shape than it has been for some
time to deal with all kinds of external shocks-including
fluctuations in US demand for our products."
Through our plan, we have
laid a foundation of sound economic and fiscal policies that
positions us to ride out any slowdown in the US and indeed to
outpace the US in terms of growth. As we enter a period of more
sustainable rates of economic growth, our plan will protect the
gains we have made and keep Ontario growing.
Looking beyond 2001, our plan
positions Ontario to continue to prosper in a growing North
American economy. Ontario's strong fundamentals underpin our
continued economic growth:
Tax cuts are fuelling
domestic demand and making our corporate tax rates competitive
with the United States;
Construction activity is
expected to remain strong;
Our budget is in surplus, and
net debt is declining;
Low core inflation lets the
Bank of Canada cut rates without fuelling inflation;
Companies are undertaking the
necessary restructuring to improve efficiencies;
The Canadian dollar is at a
level that makes Ontario's exports very competitive;
The Ontario economy is more
diversified than in the past;
We are poised to succeed in
the knowledge-based economy, with the most educated workforce in
the OECD, an excellent research and training system and a
sophisticated high-technology infrastructure.
Our economic and fiscal
record demonstrates how well our plan for prosperity has
worked.
Cutting taxes, including
personal income taxes, is the single most important act that
governments can take to create a more dynamic economy with
stronger growth today and in the long term. Since we came to
office, we have cut provincial personal income taxes
significantly-by more than 40% for lower and middle income
earners and by at least 20% for higher income earners.
With the introduction of the
made-for-Ontario income tax system, we have been able to offer
other forms of tax cuts in addition to rate cuts. For example, we
have announced enrichments to the value of certain tax credits,
including increases to the disability and education amounts. The
Ontario income tax system is now fully indexed to ensure that
inflation will not erode the value of these tax cuts in the
future.
Through our made-for-Ontario
initiative, Ontarians' capital gains are now taxed at half the
rate applied to other income. We have moved to help high-tech
firms attract and retain research employees by eliminating
Ontario income tax on the first $100,000 of taxable stock option
benefits each year.
1030
We will continue challenging
and working with the federal government to provide a tax system
that encourages job creation and growth and that is administered
at a reasonable cost to taxpayers. We are pleased to see that the
federal government is recognizing that tax cuts create growth and
jobs, and is following our lead by cutting income taxes. I
encourage the federal government to cut its income tax rates by
the same proportion as we have.
In 2001, a family with two
children and income of $60,000 from two earners will save $1,865
in Ontario personal income tax, or more than 40%, as a result of
our government's tax cuts. In contrast, federal personal income tax savings for this family
will be $1,210, or about 15%, as a result of federal tax cuts
that began in 1998. When the federal government's tax reduction
plan is fully implemented in 2004, this family's federal personal
income tax savings will rise to $1,650, or about 20%.
Canada's personal income
taxes are still too high by international standards. Tax cut
plans in the US could further widen the gap between Canadian and
US rates. In the global marketplace, Canada cannot afford to be
known as the jurisdiction with the highest tax rates.
We have also lowered
corporate income taxes to attract and retain globally mobile
investment. Our cuts in the corporate tax rate are scheduled to
bring our combined federal-provincial rate well below current
rates in the US Great Lakes states, our key competitors for jobs
and investment. When our corporate tax cuts are fully in place in
2005, Ontario's combined federal-provincial corporate income tax
rate will be more than 10 percentage points lower than the
average rate of the US Great Lakes states. By 2005, Ontario will
be tied with Alberta for the lowest general corporate income tax
rates in Canada, and we will have cut our small business rate by
more than half. At 4%, Ontario will have the second-lowest small
business rate in Canada.
However, Canada's corporate
income tax rate needs to be more internationally competitive.
Canada has the highest corporate income tax rate among
industrialized countries. Ontario is acting to reduce the general
corporate income tax rate by almost half by 2005 to improve our
international competitiveness. If the federal government were to
accept our challenge and match our corporate tax cuts, Ontario's
combined federal-provincial rate, at 23%, would be among the
lowest in the world.
Paul Martin said recently
that the recipe for success in the global knowledge-based economy
includes "a globally competitive tax system that fosters
entrepreneurship." We urge Mr Martin to act on these words and
make our tax system the most competitive anywhere.
Our plan is positioning
Ontario to succeed in the high-tech knowledge-based economy.
Advanced skills support growth across all sectors of the economy,
particularly in fast-growing new economy industries such as
information technology, telecommunications and broadcasting
media. In 2000, employment in these industries in Ontario grew to
359,000, with a growth rate of over 10% from 1999.
We already have the most
highly skilled and educated workforce in the OECD. We are
building on that strength by expanding our post-secondary system
with the largest capital investment in 30 years. Through
SuperBuild, the province and its partners are investing $1.8
billion to create 73,000 new student spaces in universities and
colleges. We are also generating strategic partnerships between
business and institutions to create the skills needed for
competitiveness and to increase the speed with which institutions
can respond to industry's training needs.
New ideas based on
innovation, research and entrepreneurship are a major source of
economic growth and jobs. We are building world-class research
and development capacity at our universities, colleges and
hospitals through the Ontario R&D challenge fund and the
Ontario Innovation Trust.
Ontario's positive business
climate also supports entrepreneurship, R&D and the retention
and growth of high-tech workers. For example, we are eliminating
Ontario personal income tax for eligible research employees of
R&D-intensive firms on up to $100,000 of taxable stock option
benefits and associated taxable capital gains per year.
Last October, we announced
the research-oriented investment fund program, which supports
access to venture capital from labour-sponsored investment funds
for emerging firms conducting R&D.
Our plan has put our fiscal
house in order. By refocusing government on core services and
through sound management, we are on track to achieving a second
consecutive budget surplus and have begun to pay down net
provincial debt.
The recent upgrading of
Ontario's debt rating by Standard and Poor's is a concrete
expression of confidence in our fiscal and economic management.
Standard and Poor's now gives Ontario the second-highest rating
among the provinces, after Alberta.
In announcing the upgrade-the
first they have conferred on Ontario since 1988-Standard and
Poor's said this reflects "the expectation of continued
favourable fiscal policy, geared toward modest but steady debt
reduction, even should the pace of economic growth fall from the
high levels of recent years."
As well, just last Friday,
Moody's revised its outlook for the province from stable to
positive, citing Ontario's improving fiscal performance and "the
promise of debt reduction over the medium term."
I am pleased to report that,
as at third quarter, we are on track for a $1.4-billion surplus
in 2000-01.
In the 2000 budget we
increased our commitment to reduce net provincial debt by at
least $5 billion during this mandate. By the end of this fiscal
year we will be more than halfway to meeting this increased
commitment, based on the third-quarter surplus outlook. The
balanced-budget taxpayer-protection legislation will ensure we
remain on track and not repeat the errors of the past.
Our drive for more efficient
government is ongoing. We will continue finding efficiencies and
new ways of delivering services that provide taxpayers with
better value for their money.
Our government is working
with public and private sector partners to build the strategic
infrastructure that will keep Ontario competitive and enhance our
quality of life. This year, SuperBuild's capital investment will
total more than $2 billion. This includes a $1-billion investment
in Ontario's highways, the largest amount in the province's
history.
In addition, we have established three new
partnership initiatives: SuperBuild millennium partnerships, the
Ontario small town and rural development program and the sports,
culture and tourism partnerships initiative. Through these
partnerships, SuperBuild will invest more than $1.7 billion in
regional and local infrastructure over the next five years.
Our economic and fiscal plan
has generated the economic growth and resources that have enabled
us to invest in Ontario's priorities at the same time as we were
balancing the budget. This investment in turn provides the
underpinning for our future quality of life and
competitiveness.
Health care remains one of
the government's top priorities. We have increased health care
operating spending by $4.9 billion since taking office, despite
federal cuts. In addition, we have fast-tracked an investment of
$1 billion through SuperBuild to accelerate hospital
restructuring.
Our economic and fiscal plan
has worked. It has laid the foundation for a stronger Ontario
that can withstand the impacts of any slowdown in the US economy
and that will continue moving us forward, building on the gains
we have made.
1040
While we take pride in these
achievements, we are conscious that continued sound management of
the province's economic and fiscal affairs is essential for us to
reach our full economic potential. Jobs and the economy are our
number one priorities. We recognize that there is more to do, and
by focusing on these key areas, we can create and keep more jobs
in Ontario.
The 2001 budget provides us
with an opportunity to continue implementing the kinds of
economic and fiscal policies that will create more jobs and
further increase the standard of living for the people of
Ontario. Ontario must not become complacent.
I look forward to hearing
from your committee and from the taxpayers of Ontario on measures
we can take to continue to build a stronger Ontario with brighter
futures for all of us.
The Chair:
On behalf of the committee, Mr Minister, thank you very much. We
have approximately 10 minutes per caucus, and I'll start with the
Liberal caucus.
Mr Phillips:
This will be the first time, I think, that the government will be
projecting economic growth above the private sector forecasters,
at least the first time I can recall. Is there a reason that you
would project economic growth above private sector forecasts, and
if you are wrong, what are the implications?
I note, by the way, it was
just two months ago that the private sector was saying, I think,
3.7% growth. I gather they are now down, in the space of two
months, to 2.8%.
Hon Mr
Flaherty: As you know, we built in some surplus
budgeting in the year 2000 budget. The economic predictions by
various forecasters have varied over time. We've included the
most recent forecasts to avoid giving an overly optimistic view
of the present predictions with respect to growth in the
province, but the prediction is for continued economic growth in
Ontario this year, getting better as the year goes forward.
Mr
Phillips: My question really was, why would you, or why
would the government, for the first time predict economic growth
above the private sector forecasters?
Hon Mr
Flaherty: I think at the time of the budget it was not
above their predictions at all.
Mr
Phillips: But I gather from your presentation today you
are assuming 3.1% growth.
Hon Mr
Flaherty: No, the year 2000 budget assumed 3.1%
growth.
Mr
Phillips: What is your advice for us in terms of-I
assume today you are predicting 3.1% economic growth for Ontario
in the year 2001. Is that what you're saying?
Hon Mr
Flaherty: What I would say is that the current consensus
calls for real GDP growth to slow from 5.5% in 2000 to 2.8% in
2001.
Mr
Phillips: So you're not predicting 3.1% growth.
Hon Mr
Flaherty: The current prediction is 2.8%.
Mr
Phillips: So that's what you're predicting?
Hon Mr
Flaherty: I'm not in the prediction business. That's
what the experts are predicting now. We are of course mindful and
vigilant with respect to what is happening in the United States,
and we're well positioned in Ontario, through prudent fiscal
management over the past five years by Minister Eves, to deal
with whatever slowdown there is from the very high levels of
economic growth in the United States and Canada over the past
five years or so.
Mr
Phillips: It's strange to me that normally you come to
our committee and say, "Here's our prediction for economic
growth," and I gather you don't have one right now.
Hon Mr
Flaherty: I've given you the current prediction.
Mr
Phillips: The 2.8%? That's what you're building the
budget on?
Hon Mr
Flaherty: Currently.
Mr
Phillips: The Premier said recently on health spending
that he believes the costs on health spending will rise 5% a year
for the foreseeable future. In fact, he says the cost
increase-the estimate-is modest at 5% and almost certainly an
underestimate.
Have you, in your planning,
assumed at least a 5% increase in provincial health care funding
over the foreseeable future, and if there is an economic slowdown
beyond what you predict, can you assure Ontarians that health
care will be protected at what I gather the Premier said was at
least a 5% increase in spending needed?
Hon Mr
Flaherty: Our government's record with respect to health
care spending, as I'm sure the member knows, is of meeting the
needs of Ontarians and increased health care spending year after
year as we've moved forward, at the same time moving toward
balancing the budget and in fact balancing the budget.
In the 1999 Blueprint, the
Premier committed to increase health care funding by 20% over
five years, and that would be from $18.9 billion in 1998-99 to
$22.7 billion in
2003-04. This funding was guaranteed regardless of federal
action.
There are a couple of
issues there. One is the reality of the need for increased
federal support for health care in the provinces, and the other
reality is the need for the continuation of health care reforms
by the provinces, including Ontario. We have the report of the
provincial and territorial ministers of health in August 2000
dealing with the underfunding by the federal government of
Canada's health care system. The report concluded that there is a
growing need for health services to be subject to some reform,
including primary care reform, which is important in Ontario, as
well as health promotion and prevention strategies. So there's
much to be done in health care, but our commitment, of course, is
to meet the needs of the people of Ontario.
Mr
Phillips: You see, I thought when the Premier was making
his case that he said he believes spending in Ontario is going to
go up 5% a year for the foreseeable future. That was his public
argument. Are you telling us today that that may not have been
what he meant, that in fact when he was saying that he believed
costs would go up at least 5% a year and that the province would
have to fund at least 5%, that wasn't what he meant, or what is
your commitment on the health spending?
Hon Mr
Flaherty: You know and I know, looking at the health
care figures, that in fact the spending is going up much more
dramatically than that. The pressures in the health care system
are very large. The 5% pressure facing the system relates to an
aging population, inflation and other factors. It's not a
forecast of future spending but it's an estimate of future health
pressures over time, and if we don't proceed expeditiously with
the needed reforms, then those pressures will in fact be
exceeded. So it's important that in addition to the 20% over five
years commitment, we proceed with the reforms in health care and
that we also receive an appropriate contribution from the federal
level, not only Ontario but the other provinces as well.
Mr
Phillips: That's very interesting.
On tax policy, you've
indicated that Ontario's corporate taxes will be substantially
lower than the neighbouring US states, and as I look at the
income tax structures that you're proposing, that would be at the
US states. Capital gains I think are now at the US states. But in
your documents for attracting business to Ontario, Here's Where
You Should Be Doing Business, you say, "US manufacturers pay, on
average, more than $3,100 per employee for the kind of health
care coverage provided by Canada's publicly supported system,
whereas Ontario employers pay about $540"; in other words, about
a $2,500 difference.
My question is on the tax
policy. That difference in funding for health care comes because
we've chosen collectively to fund the health care system very
differently than the US. We do it mainly through our taxes. If
we're going to have corporate taxes substantially lower than
neighbouring states, and personal income tax around the
neighbouring US states, capital gains taxes at the neighbouring
US states, where do we find the money to fund that unique health
care system that, as you point out in your own documents, means
that employers in Ontario are paying at least $2,500 per employee
less? Where do we fund that? Where do we find those resources for
a very different health care system in Ontario than in Michigan
or in Illinois or in New York?
Hon Mr
Flaherty: That's a good question. We have to obviously
keep on track with making sure our tax rates are competitive and
low, with continuing to reduce taxes in Ontario. We've proven,
contrary to what many said at the time, in the mid-1990s, that by
reducing taxes we can create more revenue, more stimuli in the
economy, and that increases government revenues. That has worked.
The clear evidence of that is the fact that Minister Eves was
able to bring in balanced budgets despite the tax cuts, and at
the same time substantially increase health care spending in
Ontario despite the fact that the federal government was reducing
health care spending. Not only can it be done; it has been done
in Ontario.
1050
Mr
Phillips: I would like you to maybe prepare a little
document for this committee, then, because there is no magic in
this. We've chosen to fund health care in a very different way
than Michigan and Illinois and whatnot. In this same document you
point out that the auto sector saves $400 million a year on
health costs, because of the uniqueness. There is no magic, but I
would like you to demonstrate to us-lower tax rates, a higher
unemployment level, lower per capita income-where is that money
going to come from? This is not voodoo economics. You should be
able to show us, "Here is where I'm going to fund health care,"
and prove to us that you can have corporate income tax rates
which I gather from your documents are going to be substantially
lower, personal income tax at the US, capital gains at the US.
Where does this revenue come from?
Hon Mr
Flaherty: As Mr Martin, your federal finance minister, a
member of your political party, says, this is the stimulus for
our economy. This is what creates jobs and investment. It has
taken him and the Prime Minister a long time to climb on board,
but the reality is that it does work. Ontario has shown the way
and the federal government is now following along. We wish they
would accelerate their program because then we would have more
revenue for health care in Ontario.
Mr
Phillips: Can I just request that the staff give us
documentation on the revenue that will flow from these tax
policies and how we fund our health care, because that's pretty
fundamental, I think, to the minister's presentation. If we could
get that from the minister's staff, I would appreciate it.
Hon Mr
Flaherty: What you're asking for is what I have just
provided you with. It is the reality that our tax policies have
resulted in increased revenues for the province, and you know
that more than 40% of the operating program is going to health
care.
Mr
Phillips: Actually, you haven't provided me with that. I
wouldn't mind it.
The Chair: Thank you. Mr
Christopherson.
Mr David
Christopherson (Hamilton West): Let me also congratulate
you, Minister, on your appointment.
I was just thinking,
because some of the faces here of course I am familiar with,
having spent two years in the Ministry of Finance as the
parliamentary assistant prior to appointment myself, and it
occurred to me that there's a good chance that about a year or so
from now I could see you and former Minister Laughren having
dinner one night and both of you agreeing, "Timing really is
everything in politics"-
Hon Mr
Flaherty: Or height.
Mr
Christopherson: -because I think there is a similarity
between the situation you've inherited and the one that he
inherited back in 1990.
Hon Mr
Flaherty: I'm taller than Floyd.
Mr
Christopherson: Let me point out to you, Minister, that
while what you've outlined here today may play well at the
corporate board table, it doesn't play so well at the kitchen
table. The fact of the matter is that we told you all along that
the reason you were able to cut taxes and still see growth was
the fact that the American economy was leading the way, and you
denied it, and you deny it again today. In your report, you take
all the credit for everything that's happened, and yet the first
downturn in the US economy in the last few years, and to date
we've been able to count over 15,000 layoffs, either temporary or
full-time, and rising.
My first question to you
would be, how can you on the one hand say that everything that
has happened in Ontario is because of what you've done, not in
the US, when we said the opposite, and yet the first time there
is a downturn in the US economy, we're seeing tens of thousands
of jobs being lost through layoffs? How do you square that
circle?
Hon Mr
Flaherty: A couple of things. First of all, we have
continuing economic growth in Ontario, and that's important. We
also have continuing job growth in Ontario. The figures for
January were, I think, net 16,000 new jobs in Ontario.
But dealing with your point
about the role of the domestic economy, as I said in my remarks
earlier, since our government came to office in 1995, about 80%
of our economic growth has been due to domestic spending by
businesses and consumers. We also hear the comment fairly often
about the auto sector and dependency on the auto sector. I
mentioned also in my remarks, and it's really something I hope
people in Ontario would recognize, the growth of the high-tech
sector. Certainly our colleagues from the Ottawa area-I guess
there aren't any on this panel-know this very well. For example,
in the year 2000, auto production grew only 2.9% in Ontario.
High-tech output in Ontario in 2000 grew 24%. We have remarkable
growth in that sector within our own province.
Mr
Christopherson: Let me just say to you, Minister, that I
suspect that if things continue the way they are, much like your
ministry had to do an overnight re-evaluation of what it was
projecting, you're going to be continually re-evaluating where
you are going and trying to explain why we're losing so many
jobs. Your argument that there's enough domestic demand to offset
the downturn in the US is just not going to hold, in our
opinion.
But I also want to draw
attention to what you said on page 8. You said, "In the global
marketplace, Canada cannot afford to be known as the jurisdiction
with the highest" taxes. Yet what we're becoming known for is
Walkerton. What we're becoming known for is a massive and serious
deterioration in our education system, in our health care system.
No longer do we have any kind of social housing policy
whatsoever. Some of our municipalities are on the brink of facing
bankruptcy; at the very least, looking at massive increases in
property taxes to offset the cuts you've made in transfer
payments in order to be able to sit here today and talk about all
the great tax cuts that you've made.
The fact of the matter is
that the United Nations has chosen Canada as the best place in
the world to live not because we give the richest people in our
country the biggest tax breaks. It's infuriating to have you come
in here and say to us that everything is wonderful because the
rich are getting richer.
I'm one who doesn't like to
play to sort of the extremes, but that's the reality. We were
known as the greatest place in the world to live because of our
progressive education system and all those who had access to it,
and certainly for our health care system, and certainly for our
environmental protection, which you've watered down and chopped.
In fact, in the last budget you're so proud of, you chopped more
money from the Ministry of Natural Resources and from the
Ministry of the Environment on the heels of what happened in
Walkerton.
So for you to suggest that
we need to worry about what our reputation is about tax rates
doesn't fly very well with those 15,000 people who are out of
work. Those 15,000 people, and there are going to be thousands
more-you would know that only one third of Canadians are now
covered by employment insurance. You've ratcheted down
eligibility to welfare to the point where a lot of people right
now, when they receive a pink slip, are not qualifying for EI,
not qualifying for welfare, because both the federal government
and you have changed the rules because you didn't want to put out
so much money, because you needed the fiscal room in order to
give the tax cut. They've got to wonder where they're going to be
and where their family's going to be in a few years.
Let me ask you, Minister:
if you were in that situation and you're one of the majority that
doesn't qualify for employment insurance, and you don't qualify
for social assistance, how do you put food on the table? What
good is a tax cut to you at that point?
Hon Mr
Flaherty: The tax cuts have resulted in more than half a
million people leaving welfare and obtaining jobs in the province
of Ontario. I'm very proud of that. Our government is very proud
of that. What better route from poverty is there than having a job and
having a future and being able to support one's family?
I can tell you, my
constituents-and I hear this around the province-want tax cuts.
They realize that they are very heavily taxed. At the same time,
they want the government to meet the education and health care
needs that they have. Indeed, if you look at the spending figures
for the province of Ontario, Minister Eves and the Premier were
able to accomplish that over the course of the past five years;
that is, tax cuts increased government revenues to the point
where the government not only was able to increase spending on
health, not only was able to increase spending on education but
also was able to balance the budget. That's good, sound fiscal
and economic management. We're going to continue that kind of
management in Ontario.
1100
Mr
Christopherson: You didn't answer the question. You
didn't answer the question of what happens to that family facing
a Mike Harris future when they've been given a pink slip. You
don't want to talk about the fact that even with the tighter
qualifications for welfare, StatsCan is showing us that in
January, 4,500 more people were on welfare than there were
before. StatsCan is also showing us that for the first time,
part-time job growth is overtaking full-time job growth. All
these things are happening at exactly the same time the US
economy is slowing down. Minister, it's not a coincidence. You
cannot sit there and say that tax cuts create jobs and then have
massive tax cuts, and then, when the US economy goes into the
tank, we suddenly have thousands and thousands of layoffs and our
welfare rates are going up, and then talk about how tax cuts are
going to continue to pull us out of this. It doesn't wash.
You were so fortunate.
That's why I opened up with the quip that timing is everything in
politics. When you assume office with a roaring US economy,
you're bound to see a bounce here in Ontario. We warned you about
that and you refused to acknowledge that that had anything to do
with it, and you did it here again today. Now, on the brink of
what might or might not be a US recession-we don't know, no one
knows where it's going to end up, but certainly the projections
coming from most economists are getting close to, if not lower
than, half of what they were less than two months ago.
In my opinion, you should
have been rolling in here and raising the alarm. You should have
been announcing to us that you're going to stop all the planned
tax cuts and that you're going to make the reinvestments in the
things that make a difference in Ontario. Never mind this
nonsense about whether or not we've got the reputation as being
the highest-taxed. Do you know what it's going to feel like for
somebody sitting at home who got a pink slip from General Motors
a few weeks ago to hear you brag about the fact that people
receiving capital gains only have to pay half the tax they used
to pay, and that person sitting at their kitchen table doesn't
even know how they're going to pay the rent next month? Do you
know how that makes them feel? When I ask you the pointed
questions, you go off in some other direction. You don't want to
deal with the real issues here.
What are our municipalities
supposed to do? You haven't talked about that at all. We've got
Toronto in crisis. Certainly in my hometown of Hamilton we're in
crisis in terms of trying to deal with the cuts. What are those
municipalities supposed to do? Are they supposed to cut services
further? Are they supposed to raise property taxes to cover off
the services you're not providing? What are our municipalities
supposed to do?
Hon Mr
Flaherty: Certainly many of them have applied for the
SuperBuild OSTAR program-those applications have been flooding
in-to deal with infrastructure needs in the municipalities. It's
a very important program in Ontario, and I'm sure you're familiar
with it. We're not going to do what your government did. We're
not going to raise taxes. We're not going to have record
unemployment numbers, as your government did, driving our
province into that horrible recession in the early 1990s. If
that's what you're suggesting we ought to do, we're not going
there. It's bad fiscal management. Your government proved it's
bad fiscal management. We're raising the standard of living, the
quality of life, of all people in Ontario and we intend to
continue to do that by the sound fiscal management we've had in
the past.
At the same time, I note
the increase in welfare rates. We must be vigilant about that,
particularly during the winter months. There's some fluctuation
there. We must watch that, and watch it in comparison with the
employment numbers, the 16,000 new jobs last month in
Ontario.
I agree with the member if
what you're conveying to me is that we must be vigilant with
respect to developments in the economy. Indeed we are. We're
watching very closely.
The Chair:
Thank you very much, Mr Christopherson. The government side.
Mrs Tina R.
Molinari (Thornhill): I will begin and then I will leave
some time for my colleagues because I know they would like to
have some questions and comments.
First of all, Minister, I
want to congratulate you on your appointment. It's certainly
entering interesting and exciting times ahead, as the finance
committee is going to be working with you closely to see that we
implement some of the needs for the Ontario people and what's
best for Ontario.
I also want to commend you
on your presentation on this first day of pre-budget hearings. It
certainly sets the stage for the hearings we'll be engaging in in
the next two weeks. It's clearly evident that past policies of
tax cuts and job creation have put us in a position now where we
can withstand the slowdown of the US economy. You've certainly
made that clear in several of the comments in your
presentation.
Just before I ask the
question, I want to make a comment on Mr Christopherson's
comments that this plays well at the corporate table and not at
kitchen tables. I've sat around many kitchen tables and during
the time when the $200
rebate came back, many people told me of different things they
were able to do with that rebate. Some bought new shoes for their
kids, some bought their groceries and others donated the money to
their favourite charities. So I think that also around kitchen
tables the tax cuts are doing well for all of the people in the
province of Ontario and it's not just for those whom the
opposition would think it benefits.
Minister, I want to talk a
bit about the made-in-Ontario income tax system. There are a lot
of benefits to that for all Ontarians because it will cater to
the specific need of those in the province of Ontario. My
constituents have often asked how this system will work and how
it will benefit the taxpayers. Some are concerned about whether
it would be more burdensome or expensive to the taxpayer. Can you
share with us what the greatest benefits of this system would
be?
Hon Mr
Flaherty: I think some of the members will recall this:
the difficulty we had reducing taxes in Ontario was our being
hooked in with the federal system. We are able now with the
made-in-Ontario policy to clearly define the Ontario tax cuts,
and the federal government can similarly, as they reduce
taxes-and we hope they'll continue to do that-clearly identify
their tax cuts. It will mean a few extra lines, a few extra
entries for people completing their income tax forms, but it
won't mean a separate income tax form. It won't be more
complicated for people to prepare and file their income taxes in
the province of Ontario. It also permits us to deal with
provincial tax credits from Ontario separately and directly and
clearly so that there will be transparency for people. They'll be
able to see which level of government is reducing taxes or
not.
Mr John O'Toole
(Durham): Again, Minister, I would like to convey my
congratulations, not just from the people of Durham but all of
Ontario really, universally actually. I do reiterate Mrs
Molinari's comments, but not just the comments made specific to
the kitchen table or the board table.
On page 8 you mentioned, I
think, the most important message of the domestic economy and the
tax cut, whether it's the direct cheque to the taxpayer or it's
the relief. I wonder if you could just speak to the question. I
have five children, and you know that I really speak quite
genuinely from that perspective. You use it in your example here:
a family of two, an income of $60,000 from two earners, will save
$1,865-almost $2,000 a year in personal income tax. That's a 40%
change. I just want you to address that, that the federal
government could match. That's the challenge you've put out. The
federal government could match that kind of tax change.
Clearly, that's what you're
counting on, I think, the domestic economy being responsive to
the tax cuts that we've generated over the past five years and
going forward. Is that a fair assessment on my part?
Hon Mr
Flaherty: Yes, I think that's a fair assessment. You
hear from time to time the comment that the tax cuts are not a
lot of money. Where you live and I live-in Durham region I
imagine it's the same in your riding as it is in mine-I hear
repeatedly from people, "Boy, an extra $1,000, an extra $1,800
after taxes in my pocket that I can use for my family, for hockey
equipment and all the other demands that are on parents these
days raising children, is really appreciated." In most families
today both mom and dad are working outside of the home. That's
probably one of the largest social changes we've seen in the last
generation in Canada. Taxes are high still, despite the fact that
we've been reducing them in Ontario and the federal government's
finally climbing on board. I think we have to do more to let the
hard-working people of Ontario, the mothers and fathers, keep
more of their money so they can use it for themselves and their
families, and that's what we're trying to do.
1110
Mr
O'Toole: Mr Galt has a question.
The Chair:
A quick one, Mr Galt.
Mr Doug Galt
(Northumberland): Thank you very much, and again,
congratulations to you in your appointment. It's also really
great to hear in your speech that you're on the same and the
right track, coming from the Common Sense Revolution and from the
Blueprint that the Premier has laid out for us.
We've often heard the
opposition complain that we haven't improved in our provincial
debt rating. Now we have from Standard and Poor's and also from
Moody's an improvement in our rating. Could you maybe explain to
us, give us more detail on what this means? Is that going to mean
a better interest rate? Is it going to mean more availability? We
have heard the opposition complain in the past, "Oh, with all
your moves you haven't improved in the ratings." Well, lo and
behold, we now have improved our rating. What does that mean to
the future?
Dr Bob
Christie: Perhaps I could address that. In this case,
since both of the major US rating houses have given indications
of a more favourable rating position for the province, the
ratings are generally regarded as indications that affect both
the cost at which someone borrows and also the access to markets.
Some of the major lenders will have limits on how much they can
invest at each rating level. Generally a rating improvement like
this should have benefits in both the cost and availability of
funds. Both of these were done by the major US houses. Lately
most of our borrowing has been done in Canada, so the extent to
which we would see that in the short term is something that we
couldn't really quantify, but we would expect them to be
positively received by lenders.
The Chair:
With that, we're out of time. On behalf of the committee, Mr
Minister, thank you very much for your presentation. I think the
members weren't too harsh on you this morning.
Hon Mr
Flaherty: Thanks.
The Chair:
Our next presenters will be representatives from the Ministry of
Finance, so if you could please come forward. Since we're running
a bit late, is the Ministry of Finance ready to go?
For the record, could you
state your name, please.
Dr Christie: My name is Bob
Christie. I'm the deputy minister. To my immediate right is
Gabriel Sékaly. Gabe is the assistant deputy minister for
our fiscal and financial policy division. To Gabe's right is Gadi
Mayman from the Ontario Financing Authority. To my left is Phil
Howell, who is the assistant deputy minister of the office of
economic policy.
The Chair:
On behalf of the committee, welcome. You have 60 minutes for your
presentation this morning.
Dr
Christie: Thank you, Mr Chair. I am very pleased to have
the opportunity to address the committee this morning. I will
give you a brief overview of the province's economic and
financial position and that will be followed by presentations
from several of the assistant deputy ministers on their areas of
expertise. Phil will talk about the economic outlook, Gabe will
talk about the fiscal situation, including the third-quarter
Ontario finances, and Gadi will give you an update on the
province's financing plan.
The outlook for the Ontario
economy, as was noted, is for a slowing of growth in 2001. No
forecasters are expecting a secession of growth. I believe, as
the minister noted this morning, the lowest forecast certainly
that we have to date is for 2.2% growth. The third-quarter
economic accounts that we've released today indicate that our
real GDP grew by 1.4% in the third quarter, and for 2000 as a
whole, we estimate that the economy grew by 5.5%.
As you know, the US
economy's actual growth pace slowed sharply in the second half of
last year. From an annualized growth rate of over 5% in the first
half of 2000, US real growth slowed to 2.2% in the third quarter
and 1.4% in the fourth quarter. As was noted, Ontario's economic
growth in recent years has been generated mainly by domestic
forces, that is, household spending, business investment etc.
This is one of the reasons that forecasters are expecting our
economy to remain relatively healthy.
Of course, our Ontario
economy is an open economy; it's a trade-oriented economy. The US
is our dominant market and exports to the US are critical to our
economy. As a result, the slowing in the US, particularly in
autos and capital goods, will have an impact here. The outlook
down there is for the slowdown to be relatively mild and
relatively short. The central banks, particularly the US federal
reserve, have moved rapidly to lower interest rates. Tax cuts are
helping to sustain consumer spending here, and there are strong
prospects that tax cuts will be implemented soon in the US.
As I noted, the private
sector forecasts are expecting somewhere between 2.2% and 3.2%
real growth for Ontario in 2001. Last year inflation rose to
2.9%, due in large part to rising oil and natural gas prices. For
2001, 2.8% is the upper end of the range, and forecasters
generally expect inflation to ease back to about 2.6%. With
slower growth, the unemployment rate is expected to edge up from
5.7% to 5.9% in 2001. This, again, is based on what the private
sector people are seeing. Job creation they expect to remain
positive, but on average these forecasters expect labour force
growth to be slightly faster.
The chart shows how the
outlook for the Ontario economy has evolved since the May budget.
Last year the economy grew substantially faster than the
predictions in the budget. The result was stronger revenue
growth, and Gabe will talk about that.
Last year's budget planning
number and the consensus for 2001 was 3.1%. At the time, that was
relative to the average of private sector forecasters of 3.2%. As
we've seen today, the outlook for growth has moderated somewhat,
and the average private sector forecast is now 2.8% for 2001
versus 3.1% from last May.
1120
There are significant
grounds for optimism that the Ontario economy will emerge from a
brief slowdown last year in strong shape. Obviously we intend to
maintain a prudent approach to economic and fiscal planning, and
we'll monitor the economy closely in preparation for this year's
budget.
On the budget plan itself,
the balanced budget was achieved one year ahead of schedule. In
each of the past five years, deficit reduction targets have been
overachieved, and this year we continue to project a $1.4-billion
surplus based on the third-quarter accounts, which means that
Ontario is on track to record its second consecutive surplus-the
first back-to-back surplus in more than half a century.
At this point, I'll turn it
over to Phil to provide a presentation on the economy.
Mr Phil
Howell: I'm pleased to have the opportunity to address
the standing committee. Today the Ministry of Finance is
releasing the third-quarter Ontario economic accounts. The
accounts show that Ontario's strong economic growth continued
through the summer and into the fall. However, more recently the
US economy has slowed, raising concerns about Ontario's growth
prospects this year.
Today I would like to
provide you with some perspective on this development and provide
you with an economic backdrop to assist you in your forthcoming
hearings at Queen's Park and around the province.
Ontario entered 2001 on the
back of four years of outstanding real gross domestic product
growth performance. Over that period, growth has averaged in
excess of 5% annually. While the fourth-quarter economic accounts
will not be available for some time yet, available data points to
continued growth. For example, Ontario employment was up by
64,000 jobs in the quarter, the best performance in two years.
Manufacturing shipments were up in both October and November.
Ontario department store sales were up 5.3% in the final quarter
from a year earlier. The data confirmed that the 2000 economic
and fiscal review estimate of 5.5% real gross domestic product
growth for 2000 is on track.
Not surprisingly, the
strong economic growth has been accompanied by substantial job
creation. The past three years have been the best three years of
job creation in Ontario's history. The unemployment rate for last
year was 5.7%, the
lowest annual rate in well over a decade. Adding to the
significance of the total employment gains has been the
composition of new jobs compared to earlier in the decade. Almost
all the jobs created in recent years have been full-time
positions, a development that underpins increased consumer
confidence and ability to spend.
Sustained high economic
growth rates require strong growth in domestic demand, that is,
spending by consumers on goods and housing and by business on
machinery, equipment and factories. Of course, trade is also
critically important to our economic success. However, as this
slide shows, growth in the first three quarters of 2000 has been
driven by domestic demand. In fact, net trade, that is, exports
minus imports, has subtracted from growth over this period.
Slower US demand for our exports was offset by continued strong
spending in Ontario on imported consumer and investment goods. In
fact, this trend has been evident in recent years. Over the
1997-2000 period of exceptionally strong growth, domestic demand
has accounted for almost 93% of growth. This contrasts sharply
with the previous four years, when the major source of growth was
net trade. Clearly, Ontario's vulnerability to developments in
the US economy was much greater in the earlier period.
The next slide helps
explain the remarkable turnaround. In the 1993-96 period, real
consumer spending, which accounts for about 55% of total spending
activity in the Ontario economy, was constrained by falling per
capita real disposable income. This was the legacy of increasing
personal income taxes alongside very sluggish employment growth.
In the more recent period, tax cuts have stimulated growth in
consumers' real disposable income, which has translated into a
significantly higher consumption growth rate.
Looking forward, the rising
trend for real disposable income will continue. The forecast
includes the impact of federal tax cuts in 2001 as well as the
cumulative impact of Ontario's tax moves. Increasing real
disposable income is an important buffer against the impact of
the slowing US economy in Ontario.
The third-quarter economic
accounts also underscore the diversification of the Ontario
economy. Over the first three quarters, growth was spread across
several major sectors. Note that the auto sector has not been
growing that quickly, reflecting the fact that the industry was
operating at record capacity and production levels. Production in
the auto sector will decline in the first half of this year as
companies move to rebalance inventories in the face of lower
North American demand for new cars. One of the reasons our budget
and fall statement growth forecasts were significantly lower than
for 2000 was our belief that auto production and sales would
temporarily decline from the record levels of recent years. Of
note, however, is the strength in other sectors, particularly the
high-tech sector.
Growth in the high-tech
sector, which includes computer manufacturing, telecommunication
and electronic manufacturing, computer services and
telecommunications carriers, has picked up noticeably in recent
years. Although the sector still accounts for a relatively small
share of Ontario's GDP-7.2% over the first three quarters of
2000-it has grown from a 4.4% share as recently as 1996. Over the
past four years, growth in the high-tech sector has averaged
19.2% annually, against an economy-wide average annual growth of
5.3%. This sector will play an increasingly important role in
Ontario's economy in coming years.
As the deputy noted in his
earlier remarks, growth in the US slowed sharply in the second
half of 2000 and, as also already noted, there will be an impact
on Canada and Ontario. The extent of that impact will be
influenced by the depth and duration of the US slowdown. As the
slide indicates, most private sector forecasters expect the US
economy to pick up steam as 2001 unfolds. A similar bounce-back
is expected in Canada. Prompt action to reduce interest rates by
the US Federal Reserve underpins forecaster expectations that the
recent very slow growth will be temporary.
Declining North American
auto production in the face of the much slower US demand has been
a major contributor to slower US growth. Canadian production,
depicted on the slide, is expected to slow from the very high
record levels of production in 1999-2000. As noted earlier,
reduced production volumes in Ontario in 2001 are a significant
factor in the slower growth forecast. However, while moving
Ontario GDP growth to a lower rate than the experience of recent
years, the slowdown in auto production and related manufacturing
industries does not appear sufficient to derail Ontario's
economy.
In the next few slides, I
will look at a number of factors which will contain the negative
impact of the US slowdown on Canada and Ontario. In particular, I
will draw attention to the differences with the situation that
prevailed during the early 1990s.
1130
Ontario's manufacturers
continue to be much more competitive, relative to their American
counterparts, than was the case in the early 1990s. With the
Canadian dollar trading in the 65- to 67-cent range against the
American currency, Ontario producers are well positioned to take
advantage of the pickup in US growth expected later this year.
Ontario's cost advantage also keeps Ontario an attractive
location for investment by companies interested in the North
American market.
Another important
consideration in assessing the current North American economic
situation is the fiscal position of governments. Unlike the first
half of the 1990s, governments on both sides of the border are in
strikingly improved fiscal positions. This has enabled
governments to lower taxes and provide stimulus to both consumer
and business spending.
The capacity of consumers
in both Canada and Ontario to take advantage of the fiscal
stimulus is also greater today than was the case earlier in the
1990s. Rising personal disposable incomes triggered by personal
tax cuts, combined with lower interest rates, have increased the
ability of Canadian consumers to service their debt. The slide shows the downward trend
in household debt servicing costs over the past decade.
Businesses too have
improved their balance sheets over the 1990s. Corporate
debt-to-equity ratios have declined significantly as illustrated
in the slide. Reduced reliance on debt increases companies'
flexibility to manage cyclical fluctuations in demand for their
products.
Perhaps the most
significant difference in today's economic environment compared
to 10 years ago is the inflationary situation. In Ontario, Canada
and the United States, inflation rates are not only less than
half what they were in 1990, but the levels are also very low.
While energy price increases pushed up inflation rates last year
in all three jurisdictions, forecasters predict inflationary
pressures from that quarter have peaked. As well, the slowdown in
the US economy has reduced the inflationary risk facing the US
when it was operating at full capacity in 1999 and early
2000.
The benign inflation
outlook makes it much easier for monetary authorities in both
Canada and the US to respond to cyclically slower growth. The
decisive 100-basis-point reduction in the funds rate by the US
Federal Reserve in January and a smaller move by the Bank of
Canada to cut the bank rate are reflected in the decline in
interest rates shown in the slide.
Consumer confidence remains
near peak levels. The January increase in Ontario employment and
the increase in January housing starts suggest consumer
confidence remains reasonably strong. The more volatile business
confidence indicator has declined recently, although sharper
moves in that indicator are typical, as the chart illustrates.
However, the business confidence index is still at a level
consistent with expansion.
Ontario real GDP growth
will be slower in 2001 than last year. Almost all private sector
forecasters of the Ontario economy have recently completed
forecasts. The average real growth outlook is 2.8%. This is
slightly lower than we anticipated in last year's budget,
primarily because of a sharper than expected slowing in the US
economy. However, no one is expecting a recession in Ontario and
most expect the US slowdown to be short-lived. As I have
indicated in my remarks, the economic fundamentals in Ontario are
sound. The economy is competitive, inflation is low, real
disposable incomes are rising and balance sheets are in good
shape. Against this backdrop, Ontario should be able to weather
the temporary slowdown in the United States and post another year
of real GDP growth in 2001.
Mr Gabriel
Sékaly: Good morning. It's a pleasure to be here in
front of the committee. It's my first appearance. I'm pleased to
provide the committee with an update on the province's fiscal
situation. As well, we have released today the third-quarter
Ontario finances.
The first slide, as
mentioned by the minister and the deputy minister, illustrates
the government's achievements in terms of a balanced budget one
year ahead of schedule. When the government took office in June
1995, the province was spending approximately $1 million more per
hour than it was collecting in revenue. In November 1995, the
government introduced a balanced budget plan with declining
annual deficits culminating in a balanced budget in 2000-01. In
each of the past five years the deficit reduction targets, as
shown in this graph, have been overachieved. With a $668-million
surplus in 1999-2000, the province's budget was balanced one year
ahead of schedule. With a 2000-01 surplus projected at $1.4
billion, based on third-quarter results, Ontario is on track to
its second consecutive budget surplus, the first back-to-back
surpluses since World War II.
The next slide illustrates
our performance in terms of the third quarter. We have
improvements in revenue outlook and strong economic performance
in 2000-01. The surplus is currently projected at $1.4 billion.
This is up slightly, by about $45 million, from the
second-quarter results. The $1.4-billion improvement in the
2000-01 surplus is mainly due to increased revenue of $2.2
billion and the elimination of the $1-billion reserve and
partially offset by a $1.5-billion increase in expenditure and an
additional $300-million charge for the net impact of electricity
restructuring to be recovered from ratepayers, not taxpayers.
Revenue increased by $2.2 billion, mainly due to a $1.6-billion
increase in tax revenue from personal income tax, employer health
tax and retail sales tax collections. Total expenditure is up
$1.5 billion, mainly due to two things: (1) accounting changes
introduced in the 1999-2000 public accounts, which accounted for
more than 50% of the in-year change from budget and increased
total expenditures by $746 million in 2000-01; and (2) about a
$700-million net increase for priority investments, including
almost half a billion dollars for a comprehensive hospital
strategy and emergency health services and $165 million for
provincial financial support for municipal transition costs.
The next slide shows a
summary of revenue changes. Total revenue is projected at $64.218
billion, up $2.158 billion from the 2000 Ontario budget plan and
$165 million above the second-quarter Ontario finances. Major
changes this quarter and since budget include personal income tax
revenue up $150 million this quarter and $1.35 billion since
budget, due to the pace of employment and income growth in the
province. Retail sales tax is unchanged this quarter but up $200
million since the budget, as a result of growth in consumer and
business spending. Employer health tax is unchanged this quarter
but is up about $60 million since the budget, due to the pace of
income and employment growth. Income from government enterprises
is unchanged this quarter but up $175 million since the budget
plan, primarily due to the performance of slot machines at
racetracks, as reported in the second-quarter Ontario finances.
Government of Canada revenue is up $9 million this quarter and
since budget, due to reimbursements under the federal Firearms
Act. Other revenue is up $6 million this quarter, due to policing
contracts and increased sales and rentals to reflect the transfer
of industrial parks from the Ontario Development Corp to
Management Board Secretariat. Since budget, other revenue is up
$364 million, primarily reflecting the consolidation of the Independent
Electricity Market Operator as a government organization.
The next slide shows a
summary of the expenditure changes. Net operating expenditures,
at $60.325 billion, are up $1.34 billion from the budget plan and
up $117 million from the second-quarter Ontario finances. Major
changes this quarter include: $165 million in the Ministry of
Municipal Affairs and Housing for transitional funding to
Hamilton, Ottawa, Haldimand-Norfolk and greater Sudbury,
partially offset from the contingency fund; $123 million in the
Ministry of Community and Social Services to address higher
volume and transitional costs in the child welfare services
program, fully offset from the contingency fund; a reduction of
$50 million in the Ministry of Energy, Science and Technology due
to reprofiling into future years of the funding to establish the
Ontario Cancer Research Network; and an increase of $7 million in
the Ministry of the Solicitor General for the chief firearms
office for the licensing component of the federal Firearms Act,
fully offset by federal transfers; and also an additional $1
million for OPP municipal policing services contracts for the
towns of Arnprior, Renfrew and Kingsville, also offset by
revenue.
1140
Other major changes
reported since the budget include $398 million for the Ministry
of Health and Long-Term Care for the hospitals comprehensive
strategy to support extensive modernization of hospital services,
and $100 million to improve access to emergency health services
and to implement the flu vaccination program; $138 million for
the public service pension plan for various benefit improvements
and a contribution holiday similar to changes in the OPSEU
pension plan; and $98 million in the Ministry of Education to
implement a reduction in average class size in secondary schools
to 21 students.
In terms of the accounting
changes which were reported in the second quarter, there's an
increase of $238 million for the Ministry of Energy, Science and
Technology for the Independent Electricity Market Operator. This
increase reflects the operating component for the consolidation
of the IMO as a government organization consistent with the
treatment in the 1999-2000 public accounts, a $275-million
increase in the Ministry of Finance for a provision for the
electricity sector. This additional expenditure is consistent
with the principles of electricity restructuring. The amount is
equal to the net income of Ontario Power Generation Inc and Hydro
One Inc in excess of the province's interest expenditure on its
investment in the electricity sector, consistent with the
treatment in the 1999-2000 public accounts. There is $48 million
for the Ministry of Tourism for the Metro Toronto Convention
Centre as a result of the consolidation of the Metro Toronto
Convention Centre as a government organization. This is a change
in classification consistent, again, with the treatment in the
1999-2000 public accounts.
The next slide shows a
summary of capital expenditure changes. Capital expenditure, at
$2.212 billion, is up $137 million from the budget plan and up $3
million from the second-quarter Ontario finances. Major changes
this quarter include an expenditure increase of $18 million for
the Ministry of Northern Development and Mines as a result of the
transfer of funds from the Ministry of Transportation for the
highway rehabilitation projects in northern Ontario, and a
corresponding decrease in the Ministry of Transportation.
Accounting changes from the
second quarter include $140 million under the Ministry of Energy,
Science and Technology for the Independent Electricity Market
Operator. This is the capital component of the consolidation of
IMO as a government organization, again consistent with the
treatment in the 1999-2000 public accounts.
SuperBuild capital
investment, as I just mentioned, will total more than $2.2
billion this fiscal year. There are three SuperBuild partnership
initiatives that were announced in the 2000 budget. The first is
the SuperBuild millennium partnerships, which will invest $1
billion over five years to support strategic infrastructure
projects for Ontario's large urban centres; the sports, culture
and tourism partnerships, which will invest $300 million over
five years to rebuild and enhance sports, cultural and tourism
facilities across Ontario and expand major cultural and tourist
attractions; and the small-town and rural development initiative,
which will invest $460 million over five years to improve the
quality of infrastructure in Ontario's agricultural and rural
areas and small towns and cities. This includes the $240 million
committed for public health and safety projects in round 1 of
OSTAR. The province, as well, will invest $1 billion in Ontario's
highways, the largest amount invested in one fiscal year. In
2000-01, there will be an investment of $291 million to modernize
and support Ontario's hospitals and health care facilities, as
well as $220 million to modernize and expand our jails and court
facilities.
The next couple of slides
deal with the fiscal impact of Ontario Hydro restructuring. As
you all know, on April 1, 1999, the electricity industry in
Ontario was restructured. Ontario Hydro was continued as the
Ontario Electricity Financial Corp, OEFC, which is responsible
for managing and retiring liabilities not transferred to the
other successor corporations. The other successor corporations
include Ontario Power Generation, Hydro One, the Independent
Electricity Market Operator and the Electrical Safety
Authority.
The respective business
units of Ontario Hydro were transferred to OPG, Hydro One and the
IMO in exchange for debt payable to the OEFC of $17.2 billion.
The province then exchanged equity of $8.885 billion in OPG and
Hydro One for debt owing to the OEFC. The province's cost of this
investment is approximately $520 million of interest annually and
is reflected as an expenditure in the public accounts.
OPG and Hydro One are
consolidated in the public accounts as business enterprises.
Income earned from these two entities is included in the
provincial surplus and income from investment in government
enterprises. However, pursuant to the government's commitment to
keep electricity income in the electricity sector, directing
it toward the reduction
of electricity sector debt, income earned in Hydro One and OPG in
excess of the province's cost of its investment, that is, the
$520 million, is allocated to the OEFC. This is referred to in
the accounts as the "provision for electricity sector" and
represents expenditure in the public accounts and revenue in the
OEFC. As a result, there is no impact on the provincial surplus
resulting from these transactions.
The net impact of
electricity restructuring to the provincial surplus is reflected
through the operating results of OEFC. OEFC is defined as a
service organization. As the government has developed a long-term
plan to retire the OEFC's obligations wholly through the
ratepayer and not the taxpayer, the impact of the OEFC operations
is separated from other government activities in the public
accounts. A separate one-line disclosure is provided of OEFC's
net income, which is included in the provincial surplus. There is
also a separate disclosure provided to the opening and closing
balances of the OEFC's unfunded liability which is not included
in net provincial debt. Once again, these balances are referred
to as being recovered from the ratepayer, to recognize the fact
that ratepayers and not taxpayers are responsible for the
stranded debt of the former Ontario Hydro.
The OEFC's obligations will
be repaid from the following sources: notes receivable from the
province, OPG, Hydro One and the IMO resulting from the
restructuring transaction; payments in lieu of corporate income,
property and capital taxes made by OPG, Hydro One, municipal
electrical utilities and local distribution companies-these
revenue streams are dedicated to the OEFC and cannot be available
to the taxpayer; a debt retirement charge to be paid by
ratepayers based on the consumption of electricity; and the
provision for the electricity sector.
The government, in
consultation with the Provincial Auditor, hired an independent
accounting firm to review the assumptions and the consistency of
the OEFC debt recovery plan. Based on the conservative estimates
used in the preparation of the plan and the work performed by the
accounting firm, the province anticipates that OEFC's obligations
will be defeased in the years ranging from 2010 to 2017.
In assessing the impact of
restructuring on the province's fiscal outlook in 1999, the
credit rating agencies provided further independent support of
the OEFC debt recovery plan. The Dominion Bond Rating Service
stated, "DBRS believes that the stranded debt of the former
Ontario Hydro can be fully retired without access to the Ontario
taxpayer and therefore is not including the Ontario Hydro
stranded debt in its calculation of tax-supported debt."
1150
The next slide shows
program spending as a share of the economy. The government's
commitment to controlling spending is demonstrated by significant
reductions in program spending, which excludes capital and public
debt interest, as a percentage of GDP. A weak economy and rapidly
increasing spending pushed program spending as a percentage of
GDP up to 15.9% in 1992-93. Program spending is projected to
decline to 11.9% of GDP in 2000-01 as a result of the focus on
funding priority areas such as health care and education, on
finding improvements in efficiency of government services and on
prudently managing the government's resources.
After rising for many
years, net provincial debt as a percentage of provincial GDP has
been on a downward trend since 1996-97. Net provincial debt has
declined from 32.4% in 1996-97 to an estimated 26.3% in 2000-01.
Based on the third-quarter surplus outlook, net provincial debt
has been reduced by $2.7 billion since 1998-99, from $114.7
billion to $112 billion in 2000-01. This is more than halfway
toward meeting the government's net provincial debt reduction
commitment of at least $5 billion in this mandate.
Now I would like to turn it
over to Gadi Mayman.
Mr Gadi
Mayman: Good morning. As with Gabe, this is my first
opportunity to address the committee, so please forgive me if I
seem a little nervous. Many of you know my predecessor, Tony
Salerno, who retired last summer after 27 years of service with
the public service of Ontario. I will try to take his place and
hopefully be as informative to the committee as he has been in
past years.
I am pleased to provide the
committee with an update on the province's borrowing and debt
management program. With a surplus of $1.4 billion forecast for
this fiscal year, refinancing maturing debt of just over $8
billion has been the focus of Ontario's 2000-01 borrowing
program. As of the third quarter, total public long-term
borrowing is forecast at $8.6 billion. As of December 31, 2000,
the province had completed nearly $7.5 billion of this $8.6
billion. Since the end of that quarter, in the first month and a
half of 2001, we've issued an additional $659 million in
long-term public financing, which leaves us with about $400
million to borrow for this fiscal year.
The province's issues
continue to be well received by investors despite uncertain
sentiment in both domestic and international capital markets. I'd
like to describe to the committee how we've approached the
financial markets so far this fiscal year.
The OFA takes a flexible
and pragmatic approach to borrowing. Flexibility allows the OFA
to take advantage of cost-effective financing opportunities,
which is particularly important during periods of financial
market volatility. A number of factors are taken into
consideration. We monitor international and domestic capital
markets closely to ensure the optimal timing of the launching of
our bond issues. While the Canadian dollar market continues to be
the primary source of financing for the province's long-term
borrowing, we will borrow in any major capital market where it is
cost-effective for the province to do so. We aim for a smooth
debt maturity profile to diversify the interest rate risk for the
refinancing of maturing debt and floating rate debt. We also
structure our debt products to meet the needs of investors and to
meet our borrowing requirements in a very cost-effective
manner.
The Canadian market continues to be the most
favourable source of funding for the province. As of today,
almost 90% of our public borrowing this year was raised in the
Canadian dollar market.
This slide will show you
the breakdown of where we borrowed the money. As you can see,
$7.1 billion has been borrowed in the Canadian domestic
market-$3.4 billion from Ontario savings bonds and $3.8 billion
from a variety of different Canadian dollar issues. We've also
borrowed $611 million from the Canada pension plan. This is
refinancing of debt that had matured. And we've had two foreign
issues: $621 million, Canadian equivalent in US dollars, and $352
million in Japanese yen. Both of those opportunities were
cost-effective relative to Canadian dollar cost.
In addition to the
borrowing and redemptions shown in the table, the province has
bought back $844 million of previously issued debt this year,
financing the purchases with debt of similar term at more
favourable rates.
The OFA's mandate is to
manage the province's debt and liquid reserves prudently and
cost-effectively. We prepare annual financing and debt-management
plans. Key factors that are taken into consideration include
economic assumptions, interest rate forecasts, foreign exchange
forecasts, target ranges for floating interest rate and foreign
exchange exposures and contingency plans for forecast errors. We
strive to be at the forefront of debt portfolio performance
measurement. The cost-effectiveness of borrowing, debt management
and investment activities are measured daily against benchmarks
approved by the OFA's board of directors. This ensures management
is aware of financial market volatility and obtains the necessary
background intelligence to take immediate action. As you can see
from the slide, we are well within our exposure limits for both
foreign exchange and interest rate exposure.
As you know, the
government's goal is to more than double its promised $2-billion
reduction in net provincial debt to at least $5 billion during
its current mandate. With the commitment to balanced budgets and
debt reduction, the OFA will be funding primarily for refinancing
maturing debt.
Rating agencies have
recently recognized Ontario's fiscal and economic developments
and achievements. Just last week, on February 9, Moody's changed
the outlook of Ontario's AA3 rating to positive. This is the
first positive rating development for the province by Moody's
since 1974. On January 29, S&P upgraded the province's
long-term debt rating to AA from AA-. This is the first upgrade
for the province by S&P in 13 years and marks the first time
since 1993 that Ontario has been rated AA. S&P now ranks
Ontario as the second-highest-rated province in Canada after
Alberta.
These upgrades come on the
heels of a number of recent positive rating developments for the
province. Following their analysis of the 2000 spring budget,
both S&P and the Dominion Bond Rating Service put their
respective ratings for the province on positive outlook. This was
also the second consecutive rating improvement by DBRS following
their 1999 upgrade of Ontario to AA(low).
Ontario's current ratings
are as follows: with S&P we are AA, with Moody's we are AA3
with a positive outlook and with the Dominion Bond Rating Service
we are AA(low) with a positive outlook.
Thank you very much.
The Chair:
That completes your presentation? Thank you. That gives us 20
minutes per caucus.
Mr
Christopherson: Bob, congratulations on your promotion
too. I wish you well.
Just a few questions,
actually. It was originally our understanding that the edict came
down from the previous minister that there were going to be more
cuts to line ministries, with the exception of health and
education. Is that alert still out there, and at this point what
is the figure that has been given to the ministries?
Dr
Christie: I'm not sure of the specific reference, Mr
Christopherson, but I'm sure many of you are aware that the
ministries are now in the process of going through the business
planning exercise in terms of looking at requirements and having
them reviewed in terms of what is feasible this year. I think the
government has always been very clear that they would look at
everything that's being done in order to try and find better ways
of spending and to try and find efficiencies. That process is
continuing and it has continued through the business planning
side.
Mr
Christopherson: I just want to press that a little
further, Bob. I was looking for three things: one was, has there
been a direction to ministries to cut their planned budgets;
second, how much; and third, are health and education still
excluded from that?
Dr
Christie: I'm not aware of any such message. All
ministries have been asked to be careful, to be prudent, to be
vigilant in what they're doing in terms of business planning, but
there have not been, to my knowledge at least, specific numbers
attached to any of that.
1200
Mr
Christopherson: Do I take it from that, then, that we
won't see any in-year cuts to line ministries?
Dr
Christie: I can't give you an undertaking with respect
to the future, but at the moment, as I say, we're going through
the process of planning for the next fiscal year.
Mr
Christopherson: Just another question, unrelated to
that. The $200 tax rebate, the public bribe that was offered up,
do you have a total cost on that yet, on what that was in total
for the number of the cheques, the mailing, everything, all of
it, the entire cost of that process?
Dr
Christie: I believe that was projected in the budget at
$1 billion.
Mr
Christopherson: That was the projection. I was just
wondering if the actuals are in.
Dr
Christie: No, we don't have that. We should have an
interim on that by the time of the budget.
Mr
Christopherson: But you don't have anything yet.
The savings rate-I raised this at the last go-round
and we were at historically low levels of savings rates in
Ontario. Is that continuing? I had to leave the room for a few
moments so I apologize if that was presented earlier.
Dr
Christie: I'll give that to our chief economist.
Mr Howell:
In the accounts that were released today, the third-quarter
personal savings rate is at 5.1%-still positive, certainly far
higher than personal savings rates in the US. That has been
tracking in the 5% to 7% range for the last couple of years.
Mr
Christopherson: Sorry, what page is that on?
Mr Howell:
The economic accounts were released today. I'm not sure if
they've been distributed yet to the committee. They should be on
page 24.
Mr
Christopherson: That's a dramatic decline.
Mr Howell:
It's a lower savings rate, yes. Consumption has been quite strong
in Ontario in the past year.
Mr
Christopherson: The reason I raise it, and I raised it
again last time around: if we just take a look, in the first
quarter we were at 6% and now we're down to 5.1%. What this tells
us is that at a time when we're seeing thousands of pink slips
being handed out, there are a lot of families that are in no
position to be able to withstand a loss of income, in part
because of the personal debt load they're carrying. Is this not a
concern for folks at the ministry? Are you raising this as a
concern internally and externally, saying, "Hey, folks, we could
see a whole lot of folks hitting the financial concrete if the
bottom falls out"?
Mr Howell:
First of all, the savings rate is an aggregate number for the
economy as a whole, so it's not obviously applicable to every
individual's circumstance and I don't think it can really be used
in that fashion. Of course we're always monitoring what's
happening to consumers' abilities to finance their debt. We'd be
very worried if we were in a situation now where debt servicing
costs were rising toward previous peak levels, but they're not.
They're significantly below that. Furthermore, with tax cuts that
have kicked in as of January 1 at the federal level, disposable
incomes will be going up, giving a further cushion to individuals
as we move forward.
Mr
Christopherson: I appreciate that it's an aggregate, but
those aggregates are made up of individual numbers, those numbers
happen to be families, and it's just a growing concern that that
number continues to get smaller and smaller, putting people
closer and closer to the edge. Everything is fine as long as
you're still working, if you're one of those lucky enough to make
decent wages and don't have to rely on a Tory minimum wage. If
you're making a decent wage you can keep things going, but the
second that falls out from under you, there's a real concern. I
see the Tories laughing; I don't know why they think it's funny
when I'm talking about thousands of people who have been laid off
in your government in Ontario and face this reality.
I want to ask you about the
tax cuts. Can you give me the figure for this year in terms of
the full cost of the tax cuts announced in the last budget? And
what are the ones that are projected and how much are they going
to cost us? Because this is revenue money we've lost.
Dr
Christie: I'm looking at the 2000 budget in terms of
addressing this, page 115 of the budget papers, which indicates
$1.8 billion in the fiscal year 2000-01 and a full-year benefit
to taxpayers of $5.2 billion, although I would note that that
full-year benefit is a mixture of some one-time moves, like the
rebate, which obviously don't recur every year.
Mr
Christopherson: So the $5.2 billion would be fiscal
2001-02. What is it with-
Dr
Christie: Excuse me, a number of the tax changes in the
2000 budget were to be fully implemented over a number of
years.
Mr
Christopherson: Oh, I see.
Dr
Christie: So the full-year number is what it would be if
each and every move were fully implemented.
Mr
Christopherson: What year are you using as your final
year, then?
Dr
Christie: It depends, because there's no uniform year
for ending, so it will vary. It's different years.
Mr
Christopherson: I see. But you are using a figure of
$5.2 billion even though there are some one-offs in there.
Dr
Christie: That's what the budget papers showed last year
as the full-year benefit of those.
Mr
Christopherson: Bearing in mind that the government's
decided that it's OK to give away $5.2 billion, if we continue
down this road of layoffs, where is that first going to show
itself in the finances of the province?
Dr
Christie: We're not seeing signs of such things yet, and
we monitor all of our tax sources on a regular basis. I'll have
Phil correct me if I'm wrong here, but to date what we're seeing
through the monthly revenue flows has been pretty much as
expected. If there were to be some deviation from expectation,
how it would manifest itself would be essentially dependent on
what the composition of the change was.
Mr
Christopherson: I guess that's exactly where I was
going. I appreciate your saying that so far things are as
expected, but then "as expected" as short a time ago as last
December, I think December 4, was a 5.5% increase in growth, and
already now, less than three months later, we're into 3.3%, with
Scotiabank at about 2.8%. So we've already seen some reduction in
the projected growth numbers. Just in that alone, where is that
going to show itself in terms of loss of revenue? Is it going to
be through the sales tax primarily? Will it be through income tax
primarily?
Dr
Christie: I think those numbers actually are for
different years. I believe the 5.5% is for 2000 and the 2.8% to
3% is for 2001. So they are for different years; the forecast has
not changed from 5.5%. The forecasts are for continued growth, so
what our expectation would be in that case is that-again,
depending on the composition of the slower growth, which sectors
are growing more slowly than others etc, that would depend
on-that would affect which revenue sources we would see not
growing as rapidly as
they had perhaps in previous years. But, as was indicated, all
the forecasts that we're looking at, all the forecasts that the
private sector people are sharing with us, are calling for
continued growth. I think we would anticipate that continued
growth in the economy will translate into continued growth.
1210
Mr
Christopherson: Is that assurance of continued growth
predicated on the American economy staying about where it is, or
are you factoring in a worst-case scenario or a rosy scenario,
that things are suddenly going to turn around? That seems to be
the trigger here. The US economy is in large part going to decide
this for us, so what are you basing that on in terms of your
projections for the US economy?
Dr
Christie: Again, one of the reasons the private sector
forecasts I was referring to have been reduced, that this
consensus, this average of the forecasts has been reduced by
several tenths of a per cent over the last couple of months has
been that forecasters in the US have been looking for a slower
first quarter, first half in the States, and that has been
reflected up here in reductions to the forecasted growth.
Mr
Christopherson: But my sense is that they are continuing
to re-evaluate their numbers as things go along. We certainly
hear a lot of published accounts of economists who are saying, "I
expected it to slow down. I didn't expect it to immediately halt
or to go in the ditch." I'm just trying to get a sense of how
much of what you've projected is no longer really what's
happening, and by "you" I mean the private sector too; I'm not
saying your department specifically. But how much of what you're
telling us today is predicated on the original idea of a bit of a
slowdown in the US versus the dramatic grinding that we are
seeing and that is causing the American economists to continually
re-evaluate their numbers? I'm trying to get a sense of that
shifting sand underneath us.
Dr
Christie: I'll ask Phil to comment in more detail on
this, but as I think was noted a little earlier in some of Phil's
comments, we do see a different situation here in Canada. I think
Mr Martin was talking to some people in New York several weeks
ago, and he spent some time talking about how different the
situation in Canada is today than it was several years ago in
terms of our ability to respond to a slowdown in the US in terms
of the level of the dollar, the level of interest rates, the
level of inflation, the level of government debt and deficits,
all of which are fundamentally different today than they were 10
years ago. For that reason, I think in looking at the US
slowdown, it doesn't translate dollar for dollar into Canada for
these forecasters.
I'll ask Phil to answer
your question.
Mr Howell:
With respect to the forecasts, the 2.8% is very up-to-date. In
fact, that average does include forecasts that may not even be
publicly released; they may be coming out this week from the TD
Bank and Scotiabank. As you indicate, both their chief economists
have indicated in published remarks last week that they are
lowering their forecasts. That's already included in this
2.8%.
In terms of where the
economy is headed, the general expectation is that the speed with
which central banks have reacted to the slowdown, particularly in
the States, will provide the stimulus for a significant bounce
back in the second half. We showed that slide earlier, and
obviously we'll benefit. For the reasons Bob was mentioning and
that were mentioned in earlier remarks, Canada and Ontario are in
a pretty good position to bridge that period without too much
damage from the slowdown in the States. I would never base any
outlook on one day's or one month's data, but the US retail sales
numbers for January were released this morning and they were
stronger than had been anticipated. Perhaps most significant is
excluding auto sales-everyone has been focused on autos and
expecting that autos would hold down the total number, but
excluding auto sales, US retail sales in January were twice as
strong as the consensus forecast.
Mr
Christopherson: But auto sales is the key one for us in
large part.
Mr Howell:
Yes, and for the month auto sales were up as well.
The Chair:
Mr Christopherson, we're out of time. It's government time.
Mr
O'Toole: I know there are other members of the committee
who will be making comments. First, I just want to reiterate that
our finances and the reports have been generally optimistic. I
know the minister plays an important role, but more importantly,
the staff plays an important role, so publicly on the record,
thank you for that and for your patience with we who don't work
with the numbers every single day as you do.
I want to make a couple of
comments and you can, in your general summation or response,
react accordingly. None of this, of course, is scripted, as some
might suspect-
Mr
Christopherson: As he looks at his notes.
Mr
O'Toole: They're my own notes, Mr Christopherson. I
would say the one thing that does concern me is the whole OEFC,
the refinancing of that and how the debt is carried. I'd be
interested in your response with respect to what our auditor, Mr
Peters, would think of how that's displayed and carried in the
public accounts.
I have a lot of courage,
though, in hearing the minister and watching what I see before
me. Despite what Mr Christopherson says, the net result has been
an improvement in the number of jobs and it's the changing in the
sectors. So I want to focus my questions specifically on the
remarks the minister made and you can respond accordingly,
however that works.
The focus has been to
stabilize and minimize the impact as being dependent on exports
so the growth in domestic consumer confidence, and you can
respond to that in a general sense or a specific sense, but I
think I read the same information as you read-and I'm very
interested in the financial issues-that the economic forecasts
are basically for mild and slower growth in a short term. I think everything
I see in the longer term is forecasted to bump up in the last
quarter of 2001. I think it's prudent and I'm confident that
domestic sustainability is part of the equation. With that, I
would just ask you to respond.
I think the only thing that
I see in the general account information that's provided is the
decline in personal debt as a percentage of the whole GDP
picture. That's an interesting part, too. It shows that there is
increased revenue. It shows that personal disposable income is
up. So I think I want you to comment on the strength of the
domestic economy, Bob.
Dr
Christie: Thank you for your remarks. With respect to
the Ontario Electricity Financial Corp and the way it's shown in
the accounts, we have had, through the late summer and early
fall, extensive discussions with the Office of the Provincial
Auditor on how to deal with this in our books. It is somewhat of
an unusual situation. I don't think we've seen quite this kind of
restructuring happen in the United States or in other parts of
Canada, so the process of working through how to display this in
our books versus in the books of the OEFC was one that was not
straightforward. We had to work very closely with the Office of
the Provincial Auditor.
The display that you see
and the way it's set up is as a result of the discussions with Mr
Peters. I think it may be that there's a better way to present it
and, if so, I'm sure that both we and the auditor would be very
interested in finding a better and clearer way of presenting
these matters. It's inherently complicated. We have certainly
tried-and I know the auditor's office has been tremendously
helpful in those attempts-to put it forward as clearly as we
could so that people could see how this was working, because it
is inherently complicated. We understand that it can sometimes be
difficult to see what's happening with all these numbers and
where the money is going, but the assistance we got from Mr
Peters and his office was terrific and we very much appreciated
it. We're working very closely with him on this matter.
With respect to consumer
confidence in the domestic economy, Phil, maybe I could ask you
to make a few comments on that.
1220
Mr Howell:
The issue around consumer debt and ability to service debt I
think is very important and reflects that the consumer sector is
on the right track to move forward and grow. The reasons why
there is increased capacity to service debt by the consumers I
think are pretty straightforward. Certainly tax cuts have played
a big part in that by increasing disposable income, but there is
more to it. We're in an environment now where inflation is low,
and expectations are it's going to stay low. That gives people
confidence when they're planning, especially big-ticket decisions
and financing them.
We're in a situation where
employment levels are far higher now. There are far more people
working than was the case a few years ago, and prospects are for
continued employment growth. In Ontario, while the headlines
focused on the flat growth in January in Canada, employment in
Ontario was up 16,000 jobs, and all of those full time; in fact,
more than 16,000 full time. There was a decline in some part-time
jobs, to get the 16,000 number. Those sorts of conditions all
help to build consumer confidence. In fact, one of the charts
that I showed did show that consumer confidence is at very high
levels and remains there.
Mr
O'Toole: I'm going to share my remaining time.
Mr Ted Arnott
(Waterloo-Wellington): Thank you, gentlemen, for helping
us with these numbers. I look forward to working with you in the
year ahead.
It's long been my view that
the provincial government needs to place a greater emphasis on
the need to retire its outstanding net provincial debt, and
you've indicated that currently our debt stands at $112 billion,
that we have reduced it by, I think you said, $2.7 billion this
year, and certainly the Treasurer's statement backs that up.
When I look at your fiscal
summary, the third-quarter slide that you presented here, I see
the actual surplus in the last fiscal year, 1999-2000, at $668
million. This year's projected surplus is $1.4 billion. I add
those two numbers together and that gives me just over $2
billion, yet you say that the debt has been reduced by $2.7
billion. Can you help me reconcile these two numbers?
Mr
Sékaly: Yes. The line which is called the net
impact from electricity restructuring doesn't impact on net
provincial debt, so you have to take that out of the equation.
For example, in 1999-2000, the amount that the net provincial
debt went down by was $1.22 billion, which is the $668 million,
and you have to add back in the-I think it's $354 million.
Similarly, in 2000-01, the projected surplus right now is $1.411
billion. That includes a $270-million expense as a result of the
electricity impact. You have to back that out of it, so $1.681
billion is the impact on the net provincial debt, for a total
over two years of $2.703 billion.
Mr Arnott:
You smiled. Was it a dumb question?
Mr
Sékaly: No, it was not, not at all. It is a
confusing concept as we moved into this as a result of our
discussions with the Provincial Auditor, where we've tried, as
much as possible, to provide the information and yet make sure
the numbers go into the right place. If you look at the financial
statements in terms of our presentation, there as well we have
broken out net provincial debt from the unfunded liability as a
result of the electricity restructuring. So part of the income
statement number goes to the net provincial debt and the other
part goes to the OEFB unfunded liability.
Mr Arnott:
When you look at the debt-to-GDP ratio going down to the extent
that it has, that's a very positive thing. I think reducing the
net debt by $2.7 billion is a very positive thing as well, but we
are committed over the course of this term to reducing our debt
by $5 billion. If you assume that this coming year is going to be
a difficult year economically-and I think we would all accept
that we're not going to experience 6% growth like we had last
year-it is going to be a considerable challenge to meet that
commitment of a $5-billion reduction in debt over the next two
years. We're at $2.7 billion; we're seeking to meet $5 billion. Would you
agree it's going to be a considerable challenge over the next two
years?
Mr
Sékaly: As we've done over the last number of
years, we've always planned prudently and used prudent
assumptions in terms of growth, as well as prudently on the
expenditure side. We have a $1-billion reserve built in that we
had this year to deal with an unforeseen economic situation. The
reserve will be there in the coming years. If the reserve is not
needed to deal with an unforeseen economic situation, it is
applied directly to reduce the net provincial debt. So we do
build in contingencies and reserves to deal with exactly these
kinds of situations.
Mr Arnott:
One last question: the Treasurer's statement indicated that the
promise of debt reduction over the medium term was something that
Moody's found a very favourable thing in terms of our credit
rating. Would you agree that a long-term debt retirement plan or
commitment on the part of the government would be something that
would impress the rating agencies such that it would have a
positive impact on our credit rating and lower interest rates for
the provincial government?
Dr
Christie: Perhaps Gadi, who deals with the rating
agencies most frequently, would comment.
Mr Mayman:
Yes, Mr Arnott. That was actually one of the reasons it's taken
as long as it has for both Moody's and S&P to move to upgrade
our ratings. While they were pleased with the progress we were
making in achieving the targets that were laid out in both the
Common Sense Revolution and the Blueprint, they were concerned
that the level of debt and the level of debt as a percentage of
GDP was still too high. Certainly in the discussions we had with
Moody's and S&P in December, before they made their decisions
in the past few weeks, that was an item that they did mention,
and they are looking for further progress as we move forward.
The Chair:
Mr Galt, you have approximately five minutes.
Mr Galt:
Thank you for the presentation. We did hear from the member of
the third party, Mr Christopherson, and his gloom and doom about
where we're at with pink slips, when in fact, Mr Chair, as has
mentioned, we have some 16,000 net new jobs just in the month of
January alone, moving our unemployment rate in Ontario from 6%
down to 5.7%; compared to drawing in all of Canada, only 700 net
new jobs, and the national jobless rate rising from 6.8% to 6.9%.
It's important to realize that Ontario is still moving ahead very
significantly.
The question I have is to
Mr Sékaly. On the chart you provided for us, you're showing
down here where, once upon a time, going back to 1995, we thought
we would end up. We've had a fair amount of criticism from the
opposition about adding to the debt, and, yes, that was planned,
but it was much better than we had predicted. Can you tell me how
much better off we are with the debt now than what was predicted
in 1995, the total better picture for the people of Ontario?
Mr
Sékaly: In terms of the impact on net provincial
debt-actually it's a very interesting question. I hadn't added it
up.
Mr Galt: I
can add up the figures, but I never know in financial terms
whether that comes out to what the net savings are.
1230
Mr
Sékaly: Yes, the differences in each of those years
between the targets and the actuals would be the betterment in
terms of our net provincial debt position, because our net
provincial debt is basically the accumulated surpluses, deficits
over the years so the difference between-
Mr Galt:
Simplistically, just add up those differences and that's really
the right answer.
Mr
Sékaly: That's correct, yes.
Mr Galt:
The other quick one that I have is I'm hearing a lot about the
short duration of the downturn. We heard this in the fall of 1989
and the spring of 1990, "Don't worry about it. Leave your money
invested in the stocks," and all the rest of those good things
and then all of a sudden we just plummeted into a disastrous
situation. We're hearing the same comments again. Why are we or
you people so confident things are going to turn around very
quickly in the US and that our downturn will be very minimal? Can
you give me a good feeling of confidence about why we're feeling
good about the future direction when in 1990 I was hearing the
same sort of story; however, it didn't turn out to be the way we
wanted it or hoped it would be?
Mr
Sékaly: I think Phil-
Dr
Christie: Phil would be good to answer.
Mr Howell:
I guess the real difference is the big picture, the circumstances
that prevail. Back in both the 1981-82 recession and in 1990,
inflation was much higher than it is, interest rates were higher
and taxes were rising. You had an environment-and this applies as
well to the US; it's not only the case compared to here-in which
central banks were not really able, because of the inflation
outlook, to respond aggressively by lowering interest rates when
signs of the slowdown came. I think what's really being missed in
all of the headlines and so on-and the stories, you're right, the
papers are full of these kinds of stories-has been a cool
appraisal of the different circumstances between the two
periods.
Similarly, issues like
energy price increases: why haven't they had as big an impact
this time as they did earlier? Basically because we've had rising
personal disposable incomes. The previous energy shocks in the
1970s, 1980s and 1990s, that everybody looked back to in terms of
trying to explain what was going to happen when oil prices went
up in the past year and a half, were completely different
circumstances. In all of those cases disposable incomes were
declining for people and obviously, with the added burden of the
big energy price hike, that is going to have a significant
impact.
The reason that we're-I
wouldn't say we're comfortable, because we're never comfortable
and we're watching what's going on very carefully and you can
always do
better-heartened is by the fact that the external circumstances
and conditions are quite different now than was the case in
previous downturns.
Mr Galt:
So a lot-
The Chair:
I'll let you wrap up. You've got about 30 seconds.
Mr Galt:
So a lot of the things that you're commenting on are the fiscal
policies of the current provincial government versus the
provincial government of the day and what they were doing at that
time is sort of why the predictors are holding fast to the fact
that the outlook looks pretty good for the province of
Ontario?
Mr Howell:
The tax cuts have certainly raised consumers' real disposable
incomes and the prospects of further tax cuts kicking in this
year from the federal level obviously are helping raise personal
disposable incomes and are an important buffer.
Mr Galt:
Great. Thanks very much.
The Chair:
Mr Kwinter.
Mr Monte Kwinter
(York Centre): I'd like to just raise a question about
the Ontario Electricity Financial Corp. You claim that the $520
million in interest that is shown as the province's investment is
not being paid by the taxpayer but is going to be paid by the
ratepayer. How do you differentiate between the taxpayer and the
ratepayer?
Dr
Christie: The distinction there, Mr Kwinter, is the one
actually that has been used for many, many years-even under the
old Ontario Hydro-in terms of distinguishing between provincial
debt and guaranteed debt, noting that costs associated with
electricity are reflected in electricity rates and paid for in
proportion to the use of electricity as opposed to through some
other form of revenue that has no bearing on one's use of the
electricity system. It's that distinction that has been carried
over into dealing with the distinction between the so-called
stranded Hydro debt, which was being supported by ratepayers, not
taxpayers, and the approach has been for that to continue to be
the case and that the distinction is carried over from the
previous structure.
Mr
Kwinter: Yes, but in effect when you restructured the
electricity sector, if you were to pass on the stranded debt to
the entities that took over, it wouldn't have made any sense for
them. Someone had to pick up that stranded debt and the province
has done it and they're saying we are now going to pass that on
to the ratepayers. The point I'm making is it effectively means
that consumers, ratepayers, are paying more to look after that
stranded debt than they would have to pay if that stranded debt
wasn't there and under normal circumstances that would have been
looked after by the revenues that Ontario Hydro would have
received over the years. But now it's a matter of downloading.
You're really taking that stranded debt that no one will pick up,
including the province, and saying "You as a ratepayer are going
to pay this." As a result, it just exacerbates the problems that
we have with the electricity rates.
Dr
Christie: The debt we're talking about is debt that was
in the old Ontario Hydro, and I think a significant part of the
reason for the financial restructuring of Ontario Hydro was that
that organization was no longer in a position to be able to
service that debt. They didn't have the assets to cover that
debt, so that was in part why the restructuring occurred.
Under the old structure,
the monies required to service that debt would have had to come
from the revenues that Ontario Hydro charged to customers and
therefore would have had to be reflected in hydro rates. So,
because the stranded debt will be recovered directly or
indirectly from ratepayers, there's no change from the situation
before restructuring and the situation after restructuring.
Mr
Kwinter: I just have one other question I'd like to ask.
In your Ontario economic accounts, you show various charts, and
usually when you take a look at economics you look at the trend
lines. I find it rather disturbing to see-for example, change in
inventories: inventory levels in the current period that you
show, 2000, are the highest they've been since 1992. You've got
residential construction equal to what it was in 1992. You've got
business plants and equipment expenditures equal to 1992. All of
them flatlined since 1992. You've got trade going down and
getting very close to where it was it was in 1992.
Are you expecting in this
resurgence of the economy in the last half of 2001 that there's
suddenly going to be a spike that changes those trend lines and
starts taking it back up again when in fact you know there's a
bit of a lag between the time that these numbers are compiled and
the actual calculation of what's been happening to the economy?
If I could just get your comments on that.
Dr
Christie: Sure, Phil's comments.
Mr Howell:
First, Mr Kwinter, which charts are you referring to?
Mr
Kwinter: Unfortunately, these pages are not numbered,
but it's right after the list of tables.
Mr Howell:
OK. You were asking, are we expecting to see those numbers spike
back up? This is a table of growth rates. It's not charting
levels; it's charting growth rates. So over the five-year period
here, at different points the growth rate is higher or lower than
at a given point of time.
1240
Mr
Kwinter: Yes, but your zero base is 1992. Is that
correct?
Mr Howell:
No. What we're doing here is deflating the current dollar numbers
into a constant base, in this case 1992 dollars, so that we can
compare movements in real growth. We're using a 1992 dollar
deflator to compare real movements as opposed to nominal
movements in the economy. So what these charts show are annual
real growth rates-actually they're quarterly real growth rates-in
these different indicators.
For example, if you're
looking at the consumer spending chart, you can see that as of
the third quarter, in 2000 the real growth in consumer spending
at an annualized rate was, I think, 4.4%. That means a real
increase in consumer spending of that amount in that period.
As to whether we would expect-some of these will
move again, as the rebound picks up, and hopefully if it's
strong, you'll see stronger consumer spending and stronger
investment growth.
Mr
Phillips: My congratulations too, Mr Christie. I thank
your staff and yourself for being helpful to us over the last
year; the answers you gave us were very useful.
The first thing is, what
tax cuts have been announced and are still to be implemented? The
way I understand it, the government announced that they would cut
personal income tax from 40.5% to 32.5% and they implemented the
first one quarter of that almost two years ago. Then last year
the province moved to a made-in-Ontario tax. When I do all the
calculations it looks to me like another 25% of that rate cut was
made. You've got to do the calculations because it's a tax on
income, not a tax on federal tax. So my calculations say that
there's still about half of the personal income tax cut to go,
the equivalent of from 45.5% to 32.5%; I think the province is
halfway there.
The second big one is on
the corporate tax, where I gather from the numbers last year, for
each point of corporate tax cut, there's about a $500-million
cost to it. It looks like $775 million or $770 million for a
point and a half, and the province still has roughly to go from
14 to 8; on most manufacturing, 12 to 8. Can you confirm
that those are the two major tax cuts announced but not
implemented as yet?
Dr
Christie: To comment on those two specific tax cuts, on
the personal tax cut, you're right, there has been action taken
over the last couple of years. The budget last year talked about
the province being well on its way to the commitment of cutting
by a further 20% and stating the expectation that that 20% would
be fully delivered in the 2001 budget.
Mr
Phillips: Can you tell us where we are now on that?
Dr
Christie: There have been a number of changes. You noted
some of them in terms of the made-in-Ontario tax system, the
federal government's response to the challenge in the 2000
Ontario budget and capital gains tax of moving the reduction to
50% up. The government, in the 2000 budget, challenged the
federal government to match the 50% tax rate. The federal
government did that, effective October 18th.
Mr
Phillips: The government in the campaign said, "We're
going to cut it by 20%." It's a very simple question: Where are
we now and how much is still to go of that 20%?
Dr
Christie: As I was going through, there have been a
number of changes. We have a new tax structure in place. We're
looking at that tax structure in terms of doing those
calculations, because there have been changes, as I say, as
recently as November. So we're looking at that and doing those
calculations, and I expect that, as was noted, the budget will
wrap that up and describe the delivery of the 20%.
Mr
Phillips: I have to be honest with you, I find it
incredible that nobody can tell us, with a promise of a 20% cut,
where we are now. I just find that incredible.
Dr
Christie: As I say, I expect that that would be
something-
Mr
Phillips: Am I right on the $500 million per point on
the corporate tax cuts?
Dr
Christie: How much per point?
Mr
Phillips: Five hundred million. Maybe you can get that
for us, because I don't need to take the time right now.
Dr
Christie: We have that here. I believe the $500 million
you're referring to referred to the cost of the entire-we'll have
to get that for you. I have it here but I cannot flip to it
immediately.
Mr
Phillips: That's a $3-billion difference, so I think we
have to know that.
Dr
Christie: You're asking about per point spending?
Mr
Phillips: Per point, and in your document last year you
said that the cost for the first two stages was $770 million, a
point and a half; I assume that one point is $500 million. But
that would be useful to get.
The next thing I'd like to
say is that you've talked about heading into a downturn being
better prepared. Am I right that in 1990 the debt of the province
was about $39 billion and it's about $112 billion now, and that
the debt-to-GDP was about 14% and it's about 26% now, and the
debt servicing costs were about 9% and they're about 15% now? Are
those roughly the right numbers, just in terms of the things
where we're not quite as well prepared?
Dr
Christie: Was the comparison with respect to 1989?
Mr
Phillips: To 1990.
Dr
Christie: I don't have those in front of me. Gabe, do
you have those?
Mr
Sékaly: The net provincial debt in 1990 was $38.4
billion, and your next was the per cent to GDP?
Mr
Phillips: Yes, and comparative. So it was $38 billion
and it's now $112 billion?
Mr
Sékaly: It's now down to approximately $112
billion.
Mr
Phillips: And the debt-to-GDP was around 14%? Again,
maybe you can just provide them. I'm just saying that in terms of
how prepared we are, there are some other factors of the
debt-
Mr
Sékaly: Yes, it was 14% in 1990.
Mr
Phillips: And today?
Mr
Sékaly: Today, as I said, by the end of this year,
based on the $1.4 billion anticipated surplus, it will be at
26%.
Mr
Phillips: OK. The pension costs: you showed in the
response you gave to us that while we actually are spending about
$1 billion in cash, we're showing a revenue of $845 million. In
other words, the pensions are generating for Ontario a profit, if
you will, of $845 million on our books. How solid is that,
looking forward? Is that something we should bank on, that we
should expect a profit
out of the pension funds of $845 million in the foreseeable
future?
Dr
Christie: Perhaps I could begin to comment and then I'll
let the experts chip in. But as the answer that we provided
indicates, the figures there are reflective of the way pensions
have been treated under our accounting rules that were adopted in
1993-94 and continue to reflect, among other things, gains in
these pension plans and the pension plans continue to make gains.
However, the future behaviour of that expense level will depend,
among other things, on the size of future gains and the
continuation of bringing into income some of the gains that have
been made in the past, as well as things like wage levels etc. So
there are a number of variables that can affect the size of
future gains.
Mr
Sékaly: As much as I can get into this-as you can
tell it's quite a complicated methodology to follow the Public
Sector Accounting and Auditing Board recommendations on
pensions-based on the actuarial analyses that are done on pension
plans and based on existing benefit levels that are paid through
the pension plans, we expect that this situation will continue
into the future. There are a number of different variables that
one would look at. It would depend also obviously on newer
actuarial valuations that are done on a periodic basis on pension
plans. But we are expecting that this would continue.
1250
Mr
Phillips: There's never enough time for questions,
unfortunately. It's just life.
The government has said
that the local services realignment, what's known as downloading
by some of us or many of us, has actually benefited every single
municipality in Ontario. I've been trying to get the basis on
which that statement was made for several weeks now, and I'm
going to have to rely on your good offices to provide us with the
evidence of that. The government is saying that every
municipality has benefited from the downloading. I wonder if you
might-because I assume the government did the study in order to
make the statement-provide the committee with the study that
proved that.
The second part is, as we
look at capital expenditures, five years ago, before the
downloading, it looked like the province was providing over $1
billion of capital expenditures-not operating but capital
expenditures-to service the things that were downloaded on to
municipalities. Now they're providing no capital money. I wonder
if your staff might give us an indication how much annual capital
expenditures were being expended by the province on the things
that were downloaded to municipalities before the downloading and
after the downloading.
So those two things: it's
the study the government has of how every single municipality
benefited from the downloading. All the discussion has been on
the operating side, but based on some analysis we've done, it
looks like there's about $1-billion shortfall on the capital
side. You might just provide us with that information.
Dr
Christie: I think we'll have to for that one.
Mr
Phillips: I appreciate that, and it's kind of you.
Last year, in the budget
you said that for every increase of 1% in the gross domestic
product, revenues grew by $565 million. I see now that if there's
a 1% drop, the revenue doesn't drop by quite that much, but
social assistance costs increase. It now looks like we may be
into something a little bit more aggressive, unfortunately, than
that in terms of the decline. Have you looked at what costs do
increase? You've already done a part of it-a 1% drop means a
$35-million increase in social assistance costs for the
province-but have you done some modelling on what would happen
with greater or lesser drops in gross domestic product?
Dr
Christie: The rule of thumb you're referring to is one
that, if I understand your question, if it's bigger than 1%, then
these proportionalities still hold.
Mr
Phillips: Yes.
Dr
Christie: We have certainly treated them over the years
as if they do hold, that it remains that linear. I'll ask Phil to
comment on that as well.
Mr Howell:
First, I think it's important with this rule of thumb to realize
how it's calculated, which is just basically at any given point
dividing the revenues by GDP. Obviously, if GDP and revenues
aren't growing at the same rate, you're going to get a change in
the value of that rule of thumb over time. It isn't something you
should lock in your mind as a number that's going to hold today
and three, four or five years down the road, because that's not
the nature of it.
If what you're asking is,
are revenues going to be impacted by the slowdown, I think it's
important to-
Mr
Phillips: Expenditures, I meant.
Mr Howell:
And expenditures?
Mr
Phillips: Yes.
Mr Howell:
One answer to that is to realize that even since the budget, our
estimates of revenues have increased. So compared to the budget
forecast, you're not going to be in a situation where revenues
are lower, even with a slower growth rate than we were
forecasting.
In terms of looking at the
expenditures, of course we monitor that constantly, and there are
a variety of places where you would expect spending to be
affected as economic circumstances change. The most obvious one,
and I guess the one we follow most closely, is the social
assistance spending, but there are a variety of other areas.
Gabe, I don't know if you
want to-
Mr
Sékaly: No. I think the major one is the social
assistance caseloads that were followed on a monthly basis. As
Phil mentioned, we monitor that very closely. That's the major
impact from economic changes.
The Chair:
Unfortunately, Mr Phillips, we're out of time. On behalf of the
committee, I would like to thank all the ministry staff for their
presentation. This committee will recess until 2 o'clock in this
room.
The committee recessed
from 1256 to 1400.
ONTARIO CHAMBER OF COMMERCE
The Chair:
It's slightly after 2 o'clock and, in order to remain on time,
I'll bring the committee back to order. Our first presenters this
afternoon are representatives from the Ontario Chamber of
Commerce, if you could please come forward and state your names
for the record.
Mr Douglas
Robson: Thank you, Chairman. My name is Douglas Robson.
I am the president and COO of the Ontario chamber. On my right is
Atul Sharma, who is our chief economist, and on my left is Mary
Webb, who is our chief volunteer in this area and head of our
economics committee.
The Chair:
On behalf of the committee, welcome. You have 30 minutes for your
presentation this afternoon.
Mr Robson:
I have a number of things I'd like to read into the record and
then I'm sure there will be some questions from the group.
We are pleased once again
to have this opportunity to present our recommendations for the
2001-02 provincial budget. As many of you know, the Ontario
Chamber of Commerce is a federation of 156 local chambers of
commerce and boards of trade, and we have over 500 direct
corporate members as well. The OCC represents all sizes of
business in all sectors of the economy and throughout the entire
province. Through our federation, we currently represent over
57,000 businesses in Ontario. We have been the voice of business
in Ontario since 1911.
This pre-budget submission
provides an overview of a number of areas of interest for the
Ontario Chamber of Commerce and for Ontario business, much more
than can be adequately addressed in our allotted presentation
slot. Should you have any questions or comments arising from this
submission, please feel free to contact us at any time.
The submission begins with
a brief overview of the economy followed by our specific
recommendations for the 2001-02 provincial budget. As we stated
in last year's pre-budget submission, we believe that the
provincial government's fiscal and economic goal should be to
make Ontario the most competitive jurisdiction in North America.
To achieve the government's goal of job preservation, there must
be a focus on a number of the recommendations made here. We have
grouped our recommendations into two key areas: maintaining a
competitive fiscal and economic climate in the face of changes in
the economy and smarter spending for the future.
With regard to the economic
outlook, we all know that the winds of change have begun blowing
through the Ontario economy. A year ago the Ontario Chamber of
Commerce, in its pre-budget presentation, predicted that real GDP
growth would be in the 3.5% to 4% range. In fact, it is now
estimated that economic growth will be close to 6%, much better
than we had forecast. This year, 2001, will be a year of
considerable risk, though. We've seen a sharp slowdown in the US
economy, and of course we're very closely tied to the market
south of the border. Of particular concern is the current slide
in US motor vehicle sales. While the US Federal Reserve has taken
steps to moderate this downturn, sales of automobiles and other
products will fall short of last year's records.
The Ontario economy is
probably heading for a slowdown from the previous heady years,
but a recession, in our view, is currently not foreseen at the
present time. Fifty-two per cent of our members believe that the
economy will perform slightly worse than last year. When asked
about their medium-term view, only 11% said that they expected a
recession in the next three to five years. However, 63% do feel
that the economy will advance at a slightly slower pace than in
2000.
A particularly encouraging
indicator is that 68% of our members in 2001 intend on making the
same or greater investments in computers, software and
telecommunications equipment as they did last year; 66% plan on
making the same or greater investments in other capital. When
asked about their intentions to increase or reduce their
workforce, only 7% said that they would be reducing their
workforce, while 57% said that they would be maintaining their
workforce at the same level.
The Ontario chamber
forecasts that real GDP growth for 2001 will be in the 2.5% to 3%
range. We believe that this is a prudent forecast given the
recent upheaval in the North American economy. With the
likelihood of an economic slowdown, there is a considerable risk
that Ontario's unemployment rate will rise above the 5.7% average
in 2000.
Even though the Ontario
economy at the beginning of 2001 faces a weaker outlook than a
year ago, it is well positioned to weather the economic slowdown.
The government should be recognized for its commitment to
reducing taxes and creating a positive business climate in
Ontario. Both of these achievements will prove to be an important
barrier in ensuring that Ontario can withstand an economic
slowdown.
In terms of maintaining a
competitive climate, even with the likelihood that revenue growth
will slow, the OCC looks to the Ontario government to continue
trimming the provincial tax burden whenever possible. We support
your multi-year personal and corporate tax reduction plans, and
urge you to accelerate these cuts. We also make the following
recommendations with the belief that they will help keep Ontario
competitive, accelerate its prosperity and help create jobs.
In terms of maintaining a
multi-year debt reduction commitment, we are pleased to see the
government more than double its commitment to debt reduction,
from $2 billion to at least $5 billion, during their mandate.
From the chart lower down,
you can see it's clear that little progress has been made in
reducing our debt-to-GDP rate since it peaked in the mid-1990s.
The current debt-to-GDP ratio is approximately 28%.
The faster the debt can be
reduced, the faster Ontario can stop spending over $9 billion to
service the debt every year and the faster money can be allocated
to additional spending or tax cuts. Public debt interest
payments are the
third-highest government expenditure after health and
education.
Another reason to focus on
reducing the debt is to mitigate the impact of a slowdown on the
government's financial position and fiscal objectives.
Alongside the province's
commitment to reduce debt by at least $5 billion by fiscal
2003-04, the OCC urges the government to set a concurrent goal of
reducing its debt-to-GDP ratio from its current level of 28% to
20% within five years, and subsequently the goal should be a
debt-to-GDP ratio of 15% within a decade, returning the province
to the level at which it entered the 1990s.
The provincial government
is now allowing school boards to accumulate debt that is not
recorded on the province's book and without proper assurance that
the province will not be responsible for the debt. The OCC
recommends that the provincial government should not allow school
boards to accumulate their own debt. Further, the provincial
government should also ensure that it is not liable for any
accumulated school board debt.
In terms of raising the
personal income tax threshold, the OCC supported the province's
move to create a made-for-Ontario personal income tax. Now that
Ontario is able to set its own brackets and rates, it should
consider the following recommendation to continue Ontario's
competitiveness. A relatively low threshold for the highest tax
bracket is punitive for many middle-income families, given the
cumulative impact of inflation on earned income over the past
decade. The OCC applauds the government's move back to full
indexation, but more substantial bracket adjustments are
required, in our opinion.
The provincial surtax was
originally imposed to help eliminate the deficit. With Ontario's
books now balanced, and the opportunity to create a simpler, more
transparent personal tax system, we think the provincial surtax
should be reconsidered. So the OCC recommends that the provincial
government raise the threshold for the highest income tax
bracket, possibly to $150,000, and strongly consider eliminating
the provincial surtax.
In terms of small business,
we presented a resolution for discussion at our annual meeting
calling for the government to raise the small business limit from
$200,000 to $500,000 to eliminate the clawback. Two days prior to
our annual meeting, the 2000 budget was tabled and it contained a
provision to raise the small business limit from $200,000 to
$400,000. We were pleased to see the government move so quickly
on an OCC recommendation. We remain concerned, though, that the
clawback is an obstacle for small business expansion. So we
recommend that the government accelerate this change and
eliminate the current clawback.
In terms of eliminating the
capital tax on financial institutions, in this environment of
slower growth, the negative impact of profit-insensitive taxes
can be significant. In prior submissions to the government, the
OCC has suggested the capital tax on financial institutions be
removed, as it is a discriminatory tax against the financial
services industry, which is a major industry and a major
component of the Ontario economy and one of the biggest
businesses in this city. We recommend that the provincial
government eliminate the capital tax on financial institutions
and then reassess the general corporate capital tax.
With regard to seeing if
taxes are fulfilling their original purpose, the Red Tape
Commission has reviewed a number of outdated regulations. It's
now time to re-evaluate a number of taxes that may now be
disconnected from their original purpose. Their negative impact
on Ontario's competitiveness may far outweigh their revenue
generation. Examples include the tax for fuel conservation, TFFC,
the corporate minimum tax, CMT, and tax exemptions for
labour-sponsored venture capital corporations, LSVCC. We
recommend that the provincial government should initiate a
reassessment of current taxes to see if they are fulfilling their
original goal.
In terms of GST-PST
harmonization, the issue of harmonization has not been widely
discussed in the political arena in recent years. Understanding
the political hesitation to move forward on the issue, the OCC
nevertheless maintains that business efficiency arguments call
for an examination of the potential to combine these two taxes,
thus decreasing the administrative burden on business.
The OCC believes the
broader base of a harmonized sales tax would allow this change to
be revenue-neutral, with a one to two percentage point reduction
in the rate. So we recommend that the provincial government
should examine the benefits of GST-PST harmonization, coupled
with a one- to two-point rate reduction.
1410
With the recognized
longer-term advantages of stimulating savings and
productivity-enhancing investment, the OCC favours cuts to
personal income and corporate taxes over a reduction in retail
sales tax. However, we continue to advocate the advantages for
business efficiency of the harmonized sales tax. In a recent
survey of our members, nearly four fifths of our members said
that they would favour a combined GST-PST if it leads to lower
reporting costs for their businesses.
In terms of municipal share
corporations, the OCC would like to take this opportunity to
applaud the government's initiative to bring together
representatives of the business and municipal sectors to see if
consensus could be reached on some of the outstanding issues
regarding a new municipal act. We participated, along with other
associations, in the municipal share corporation consultations.
Based on those discussions, the OCC believes that there is a
fundamental agreement around the principles that should guide the
creation of municipal share corporations. Our members feel that
if approval is given for the establishment of municipal
for-profit corporations, then they should be incorporated under
the Ontario Business Corporations Act. There was some discussion
around establishing a completely separate type of corporation
specific for municipal purposes. We cannot support the idea of
allowing municipalities to establish for-profit corporations outside the OBCA
since it is possible that municipal for-profit corporations may
be competing strongly against private sector corporations.
The OCC recommends that if
municipalities are allowed to establish for-profit corporations,
then they must operate on a level playing field with the private
sector for-profit corporations.
In terms of smarter
spending for the future, the OCC recognizes the difficult
tradeoffs facing the province in balancing its multiple
investment priorities. We believe that there are primarily three
areas that will require smarter spending for the future: health,
education and transportation.
With respect to health
care, we have recently formed a task force to look at how Ontario
spends its health care dollars, with the objective of achieving
service improvements more efficiently. We see our health care
system as part of our economic infrastructure in Ontario. All of
the demographic indicators point to an increased usage of the
health care system over the next decade because of an aging and a
growing population. Our hope is that in our 2002 pre-budget
submission we will be able to make some specific recommendations
related to health care.
Investments in education
will continue to be an important part of the investments needed
for the future growth and prosperity of Ontario. The OCC, through
its board of directors, decided to tackle education as a business
issue. We have worked with the government on developing its new
curriculum to ensure that business studies were part of the mix.
We also supported the government's move to open up the university
sector to allow for more choice for students when deciding on
their post-secondary path. We look forward to continue working
with government to make Ontario's education system the best in
the world from early childhood education to post-secondary.
The third area of smarter
spending for the future is transportation. As some of you know,
we have launched an initiative calling on the province to study
and establish an Ontario transportation authority. This authority
would coordinate transportation infrastructure development and
public transportation in Ontario. A world-class transportation
system is key to continuing Ontario's prosperity, in our
opinion.
We would recommend to the
province that they establish a task force to report to the
Premier within 90 days outlining the business case and plan for
establishing an Ontario transportation authority. This task force
would be led by the OCC and include representatives from all
levels of the government, business, non-profit and institutional
sectors. I think you've all got a copy of the separate
submission, plus there are points in the paper you have.
Ladies and gentlemen, we
know there's no one solution to keeping Ontario competitive.
However, there are many areas which require attention, and we've
attempted to bring those issues forward. We hope that our efforts
assist you in your deliberations. We thank you for the
opportunity, Mr Chairman, to make this presentation and we are
prepared to answer any questions in the time allowed. So if there
are any further questions, we are happy to meet with members now
or at a later date, but I think we have a bit of time.
The Chair:
Thank you very much. We have about three minutes per caucus and
I'll start with the government side.
Mr
O'Toole: Thank you very much for making your
presentation. I certainly look forward to the comments on an
annual and more frequent basis. I may share my time with Mr
Galt.
I just want to focus on
page 13 of your presentation. You talked about-and I may just
jiggle this around a bit for you-smart spending for the future. I
took that to mean something more than you've just said here. You
looked at transportation and other infrastructure. I want to
specifically ask for your response to what I consider a
challenge, whether it's B to B, a business-to-business basis, or
business to government or government to business, and some of the
initiatives. When you look at the minister's overview this
morning, it was clear that not just the domestic economy and the
changing profile of the domestic economy, moving from more
manufacturing to a knowledge-based economy-are those the right
decisions? What I'd call smart investment as opposed to smart
spending were some of the initiatives that we took to support the
high-tech sector. I could mention a couple of them here. From the
minister there was the research-oriented investment fund. There
was also the research and development stock option benefit.
Looking forward in positioning ourselves, not just in the
Canadian context but certainly the North American, if not indeed
the global, do you think these are the right kinds of decisions
or should we look in the mirror and look back at the
manufacturing, some might argue, lower-value-added sectors of the
economy?
Mr Robson:
One thing we know is that the Ontario economy has restructured
itself. It's in a lot better position to withstand any downturn.
The government has done a lot to restructure things in its own
right. I'll let the economists go on with it, but in terms of our
transportation initiatives, we've heard senior members of the
government say, "We're not the government, we're here to fix the
government." They have fixed a number of areas, but in this
particular area of transportation we believe that there has to be
a multilevel government approach on it. We're talking about
interurban transportation; we're not talking about the TCC.
Mr
O'Toole: I understand.
Mr Robson:
We believe there'd be a lot to be gained from that because people
are all caught in their own silos.
Mary, I think you may have
a response to that one.
Ms Mary
Webb: While the technology now is under a bit of a cloud
with corrections on the equity market etc, we certainly do not
see its growth ending for Ontario, and I think Ontario is a
classic example of how much the new economy can benefit a
province. I think we have to give full credit for the
government's support of those initiatives and looking for further
co-operation between academic, the government and private business.
It seems to be what generates the new ideas and new
technology.
But I also would argue that
one of the things going into the slowing that we see for the
Ontario economy is its better diversification this time. That
means that continuing support has to be given to the old economy,
particularly because it's so important for old economy industries
to adopt the new technology. Auto parts is an example of that,
where over $10 billion in business investment over the past
decade has really put it in a stronger position in terms of
serving US assemblers and tier-one parts companies.
I think a sole focus on the
new economy is short-sighted because we have a lot of growth and
job creation still remaining in the old economy.
Mrs Sandra
Pupatello (Windsor West): Thank you so much for that
presentation. I wanted to ask you specifically about the
SuperBuild fund. You've spent a great deal of time lately
developing this plan and your view for transportation
improvement. It's very good to see the references to southwestern
Ontario and the corridors that require significant upgrades for
future growth and even current levels of transportation
requirements.
Mr Robson:
I should apologize. We left out the tunnels, which equal 2,000
trucks a year.
Mrs
Pupatello: Thank you. Yes, about one fifth of what goes
through our bridge every day in Windsor.
I wanted to mention,
though, that given what you feel is the chamber that should
happen in terms of a new authority for transportation and the
almost opposite view that the government holds that each
municipality would go forward with having to submit an
application to SuperBuild in order to get infrastructure dollars
for roads, then there really is no working together among the
corridor to get the kind of infrastructure that's required,
especially along southwestern Ontario, where the majority of auto
plants are, where the majority of manufacturing exists for
Ontario. So really, SuperBuild would work in an opposite fashion
to what you feel is required to develop proper transportation
infrastructure.
1420
Mr Robson:
One of the keys is that it will work between all levels: federal,
provincial, regional and municipal. Second, it uses a business
model. So when someone is appointed, no matter what the
appointment process is, which would be part of the study, as far
as we're concerned, their fiduciary duty, if you will, would be
to the Ontario transportation authority, not to Etobicoke or
Sarnia or Thunder Bay or Ottawa. That creates quite a difference
in the way the organization thinks, that they have to do the best
thing for the entire province.
Mrs
Pupatello: So the concept of SuperBuild, where
individual municipalities have to go forward with an application,
then wouldn't result in the kind of infrastructure development
that's going to be required in the paper you've laid out for the
development of a transportation authority.
Mr Robson:
One of the keys to the transportation authority is
forward-looking. One of the things we found when we were in
Hamilton last year and we had a conference on transportation was
that in 1960 you could look 10, 20, 30, 40 years out in
transportation and see what should happen. They've said that the
407 was talked about 20 years before it was done. Unless somebody
is hiding something, we don't see that sort of look now. So what
we're saying is that you need an organization that can do that
sort of planning, coordinate it all, consult on it, is an open
organization and has different ways of financing, whether it's
going to bond markets or exempt bonds or toll highways or
whatever. It's a whole different look at the thing, and that's
why you do a study to see how things like SuperBuild would fit
into it or how the GTSB would fit into it, what have you.
Mrs
Pupatello: And if you did continue with that type of
financing you've just mentioned, wouldn't they then be in the
same boat the school boards are in now in accumulating debts
because they're having to get debt for the capital projects to
build schools?
Mr Atul
Sharma: The way the authority is intended is that it
would be a not-for-profit authority, as well as being a
not-for-loss authority. So it would ensure that there should not
be any sort of accumulation of off-book debt, but certainly
that's an issue that should be brought into the study.
The Chair:
Thank you very much. Mr Christopherson.
Mr
Christopherson: Doug, good to see you again.
Mr Robson:
Likewise.
Mr
Christopherson: I wanted to ask you about the
acceleration of the debt, if I can get my hands on the exact
recommendation.
Mr Robson:
You mean in terms of moving down in the GDP ratio?
Mr
Christopherson: Yes. This was your first recommendation,
actually. I guess my question would be the timing of it, given
the fact that the US slowdown is affecting us. We've got over
15,000, 16,000 layoffs, either temporary or full-time, already
announced. You mentioned in other recommendations about the need
to do things about health and education and the continuing demand
on there. I'm wondering how you view the potential for lower
revenue in the foreseeable future, as a result of the slowdown in
the US economy, with increasing expenditures, which would be
reducing the debt, at a time when we don't have enough money
right now being invested in the fundamentals: health and
education. How do you square all that, Doug?
Mr Robson:
I'm going to ask my colleagues to join me after I answer, but I
would like to use the auto sector, if I might. Last year they
sold 18 billion units in America. They recommend this year it'll
be 16.5 million units. I think I said billion.
Mr
Christopherson: Yes, you did. I was wondering. Wow.
Mr Robson:
But that 18 million vehicles was the greatest year they'd ever
had. The point is that they're moving down not that much. If you
look at what happened in the early 1990s, they were at 12
million. So they are
forecasting less but they are not forecasting a crash. That's
what we're saying. There's less growth but you can't take your
eyes off that debt-to-GDP ratio because it's twice what it
normally would be. It's one thing to say you've paid off your
Chargex, but if you've still got a mortgage on your house of
$300,000, it can be a burden, and we've still got the mortgage on
the house. Either Atul or Mary may want to add to that but that's
how I see it.
Ms Webb:
Yes. There's no question the slower the revenue growth, the more
trade-offs are going to have to be done and more balancing, which
is why we ended up our presentation with the smarter spending,
because we see that it's going to have to be a continuing
priority of the government to spend as effectively as
possible.
But to accomplish the 20%
debt-to-GDP ratio in five years, it requires a debt repayment of
just over $1 billion each year. Of course, that can be averaged
over the period. Some years might be slightly less than that;
some years could be more than that. But it's probably not an
unreasonable amount to set aside. It simply goes to prove the
fundamental truth of debt repayment. In one year the saving in
debt service is not that great from paying down just over $1
billion, but if you do it for five years, the cumulative saving
is in fact substantial.
Mr
Christopherson: I don't think anybody is arguing with
the fact that paying off debt is good. That's not really the
point, if you will. It's more a matter of these trade-offs. I'm
trying to understand. At a time when there's not enough money to
go around for the things that are needed by the majority of
people, the ordinary working middle-class families that are out
there-there's not enough money to meet their community needs. To
suggest that if there's going to be greater spending-it's not
often the chamber recommends greater spending, but that's what
this is. It's spending money. It's just spending money to reduce
a debt, and yet there are all these other pressures. To use
Doug's analogy, if you paid off a Visa card and you've still got
a huge mortgage and you need to take care of it, if you have a
bigger priority and a bigger problem putting food on the table,
that's going to be your immediate need, as opposed to saying,
"We've got to go beyond our regular mortgage payments and we've
got to pay down extra." That's where I think a lot of people are,
certainly in my community of Hamilton. I have some real
difficulty with that.
The other thing is, I was
curious that in recommendation 6 you are making the case, and I
quote from your document: "With the recognized longer-term
advantages of stimulating productivity-enhancing investment, the
Ontario Chamber of Commerce favours cuts to personal income and
corporate taxes over a reduction in the retail sales tax." We've
already seen enormous amounts of cuts that have gone to the
corporate side of things, and on the personal income tax
benefiting, again largely on an individual basis, those with a
higher income. At least with the PST, everybody who makes a
purchase would benefit in some way. Why, after all these cuts in
the corporate sector that have benefited the very wealthy in
Ontario, do you now want to deny any opportunity, if you're going
to go on cutting taxes, to do it in an area where it would affect
the most people and do the most good, quite frankly, on a
day-to-day basis because it would free up that spending money?
Why would you do that?
Ms Webb:
Three reasons: first of all, I think there's a greater long-term
advantage to reducing corporate taxes. In fact, the government
just embarked on that program last spring. It was a multi-year
program. It's to Ontario's advantage to accelerate it because in
this period of fuller growth there's going to be more and more
competition with new investment. If Ontario can't succeed in
attracting that new investment, then we see the loss in terms of
job creation. For low-income families, the most important thing
we can provide is the job creation that gives them a source of
income. The corporate taxes have been proven to be very
effective, in a range of industrialized countries, to attract new
investment and job creation.
On personal income tax, I
think the records show that the cuts were certainly benefiting
higher income but also benefiting lower income. Once again,
that's setting up a productive capacity, developing skilled
labour, that type of initiative that is not a one-time spending
initiative; it's a longer-term productive capacity.
The Chair:
With that, I must bring the discussion to an end. Thank you very
much, on behalf of the committee.
Mr Robson:
Thank you very much on behalf of us. Thank you to all the members
too.
1430
GREATER TORONTO HOME BUILDERS' ASSOCIATION
The Chair:
Our next presenter is a representative from the Greater Toronto
Home Builders' Association. Please come forward and state your
name for the record. On behalf of the committee, welcome. You
have 30 minutes for your presentation this afternoon.
Mr Patrick
O'Hanlon: My name is Patrick O'Hanlon. I am currently
president of the 1,100-member Greater Toronto Home Builders'
Association, or GTHBA. As well, I am president of Angus Glen
Developments and Kylemore Homes. With me is our director of
government relations, Jim Murphy.
I want to talk to you today
about two things: first, the state of the housing markets in the
GTA and Ontario; second, the recommendations contained in the
GTHBA pre-budget submission, a copy of which you have just
received.
We have had a couple of
good years in the housing market in the greater Toronto area and
Ontario. However, I am here to tell you that things are slowing
down. Last year was a record year in new home sales in the GTA,
with over 40,000 new units sold. The GTA accounts for nearly 60%
of new home sales in the province. In addition, the GTA accounts
for nearly one quarter of all new home sales in the country. By
comparison, the state of California accounts for roughly 10% of all
the new home sales in the United States.
The product that purchasers
are buying is diverse. Today in the GTA, nearly one third of all
new home purchasers are buying condominiums, many of them
multi-residential. Nearly 30% of all new home sales in the GTA
last year were in the city of Toronto, over 80% of which were
condominiums. There are very few other North American cities
where the central area accounts for such a large portion of new
sales activities.
Perhaps more important, the
housing and renovation industry is a major economic contributor.
In 1999, the new residential construction and renovation sectors
contributed $8.4 billion in GDP to the province. By comparison,
the automotive manufacturing industry contributed $7.2 billion.
According to the CMHC, each newly constructed home generates 2.8
jobs, meaning that our builder members contributed in excess of
100,000 person-years of employment last year in the GTA
alone.
Housing is a major economic
contributor to our economy. Government tax policies should
support, not penalize, the industry. As I mentioned, sales are
slowing. While we had a record year in 2000, the sales for both
November and December 2000 were down when compared to November
and December 1999. We will be releasing our sales numbers for
January 2001. Based on the feedback from our members, we expect
the same trend. We will then have a full quarter where sales are
down.
As well, compared to the
boom of the 1980s, builders were performing in an economy with
very little inflation or speculation. There is double the number
of sites versus the 1980s and almost double the amount of
competition. It is a very fierce marketplace.
Prices of new homes are
higher in the GTA than elsewhere in Ontario, or the country for
that matter. The average price of a new single-family home in the
GTA is now over $280,000. This is a result of higher land costs,
higher labour costs and higher material costs.
Our five budget
recommendations speak to this reality as most of them have as a
basis a concept of putting more money in the pockets of consumers
and new homebuyers. They also speak to fairness, enhancing
affordability and creating jobs.
GTHBA contracted with noted
housing economist Greg Lampert to provide the financial impacts
of our recommendations. We believe strongly that by targeting
potential new home purchasers and existing homeowners, monies are
directed right back into the economy to make ancillary
purchases.
This has certainly been the
case with the land transfer tax refund. Our first recommendation
will deal with the land transfer tax refund for first-time buyers
of newly constructed homes. We believe this has been one of the
most successful programs the province has introduced. In 1999,
the refund was increased to $2,000 as per a previous GTHBA
recommendation and was made permanent last year. Our housing
economist, Greg Lampert, estimates the refund will put $35
million back into the pockets of new home purchasers this current
budget year. Why was this tax introduced? We believe that back in
the 1980s, when speculation was rampant, and inflation and
escalation of prices, it was necessary to tax that activity. This
is not the case in 2001 and we do not foresee it for the rest of
the decade.
GTHBA is recommending that
to assist purchasers with their downpayment, and in light of
higher housing costs in the GTA, the maximum refund limit of
$2,000 be eliminated entirely. In other words, first-time
purchasers of new homes would pay no land transfer tax. We
believe that purchasers use this refund for ancillary purchases
such as appliances, usually in the community where they have
purchased their new home. Our proposal is estimated to put a
further $6 million to $8 million into the pockets of new home
purchasers annually.
Alternatively, and again in
light of higher housing costs in the GTA, we would recommend
increasing the refund limit to $2,500. This, according to
Lampert, would equate to a $270,000 home, still below the GTA
single-family average. I wish to note that this program is only
for newly constructed homes, not resales, and we would strongly
recommend that it stay this way. Resale homes do not generate
jobs and there is no federal tax, such as the GST, on resale
homes.
Second, GTHBA recommends
eliminating all current size criteria in the province's PST grant
program for newly constructed rental units. This program should
be used to promote newly constructed rental projects, period,
regardless of unit sizes. Removing the restrictions would expand
the program to include medium- and high-end rental projects that
are likely to be attractive to investors and free up other units
for renters.
Additionally, GTHBA is
recommending that the grant program also apply to condominium
registered units. Condominiums are an important part of the
secondary rental market. Approximately one quarter of all
condominium units in Toronto are rented. Builders are planning to
construct new rental units but register them as condominium for
property tax reasons. Condo-registered rental units should be
treated the same, as they serve the same purpose of creating
rental housing options for individuals, many of them right here
in the city of Toronto. We have been informed that the majority
of these funds were allocated to long-term facilities and not new
rental projects. The government has recently, we understand,
rectified this situation.
Our third recommendation is
related to the first two. While the last recommendation deals
with encouraging builders to build rental units, we also believe
that like the land transfer tax refund program, there should be
an incentive to individual renters to buy new homes. We are
proposing that purchasers of newly constructed homes who are
currently renting be provided a $2,000 grant. This would be over
and above the land transfer tax refund and would help individuals
to meet a downpayment. It would also have the added benefit of
freeing up rental units for other consumers. We believe it is a
win-win situation. Our
economist, Greg Lampert, estimates that such a program would cost
roughly $47 million.
Our fourth recommendation
deals with the renovation market. This market is a growing
component of the overall residential market. The GTHBA is
proposing a provincial sales tax rebate program for renovations
of $5,000 or more. Greg Lampert estimates that every 1% reduction
in the PST on materials used for renovations above $5,000 equates
to roughly $20 million. A rebate of half the PST would equate to
$80 million. However, again, this rebate would go to homeowners
and taxpayers that are paying the PST. It would also encourage
the upgrading of the existing housing stock in our cities. Today
much of the renovation market is, unfortunately, conducted
underground. Such a program, we believe, would encourage more
renovation work to be conducted above-ground.
Finally, the GTHBA is
recommending, as we did last year, that the capital tax exemption
limit be increased from the current $2 million to $5 million.
Real estate, like forestry or mining, is a capital-intensive
industry and we are penalized as a result. We are taxed
regardless of any economic activity and, rather, taxed on assets.
We believe that the capital tax exemption should be raised.
Those are our five
recommendations. They have as their basis promoting home
ownership by putting more money back into the pockets of
individuals. As I stated earlier, every new home generates 2.8
jobs and there are numerous spinoffs in other industries. As we
begin to slow down, now is the time to assist home purchasers,
particularly first-time buyers.
Thank you, Mr Chairman. I
would be pleased, along with Jim, to answer any questions the
committee may have.
The Chair:
Thank you very much. We have approximately five minutes per
caucus. I'll start with the Liberals.
1440
Mr
Phillips: Thank you for the presentation. One of our
concerns is the lack of rental accommodation. You haven't got the
numbers in here, but you refer to it in several different places.
The numbers I've seen say that Ontario needs a minimum of 15,000
rental units built per year-I think it's either 15,000 or 20,000;
I've seen two different numbers-and that there were perhaps well
less than 1,000 per year built over the last four years. Most of
them, I gather, are not for people of modest income but maybe at
the upper-income level. We have in Ontario, then, a need of
15,000, but fewer than 1,000 a year, so the backlog appears to be
building up-a 60,000-unit backlog in the last four years or
so.
In the area I represent in
Toronto, I get a lot of people into my constituency office who
simply can't find accommodation. The reason I'm asking the
question is that you refer in this document to some suggestions
you have to perhaps improve that. The challenge, I recall, is
that previous presentations by homebuilders-maybe the Ontario
homebuilders, not yourself; I can't remember-have said, "Listen,
nobody is going to build substantial numbers of medium-income
rental accommodations in Ontario." Have you any advice for us on
how we can begin to tackle that? I gather, with the rental
program here, you're suggesting most of it has gone to retirement
homes, so that even the modest proposal over the last two years
hasn't gone to rental accommodations; it has gone to retirement
homes. Do you have any advice for us on how we can in any
substantive way see rental accommodation being built?
Mr
O'Hanlon: I'm going to deal with part of your issue on
what we're doing now and then I'm going to turn it over to Jim on
what some other jurisdictions are doing. Right now, the way we've
been tackling the rental shortage is through the building of
condominiums. About a quarter of the 13,000 condominiums that
were built last year have gone into the rental pool, so roughly
3,000 units a year have been coming from the condominium sector,
which have been very affordable, especially in the city, going
anywhere from $90,000 to $300,000. So we have been able to find
affordable accommodation. We have been able to find it right in
the core and in the surrounding areas.
What we're suggesting here
in our pre-budget submission is, how can we make it even more
affordable, especially for that first-time buyer to enter into
the market and free up existing rental units? We're tackling that
as a win-win situation. As far as other jurisdictions, Jim?
Mr Jim
Murphy: We're members, along with a number of other
trade associations, on something the province has set up called
the housing supply working group. Former Housing Minister Clement
had established this at Municipal Affairs and Housing to look
primarily at what we can do to get private rental construction in
Ontario. We're going to be coming out with a report on that
fairly shortly, probably in February or March.
A lot of the impediments to
new rental construction in the province are federal tax policies.
The federal government changed their federal tax policies for new
private rental construction back in the early 1980s, things like
appreciation, capital cost allowances, provisions to roll over-if
you sell one apartment building and use the profit from that to
buy another one. The federal government brought in a number of
measures in the early 1980s that have acted as a disincentive to
new private rental construction in the province. So we will
encourage the federal government to deal with some of those
issues.
It's important to note that
in the city of Toronto, at least, many developers and builders
are very close to building rental. The numbers are working out,
with low interest rates and other numbers that are out there in
terms of their pro formas. It's very close to new private rental
construction. What we're seeing, as Patrick indicated-and it was
one of our recommendations-is that builders and developers are
going to register these as condominiums anyway. They're not going
to register them as apartments, primarily in the city of Toronto,
for property tax reasons.
You may have seen in the
newspaper, for example, that Minto Development wants to build a
fairly large project
at Yonge and Eglinton. One of those 50-storey buildings will be a
condo-registered rental building that will provide new rental
spaces in the city. We're seeing that also, I believe, down at
John and Wellington. A US developer is building rental units. So
we're seeing new production. I think we're going to have 2,000
new rental units built in the province, which obviously is not
enough but is more than was done previously.
As Patrick indicated, there
is a whole secondary market out there that's meeting that need,
primarily the condominium market in this city, and secondary
access apartments and other things. So we're seeing some
construction.
We have been working with
the province on some measures to promote it. The province does
have a program, admittedly fairly small. If you look at some of
the numbers-we've done some research-if you exclude the down
payment on an affordable condominium, the carrying costs for a
$100,000 or $120,000 one-bedroom or bachelor condominium, as
Patrick referred to, equate to what the average rent is now in
the city of Toronto. So some of our recommendations deal with
trying to make it more affordable to own in terms of the down
payment issue, because your monthly costs are very similar in
terms of what your rent is, which has been increasing, versus
your carrying costs of the mortgage, which have been either
staying the same or decreasing. In fact, in the next several
months we'll see further reductions in interest rates.
That's a long-winded answer
to your question, but a lot of the issues have to do with federal
tax policies that act as a disincentive.
In the United States, the
federal government has a very large what they call low-income tax
credit program. It's a $3-billion program that's applied across
the United States. It was brought in in the mid-1990s and had
bipartisan support among Republicans and Democrats. It has
resulted in about 90,000 units being built in the US annually.
It's targeted toward developers and builders. They have to have a
certain percentage in their projects that meets an income test.
We have a number of Canadian and Toronto builders who are doing
this in the US-in Texas, in Florida, and all over the States.
It's a very successful program; something we would like to see
emulated either provincially or federally.
Mr
Phillips: What I heard was that there aren't going to be
a substantial number of rental units built.
Mr Murphy:
That's correct.
Mr
Christopherson: To follow up on the same issue but maybe
just a little different tack, you mentioned in your response to
Mr Phillips that the condo market was providing people who are in
apartments somewhere to go, and that frees up the apartment units
and therefore puts more supply on the market. Correct? I think
that's fair.
One of the difficulties
some of us see with that for the apartments that are being freed
up as a result of someone being able to muster a down payment and
purchase a first-time condo, for instance, is that without rent
controls, and the fact that there are so few apartments on the
market, it means that once it goes on the market, the price
jumps. Yes, you have a unit on the market but it's not
affordable, at least for a lot of folks. And, of course, the
lower your income, the greater the urgency of who we're trying to
address here when we talk about affordable housing. Could you
comment on that for me?
1450
Mr
O'Hanlon: In a number of municipalities there are
studies going on right now on exactly what you're talking about,
and that's affordable housing. When you talk about affordable
housing and rental housing, there is a distinction. They are
actually two different matters. What we're talking about right
now is market housing and bringing market rental units back on to
the marketplace.
Back in the early 1990s,
the NDP, and the Liberals before that, actually brought out
certain thresholds that each community or each building had to
meet in terms of affordable housing. Our industry is doing that
by itself now. The economy is dictating it, our costs are
dictating it and the market is dictating it. We feel, as an
industry, we are bringing out more affordable housing now than
ever in the 1990s and we are addressing that market.
As far as assisted housing,
we feel that is something the government should be tackling. All
the municipality mayors actually have been gathering a task force
to do such a thing.
Mr
Christopherson: I think we are using different
definitions, and I agree with that.
I have to say, though, that
just about every study I've seen says that we aren't, as a
province, meeting the need for affordable housing, especially for
modest- and low-income families. It's not being met. I'm not
suggesting that you aren't trying in some fashion, but to suggest
that somehow it's therefore being dealt with is not really where
we are. We're seeing more and more and longer and longer waiting
lists for people who are waiting for affordable housing.
You referred to our
government in the 1990s. We were the last government in North
America that was still directly providing affordable housing. The
interesting thing is, the government uses that as an attack; I
say it with pride. I think it's a shame that we don't have a
national housing strategy. The Liberals bailed out, and the
Tories bailed out in Ontario. There is nobody left in North
America as a government that is saying, "We've got a
responsibility to our most vulnerable."
I appreciate that what
you're talking about is within the market, but you've put a
dollar figure of $47 million on there. In terms of absolute need,
when you talk about homelessness-and it's finally starting to
creep up in the poll numbers for people's awareness-and link it
to the fact that a lot of people who consider themselves middle
class are on the brink of sliding off middle class, this is a
huge problem for all of us. I still don't see where that gets
addressed here. At the end of the day, it's you folks who will
physically build it. I realize it will be financed elsewhere, but there is that
partnership. So we're still missing a huge need in our society
vis-à-vis housing.
Mr Murphy:
Maybe I might comment on that just quickly, Mr Christopherson. As
Patrick says, there are two issues here. One is the bricks and
mortar, and that's some of the stuff we've been working on with
the province and with the federal government, to say there are
two ways you can do that: either the government has a program or
you do it through the tax system to encourage it, which is what
they're doing in the United States. Either way, they are meeting
a need in the market. I think our position would be that you do
it through the tax system.
The second point of the
whole issue is an income problem, which is more of a social
issue. It's getting away from the bricks and mortar to say
there's an income problem with tenants or income groups. The best
way to deal with that-and we certainly supported this as part of
our response to the Golden commission-is through a shelter
allowance program. So there are two issues. One is the bricks and
mortar in terms of meeting the need and the other is an income
shortfall.
Mr
Christopherson: It's interesting that minimum wage,
which is a key issue-
The Chair:
We're out of time. I'll have to go to the government side.
Mr Arnott:
Thank you, gentlemen, for your presentation. I think you've laid
out very well the expectations of your membership for
consideration by this committee, and I hope the Treasurer will
listen to what you have to say too. The fact that you've
attempted to give us the financial implications of each of your
recommendations is very helpful. We get a lot of groups that come
in here and ask for certain things, but when you tally up what
their expectations or requests are, it's fairly excessive. It's
helpful to know what it's going to cost in terms of our
recommendations that we will take forward.
In terms of your sector,
your industry today, we often hear about housing start numbers. I
think in the last three or four years, housing start numbers have
been very strong across the province. I assume that's been the
case in Toronto and the greater Toronto area. Can you give me
some up-to-date statistics on housing starts in Toronto right now
and where you see the trend going in the next year?
Mr
O'Hanlon: Actually, CMHC just released the housing
starts for January and they're substantially up. However, as you
all know, housing starts reflect the sales of six to 18 months,
when you go to a condominium, behind. So as an industry we really
look at sales as the barometer, and over the last two months and
January we see sales decreasing across the GTA, where the bulk of
our sales come from.
Last year we reached an
unprecedented number of 41,000 sales across the GTA which even
beat our record in 1986. This was done with a very stagnant
inflation and very little or no speculation, but it also came
from a marketplace where in 1986 we had just over 200 builders;
now we have 400 builders. We had 300 sites back then; now we have
600 sites. So we see the average number per builder per site
going down each and every year, and we're looking at possibly a
10% to 15% decrease from sales in the year 2000, which is still a
very robust year.
We don't want to paint a
dark picture here; in fact, in two weeks we write an article for
the Toronto Star where we're trying to dampen this recession
word, because we see that Ontario is poised for a very good
marketplace, very low in unemployment and good economic
conditions. But we're bracing ourselves for lower, more stable
growth and we're trying as an industry, this year especially, to
talk to our trades, to talk to the governments and talk to our
business partners and say, "Look, let's not look at this as
something that is just going to keep going, let's not get caught
back in the early 1990s when we went through five years of very,
very poor growth, and how do we maintain and sustain this with
our partners?"
We don't mind returning to
normalcy or stable figures, but we do not expect this 41,000
figure to continue this year. Then beyond that we're not sure.
Sorry for being long-winded here, but this year we're going into
a strike situation, and the government has given us the
ammunition with Bill 69, where all the trades come up all at the
same time on April 30. So for the very first time we're not going
to go through what we went through in 1998 when it was almost
nine months of strikes, first the sheetmetal workers, then they
found out, and it just went on. Here we're going through and the
trade unions and the builders are looking at this and saying,
"How do we maintain this?" and we're looking at government to do
the same thing.
The Chair:
On behalf of the committee, gentlemen, thank you very much for
your presentation this afternoon.
CANADIAN MENTAL HEALTH ASSOCIATION, ONTARIO
DIVISION; SCHIZOPHRENIA SOCIETY OF ONTARIO
The Chair:
The next presenter this afternoon will be representatives from
the Canadian Mental Health Association, Ontario division. Please
come forward and state your names for the record.
Dr Barbara
Everett: My name is Barbara Everett. I'm the chief
executive officer of the Canadian Mental Health Association.
Ms Janice
Wiggins: Good afternoon. My name is Janice Wiggins, and
I'm the executive director of the Schizophrenia Society of
Ontario, just to distinguish our two organizations, and we truly
appreciate the invitation of the CMHA to co-present with the
committee today.
Ms Brigette
Hough: I'm Brigette Hough. I'm president of the Toronto
chapter of the Schizophrenia Society.
Mr John
Trainor: My name is John Trainor. I'm chairman of the
Ontario Working Group on Early Intervention in Psychosis, and we
are partners with the Canadian Mental Health Association in that
effort.
The Chair: On behalf of the
committee, welcome, and you have 30 minutes for your
presentation.
1500
Dr
Everett: Thank you very much for the opportunity to
present to the committee. We thought we would keep it relatively
short, perhaps 15 minutes of our presentation, and then take
questions and have conversation, because that's the way we like
to do things.
My name again is Barbara
Everett, and it's a pleasure to be here today.
The CMHA, Ontario division,
represents 35 branches, and that's 35 agencies all across the
province, serving the seriously mentally ill. We also represent
approximately $50 million in spending in community health
endeavours, and we serve about 65,000 clients a year.
While it would be typical
for me, invited to this committee, to speak about the needs of
community mental health in general, specifically when a sector is
under pressure due to the divestment and the downsizing of the
psychiatric hospitals, I wanted to do something a little
different today, and hence my partners are here with me today.
What we would like to do is highlight a good-news story in mental
health. They're not that common, and we thought we'd bring that
to you today.
The good-news story is
early intervention treatment in psychosis. Psychotic illness is
typically understood as schizophrenia, but it's not necessarily
so narrowly focused. However, in this case, we're going to talk
specifically about psychosis as it relates to a diagnosis of
schizophrenia. The onset of schizophrenia is often in mid or late
teenage years, and children at that age can go years without
recognition and diagnosis of this particularly difficult
illness.
One of the CMHA's roles is
to create or to participate in partnerships in mental health care
in Ontario, and today I've brought my partners with me. We have
joined together in order to look at early intervention for youth
experiencing psychotic illness. The partnership represents mental
health professionals, physicians, families and consumers. The
other partners, who couldn't be with us today, are the Hamilton
Health Sciences Centre, the London Health Sciences Centre, and
the Ottawa Hospital. So this is a project that has a true
provincial scope to it.
As you probably are aware,
partnerships are always complex and partnerships in mental health
are doubly so. Families and consumers often cannot agree on what
is the best course of action to take. Mental health professionals
and policy-makers can be at odds with one another. However, every
so often an idea comes along where we can all agree on the right
course of action to take, and in this case it's the early
intervention strategy.
Psychotic disorders, most
notably schizophrenia, strike young people. When that happens,
it's not generally easily recognizable, and you can imagine the
confusion of the families when they are struggling with these
kinds of manifestations of symptoms in the home. The teens
themselves can hide these symptoms as a part of the disorder but
simply from shame and not understanding what is going on.
Professionals can misdiagnose, also not understanding what is
occurring at this point in time. The result is tragic. The teens
can grow up to be extremely troubled adults. They can drop out of
school. They become alienated from their families due to the
disorder and they end up alone and, in worst-case circumstances,
can end up on the streets.
The other side of the story
is that this can cost millions of dollars to the system in health
care. You've not only created a chronic mental health patient,
but you've lost the opportunity for a productive adult in the
world. The capacity to get an education, to get a job and to pay
taxes is all lost to us.
So there are two sides to
the coin. There is the suffering that is engendered by psychotic
illnesses, but it's also the cost to the system when they are not
identified and treated early.
Today we have a model that
works. The early intervention model is dynamic, is creative and
is effective. It starts off with substantial public education to
the teens themselves, their families, teachers, guidance
counsellors, coaches, clergy-wherever the kids hang out-talking
about the early signs of psychosis. It's an interesting
innovation in health care when you talk about public education,
because often health care is focused on illness care. In this
case, these types of projects go out into the schools. The
Schizophrenia Society and other family groups are particularly
helpful because they go and speak directly to the kids themselves
and to the people that the kids are likely to interface with and
trust. They tell them all about what psychosis can look like, not
to be ashamed to get some help and to get it early.
What then happens is that
youth can actually be treated at home. There are innovative
clinical teams that go out into the community, meet with the
families and treat the kids at home. We recognize that it can be
stigmatizing for kids and their families to show up at a
psychiatric hospital, and therefore these kinds of innovative
treatments are particularly valuable because they defend against
stigma. The kids can stay in school if they're well enough,
there's minimal interruption to their lives, and something else
that's important is that they're treated with low doses of
medication. So this is a little problem treated in the least
intrusive manner possible and of course at a low cost to the
health care system. The thing is that it works. It doesn't work
for everybody, and we don't want to overstate our case here
because there are certain numbers of people who have a really
difficult onset and they're going to have a long, difficult
struggle with the disorder, but for other people it works.
Brigette will speak eventually about the good-news stories and
what they look like.
Before you I've circulated
a proposal that suggests a foresight pilot project, hence our
partnerships with the academic health science centres. It extends
existing clinics in early intervention and it's province-wide.
The cost is $4.8 million per year. In the staggering cost of
health care, that is not a lot of money. That includes only the
provision to provide the service and a public awareness campaign. There's no
statement in there of the savings to the system of youth who are
saved.
Early intervention clinics
save lives and they save money by ensuring that people with
schizophrenia and other psychotic disorders do not become
chronic, long-term mental health patients and instead grow up to
lead productive and meaningful lives. The CMHA, Ontario division,
is suggesting, in concert with our partners, that early
intervention in psychosis not only works but it's cost-effective.
It's a good-news story for Ontario's youth.
I'd like to turn it over to
Janice. I believe you're going to speak a little bit about the
Schizophrenia Society, and then Brigette.
Ms
Wiggins: Yes. Thank you very much, Barbara. As I stated
from the onset, we appreciate the opportunity to present in
partnership this particular proposal with the CMHA and other
partners. This really represents a first for our
organization.
As many of you are aware,
we're a family-based organization and we provide public education
and awareness. We seek better laws and policies for the mentally
ill and we represent people with the illness as well as people
whose family has been affected. You can be a family member or a
friend of a person with schizophrenia. As you know, it's the most
serious of all psychotic illnesses.
While I'm here today to
support the early intervention program which Barbara has
introduced for you and Brigette will provide more detail upon, I
also would like to respectfully remind all the members that there
are many other services and fundamental and basic resources that
are needed in the mental health system for the seriously mentally
ill. However, because we have very limited time today, I'd like
to turn the presentation over. Brigette Hough, by way of
introduction, is one of our fabulous volunteer family members who
donates probably the equivalent of a workweek and then some to
the organization and to the cause of helping those people who are
seriously mentally ill and their families. Brigette, please take
over.
Ms Hough:
Thank you, Janice. I'm one of two representatives of the
Schizophrenia Society of Ontario on the Ontario Working Group on
Early Intervention in Psychosis. The other, who is not able to be
with us, is Ian Chovil, who is a man in his forties who has
schizophrenia. Ian is also on the Schizophrenia Society's board
of directors and does educational work in the Guelph community
around mental illness.
I'd like to quote from
Ian's presentation last June to the schizophrenia conference in
Kingston. He told us his story:
"I had an insidious onset,
which is a gradual increase in symptoms over the course of
several years. By the time it was obvious I needed help there was
no one who could help me because I had lost all my human
relationships. I had been kicked out of university, I had
alienated my parents, I had lost all my friends.
"I was psychotic for 10
years. I was homeless, I attempted suicide and I spent a couple
of nights in jail before I was court-ordered to see a
psychiatrist as a condition of my probation." Ian says: "I often
wonder why I had to lose 10 years of my life to an untreated
psychosis. In fact I wonder, why didn't I receive help in the
first five years, as I became psychotic?"
1510
Now this is me speaking.
Studies show that the average young person who is experiencing
psychosis has had one to two years of symptoms before treatment
is initiated. If this were cancer or heart disease, our society
would not tolerate such an appalling delay in treatment. As in
cancer and heart disease, the benefits of the earliest possible
treatment are proving to be a shorter and more complete
recovery.
So today we know that there
are still unacceptable delays in treatment, but the family
usually knows that something is wrong. But, largely through
ignorance, they don't recognize what it is. So the public,
particularly those who are in daily contact with young people in
the vulnerable age range-and we're talking adolescents and young
adults-need intensive education about the early signs and
symptoms of psychosis. Then they can make sure that these young
people get prompt, specialized and supportive assessments,
treatment, rehabilitation and follow-up.
Early intervention in
psychosis is not an experimental treatment. Similar strategies
have been in place for some time in other jurisdictions, notably
in several provinces, Australia, the United Kingdom and some of
the Scandinavian countries. In our own province, there are
already two pilot early intervention programs, with two more in
the process of coming on-line. The time has come to strengthen
these pilot programs and plan to provide the whole population of
Ontario with access to the leading-edge treatment for
psychosis.
I'm going to end with
another quote. This is from a mother whose daughter, now 20 years
old, received treatment and support from the early intervention
program in London, Ontario, one of our partners. She says, "I am
pleased that after almost four years, Tara remains healthy as a
result of a new approach to the treatment of schizophrenia. My
daughter has avoided any relapse of her illness and she looks
forward to a promising future. Early identification and treatment
has greatly influenced the outcome of my daughter's health, and
I'm grateful for the new thinking which has helped us avoid the
full burden of a serious mental illness."
Ladies and gentlemen, the
promise of early intervention in psychosis is that some young
people, instead of being discharged to a lifetime care of
caseworkers, ACT teams and social services, are returning to
school, are completing their education, are entering the
workforce and becoming contributing members of society. Surely
that's what this government wants.
Dr
Everett: That concludes the more formal portion of our
presentation. I anticipated questions. We brought John along, not
as window dressing, but because he has been the chair of the work
group right from the outset. Should you have specific questions
about early intervention, he can help you with that, while
Brigette and Janice can talk about the family perspective and I
can pitch in on community mental health in general.
The Chair:
We have approximately three minutes per caucus. I'll start with
the official opposition.
Mrs
Pupatello: It was interesting that the government
decided on a tack of early identification in terms of needs for
children in general and in particular with the children's mental
health agencies that are spread out across Ontario and in total
have a budget that equals less than Toronto Sick Kids Hospital,
considering the many needs across the province for those
services. I'm assuming that your organization works with these
same individuals who would be identified as needing intervention.
I often thought how cruel it was to have young kids identified as
needing intervention, and then the agencies are powerless to
actually intervene, because they don't have the funding
available. Over time, their budgets have not grown or kept pace
with the needs of these children to have an intervention
service.
In my community and in many
across Ontario, we're seeing the waiting lists growing longer and
longer for service. In some cases, the statistics are fooling us,
because the first intervention will be considered a phone call.
So that essentially gets them off the waiting list, because
there's been an intervention of a telephone call, and that puts
them off to some other list. Do you have any comments about
this?
Dr
Everett: I think I could pitch in there. This particular
project is the adult mental health system reaching down to
younger people. You know, there's a substantial lack of interface
between the adult system and the child mental health area.
Because we can work with teens here, we get into what's called
transitional-age youth and we have a responsibility toward
transitional-age youth. But everything that you've said we
witness and understand because we are responsible for those
children when they become adults.
Mrs
Pupatello: In fact, your numbers are growing and the
severity of the conditions that you're seeing is growing, and
that's because we've failed so miserably at a very young age for
these kids. In light of having had the first children's ministry,
which the government vaunted and which has now disappeared-I
think under the carpet of another ministry since that time-really
we've seen nothing change on the front line other than a shifting
of statistics into different places. Kids are still very much in
need, and frankly it's a cruelty to identify more kids at risk
and then not be able to provide the intervention that's required
for these children.
Ms Hough:
The clinical interventions that we are talking about here are
very clinical interventions; we're not talking just making
clinicals.
Dr
Everett: No, they're specific and very active
outreach.
Mrs
Pupatello: In fact, for some of the very serious cases
there's initial significant expensive intervention but, as you're
pointing out in your submission, over the long term the
government would be saving millions and millions of dollars by
intervening at this pace at an early age.
Dr
Everett: Yes.
Mrs
Pupatello: Thanks for coming today.
The Vice-Chair (Mr
Doug Galt): We'll move on to the third party.
Mr
Christopherson: Thank you for your presentation. I
believe you said there was a dollar figure of
$47 million.
Dr
Everett: It's $4.8 million.
Mr
Christopherson: Pardon me, $4.8 million.
Dr
Everett: We'll take $47 million.
Mr
Christopherson: I'm sure you would. I know what it was;
$47 million was what the builders wanted. They did, just a few
minutes ago. That was their figure. You only want a percentage of
that.
Given the dollars involved
here and the number of people who are affected, are you able to
put a figure to the actual dollars that can be saved as a
comparator?
Dr
Everett: I looked at those. As you know, we have a
knowledge centre at CMHA, and we have general figures for
children's unidentified mental health problems and they are in
the billions of dollars, and they're not broken down specifically
into psychotic disorders. But you certainly can imagine the
burden on the system of an unidentified psychotic disorder of a
teen in trouble with the law who perhaps is apprehended and put
into the youth correctional system and ends up in the psychiatric
system, who has caseworkers and ACT teams attached to them, who
has to be in subsidized housing for the rest of their life and on
social assistance.
Mr
Christopherson: Also, as a former Minister of
Correctional Services, we all know the percentage of people in
our jails who have a history of mental illness.
This is one of the key
things. I've got to tell you, my experience is that we get a
whole lot of the financial folks roll in here and they make the
arguments about what's going to happen five, 10, 15, 20 years out
and this government listens. We get a lot of social or health
groups, community groups, environmental groups for that matter
too, that will come in and make the same argument and it just
lies flat. It doesn't register.
I want to suggest that
somehow collectively we've got to find a way to show-and maybe it
means a different way of showing financial accounting, where we
actually build in-and it was suggested in the past and
governments have been afraid to do it, but we've got to look at
things differently. If you make the investment now, then you
actually build in X dollars of reduction, conservatively-small-c
conservatively. But build that right in so that people can see
that it does actually equate to less cost in the future, because
unfortunately, to make the case on the heartstrings alone doesn't
always do it, certainly not with this government. It's got to be
boiled down to its lowest common denominator, which is
dollars.
I want to tell you that
when groups come in-the Ontario Chamber of Commerce came in a
little while ago and the Greater Toronto Home Builders'
Association-they talk about certain tax cuts or certain
reductions in the debt
that they'd like to see; the chamber wanted an acceleration.
Those are expenditures. Some folks have a problem hearing that or
accepting that, but the reality is that is spending money. You've
just decided to spend it in a way that's different than actually
going out and buying something, if you will. But the government
is still spending money. In this case you're talking about $4.8
million. For instance, $4.8 million would help roughly how many
young people over a given period of time?
1520
Mr
Trainor: I think each of the clinical sites that we're
working with that would be involved in the four pilots across the
province would be dealing with between 200 and 300 people a year.
There are four of them, so that's the number of people who would
be helped each year.
Mr
Christopherson: Sorry, what was the figure per?
Mr
Trainor: Two hundred to 300 per site per year.
Mrs
Molinari: Thank you very much for your presentation.
It's certainly a very sensitive topic. I represent the riding of
Thornhill. I had a family actually come and see me when the
introduction of Brian's Law was in the picture, and we were
certainly encouraged to pursue that and continue that. I heard
some very troubling stories of what families have gone through
over the years because of such a sensitive area when we're
dealing with adults and they're at an age where it's difficult
for families and parents to help those who don't realize that
they need the help at that point in time. Certainly having heard
their stories gave me a greater sensitivity to the need for this
type of service.
I note that in your
presentation-and I thank you for breaking it down in various
areas and actually coming up with dollar figures and what it
would cost to provide the type of early intervention services
that you're recommending here today. In the last page you also
indicated that there have been some funds that have been awarded
since the presentation of this. Could you expand a little bit on
that and what the funds are for and what the presentation for
your request was and how it was granted?
Mr
Trainor: I can give you a little bit of information, a
little bit of background. When we began the working group, which
includes the organizations represented here, plus the clinical
sites that have been mentioned from the health sciences centres,
we did from the beginning involve staff from the Ministry of
Health and Long-Term Care, from their mental health policy group,
and made sure that they were aware of this. We have worked
closely with them for the past year.
Two kinds of support are in
the works. One is a study between the four sites-Ottawa, Toronto,
Hamilton and London-that would look in more detail at how these
programs work, what kinds of outcomes they're generating and what
are the best ways to go about providing them. The second thing
that has been announced, and that was just a couple of weeks ago,
was from the Ministry of Health and Long-Term Care's Toronto
region, and that was funding for an early intervention mobile
treatment team for the Centre for Addiction and Mental Health.
The funding amount is $855,000. That team is already in fact
being developed, now that the news has been received from the
ministry. Those are certainly steps in the right direction. Our
overall strategy, which includes budgets from the four clinical
sites, as well as the family groups and the CMHA and the working
group itself, has also been developed and submitted to the
Ministry of Health and Long-Term Care.
Mrs
Molinari: This present funding that you've already
received, is that going to serve-you've given us a number of
people who would be served per year with the amount that you're
asking here. You said between 200 and 300. That initial funding,
what specifically will that do for the end client?
Mr
Trainor: The funding that has been awarded to the Centre
for Addiction and Mental Health is for a mobile early
intervention treatment team. This is a psychiatric treatment team
that involves a group of disciplines: nursing, social work,
occupational therapy and a psychiatrist. The team will be able to
go on a rapid-response basis-it could be to a high school, a
family practitioner's office, it could be an emergency room where
somebody has turned up who is showing the early symptoms of
psychosis-and provide whatever treatment is needed to get them
the help that they need. It's estimated that team will deal with
about 250 patients per year and will treat them for a period of
time. It will not keep them in the long term, but perhaps three
to six months until the early intervention is completed and they
can be turned over to other components of the mental health
system, or if they can't be, they will continue to be supported
by that team.
The
Vice-Chair: Thank you for your presentation. It's much
appreciated.
CHILD POVERTY ACTION GROUP
The
Vice-Chair: Our next delegation is the Child Poverty
Action Group. Good afternoon. Make yourself comfortable. Welcome.
We look forward to your presentation. You have a half-hour for
presentation and for questions and answers, questions and answers
being divided equally by the three parties.
Mr Colin
Hughes: Thank you very much. My name is Colin Hughes. I
am with the Child Poverty Action Group. With me is Dr Brigitte
Kitchen, who is a founding member of the Child Poverty Action
Group.
What we would like to do is
walk through the brief we've given you. I should note that the
Child Poverty Action Group has been in existence for about 16
years now. In 1985 it was very difficult to get people to
register that children were actually in poverty. Sixteen years
later, it seems that we've got people registering, they do
understand, that children are in poverty, but what we're not
getting is action. I think what we'd really like to do is try to
promote what kind of action we can start to see from Ontario once
again. So we would like to quickly walk through this brief and then we really look
forward to some discussion.
We'll start with the fact
that Ontario does in fact have a huge child poverty problem. What
we have seen over the last two years, and one would say it's
about time, is a decline in the number of children who are poor.
What is really quite astonishing, though, is that given the kind
of economic growth we have, given the kind of prosperity we've
had, given the decline we've seen in things like the unemployment
rate, the number of people on welfare, is that the decline in the
number of poor children has been really quite marginal in
comparison to that. We have about a half-million poor children in
Ontario, about 470,000, I believe, so that makes about one child
in five in Ontario poor.
We have a few legacies that
I don't think we should be very proud of. Ontario since 1996 has
been one of only two provinces, the other province being
Newfoundland, that has actually seen the depth of poverty grow
among families. The average poor family is somewhere in the area
of $9,800 below the actual poverty line. We have a big debate
about the poverty line; it's an artificial debate. Poor people
live thousands and thousands of dollars, on average, below the
poverty line.
Ontario has also seen
significant growth over the past decade, since 1989, in the
number of children who are poor. We've seen a 91% growth in the
number of poor kids in this province, compared to a 28% growth in
the number of poor kids in the rest of Canada.
The message we've been
hearing from the government of Ontario has consistently been one
of placing a fair amount of stock on economic growth and on tax
cuts as a way of getting family income security. What these
numbers, we think, show is that that is a fairly limited
strategy, that that strategy isn't really going to work. Clearly
from the numbers, the amount of economic growth is showing that
we're not going to grow our way out of the problem.
Tax cuts, as we see in our
brief, are problematic. Mostly across-the-board tax cuts really
do result in an unequal distribution of the benefits. Low-income
families get very little, if anything; upper-income groups and
families get the lion's share. They are also quite expensive,
which means they use up any kind of public revenues that we might
have for alternative policy directions in terms of giving away
those revenues in the form of tax cuts.
What we're suggesting is a
more balanced approach, that we put the brakes on the
across-the-board tax cuts and that we look at investing in other
areas to promote the well-being of families. We would like to
highlight quickly some of the areas that we think some action
should occur on.
1530
The first one is around the
national child benefit supplement. Federal child benefits come in
a base benefit and a supplement for lower-income families. That
supplement is clawed back from social assistance, and the idea of
the clawback is to promote labour market attachment. In other
words, if you're working, you get to keep the full supplement; if
you end up on social assistance, the value of that supplement is
taken away from you.
We think this is really
problematic for two reasons. The argument that it promotes
attachment to the labour market is weak because it is taken away
from recipients who aren't expected to work at all. These
recipients include parents who have very young preschool
children. Under Ontario Works they are not expected to work, and
yet their money is clawed back. It includes disabled parents, who
are not expected to work, yet the money is again clawed back. It
also includes community foster children. These are children who
are taken into the homes of relatives or neighbours because their
parents are unable to look after them for a period of time. We
certainly don't expect them to work; it's clawed back from them.
So we have a huge inequity just in this whole idea of whom we
consider employable and why the benefit is taken away from
them.
The second problem is that
it doesn't really address the big reasons that families have
trouble leaving welfare, and these are outlined in our brief.
They include growing in-work poverty and the whole problem of
welfare poverty, which in itself is a huge barrier. You can't
find work if you can't have a secure home, you can't find work if
you don't have a telephone, if you have shabby clothes, if you
have ill health, because you're so deeply poor that you can't
afford those things. It's self-defeating.
Our recommendation is to
really do what was intended with the federal benefit. The federal
benefit was intended to fight child poverty. It does represent
some progress in that area. A lot more could be done federally.
We think the province should allow recipients to keep the full
value of the benefit and not claw it back from their welfare
assistance.
There is a reinvestment.
This is the money that is taken from welfare and gives provincial
savings, and that does get plowed into a child care supplement.
There are some good things and some bad things about the
supplement, things we like and things we don't like. The obvious
one is that you really need to use revenue other than the
clawback for this supplement. This supplement really shouldn't be
funded by taking money from one group of poor children, welfare
poor children, and giving it to another group of poor
children.
The other difficulty we
have with it is that it's not really child care. It is called a
child care supplement. That's great. At least it acknowledges
that child care is an issue for families, but it really doesn't
address that issue. The supplement is not tied to any kind of
child care expense at all. You can receive that supplement and
not have any child care expenses. The amount of the supplement is
not enough to pay for very much child care, so it's not going to
go very far. Perhaps the biggest problem is that you're not going
to build a system of quality child care through supplements. It's
just not going to
happen. That's where you have to start teasing out these
policies.
If you look at what's good
about this particular program-and we were pleased to see that it
has been bumped up a couple of hundred dollars for single parents
in last year's budget-is that basically it's a work income
supplement. We think, and we are recommending, that you should
really relabel it as a work income supplement and that you should
pursue child care through other means, as a separate policy
option, so that you can be sure to build in the quality
dimensions that are very important, and you can't do that through
supplements; finally, that you of course fund it from other
provincial sources of revenue. Again, taking it from one poor
group and giving it to another poor group is just unfair and
unreasonable.
We would also like you to
do something about minimum wages in this budget. It is very
unfair, in our view, to expect people to have a work ethic and
then to pay them increasingly less every year for their work
effort. This is just utterly indefensible. That minimum wage has
been frozen since 1995. We calculate, if you take a look at
what's happened in terms of inflation, that a working parent
putting in 40 hours a week, 52 weeks a year, has lost about
$1,350 in purchasing power. These are the poorest working people,
and it is just unconscionable that that wage remains frozen. So
we're really very much urging that you bump that minimum wage up
to $7.50 an hour to compensate for five years of inflation. It is
really only fair and it won't cost the province a single nickel
to do that.
We're also very concerned
about the proposed changes to the labour code that may lead to
families having to work 60 hours a week or having to take broken
holidays. We would really encourage you to throw that out. We
believe that is anti-family and that, instead, you should be
looking at ways that the labour code can actually support
families in the labour market.
In the area of childcare,
we believe you have to look at both the supply and quality of
care, that these both go hand in hand, and that you should be
pursuing two goals: one goal should be to help parents work and
the other should be to give children a good start in life.
Ontario really has gone from being a leader to a laggard in
childcare. The official policy of the province of Ontario for,
gosh, I don't know how long, has been to develop childcare as a
public service. That no longer seems to be the case. There has
been a $70-million cut to regulated childcare since 1995, and we
really need to be turning this around. Ontario is heading in one
direction, where it used to lead. The rest of Canada, British
Columbia, Quebec and, more recently, Manitoba are clearly moving
in the direction of developing decent childcare systems. Ontario
should do that.
There is a real incentive
to do that as well. The federal government is going to be
investing $844 million into prenatal childcare and parent
supports. We really want to see the province come up with the $70
million that has been cut and to develop a comprehensive package
to put some particular emphasis on moving on childcare.
Briefly, with the early
years challenge fund, we're very concerned about what would
appear to be the development of a new level of bureaucracy that
is very partisan, that is connected to the Premier's office, and
we would very much urge you to look at the existing and
non-partisan mechanisms for providing funding to develop early
years programs outside of what currently is happening.
Unemployment insurance
isn't an area of provincial jurisdiction, but it should be an
area of provincial concern. It would appear that we may be
heading toward a recession. Ontario would be very, very wise to
take a look at what's happening to the employment insurance fund.
Coverage in this province for unemployed workers has dropped down
to about one unemployed worker in four. It's been estimated that
Ontario is losing $2.25 billion per year because of changes to
employment insurance coverage.
Employment insurance really
should be the first line of defence for families if they lose
work. If that's not going to happen, you can bet what will happen
is that they will land on welfare, which is a poorer program and
is, of course, going to cost the province considerably. So we
would really urge that the province press for fuller coverage and
that working families get, in fact, what they're paying for.
In terms of welfare, there
are basically two approaches to welfare reform. One is the
workfare approach, which is the approach which has been adopted
by this province. It tends to emphasize cutting benefits; it
emphasizes making life hard for recipients on welfare and getting
the quickest route as possible into any job. The second approach
tends to emphasize more of a reasonable minimum income, one that
is enough to reasonably pay for housing and for other basic
needs, and makes investments in people and in the labour market.
The Child Poverty Action Group is basically just opposed to
workfare. We believe it's degrading, we believe that it's
ineffective and that basically what it results in is a revolving
door into deeper and deeper poverty between welfare and work.
1540
The more specific point we
would make in our brief is that the cuts really are hurting. They
are hurting bad. The 22% cut to welfare-personally, I do not
understand how anyone can live with this on their conscience, but
that has been terribly, terribly hard on families. That cut is
now a 28% cut when you factor in inflation. The cost of
everything everywhere goes up. The fact that there has been no
increase to the benefits also affects the disabled, even though
their benefits were not slashed by 22%. Their rents go up, their
food goes up, their clothing goes up, everything they need goes
up, but those rates have been frozen.
We're very much opposed to
workfare. We do feel it's degrading. I think the Minister of
Community and Social Services's announcement on the whole drug
testing-reaching into
a box of syringes, saying that recipients were shooting their
cheques up their arms-is just a characteristic of the approach to
welfare that is beating up some of the poorest people. And those
people have kids; 40% of those families, those people on welfare,
are kids. What message is this government sending to those
children about their parents? We really have to take a look at
what's going on. You're not going to get far beating people up.
It's just not working. I don't care if the caseloads are going
down. The caseloads are largely going down because of economic
growth and because it's been made hard to get. That is not good
enough. We really need to get away from this whole workfare
business and begin to get away, for goodness sakes, from this
welfare-bashing. It's shameless. We would really like to see the
province in this budget restore the benefit levels at least to
what they were in 1995.
We would like to see some
discussion and some action taken on assured child support. We
understand that arrears are being reported to the tune of about
$1.2 billion. What we're really urging is, yes, step up
enforcement. People do have an obligation to pay child support
and there has to be that enforcement, but you have to also start
looking at making the system child-centred. That means that you
make sure the child receives payments in a regular way at a
pre-set minimum, and if the parent defaults or delays for one
reason or another, the child still gets that support that they're
entitled to. In other words, the state goes up to bat for the
kid.
The whole area of housing:
we have concerns about the impact of rent controls. There's a
chart that shows what the impact has been in Toronto. When the
controls were announced in 1998, you can see that when you take
inflation out of the rental increases, the rents popped up
considerably. This is a very disturbing thing, especially if this
is a trend. So we're asking, where is the protection in the
Tenant Protection Act? We really need to see some guts in that
act and that act has to be revisited.
We also really need to see
some action on affordable housing. We just simply can't go on as
it is right now. We now have 6,200 children living in shelters in
the capital of Ontario, in Toronto. This is just unconscionable.
This is a 130% increase since 1988, and all the forecasts show
that we're going to end up with even more kids growing up in
shelters. Some of these families are living in shelters for up to
a year. Can you imagine growing up in a shelter? This is
absolutely shameful. The market is not going to do it. We really
have to get into the whole area of building affordable housing,
on the one hand, making sure there are protections for tenants,
on the other hand, and then, of course, making sure people have
the income to start with.
Our final point is around
post-secondary education. The link between higher education and
employment is absolutely irrefutable. We won't discuss that. I'm
sure we all agree on that. We're very much concerned about the
growth in tuition. There has been about a 150% increase in
tuition in Ontario over the past decade, and the average student
debt is now around $25,000. We really think that tuition has to
start coming down overall because that is an access issue, and if
you have people coming out of education with huge debts, it's
really quite self-defeating. Either they won't pursue it or
they're just going to be financially crippled by the time they
get their college or university studies finished.
The other area that needs
to be revisited is the whole grade 12 maximum in terms of access
to any kind of education for social assistance recipients. The
research is fairly clear that if social assistance recipients who
qualify can pursue post-secondary education, they often end up
earning enough not only to leave welfare altogether but to
actually leave poverty. Even in Alberta, in their welfare
reforms, they made provision for recipients, particularly for
single parents, to have access to post-secondary education. So we
would urge that you head in that direction.
I hope I haven't taken too
much time. We've given you the shotgun effect in terms of a lot
of different policy areas but we really think that a
comprehensive approach is necessary. There are all kinds of
opportunities here for Ontario. Some of these things don't cost
Ontario a nickel; some things require adjustment but it's money
well invested.
We welcome your
questions.
The Chair:
We have approximately three minutes per caucus. I'll start with
the government side.
Mrs
Molinari: Thank you very much for your presentation. It
was certainly a very passionate presentation when we're talking
about the welfare of our children and their future. It brings out
a lot of passion within all of us. I think we all agree they are
important to all of us and to our future. I think there are
varying views on how we achieve the long-term benefits and
effects that we want for our children, but you've made an
excellent presentation with a number of recommendations. They are
very succinct and comprehensive and to be included with all of
the other presentations that are here. So I want to thank you, on
behalf of this side of the table, for the very passionate
presentation you've made today.
The Chair:
Do you have any questions? If not, I'll go to the official
opposition.
Mr
Phillips: I appreciate your thoughtful presentation and
particularly the work that you do. I'd like to comment on your
comment, referring to the Minister of Community and Social
Services and the syringes. I've said this publicly in the House
twice now: I find what the minister does reprehensible. He puts
up posters saying, "If you suspect anyone of welfare fraud, phone
this number." The syringes play to fears that people have and
misconceptions about people on social assistance. He will wave
around a credit card that he found on one person on social
assistance to leave the impression about many on it. I've said it
twice now; it's been one of the more distasteful things that I've
found here in the Legislature.
That is the minister who in
my opinion should be defending our most vulnerable, not attacking
them. The public I think want to spend their taxpayer dollars
wisely, and doing that
does more damage to the collective will all of us have had in
this province to make sure that we look after each other in tough
times. All of us will go through a difficult patch in our
lives-all of us-when we need a little bit of a helping hand. I
found attacking the most vulnerable by the minister who should be
defending them very distasteful and it undermines the public's
will to support those programs. I don't mind saying that without
him here because I said it to his face twice in the
Legislature.
I appreciate your
recommendations. My comment is on your opening statement. One of
the ways the government, in my opinion, dismisses poverty among
young people is to say, "That's overstated." They are using one
measurement and others use another measurement. When you dismiss
it as not a problem, then the public say, "It must not be a
problem that we need to tackle." Can you help humanize the issue
of poverty among young people and help us to understand better
the level of poverty among young people and what it means in real
terms? As I say, that's the starting point, I think, in your
brief.
1550
Dr Brigitte
Kitchen: It's interesting that you tackle poverty from
this perspective, because in Europe they have given up talking
about poverty. What they are talking about is social exclusion.
They are looking at those factors that make it difficult or
impossible for people to have and share in what the rest of
society takes as normal and acceptable standards of living. The
European Community now bases its whole development of social
policy on achieving social inclusion. For instance, if on average
children in the European Community achieve an education of 17
years, it is considered as socially exclusionary if you leave
school at 14 or 15. You are supposed to come up to at least the
average.
You can argue over and over
again, as we have done in this country, how much a family needs,
how much an individual needs. I don't think you have to be an
Einstein if you think about $520 for an individual on social
assistance in the city of Toronto. I just taught a class on
social administration and I asked my students, "Go out and do a
budgetary analysis." They came to the conclusion that with that
kind of money, either you are supposed to learn how to cheat or
you have to go and steal. In either case, it's not very social
behaviour that is being encouraged by those kinds of support
levels.
What we have to do is talk
in realistic terms about what people need. People do not compare
themselves with people in poverty in some Third World country;
they compare themselves with what people have here. Colin talked
so movingly about the housing problem. Wouldn't we all agree that
every Canadian citizen and resident has a right to housing? We
have 6,200 children living in shelters in Ontario.
Mr Hughes:
In Toronto.
Dr
Kitchen: In Toronto. As Colin said, some of them stay
longer than a year when all the child development literature says
that what children need is consistency and stability. Some of
these children move in and out of shelters-another way of
upsetting them in their developmental opportunities. That is just
one kind of policy. It's short-sighted, because instead of
preventing problems we are creating problems.
Mr
Christopherson: Thank you for your presentation. I won't
name names, but I've got to say that the response from the
government side was pretty pathetic, to the extent that all we
got was a nice little pat on the head for you for coming in. They
didn't even use up all their time, no engagement of the
discussions at all, just a hope that you'll go away because
you're the problem. All the things you present here today, and a
loudmouth like me, are a problem, because we get in the way of
what they want to do. It's just so infuriating. I look at all the
issues you've listed here, and every one of them we've taken to
task on the floor of the Legislature time and time again and none
of it seems to get through. All we hear about is that more tax
cuts are going to solve all the problems of the world. It's so
sad.
My question to you would be
this, and I'm sure it's a difficult one, but if the recession
continues-we always said this is where you will see things. You
can paper things over when you've got money because, as you
pointed out, there's growth. It does create some jobs. It hides
things. When that disappears, as it does in the cyclical nature
of things, this is when it gets exposed. If we continue like this
for any length of time, out of all the key areas you identified
this morning, what are the ones you think we should watch for in
terms of there being the most notable deterioration? What should
we who care a lot about these sorts of things be watching if the
economy continues to slow down in terms of the first signs of
further deterioration, almost an accelerated deterioration,
because of what's happening and what's being exposed?
Dr
Kitchen: I think Colin addressed that, because the first
thing that's going to happen is that the welfare caseload will
start increasing.
Mr
Christopherson: Which has started already.
Dr
Kitchen: Yes.
Mr
Christopherson: We saw January go up by 4,500.
Dr
Kitchen: The second thing that's going to happen is we
will see more and more homelessness. As far as from where I sit
as a professor of social work at York University, that's what my
students bring back, the increasing risk of homelessness of
families. You talk about the cracks only appearing in recession.
I think the cracks become deeper in the recession, but we have
had now a number of good years of economic growth and the poverty
rate of children in the province has not come down substantially.
It has come down slightly, but what we are seeing appearing is a
deeply ingrained problem of a low-wage sector where people who
have children, ie, parents, find it impossible to get out and
give their children the kind of life chances that are needed for
the social inclusion I talked about that has become the key
policy issue in Europe.
The Chair:
On behalf of the committee, thank you very much for your
presentation this afternoon.
COUNCIL OF ONTARIO CONSTRUCTION ASSOCIATIONS
The Chair:
Our next presenters will be representatives from the Council of
Ontario Construction Associations. Could you please come forward
and state your name for the record.
Dr David
Surplis: It's good to see all of you again. I'm David
Surplis, president of the Council of Ontario Construction
Associations, and with me is Gary Robertson, a new face to you.
He has joined COCA from industry. He worked for many large
construction firms in the last few years, around the Hamilton
area in particular. As I refer to him, he's the real person. He
can tell you about the industry first, as of course can Mrs
Pupatello.
At any rate, COCA is
delighted to be here for I don't know how many years it is now.
It seems we could just carry on from one year with the same
players really, come to think of it. We represent about 40
associations from pole to pole in Ontario, the big ones, the
small ones, everything in between. We do not do residential
construction. We just remind you of that again. Fortunately,
you've had the home builders, or at least Metro home builders,
here today, so you'll know that. We do everything else, and
that's important to know.
We're the second-largest
industry in the province and we're hopeful of impressing that
fact on the Honourable Bob Runciman as he settles into the chair
of the Ministry of Economic Development and Trade, because we
think frankly that construction per se, as the second-largest
industry, has been ignored by all governments really at Queen's
Park and deserves to play a bigger role here.
In terms of the economy and
the budget, which of course we're here for and you're here for,
as you know, after 1990, the recession and so on, we dropped down
to about $6.6 billion from around $12 billion by the way, and
we've recovered back to about $9.2 billion in 1999, a little more
than that in 2000. But it has been static. As you can see-I think
it's about page 8; it would be somewhere in there anyway, the
last page perhaps-the value of new construction is flatlined for
industrial/commercial/institutional. That's actually astounding
when you notice the growth, the strength of Ontario's economy and
so on. When you see that non-residential construction is
flatlined, you say, "What's going on here?" That's what we ask
all the time. What is going on here?
One of the things that's
going on here, and we do want to impress it on you: severe
shortages of skilled labour in Ontario-we were just at an outlook
conference on January 31-30,000 to 40,000 workers short of the
needs over the next four years here in Ontario. The irony is, as
I point out in our brief here, most of our members, the 7,000 to
10,000 companies, are busy, margins are improving, but they're
not adding new business because they can't find the workers to do
it.
So you find anomalies.
There was a cancer centre outside of Toronto that had to be
tendered out. Five general contractors responded to it. One
withdrew immediately, two said they were courtesy bids only, and
so there were only two real bids on the work for the regional
cancer centre. That's astounding to us, but a great deal of it
has to do with the shortage of labour. You just can't get it. As
we point out on page 2, the construction labour force has shrunk
drastically in Ontario. We're only about 5% of the whole labour
force in Ontario now. We used to be up around 6.6%, which is
pretty high. We were up around almost half a million at the end
of the 1980s, early 1990s, and we're just over 300,000 today.
1600
We have always made a plea,
and we will make it again, for champions at the cabinet table.
There is no minister responsible for all aspects of construction;
there's a minister who has a bit of this and a bit of that. We
have to deal with about 14 ministries in terms of getting the
construction industry's interests looked after here at Queen's
Park. That's not to mention, of course, all the agencies, boards
and commissions. But there's no focus, and we would desperately
like to have that. As I say, we're going to try and get the
Honourable Bob Runciman to play that role.
We've got to say again that
we're delighted with the progress made in reducing the deficit
and balancing the budget. We're delighted with the announcements
of hospital expansion, renovation, long-term-care beds, expansion
renovations at the colleges and universities, but the shortages
of skilled labour are impinging on those very things. I've
mentioned this to the ministers, the Minister of Health and
Long-Term Care and so on. If you can't get the workers, you're
not going to get all these projects done or you're not going to
get them done on time or you're not going to get them done on
budget. There are just no two ways about it. There aren't enough
workers to put, for instance, 2,000 long-term-care beds in place
by 2004 without extra cost. It's just that simple.
Our second message-and I
know you've heard it before; we always say it-is about
maintenance and expansion of the infrastructure system in
Ontario, specifically sewers and water mains, waste water and
roads. Again we say-and Mr Christopherson of course agreed with
this; I think all of you did last year-because in the
municipalities the infrastructure is underground it tends to be
forgotten: out of sight, out of mind. It is very foolish not to
pay attention to those infrastructure systems, because they do
break down. It's so much cheaper to maintain them than to replace
them, and we'd just like to see some activity along those
lines.
As we say on page 4 here,
we don't see any reason at all why the principle of full cost
recovery should not be implemented with regard to water systems
in Ontario. The Ontario Sewer and Watermain Construction
Association, one of the members of COCA, has pointed out for
years that the clean water delivery to most homes in most
municipalities is subsidized to the tune of about $500 a home. We
just don't understand that. We pay full freight for everything
else: hydro, heating oil, telephone cables and so on. I know, it
looks like a tax increase and so on, but we think it's an
investment to keep the infrastructure in good shape, to improve it and, with any luck
at all, to expand it.
The same goes for the
roads, of course. As I point out, we don't want to get into a
Mayor Lastman-Minister Stockwell sort of debate on this, but the
fact is that roads and bridges under municipal care appear to be
deteriorating or are not in as good shape as they could be.
That's just what our members tell us over and over again. As Ms
Pupatello would certainly know, we need some help with the roads
for international trade at the gateways, the Windsors, the Eries,
the Niagaras and so on. We need help with that and we need to be
partnering with the federal government.
We're really pleased to see
the work of the Red Tape Commission over the last five or six
years. They have reduced a number of the burdens that we bore as
contractors. Reducing the deficit and the tax burden all help,
but one of the things we can't quite understand is the
inattention to the problem of revenue leakage at the Ministry of
Finance. As we've pointed out to this committee for over five
years, the growing practice of replacing employees with
independent contractors or independent operators, whatever you
want to call them, not only reduces costs for employers, which of
course everyone wants to do, but it creates huge shortfalls in
provincial revenues, in our estimation, in our research.
Take a construction site
with 20 workers, for instance. The average wage for them over the
period of a year would be about $50,000 each, or $1 million. The
trigger for employers' health tax is a payroll of $400,000. If
those 20 workers on the construction site are all independent
operators and billing, there is no payroll, there are no
employees, hence there is no trigger and not a cent is paid to
the employer health tax, not a cent. So we can't figure that
out.
Here's another astounding
figure that we've got for you on page 5. Out of the Statistics
Canada data they show a construction workforce in Ontario of
about 300,000, with 110,000 of those as self-employed. That
doesn't make any sense. It doesn't tell you that there are
110,000 independent operators out there. What it tells you is
there are 110,000 people who are paid that way. That phenomenon
has enormous ramifications for, as we say, the employers' health
tax and other taxes-we'll get to that in a minute-but certainly
for the Workplace Safety and Insurance Board. If they're not
workers they're not covered; there's nobody paying premiums on
their behalf. They're not covered. It doesn't make any sense.
Our research shows-and
we're repeating ourselves but it's been confirmed now by WSIB
themselves-that less than 50% of the construction workforce in
Ontario is registered at the board. We don't think that's good
for the workers, it's certainly not good for the WSIB and it
really isn't good for our members who are paying WSIB because as
the shortfalls increase in revenue to the board, what do they do?
They up the rates. And what do our people do? For the unionized
ones, of course, there's no way they can escape or dodge. For the
rest of them, many go underground, more and more every year. It's
driving us nuts, and we've got a whole plan with the WSIB to
address it, but it looks like it's going to take a number of
years to get it going.
Our bottom-line projection
for the Ministry of Finance is that with the revenue not being
declared, with the payrolls not being declared-we don't think
that the independent operators are declaring all of their income
for tax purposes-when you total it up, we think that the Ministry
of Finance here is losing between half a billion and $1.5 billion
a year. That's potential. It bears serious examination. That is
what we would like to see, some more attention paid to the
revenue leakage.
Interestingly, one of the
things we're working on at WSIB, the federal legislation was
changed to allow the Canada Customs and Revenue Agency to talk
directly with workers' compensation boards and they're doing that
now. You need a memorandum of understanding, but once they've got
it in place they'll be able to check CCRA records and see which
companies are making deductions for employee costs and then run
it against who is or is not registered at the board and go after
them.
I know I'm repeating what I
said last year, but we think it bears repeating. There isn't a
single agency in Ontario, not any part of government, the
Workplace Safety and Insurance Board, the labour relations board,
anything, that can tell us how many construction companies there
are in Ontario. There is no place that can tell you with any
degree of authority how many construction workers there are in
Ontario. They are all guesses. They're reasonably good guesses,
but there isn't a single agency that registers companies or
workers, and we would like to see that.
A couple of things-and I
want to wrap up because we do enjoy the give and take of the
questions and answers better. Perhaps you do too.
1610
But we do want to say some
of the initiatives and brag. The building regulatory reform
advisory group report, of which we are a part of course, has a
number of things that will be very helpful to the industry, some
that may be detrimental. We don't see, for the life of us, why
superintendents and ICI construction have anything to do with the
code because they follow the drawings and specifications that
have already been stamped by engineers and architects at two
levels, the ones who've initialled them and the municipalities
that have approved them. It doesn't make any sense. We don't want
the red tape and costs of running 9,000 of our superintendents
through some kind of training course. But the Red Tape Commission
is well aware of that.
We also want to mention
that we were part of the brownfields redevelopment advisory
group. I think there's quite a lot that's going to come out of
that to help. If you look around any of your communities, the
brownfields are everywhere. The impediments to smartening up
those sites, providing work, providing a tax base, providing all
kinds of things is a real challenge and we commend it to everybody. We hope that out of
the brownfields we can get there.
Finally, of course, we'll
leave you with our usual offer and that is, we have tens and
hundreds of highly qualified, industrious people with expertise
in the construction industry and all kinds of other things at
your beck and call. If you ever want any advice on anything,
please just give us a call, whether you want us individually or
as groups. We want to help, because frankly, as I said, the
conclusion is that when Ontario's booming, the construction
industry is booming and vice versa. When we're booming, so is
Ontario.
That's about it. If you
have any questions, Gary and I would certainly be happy to get
going here.
The Chair:
Thank you very much. We have approximately four minutes per
caucus and I'll start with the official opposition. Mr
Kwinter.
Mr
Kwinter: As always, I enjoy your presentations and the
important role you play in our economy. I've been here long
enough to have heard you go through a whole cycle where you were
having problems getting work and you wanted the government to
expand and accelerate its capital works projects or
infrastructure support because you were losing employees because
they didn't have any work. Now you tell us that it's just the
opposite, that you've got a shortage of labour and that your
apprenticeship program is in decline.
I think one of the problems
is that in today's economy, and the so-called new economy, there
seems to be a premium on young people getting into the new
electronic industries and it's very difficult to attract them to
the kind of jobs you offer, even though they're excellent
jobs.
Dr
Surplis: High-paying, yes.
Mr
Kwinter: So I think there's got to be an educational
program to let people know that the old economy, and we've heard
it earlier today, is as important as the new economy. But I think
you have that challenge, because when you talk to an average
student who's in school and you ask them, "What do you want to
be?" I would say that very, very few of them will say, "I want to
be a construction worker when I graduate."
Dr
Surplis: That's right.
Mr
Kwinter: I think the reason for that is because-and I
don't know the answer as to why that has happened-someone who is
in construction is seen to be not reaching their potential as if
they were in the professions or, as I say, into this new
economy.
Are you, as an industry,
doing anything to address that problem?
Dr
Surplis: We surely are. I'll let Gary answer in a
minute, but briefly, we have initiated a major initiative in the
last month with the Ministry of Training, Colleges and
Universities. The deputy and I are co-chairing a task force to
address this very thing. We've brought together a coalition of
the entire industry-architects, engineers, home builders,
apartment builders, the UDI, labour-everybody's there. We
recognize the problem and we're going to have a go at addressing
it.
But you're absolutely
correct. We emphasize careers in construction, as opposed to
jobs. I had a friend who sold his electrical company last year.
There were two reasons: one, he had a fortunately mild heart
attack; secondly, because he writes the cheques, he was writing
cheques for more money for his workers than he was able to get
out of the company himself. He was writing cheques for $110,000,
$120,000, $130,000 a year. That's pretty darned fine income, but
the young people don't know it. There's the dot-com thing. But
Gary, you've had practical experience of that.
Mr Gary
Robertson: I've sat in classrooms, I've sat in schools
and made presentations. Sometimes you're viewed as coming from
another planet. When you start talking about construction as a
career, you lose them right away.
I think part of it, and we
recognize it, is the visibility of the actual profession itself.
Everybody has sort of a picture of what construction is, based on
what they see. They don't really get to see behind the scenes and
get involved in some of the things that take place and the
reality out there. It's the same problem we face at Queen's Park.
We're still not very visible within Queen's Park and yet, as
David was saying, we're the second-largest industry in the
province.
We suffer at the end to get
people in, but we suffer from a bigger perspective too. There's
not as great an appreciation of the role this industry plays in
the continued economic growth of the province.
The Chair:
You've got time for a quick question.
Mr
Phillips: There are so many questions. The government
just published its projections of population growth and it said
the population will grow in the next 10 years by about 1.4
million in Ontario. Well over 80% of that growth will come
through immigration. That's the huge part of our population
growth.
Historically, that's been a
source of some of the employees in your industry. If in fact that
is going to be one of the major sources of labour force growth in
the future-and by the way, Ontario's tended to cut back
substantially on its settlement services, on the things where you
can attract the people who want to come to Canada-have you been
involved in discussions at all with the provincial government
around where this is at least a part of the solution to your
future problems?
Dr
Surplis: We're starting down that road and perhaps you
got into this with the home builders. They made an initiative
with the federal government to try to relax some of the
requirements and so on to allow skilled workers to come here.
The reality is apparently
they don't want to come. They're doing so well in Europe now that
they're not all that keen to come here, so we might not
necessarily be getting the masons and the trowel people we used
to get. But we are starting down that road.
Mr
Christopherson: Thank you for your presentation again,
David. It's good to see you. I think as the years go by we find
that we have more and more in common than just our first names, which probably gives
both of us sleepless nights.
I particularly wanted to
just touch on a couple of those actually, the whole issue of what
you just spoke about with my colleagues from the Liberal Party,
about the whole idea that there's a career there in construction
and it is an honourable one, and if we have time, maybe come back
to the idea of why the apprenticeship programs aren't as
appealing as they once were.
Besides what you've already
addressed, there's got to be more to that because there's got to
some awareness by some young people that either technology's just
not their interest per se or they just don't have the aptitude
for it. Some are good at it, some aren't. Here's an opportunity
to do something else that'll give you the ability to build a good
life.
Infrastructure: yes, you
and I have gone on and on about that and it still remains a
problem. One of these days it's going to dawn on folks. There's
some initiative going on now. The province, the feds and the
municipalities are coming together, but again, it's not all going
into infrastructure and it's not dealing with it fully.
I'm very impressed, and
always was from the first time you enunciated the notion, that,
look, there's the rules and you're here to represent those
employers who are playing by the rules, and those that aren't are
as much a concern for you as they are for anyone else, for
whatever reason. If everybody took that approach, we'd probably
have a lot more going in our favour in this province.
You also raised the issue
of brownfields, a particular issue in Hamilton, of course, that's
coming up. Councillor Andrea Horvath, for instance, takes the
lead on that in our community and that's where I wanted to ask my
question, on the issue of brownfields, because eventually we're
going to have to deal with it. We're just scratching the surface.
The Americans are ahead of us a bit on it. But as the government
finally starts to talk about the issue of urban sprawl and that
it can't go on, then brownfields start to go up the priority
list.
Do you have any particular
approaches to it or thoughts that aren't being looked at, that
should be, or that you feel strongly about one way or
another?
Again, at the end of the
day, we're talking so much money. It's the whole business of
musical chairs: the music stops and who's left holding the bag in
terms of who has the property and has responsibility under law
now to clean it up, which in many cases makes it useless as a
development property because of the prohibitive costs of cleaning
it up. It's a problem for all of us, regardless of where on the
equation you think you sit. Your thoughts on that.
1620
Mr
Robertson: You've brought up some of the projects that
have taken place under the EPA program within the US, for
instance. What has happened down there is that in some of the
specific areas identified, such as Pittsburgh and Cleveland and
some high-industry areas that have gone through a change in
industry that have left some of those properties undeveloped and
just basically sitting not doing anything because nobody wants to
pick up the tab for cleaning up, they've developed a tax relief
program in the US whereby owners of that property are able to use
the cost associated with that cleanup as an actual expense in the
year that it is incurred, rather than capitalizing it for the
future. So they actually can write it off their income in that
particular year or, if it's a significant amount, they can count
it as a loss for a period of time. They can apply it
retroactively two years or for the next 20 years.
What that has done is
inject development. You just have to go to downtown Hamilton and
take a look at some of the prime property and prime residential
property that is sitting there and is not being developed because
nobody wants to clean it up.
Mr
Christopherson: Exactly.
Mr
O'Toole: Thank you very much for your presentation. I
just want to thank I guess it was Mr Kwinter who remarked on the
need to educate our young people to look at the high-value trades
and skills. In that respect I think the government, with the
Ontario youth apprenticeship program, is moving in the right
direction and in fact increasing the number of spots and the
funding. I think the expansion of the post-secondary model under
the new cohort, double-cohort funding-hopefully the colleges will
continue to provide that sort of-not particularly not academic
because I don't mean to imply that, but more skill-based learning
situations. So I compliment you on that.
I have a couple of
questions but I just want to make a couple of statements. You
said there is no one at the cabinet table, and I take some
exception to that. The government has spent a fair amount of time
examining the best methodology and perhaps the best delivery
model. In the previous term, the 36th Parliament, the Ontario
Jobs and Investment Board, as you know, produced a specific
report dealing with much of that hard and soft infrastructure.
The Road Map to Prosperity document I think is a fundamentally
important document looking ahead. As you probably know, growing
out of that came the SuperBuild fund, which was consolidating and
managing capital investment for the province of Ontario. That $10
billion intended to match some other private sector or other
sector involvement to $20 billion is a pretty ambitious and
efficient plan. I think the overall is to include to joint use
and multipurpose in the best kind of arrangement.
I did meet yesterday with
my federal counterpart and we spoke to one of the lower-tier
municipalities. I was quite surprised to learn that I think on
October 2, 2000, the federal government signed on to COIP, the
Canada-Ontario infrastructure program. I think the five-year
commit was something just over half a billion. Cast that against
the $10 billion that I've mentioned and it's infinitesimal. I'm
not just playing the "blame the fed" game here. What I'm trying
to say is that we recognize clearly-Minister Eves and certainly
the Premier, who were
at the table-that the SuperBuild fund is a growth-oriented
commitment.
Also OSTAR, which is part
of the SuperBuild fund, is an extremely important initiative,
given the fact that water and sewage issues as we know them are
challenges for all of us, given the recent events at
Walkerton.
The Olympic initiative that
is underway-I see your pin and commend you for that, I think. I
live in the GTA so will have to be mild on that one.
You've said there has been
spectacular growth. I want to get back to the capacity issue is
really what I'm getting to here. In the capacity of your sector,
the commercial-industrial sector, it went from 6.6% to 9.2% or
something like that. That's pretty specific growth, given the
constraints; that is, the shortage of skilled trades, the
attraction and redevelopment. We've tried, as you know, to
implement some differentiation within the skill sets. One of the
bills we introduced was to try and introduce some way of
reskilling existing trades so they don't have to go through the
whole four years of training. I'd like you to comment on
that.
What is the capacity of
your sector? It's at 9.2%. Given all things, SuperBuild and all
the pressures, do you know what's really happening? That hospital
that you said had five quotes, two were just courtesy quotes and
one really didn't mean it. The price is going through the roof
for most of this capital, which is another debate. But talk to
the capacity, skills shortage and what we could do specifically
perhaps in some of the labour issues that we've dealt with in
legislation to deal with that and help you to move that number
up.
Dr
Surplis: The number was at $12 billion plus in 1989-90.
That's sort of the benchmark for us.
Mr
Phillips: Those were the days.
Dr
Surplis: Those were the days, and we were growing and
growing.
Mr
O'Toole: That was when you doubled your debt, wasn't
it?
Mr
Phillips: No, no.
Dr
Surplis: We just grew and grew, but that was pretty much
the capacity. We were up around a 500,000 workforce and all that
amount. It was really very good. Then it all dropped down.
Ms Pupatello has asked me
for a chart which we have on apprenticeship. Of course it dropped
like a stone, for all kinds of reasons, one of which was not
necessarily that they weren't interested, but once they got
interested, there was no work for them. You have to have a
working spot to be an apprentice and to finish your
apprenticeship. Too many gave up on that; they just couldn't find
work. There are all kinds of reasons for that. But we're getting
to it.
We do commend SuperBuild,
all day, every day. We commend the initiatives that way. What we
were saying, by the way, in terms of a champion minister is a
minister who can look at the entire industry, at all our
problems. For instance, we've got to go to the Attorney General
for the lien act and the limitations. We've got to go to the
Ministry of Labour for labour relations. We've got to go here and
we've got to go there. There isn't one person who can say,
"Here's what the construction industry needs." That's what we're
looking for. But no, we do acknowledge SuperBuild in every
way.
The Chair:
On behalf of the committee, thank you very much for your
presentation this afternoon.
TORONTO ASSOCIATION FOR COMMUNITY LIVING
The Chair:
This next presenter this afternoon are representatives from the
Toronto Association for Community Living. If you could, please,
come forward and state your name for the record. You have 30
minutes for your presentation this afternoon. On behalf of the
committee, welcome.
Ms June
Chiu: Good afternoon, ladies and gentlemen. My name is
June Chiu. I'm the president of the Toronto Association for
Community Living. With me today are Agnes Samler, who's the
executive director of our association, and to my left is Keith
Powell, who's the executive director from our provincial
organization, the Ontario Association for Community Living. To
his left is Mr Frank Drasnin, who is a member of the board of
directors from the Ontario Association for Community Living. I'd
like to thank you for the opportunity for seeing us today.
First of all, I'd like just
to say that our association supports people with an intellectual
disability from birth through their senior years. Our association
was established over 50 years ago when a group of parents formed
the "parents' council for retarded children." This group of
parents was determined not to place their children in
institutions but rather to find community alternatives for them.
We started by developing special schools for children who were at
that time excluded from the school system for many years.
Today, we are a large
association, serving approximately 5,000 individuals with an
intellectual disability and their families. We offer a wide range
of services, including early childhood education, employment
training and placement, residential placements for adults, parent
relief for children and adults, as well as case management.
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As president of TACL, as it
is known, I represent a membership of about 1,000 people, many of
whom have family members with an intellectual disability. I
myself am the mother of a daughter with significant special
needs. Our daughter Nadine, known as Dee, had an intellectual as
well as a physical disability. As an association, we have the
support of over 800 volunteers.
Today, I would like to tell
you about four major issues which face our association and indeed
which face the entire sector of people with intellectual
disabilities.
Our first concern: senior
parents who are still supporting their adult children with an
intellectual disability at home; second, school-aged children and
youth whose parents are finding that their children are not
included in their
local schools, although that is the option supported by
legislation; third, the need for government to support lifelong
planning and resources for people with an intellectual
disability; fourth, dangerously inadequate salaries for the
workers in this field.
To start, I want you to
know about a pressing problem facing an increasing number of
families in the Toronto area. It is the critical issue of senior
parents who are still caring for adult children at home.
In the 1930s and 1940s, if
you had a child identified as being "mentally retarded," you were
advised to place that child in an institution. Although this was
difficult for many parents, they followed the advice of
professionals and put their children into institutional care.
Some parents were determined to keep their children at home.
Often, they did so at great financial and personal cost to
themselves and other family members. These parents were of a
generation that took care of their own. They seldom asked for
help from government.
Now, these same parents are
aging. They are in their seventies, eighties and a few are even
in their nineties. Sometimes there's only one parent still alive.
Often, their adult children still need physical help with
toileting and eating. These parents are tired. Other family
members try to help, but they usually have families who depend on
them as well, or they may not live in Toronto. In reality, very
few are ready to take on the additional challenge of a sibling or
family member with an intellectually disability. These parents
are desperately worried. They ask what will happen to their son
or daughter when they themselves become ill or die.
What makes their situation
particularly unfair is the difference between how the children
who are supported at home are treated and how the children who
were placed in institutions are treated. We have estimated that
if a child was placed in an institution in 1955, the government
would have paid over $4 million to support that individual if
translated into today's dollars. As institutions are closed, now
each of the residents leaving an institution is guaranteed
annualized funding to provide a safe place to live in the
community, as well as a stimulating day program. People with an
intellectual disability, living at home with senior parents right
now, do not have any of those guarantees.
Yes, our sector has
received $50 million in new money recently. We are very grateful
for that infusion of funds, but let me tell you how woefully
inadequate that really is. Some money was allocated for senior
parents in Toronto. Approximately 100 Toronto senior families in
great need, and who were ready to accept placement immediately,
were identified. There were funds to find residential supports
for the sons and daughters of only 33 of these parents, almost
all of whom were over 80 years old. Still there remain at least
65 Toronto families with very senior parents who have been left
in frightening uncertainty.
What we are asking for as a
first step is that your government provide the opportunity for
residential and day supports to every family where the primary
caregiver is over the age of 65 or has a life-threatening
illness. We know that some parents will choose to continue to
keep their son or daughter at home, but the knowledge that the
help will be there when needed will remove the tremendous burden
of anxiety about their future. For other senior parents, these
resources will allow them to live their final years knowing that
their adult child is provided with adequate care.
Senior parents are not the
only people who feel that they are up against impossible
barriers. Many parents of school-age children feel the same way.
As one of them said recently, "Why do we have to fight for
everything, forever?"
Government regulation 181
stipulates that for children with an intellectual disability,
placement in a regular classroom, with the appropriate
educational support, should be considered first. We applaud this.
Unfortunately, there are many barriers which stand in the way of
schools and parents in making this a reality. In order to get
funding for critical supports, schools and parents have to go
through a long and costly procedure of testing and meetings of
professionals, most of which is unnecessary. This process forces
parents to present their children in the most negative possible
light. Some parents even say they are made to feel guilty because
they have a child with special needs.
As Dee's mother and
advocate, I can remember that whenever I sought the appropriate
supports for my daughter, I was often reminded that if Dee were
provided with such assistance, then it would be at the expense of
other students and even the school's needs. But this has not been
our experience. In fact, we find that in schools where children
with special needs are included, all children are more likely to
be regarded as individuals.
One problem is that the
school staff have not received the training and support they need
to realize and to sustain an inclusive classroom environment.
Regular classroom placement is often not mentioned as a
possibility to parents. While we do not believe that every
student with special needs requires an educational assistant, we
do know that it is unreasonable to ask a teacher to support the
student with special needs without extra resources.
We do believe that the
school system is beginning to recognize the value of inclusion.
We ask the government to play its part by supporting children in
regular classrooms so that they will be fully included in our
communities where, later, they will be able to make their
contributions through employment, volunteering or providing
examples to others through their spirit and courage.
Parents of children with an
intellectual disability should not feel that they have to fight
for everything forever, whether in the school system or in other
social service programs. Families need the larger community of
ministry agencies, service providers and the public to welcome
and include their children, giving them the same opportunities to
thrive as other children have.
Our third major need is for
government to work with us to create lifelong planning for people
with an intellectual disability. An intellectual disability is a
lifelong condition, so
it makes no sense to provide support for certain times in a
person's life without recognizing that this same person will need
different kinds of support at critical transition points
throughout their lifetime. I remember how frightened and confused
I was as a parent of an infant recently diagnosed as having an
intellectual disability. It would have saved my husband and me
years of frenzied worry if we had received supports to determine
how best to help our daughter, Dee, find those opportunities to
achieve her potential at the beginning of our journey and as she
started school.
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To have information and
assistance as soon as a child is diagnosed, help to get the most
appropriate schooling, extra support for transition from school
to work or other productive activities are all needed. Also, as I
mentioned at the outset, at the point when family can no longer
provide necessary care, other ways to meet the individual's needs
must be readily available.
The kind of planning for a
person's entire life requires a change in approach. The
government now spends a great deal of money dealing with crises.
A comprehensive and supported life plan will ensure that money is
spent wisely, that existing community resources are used as fully
as possible and that the anguish of uncertainty is avoided.
To summarize our first
three needs: the plight of senior parents requires immediate
attention in the upcoming budget; facilitating the inclusion of
children with an intellectual disability in the school system
will require some resources, but more than that, it will require
changes in current procedures and attitudes; and finally,
instituting a planning approach for people with an intellectual
disability which recognizes the disability as a lifelong
condition will be very helpful to government, as well as to
people who have an intellectual disability and their
families.
As an association, we do
not believe that we should sit back and let the government do
everything. We feel that if we are bringing forward problems, we
should also be looking for solutions. For instance, during the
past year we have built on our history of partnership with the
private sector to create a pilot program directed at youth 14 to
21, to assist in their transition from school to the world of
work or other productive activities. By working closely with
schools and private groups such as Junior Achievement, we now
have a group of 50 young people who are trying different
volunteer and work experiences. These young people are gaining
the skills which will help them succeed in jobs and other
post-school activities. Some of them have already achieved
competitive employment.
Some of the initial funding
for this project has come from a major bank, the Canadian
Imperial Bank of Commerce, and companies, like Trimark, which
believe this to be an important contribution for them to make. At
this point, the government is considering this program for
ongoing funding.
Now to our fourth issue of
concern. We are reaching a crisis in terms of funding for staff
who work with people with an intellectual disability. A recent
study shows that workers in our sector receive 20% to 25% less
than people doing the same work in provincial institutions or
similar work in other settings. For 10 years, our staff received
no increase in wages. Recently the government provided a 1% and
1.5% increase in subsidy over two years. We immediately passed
this on to our staff, but it does little to stop staff from
leaving the field. Often when they do leave, they talk about
wanting to stay but being unable to support themselves and their
families on existing salaries. Their jobs in other workplaces
often pay $10,000 more per year.
Numerous vacant positions
decrease the amount and the quality of support and care we can
provide. At TACL, we have positions which have not been filled
with permanent staff since April and August of last year. It is
verified by the community colleges that people are not enrolling
in the programs which train them to work in this sector. This
seriously jeopardizes our ability to provide essential support in
the years to come. We are facing a very dangerous situation for
people with an intellectual disability and their families. This
issue deserves to have top priority as you plan the next
budget.
In addition to the
assistance required for families and staff, we need your help on
the issue of increasing costs for which there is no extra
funding. Prior to January 1, 2000, we received letters from our
ministry indicating that we must address the Y2K issue. We were
obliged to replace most of our systems in order to be
Y2K-compatible. This was very costly. We know that in the health
sector, hospitals and other agencies receive funding to address
these needs. We ask that you also provide similar resources to
social service agencies as part of the new budget.
Pay equity and WSIB are
government initiatives which have added significant costs. How
can we cover these costs without further affecting the quality
and the quantity of support to the people with an intellectual
disability and their families?
On a positive note, the
last time we spoke with you we also had a number of concerns
about the implementation of a government restructuring approach
called Making Services Work for People. I am delighted to report
that in Toronto, by working together, government, families and
agencies have taken a fresh look and developed a system which
answers our previous concerns. We are now working co-operatively
within the service sector and with our ministry to implement an
approach which is more responsive to the needs of individuals and
their families.
Let me end by thanking you
for your attention and reminding you of our four greatest
concerns. Senior parents and caregivers over 65 or who have a
life-threatening illness and are still supporting an adult child
with an intellectual disability at home need a plan which
provides residential and day support resources to their family
member when they require it.
There is the need of parents of school-age
children to not have to fight for everything forever. This means
a move in attitude to include our children in neighborhood
schools. It means training for teachers and appropriate classroom
resources.
Next is the importance of
government supporting lifelong plans for people with an
intellectual disability through recognizing and providing
resources at key transitions in their lives.
Finally, the importance of
a living wage for the workers who provide essential support to
individuals and their families. Without this component it will be
impossible to provide the necessary care for people with an
intellectual disability.
I leave you with one
thought. Our sons, daughters, brothers, sisters and cousins,
uncles and aunts, friends and neighbours with an intellectual
disability will continue to live among us, loved and valued as
friends and family members. Their numbers will increase since it
has become the norm for individuals with a disability to grow up
and live in their communities. Our larger community and groups
like our association must work hard to prevent them from
experiencing a life of ever-diminishing quality where limited
resources cannot meet the needs.
We look to our government
for leadership. We trust that as you develop a new budget, you
will bear in mind that essential supports are needed by our most
vulnerable citizens so they may live and contribute in a safe and
secure environment. Thank you.
The Chair:
I thank you too. However, I'll take a quick question from each
caucus, about 90 seconds each. Can we do it?
Mr
Christopherson: I'll try. Thank you for the opportunity,
Chair.
Thank you for your
presentation. I wish the media were here now in the numbers they
were at this morning to listen, to watch the dog-and-pony show of
the minister roll in, because what we see after that is the real
Ontario and the reality of what's there.
I want to ask you, because
I don't imagine the government will-so far the only solution
they've offered to anything is tax cuts. I'd like you to rack
your brain for me and see if there's any way you can possibly
conceive of further tax cuts being the solution to all the issues
you've raised here. One thing about this issue is that it cuts
right across income, education, geography. Many of us, myself
included, have experienced individuals in our families who face
the kinds of challenges you've mentioned here today. Are tax cuts
going to do anything about this?
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Ms Chiu:
I'll answer that but I would like my colleagues here to jump in
as needed. We know there are individuals in our community who
require that ongoing support throughout their lives. We know the
numbers will increase. Different groups around the province who
provide the services are trying desperately to meet those needs
and to address the upcoming needs in the future. We have to do
that. We, as a humane society, must look at how we can do that in
the best possible way.
Mr Arnott:
I'll be very quick because Mr Galt has a question too. I just
want to thank you very much for your presentation. I think you've
made a very compelling case for the need for greater resources,
particularly for aging parents who have a child with an
intellectual disability, as you said. I would like to indicate to
you that I will certainly follow up and do what I can to support
you in this objective. As I said, you've made a very compelling
case. I'm pleased that the government has responded with $50
million to date. If that's not enough, we need to find the
resources to do what needs to be done. Thank you.
Ms Chiu:
Thank you for your support.
Mr Galt:
Thank you for your presentation. I've had similar presentations
made to me by Chris Grayson of the Campbellford Association for
Community Living, and also I've had some parents present to me.
I'm coming to the question of the adult children with
intellectual disabilities. Do you have any feeling as to numbers
in Ontario or Toronto or a given area and the dollars that we're
talking about? When we approach the Minister of Finance, we need
to know what the cost would be that we're recommending to him. I
certainly have empathy for your concern but I need a few more
figures, if you have them.
Ms Agnes
Samler: I could speak to that. We have recently done a
survey just in the Toronto area, because that would give us some
idea. Of the families where we had parents over the age of 65, we
had 144 families that we could identify immediately. We also
provided to the Ministry of Community and Social Services some
indication of whether those parents would accept service
immediately if it were offered or whether they might continue to
have their children at home. We were hoping through this process
to allow the government to make an estimate of the cost and I'm
sure we could provide that across the province within a short
time.
Mr Galt:
And the 144 is Toronto, not greater Toronto.
Ms Samler:
No, simply Toronto.
Mr Keith
Powell: I'm Keith Powell. I'm the executive director of
the Ontario association. Collecting data like you're suggesting
is not an easy task, for a number of reasons. One is that often
families who need services don't wish to come forward and put
their name on a waiting list until such time as they feel it's a
necessity. Additionally, some families who have been on lists, so
to speak, for quite a long time have given up because the
information they had back is that they'll wait for eons. So the
data are questionable.
However, among the
affiliated local associations in our provincial federation-and
there are over 100 across the province with whom we are
affiliated-we did a recent waiting list study. About 43% of our
associations participated in that study and, based on the
information we received back from them, we're aware that across
our federation there are likely 8,700 people specifically waiting
for services and identifying that they need them now. This is not
a figure for the entire developmental services sector; this is for those transfer
payment, service-providing organizations affiliated with
OACL.
Mr Galt:
Of the individuals who are challenged, 8,700 need assistance
now.
Mr Powell:
That's right.
Mr
Phillips: Thank you for your presentation. Just a
comment and then a question. One of the challenges as we move to
more and more community-based care is, how do we make sure that
we are actually providing for the needs? When there was an
institution, whether it be a long-term-care facility or a
facility for the developmentally handicapped, you could measure
that. But when they're out in the community, we do not have, in
my opinion, any kind of measurement at all. I'm afraid as we move
to more community-based care, whether it be seniors, whether it
be people with a developmental handicap, whatever, we're not
going to keep in touch with those.
I'll give you my question
and then maybe you can answer both of them. I've been aware for
some time from the Toronto-based Association for Community Living
of the major problem with salaries and almost a crisis of being
able to retain staff. "Crisis" may not be too strong a word.
Where do you stand on that? What has the government been saying?
Are they saying, "The 1% and 1.5% should handle the problem," or
"We are about ready to make a decision on whether we're going to
provide more funding for that"?
Mr Powell:
The minister has indicated that he knows the funding available in
the sector is not adequate and has indicated that they are
committed to examining and doing what they can to address the
issues. I think that's probably the best answer I can give.
Mr
Phillips: Is there a timetable on that?
Mr Powell:
We were not given a specific timetable.
The Chair:
On behalf of the committee, thank you very much for your
presentation this afternoon.
WINE COUNCIL OF ONTARIO
The Chair:
Our next presenters will be representatives from the Wine Council
of Ontario. Please come forward and state your names for the
record.
Ms Linda
Franklin: I'm Linda Franklin. I'm the executive director
of the Wine Council of Ontario.
Mr Bruce
Walker: I'm Bruce Walker, vice-chair, Wine Council of
Ontario.
The Chair:
On behalf of the committee, you have 30 minutes for your
presentation.
Ms
Franklin: Terrific. I'm sure you've had a long day, so
we won't read ad nauseam from our presentation. We have copies of
it for you.
Thank you very much for
seeing us today. We are here to talk about the wine industry,
obviously, to share with you where we are as an industry, some
exciting news about where we think the future is and how we would
like the Ontario government to partner with us in reaching that
future.
Many of you around the
room, I know, have been involved with the wine industry in the
past. Mr Kwinter and certainly Mr O'Toole know our industry. For
those of you who may not be as familiar with it, we had a period
of crisis about a decade ago when free trade was established.
Markups, taxes, on wine for our industry used to be at 1%;
foreign wines were marked up 66%. The free trade agreement
equalized those markups, so now all wines in Ontario, whether
they are foreign or domestic, are marked up at 58.6%. The
corollary to the free trade agreement was meant to be that
foreign markets would open to us and that we would have equal
access to those markets.
The good news is that our
industry survived that crisis. Instead of eliminating the Ontario
wine industry in a couple of years, as many predicted, our
industry grew stronger as a result of the free trade agreement
and our need to base our industry on quality and premium wines.
The VQA was established, coming out of free trade. A generic
marketing campaign was put forward that really moved our industry
ahead, and over the course of a short space of time our industry
went from being, in consumer perception, "Well, gee, they're OK
value, not great quality, wouldn't take them to a friend's
house," to now being in a position where consumers overwhelmingly
believe we make wonderful wines. They come down to wine country;
they visit all the wonderful properties that are in Niagara and
southwestern Ontario. There has been an enormous transformation
in our industry.
On the down side, though,
the free trade agreement has not opened foreign markets to our
products. We still find ourselves competing in our shelves in
Ontario with highly subsidized foreign wines that get enormous
subsidies from their home governments to market in our province.
In Europe alone it's $6 billion a year. In the United States
there's a $10-million fund that goes directly into exports,
primarily directed at Ontario. So there are clearly issues for
our industry.
1700
We're growing as an
industry, we've made a lot of strides, but we are very concerned
about the future of the industry going forward. After several
years of impressive growth with the establishment of the VQA, in
the last two or three years our market share has started to
slide. At one point, just about three or four years ago, we had a
47% share of the wine market in Ontario. It's now down to about
41%. Most of that is attributable, again, to foreign subsidies in
marketing programs, trade commissions that run programs of
advertising for their members, run promotions in the liquor
control board. So we're fighting tremendous competition.
At the same time, we are
facing, in the not-too-distant future, a global glut of wine. The
Australians are planting enormous acreages right now. They're
still planting in Europe. Tremendous plantings are coming on
stream in California. The number one export destination for all
those products is Ontario. It's the most open market available to
foreign producers of wine. Again, their markets are not open to
us.
So we have an enormous
challenge in the industry: translating the image successes we've
managed to achieve
with consumers into retail sales success and into a program where
we can beat foreign wine producers at their own game and really
move ahead and advance the industry in Ontario.
As a result of those
challenges, we have spent the past year working with government
to develop a long-term strategic plan. It's just being finalized
now. The documents that we're circulating to you have a big
glossy colour document that is the first piece of that strategic
plan that deals with retailing and marketing of Ontario wine. We
believe that plan, if properly executed, is going to transform
our industry. It envisions taking us from an industry that sells
about $350 million of wine today to an industry that sells $1.5
billion of wine in 20 years. It has a tremendous impact on jobs.
It will create about 10,000 new jobs in the Niagara region. It
envisions planting every single acre of available land in the
Niagara and southwestern Ontario areas that are suitable to
grapes. It means sustainable economic development in areas of the
province that are particularly hard hit by downsizing in
industry. It means retaining agricultural land as agricultural.
It means supporting grape growers who right now are one of the
few success stories in agriculture in terms of what they're able
to make from their land and the sustainability of their land.
It has enormous impacts for
the Ontario economy, not only in jobs but also in economic impact
generally. Every $10 million of Ontario wine sales produces about
$14 million in economic activity in the province. Of course, as
we increase wine sales, we also increase provincial revenues in
terms of taxes. Again, from the years before free trade, when our
industry paid about $2 million in taxes on markups to the
provincial government, today we pay $150 million a year in taxes
just through markups. About $200 million in taxes from an
industry that makes $325 million worth of wine is a tremendous
amount of tax, as you can imagine. So we are major contributors
to the provincial economy and its revenues from taxes. We believe
this plan achieves the ends of boosting the economy, boosting the
industry, encouraging agriculture to continue in Niagara and
increasing the revenues to the provincial government.
For all of those reasons we
think the strategic plan is important. It creates very high goals
for the industry in terms of growth over the next few years, but
we believe those growth challenges are attainable. The Australian
wine industry about five years ago developed a 25-year strategic
plan for exports. At the time they were thought of as crazy,
frankly, because the targets were so high. But as of this year
they have now shelved that strategic plan, because they're within
a year of reaching their 25-year target, six years into the plan.
The California wine industry, again, working off a strategic
plan, has grown in its own market 12% a year for the past decade,
even though they already own about 90% of their home market. We
have tremendous room for growth, only owning about 41% of the
market. I can't imagine, frankly, why in Ontario you would want
to sell a foreign wine if you could sell an Ontario one with all
of its ancillary benefits. We believe we can get there.
The plan obviously is going
to take financial resources to achieve. We believe it's going to
require about $1.2 billion in capital expenses over the next
20 years: cooperage facilities, planting of vineyards, buying of
land. Our industry is prepared to take on that investment. It
also envisions about $12 million a year against marketing the
industry and fighting foreign competitors' marketing dollars in
our home market. Again, our industry is prepared to take on that
challenge. We believe we can create a pot of money that comes
close to meeting our needs, but we're not quite there. That's
where we would ask for help within the budget this year from the
government.
As you know, we are a
fairly heavily taxed industry. There is very little that can be
done about that in terms of markups on wine because those are
regulated by trade restrictions. But there is one tax in the
province that is specific only to Ontario wineries and that is
the retail store tax that's placed on wine that is sold by
wineries, either in their own stores or when they sell directly
to restaurants. That tax is 2% on the value of the wine. It
brings in about $2.2 million a year to the coffers of the
government of Ontario. What we would like to see is two things
from the budget.
First is the elimination of
that tax. Our industry has agreed that should the tax be
eliminated they would be prepared to invest the entire tax
through the Wine Council of Ontario in generic marketing of the
industry to boost our smaller, newer players, to give a
heightened profile to VQA and to provide a pot of money that
would help us master our own market against our foreign
competitors. We think that's a critical element of making this
plan work. We don't think it can work without that investment,
and we think it's one way that the Ontario government can help
level the playing field a little against our foreign competitors,
by reducing the tax burden on our industry. Most wine industries
worldwide are taxed at a much, much lower level than we are. In
the United States it's a question of pennies a litre. In our
case, a $7 bottle of wine generates about $2.50 for the producer
and the rest is tax. We'd like to see some of that money made
available to the industry in order to boost sales. We think it's
an investment, frankly, by the government. We believe we can
return far more than the $2 million a year we're asking for with
the advancement of this strategic plan.
The other thing we're
proposing is that the government consider a superallowance for
the planting of vineyards. Vineyards are already tax deductible
in the federal government. We would like to see an additional 10%
or 15% allowance over and above that to encourage growers to buy
up agricultural land, to plant it with vineyards, to preserve
that land in Niagara against housing development on rural lands.
Frankly, this plan will not work if we keep losing agricultural
land in Niagara and southwestern Ontario to building and
development. We believe that with that sort of incentive we can
incent the growers to
plant the rest of the available lands over the next 20 years and
to really grow our industry.
That, in short, is our
plan. We're very excited by it. We're at a critical junction in
the history of this industry, and we believe that we can produce
a very exciting future for the industry with a strategic plan in
place. We think that our request is within an appropriate range.
As I say, it's an investment. We think we'll return more money to
you over a short period of time, and over the long term we think
it has huge potential for the province.
I don't know whether Bruce
has anything to add.
Mr Walker:
Not a lot, Linda.
I would just add to what
Linda has presented in terms of this as an investment in Ontario.
When we came at this as a strategic workshop a year ago, when we
came to the bottom line of it all, we saw clearly what we as an
industry had to invest in our future, in our own future, in a
sustainable agricultural-based future. As Linda has indicated,
we, as an industry, have put our money forward in this plan to
the tune of about $12 million of the amount that we need for a
generic annual campaign to get us kick-started again and to grow
again in absolute terms and in market share growth.
Also, I want to add in the
tourism factor. Wine country, wherever it is in the world-Napa
Valley, Bordeaux, Loire, Tuscany, Australia now, the Barossa
Valley and so on-is a tourism destination. Half a million people
go through our wineries every year, and that's just over the
course of basically the late spring and late fall. We are clearly
drawing people, not only from outside the country but Ontarians
travelling in Ontario and stimulating the economy in Ontario,
because we have clearly established a grape and wine region with
world-class wines.
I'll just add a little
snippet. I also, in my day job, work for one of the wine
companies, Vincor, and just by way of establishing the
credentials of the bench in the Niagara region, we this past year
announced a joint venture with the Boisset family out of
Burgundy, France, who have judged that the soil, climate and
total growing conditions on the bench in the Jordan area actually
suits Chardonnay and Pinot Noir so well, they want to put their
stamp on them and sell those wines worldwide. The vineyards are
planted as we speak, and I think Frank Ghery is the architect
who's going to build the winery. He's already designed it, so I'm
pretty excited about that.
By way of the establishment
of credentials, of a reputation that speaks for itself-tasting is
believing, I guess-we believe we have a future and we're darn
well going to make it happen.
1710
The Chair:
Thank you very much. We have approximately four minutes per
caucus, and I'll start with the government side.
Mr Galt:
Thank you very much for your presentation. It was extremely well
done. Thank you for the revenue you create for the province of
Ontario. Congratulations on the product. I believe it was black
arm bands that your industry was wearing back in 1988 or
1989-quite a turnaround when the challenge is there.
I think you must have
missed, and you don't owe us an apology-you talked about the
growth of grapes in the Niagara Peninsula and southwestern
Ontario. Don't forget Prince Edward county. We even have some
into Northumberland, and there are wine courses now being given
at Loyalist college in Belleville. So it is moving into eastern
Ontario and I think there is a great future for it there as
well.
I also have an interest in
it because my in-laws grew grapes in the Niagara Peninsula
throughout their lifetime. Consequently, whenever we're on a
flight and wine is being offered, my wife always asks for
Canadian wines. I'm left wondering why on Air Canada, the federal
crown corporation, unless in recent years, you could not get a
Canadian wine. They didn't even carry it. They didn't even have
it there as backup. You'd think at least they'd have a little bit
as backup for somebody who asked for it. Hopefully that has
turned around in the last year or so, and it may have and I may
be outdated in my question.
Ms
Franklin: It hasn't, actually. But the good news is that
British Airways now carries Henry of Pelham.
Mr Galt:
British Airways now carries Canadian wines, but Air Canada
doesn't.
Ms
Franklin: Exactly.
Mr Walker:
I just flew Air Canada the other day and it's a tad frustrating.
I joined this industry back in the early 1980s with Andrés
Wines and have worked in the wine industry on both sides of this
fair country, and every time you sit down with a marketing plan
it's, "How can we address the issue, the opportunity, of airline
distribution and particularly Air Canada and Canadian?" Canadian
actually was more amenable and had taken some of the wines on,
but at the end of the day you'll only get Canadian wines limited
in business class, poured from the bottle. In order to quote on
airline business, you go to their head offices and they tend to
be staffed by what I'll refer to as wine snobs, Europeans, very
often, by birth who really don't consider any wine a pedigree
wine unless it comes from France, Germany or Italy.
That's always the tough
part, to get by-the purchasing agents for Canadian Airlines and
Air Canada historically have been Europeans. So it's been tough,
plus you have to quote so low that you can't make anything at it,
so it's a marketing cost. You basically quote at cost. But I
don't want to drag it out. It's been a struggle and we're not
giving up.
Mr Galt:
When asked, the steward or stewardess's standard response is,
"There's no interest in it. That's not what people want. You must
be from the Niagara Peninsula." We say, "No, we're not. We're
just interested in Canadian wines." You write to the president of
the company and, "Oh, nobody ever asks for it," is the type of
response we get back.
But I think it's
interesting that you're saying other airlines now carry Canadian
wines but a Canadian crown corporation won't support a Canadian
industry, yet they expect Canadian industry to support them.
Ms Franklin: Interestingly
enough, the South African airline industry, for example, proudly
displays and showcases South African wines. Part of their
brochures and their materials to travellers is that they are a
proud sponsor of the South African industry. It could be a plus
for the airlines but we haven't been able to make them feel-
Mr Galt:
Maybe we can understand why the demise may be coming for that
particular airline.
The Chair:
Mr O'Toole, you've got time for a quick one.
Mr
O'Toole: Thank you very much, Linda and Bruce. I agree
with you that it is a modern-day success story, and without
dwelling on that, that reflects well on the government as well.
From the points you've made here, I'm certain the new Minister
Sterling is no stranger to that, as he was there at the
beginning, so I'm sure he will be able to pick up that quite
quickly.
I do hear the two specific
challenges of the 2% retail as well as the tax credit, as you put
it, for the revitalization of the industry. It looks like it's an
investment, not a tax thing. Certainly, based on past
performance, the future looks like it's a good investment.
The Chair:
The official opposition.
Mr
Kwinter: Thank you very much for your presentation. I
was looking around the room and I'm the only person in this room
who lived through what happened in 1985-86-87, when I was a
minister.
Mr
Phillips: I was alive then but I didn't-
Mr
Kwinter: You were alive. I have to tell you that at that
time, the reputation of Ontario wine was that it was plonk.
People would be embarrassed to take a bottle of Ontario wine to a
dinner party because it would be seen to be less than acceptable,
notwithstanding that the Italian or French wines they took that
were imported into Canada were worse than the Ontario wines. Even
at their worst, it didn't make any difference. It had the French
or the Italian label and that's all that mattered.
It was part of our
government, and we just happened to be in the right place at the
right time and we were receptive. We put in this program to
convert all of the labrusca grapes to viniferas. What you're
seeing now is the result of that change. We have the Chardonnays
and the Rieslings and all of those things that are being grown.
We took it to that step, and I think the time now is to take it
to the next step, because Ontario wines have an excellent
reputation as long as people get a chance to try them and as long
as people get a chance to know them. Certainly our ice wines have
got a world-class reputation and I know that Inniskillin's ice
wine-I don't know what the year was, 1997 or-
Mr Walker:
I think it was 1993. They won the grand gold medal.
Mr
Kwinter: They won the grand wine at-
Mr Walker:
Vinexpo.
Mr
Kwinter: -at Vinexpo. Not only that, but I've seen the
evolution of the tourism aspects of the wineries and I've seen
the expansion into these other parts of Ontario. I think it's
absolutely incumbent upon us to build on that particular base
that has developed over the last 15 years. Not only that, but in
your brief-I went through it very quickly-there is a halo effect
to a very viable wine industry that has an impact on other areas
of tourism and the impression that people have of your particular
jurisdiction. So I am very supportive and very sympathetic. I
just wish you well and hope that some of the things that are
these irritants, these trade irritants in particular, where these
European countries insist that they have access to our markets
but balk at us having access to their markets-to me that is just
unconscionable.
As I say, I am totally
supportive and I hope that your presentation falls on receptive
ears and that somewhere along the line we take it to the next
step, which I think is absolutely critical. If you have any
comments, I'd be happy to hear them.
Ms
Franklin: I think we'd be remiss, as Mr O'Toole and Mr
Kwinter both pointed out, in not crediting the Ontario government
over lo, these many years-Liberals, Conservatives and NDPs
alike-because we have had as an industry tremendous governmental
support for that transition. As you say, Mr Kwinter, if it hadn't
been for that intervention at the end of the 1980s and the early
1990s, the industry would not have survived. We often I think are
held up, and rightly so, as a stunningly good example of what
happens when a government-and-industry partnership works, and
works well, and it certainly has.
Mr
Christopherson: Thank you for your presentation. I think
it's probably one of the few presentations we're likely to hear
where there's close to unanimity on the issues, although I'm sure
we'll work hard and find a way to disagree. It's our nature.
Interjection.
Mr
Christopherson: Yes, I'll just keep talking my way into
that, Gerry.
I appreciated the fact that
you mentioned that both our government, the NDP government, and
the Liberal government had also played a role. That's appreciated
very much. I guess the only thing I really wanted to touch on was
the issue of the farmland, just to get it on the record, the rate
at which we're losing what has now been clearly identified as
world-class growing land. Maybe you could just put a little bit
of meat to the bone on that issue for me.
1720
Ms
Franklin: This is an issue of enormous concern to us. It
has been for a long time, but as we developed the strategic plan
it came into much clearer focus, because we are looking at
planting twice as many acres as are currently under production,
and that will barely get us to our goal, frankly. At the same
time that's going on, we are seeing tremendous development
pressures, particularly in the Niagara region. The microclimate
in Niagara means that it's one of very few growing areas-Prince
Edward county along with southwestern Ontario around Pelee Island
being the others-where, unless global warming takes hold
tremendously, we will ever grow vinifera grapes for fine wines. So it's
critically important that that land be preserved, and as you say,
day by day we're seeing encroachments, extensions of the urban
boundaries, new housing developments going in, even a case of
housing developments in the Niagara Escarpment plan area. So it's
a really critical issue to us.
One of our members whom
many of you will know, Donald Ziraldo from Inniskillin, has been
pushing the idea in recent months of creating a land preserve in
Niagara, similar to what was done in Napa and similar to what was
done in British Columbia, to protect the grape-growing regions.
At the end of the day eventually they'll protect themselves,
because when the wine industry really takes off, agricultural
land becomes the most valuable land on the planet. It's certainly
true in Burgundy; it's true in a lot of the European countries
that produce fine wine. In Niagara we haven't got to the point
yet where as agricultural land it's more valuable to the grower
who owns it than it is if you hand it to a developer. We really
do need to work at preserving that land until we can get it to
the point where it's so valuable in its own right that it will
never be subject to development issues.
We have a land use
committee right now in the Wine Council. We're struggling a bit
with this issue. We know the growers won't be with us because
frankly there are issues of land severance. If you own the
property and you need to make money for your retirement, you want
to sever the land. But if that's allowed to continue and
development continues, we won't be looking at expanding the
industry because there simply won't be any agricultural land left
to do it.
Mr
Christopherson: Yes, at the end of the day it's going to
be another one of those philosophical questions that we look at
in terms of individual rights versus collective rights. We're
hearing that there's a collective rights issue here as a
business, both for this generation and future generations, so
it's not always cut and dried when we deal with those kinds of
things.
Just sort of a housekeeping
kind of thing, but given the aggressiveness of your plan-and it
is very impressive, by the way, aggressive and impressive-I'm
just curious about the makeup of the council itself. Is it
mandatory for members to belong? You gave the assurance that
there could be close to-was it $1.2 billion, I think you
said?
Ms
Franklin: It is $1.5 billion.
Mr
Christopherson: Over 20 years. Obviously that means
you've got commitments from your members. I'm just wondering how
your organization lines up members and how many growers are
members and what is their commitment to stay there, just that
sort of structural thing I'm interested in.
Ms
Franklin: The Wine Council is a voluntary organization,
so it's not a requirement to join. Having said that, our
membership represents 99% of the wine that's made in the province
today. There are 42 members of our board right now. They're all
directors so they all sit around our board table. We've had an
awful lot of input from them as we developed this plan, and at
the end of the day that meant commitment at the end of it.
Andrés and Vincor, who represent between them about 75% or
80% of the wine production, are both signed on to this plan, are
wholeheartedly in favour of it and are prepared to spend. So are
our mid-sized wineries and our small wineries. There's something
in it for everybody. Everybody recognizes the need to do this, so
we can deliver on that commitment. We are not an association that
includes growers at the moment. We're looking at advisory
councils, actually, because they exist in other countries and
jurisdictions. They don't exist in Ontario, but we work fairly
closely with the Ontario Grape Growers' Marketing Board. As of
yet we don't have a commitment of funding from them, but we're
hoping to get that commitment on the table as well.
The Chair:
on behalf of the committee, thank you very much for your
presentation.
Mr
O'Toole: Mr Chair, I would like to correct the record.
In Durham region there's Ocala winery and Archibald Orchards.
Since the member for Northumberland went to some extent, I would
be remiss, since this is televised, not to speak up.
The Chair:
They did mention southwestern Ontario.
Mr
O'Toole: Ocala is a very inventive micro-winery.
Ms
Franklin: The Ocala folks actually are members of the
VQA. They make great wine now-wonderful people, lovely people to
deal with. On page 3, Mr Galt, we do reference Prince Edward
county as an emerging wine region.
Mr Walker:
And we welcome new regions, because I think it's not so long ago
that-
The Chair:
Mr O'Toole, thank you very much for bringing a different
dimension to the discussion.
Again, thank you very much
for your presentation.
Ms
Franklin: You're entirely welcome. Thank you for the
time.
CENTRE FOR EQUALITY RIGHTS IN ACCOMMODATION
The Chair:
Our next presenter, and the last presenter for this afternoon, is
the representative from the Centre for Equality Rights in
Accommodation. Could you please come forward and state your name
for the record.
Mr John
Fraser: My name is John Fraser. I'm program coordinator
with the Centre for Equality Rights in Accommodation.
The Chair:
On behalf of the committee, welcome. You have 30 minutes for your
presentation this afternoon.
Mr Fraser:
I know it's the end of the day so don't worry, I won't go that
long.
I work with the Centre for
Equality Rights in Accommodation. We're a provincial non-profit
human rights and housing organization. We've been around for
about 15 years in Ontario and we primarily work with low-income
households, individuals-primarily families-who are trying to get
access to rental housing but are having a difficult time. I'm
going to talk a little bit about what we feel is a need for a provincial housing
allowance program in Ontario.
When the Ontario
Progressive Conservative Party came to power in 1995, they came
with a very explicit platform, the Common Sense Revolution. Part
of this platform was a promise to introduce a shelter subsidy
program for all Ontarians who need help affording a decent level
of shelter. It is now 2001 and the need for such a program is
staggering. It's greater than could have been imagined in 1995.
But unfortunately, while the government has made much of keeping
the promises made in the Common Sense Revolution, this is one
commitment that we feel has been conspicuously neglected.
Over the past five years,
low- and moderate-income tenants have seen their housing options
virtually disappear. A combination of factors, including a
booming urban economy, rent decontrol of vacant units and an
almost complete lack of new supply of rental units, has led to
rapidly increasing rent levels across the province. Combined with
stagnating or even declining tenant incomes, this increase in
rent has made housing affordability a major problem for a large
proportion of tenants in Ontario. Thousands of individuals and
families are being forced to double up with friends or family, to
live in low-quality or inappropriate housing, or to lose their
apartments altogether because their incomes have failed to keep
pace with housing costs across the province.
One thing that tenant and
housing advocates have appealed for repeatedly is to address the
lack of new rental housing in the province. The virtual absence
of new units coming on to the market is a fundamental problem. We
emphatically support these efforts, and it's something that
certainly you've heard of in the news over the past few years.
However, in our view, to adequately address the needs of
thousands of households with desperate affordability problems, we
must also consider the depth of poverty among renters in Ontario.
Whether they live in communities where available rental housing
is scarce, such as Toronto, which has a 0.6% vacancy rate, or
where supply is not such a problem, such as Sudbury, where the
vacancy rate is close to 8%, increasing numbers of tenants are
finding that their incomes are not sufficient to cover housing
costs.
These individuals and
families can't wait for affordable housing to be built. They need
assistance immediately. If they could wait, it would almost
certainly be in vain, because for the foreseeable future, even if
social housing programs were reinstated at their early 1990
levels, the vast majority of low-income renters would still rely
on the private rental market for their housing needs; that's just
the reality. So to address this problem, CERA proposes that the
provincial government implement a housing allowance program for
low-income households in Ontario.
Though a provincial rent
supplement program was introduced in January 2000, it is intended
to reach just over 5,000 households, and as of December 2000 has
assisted just over one third of this number. It's clearly not a
program for all Ontarians who need help in affording a decent
level of shelter. As this paper will document, the current rent
supplement program does not scratch the surface, unfortunately,
of the problems faced by Ontario's low- and moderate-income
tenants.
1730
Across the province,
average rents have increased significantly over the past five
years. For example, the average rent for a two-bedroom apartment
has increased by 22% in Toronto, 18% in Hamilton, 10% in Windsor
and 19% in Ottawa. Rent increases over the past year were
particularly dramatic. The average rent for a two-bedroom
apartment in Ontario increased by 5.6%, which is double the
inflation rate over the same period. In the Ottawa CMA, Canada's
tightest rental market, the rent for a two-bedroom apartment
increased by a staggering 12%.
These statistics, however,
do not reflect the magnitude of the problems of housing costs in
Ontario. The CMHC average rents that we are using here are
calculated using rents for vacant and occupied units. Since
occupied apartments tend to have significantly lower rents than
vacant apartments of the same size, these average rents that I'm
talking about significantly underestimate the actual rent that a
prospective tenant searching for housing will experience in the
rental market.
Similarly, utilities are
not always included when calculating the average rents. For
example, though the average rent for a two-bedroom apartment in
Hamilton is relatively low at $719 per month, only 35% of the
apartments that went into that survey to generate that average
included hydro costs in their rent. So these average costs
actually are significantly lower than what someone would be
actually experiencing if they were looking for housing.
In terms of affordability
and income, in 1995, 45% of renter households in Ontario were
paying greater than 30% of their income toward rent; 22% were
paying more than 50%. This means that over 300,000 households in
Ontario were paying more than half of their income toward rent.
While it is tempting to treat this as a "big city" issue, limited
to places like Toronto and Ottawa that have extremely tight
rental markets, research actually suggests that affordability
problems are widespread across the province, regardless of
vacancy rates. Many municipalities with relatively high vacancy
rates in 1995, such as Sudbury, North Bay, Muskoka, Cornwall and
Timmins, actually had a higher proportion of renter households
paying more than 50% of their income on rent than the provincial
average.
These affordability
problems have almost certainly increased in the intervening
years, as tenant incomes have just not kept pace with increasing
rents. This is particularly true of the most disadvantaged
renters in Ontario, people who are working at a minimum wage or
people on social assistance. The minimum wage has not increased
in the intervening five years and social assistance incomes have
actually declined. We have every reason to believe that these
figures that I've stated earlier, in terms of affordability problems,
have actually gotten much worse in the past five years.
To really get at the
problem, we have to go beyond looking at the statistics and look
at actual case examples. This is not a theoretical case example.
This is quite in line with the experiences of people we deal with
every day. If we look at, for example, Mary, a single parent with
one child receiving Ontario Works, most landlords in Ontario
would insist that Mary rent a two-bedroom apartment so that she
and her child could each have their own room. However, as figure
3 illustrates, in Toronto Mary would have to pay close to 90% of
her income to rent such an apartment. This would leave her with
about $116 a month to cover an entire month's worth of food,
clothing and entertainment. Even in Hamilton, where the rents are
significantly cheaper, Mary would likely be paying close to 70%
of her income on rent. It is important to stress that this
average rent that we're using here is probably not what Mary
would experience. She would experience rent far higher than this
if she was actually looking for an apartment. Should Mary
actually find a landlord who would rent her and her child a
one-bedroom apartment, in Toronto she would still have to pay
close to 80% of her income on rent, and in Hamilton it would be
over 50%.
Families relying on social
assistance in Ontario must pay an inordinate amount of their
income on rent; that is just the present reality. These
households make up close to 25% of all tenants in Ontario, a
significant number of people.
If we look at the
affordability squeeze for someone who is actually in paid
employment in a minimum wage job, we would find that a single
parent with one child working full time at minimum wage would
likely have to give up three quarters of her paycheque for rent
if she lives in Toronto. In Hamilton, she would likely have to
pay approximately 55% of her income toward rent, in Ottawa 67%,
and in Windsor 56%. So there is a clear mismatch between rent
levels and incomes for thousands of low- and moderate-income
families in Ontario. They just do not have enough money after
paying the rent to adequately cover the costs for food, clothing
and other necessities.
It should not be
surprising, given this information, that in March 2000 over
280,000 people in Ontario utilized food banks. When a household
is paying up to 90% of its income on rent, hard decisions have to
be made. The provincial government needs to address the fact that
its most disadvantaged citizens are being forced to live in
substandard accommodation or forgo basic necessities in order to
keep a roof over their heads.
While we agree the
provincial government needs to definitely take action to promote
the production of new rental units, this alone, in our opinion,
will not solve the housing problems faced by low- and
moderate-income Ontarians. It is equally essential that the
province address the growing gap between housing costs and tenant
incomes. To this end, CERA proposes a provincial housing
allowance program to help bridge this gap. Two principles should
be key to the program to make it effective and equitable:
Universality is the first
principle. This program should be available to every household in
need. It's hard to justify not making it available to everyone in
need and to limit it to only certain households who are in
need.
Flexibility is the second
key to the program. This means it should actually be a shelter
allowance program as opposed to what's called a "rent supplement"
program; that is, the funds should not be tied to specific units,
but should go directly to eligible households, much like a tax
benefit. This would maximize the housing options of these
households and ensure that the effectiveness of the program was
not dependent on individual landlords "signing on" to the
program, which appears to have been a problem with the current
rent supplement program, because a lot of landlords just aren't
signing on to the program and, as a result, they haven't been
able to use all the supplements they've had available.
The program could be set up
much like the federal national child benefit. For example,
eligibility would be based on an income cut-off and the housing
allowance provided would be based on household size and
composition. To be effective and in compliance with provincial
human rights legislation, the housing allowance program must be
available to both people receiving social assistance and
low-income households in paid employment. It should not be clawed
back from people on social assistance.
CERA recommends that all
households that would be paying more than 50% of their income to
rent an appropriate-sized apartment in their community be
eligible for this housing allowance. The allowance provided will
be based on the number of dependants in the household, and there
will be a maximum.
There's no magic number for
what the maximum would be, but we believe that setting a maximum
at $300 per month would provide significant assistance to
individuals and families living in poverty. At the same time, we
also feel it would also be sustainable, either by the province
alone or through a federal-provincial cost-sharing agreement. If
we estimate that approximately 400,000 households would currently
be eligible for the program, and the average monthly allowance
was about $200, the housing allowance program would cost
approximately $960 million.
While this seems like a lot
of money, it's actually an appropriate correction, in our
opinion, to the recent deterioration of income transfers to
low-income households specifically for shelter costs. The reality
in Ontario, unfortunately, is that the gap between rent levels
and tenant incomes has grown hugely and has been left unchecked
over the past number of years. As a result, hundreds of thousands
of tenants are in desperate need. However, as the provincial
government has stated, welfare reforms alone have had cumulative
savings of $8.2 billion over the past five years. In the year
2000, annual expenditures on welfare were almost $3 billion less
than they were in 1995. This means the government is spending at
least $1.5 billion
less, approximately, in income transfers to low-income families
for the shelter allowance component of social assistance each
year. It is time to put some of this money back into the pockets
of the neediest households in Ontario to ensure that they have
access to secure, affordable housing.
In conclusion, I just want
to say that each year the provincial government spends millions
of dollars to manage or contain Ontario's rental housing crisis.
The current response to the crisis, which leans heavily toward
emergency services, in our view is just not cost-effective and
ultimately does little to reduce the suffering of the thousands
of Ontarians who cannot afford their housing costs.
1740
A universal, flexible
shelter allowance program would allow the province to follow
through on an election promise that has been overlooked for
almost six years. More significantly, it would be the province's
first new initiative that addresses a fundamental cause of
homelessness and housing insecurity in Ontario: the mismatch
between tenant incomes and housing costs. A province as wealthy
as Ontario, in a country as wealthy as Canada, cannot permit
close to half a million of its citizens to live on incomes that
place access to a basic necessity and a fundamental human right
in jeopardy or out of reach. Thank you very much.
The Chair:
Thank you. We have approximately five minutes per caucus. I'll
start with the official opposition, Mr Kwinter.
Mr
Kwinter: Thank you for your presentation. You really
touched on a very basic problem that we have. I see it every day
in my riding. The reason I say "every day" is because I happen to
be a Toronto member and my constituents have access to me every
day. It's really heart-wrenching. I have people coming in to see
me and they say they're seniors who are on fixed income. Their
income is some 900-odd dollars a month and their rent is some
800-odd dollars a month. They tell me they've got less than $100
to last them for the whole month for everything else they
need.
The problem-and we heard it
from the Toronto home builders-is that there is absolutely no
incentive for a builder-developer to build rental accommodation.
The land costs him the same, whether he builds a condo or whether
he builds rental accommodation. The bricks and mortar cost the
same. The services cost the same. Everything costs the same,
other than he may put in more luxurious finishes because it's a
condo and he wants to sell it. But the basic costs are there. If
you divide the costs with the number of units, in order for him
to get the kind of rent that makes it economically feasible, it's
out of reach of these people, who can't afford it. So there's no
way the private sector can come to the table. Notwithstanding
what they said, that they're building condos that are being
rented, they are for a sector of the community that can afford
the down payment and then to carry it, but it can't address the
problem you've identified.
The only way-and this is
what the government kept sort of heralding when they went along,
saying, "We're not prepared to put money into bricks and mortar.
We're going to give it to the people as a shelter allowance."
They've never delivered on that. I think that is a critical
problem and it's going to get worse, because as we go along, more
and more people are finding that they can't afford to live
anywhere. They just don't have the income, so they take to the
streets and we have the homeless. It's just accelerating at a
very quick rate.
I'm almost disillusioned,
because even the recommendation that you make, what you call this
$200 shelter allowance, might have some impact but is not going
to go anywhere near to addressing the problem. Do you have any
thoughts on that?
Mr Fraser:
That's true. This would just be something we said would make it
easier for people, but affordability problems would still exist.
Unfortunately, it's gotten to such a level, that gap between
incomes and housing costs, that it would be very difficult to
completely close that gap, at least in the short term. That's why
we suggest at this point sort of an interim measure of providing
up to potentially $300 a month to someone.
With the people we work
with, that would make a difference. If someone is earning $997 a
month from Ontario Works and needs to rent a $700 or an $800
apartment, having potentially $200 or $300 a month will make a
difference to that family. It won't remove their affordability
problems, but we think it will make a difference, especially if
this is done in conjunction with efforts to increase the supply
of affordable housing, which is also desperately needed. I think
we have to think of this as one component of a larger strategy to
address homelessness and the housing crisis in Ontario. This has
to go along with a bricks-and-mortar approach at the same
time.
Mr
Christopherson: I'm pleased to hear you add the last
bit, because everything was focusing here on a subsidy program,
when there is a good economic argument to make, given that the
dollars you're spending and the dollars required ultimately to
close the gap would be better spent building bricks and mortar.
It's there for a rotation of people in need, and once it's paid
for, like any other facility, the people of Ontario have paid for
it, they own it and it becomes their asset. But you're right;
we're not going to see that from this government probably at all,
let alone in the short term. So I can understand why you've gone
this way, but I was glad to hear you emphasize that at the end of
the day that really is the prudent thing to do.
Mr Fraser:
Yes, exactly. But I want to stress also that even if you look at
the proposals that are made to increase the supply of housing in
terms of the number of units to be made, it's not going to
address the affordability problems of people in need. We're not
going to build enough affordable housing. Even if we do the ideal
number, for example, that the 1% solution is suggesting for the
federal government, it's not going to build enough housing to
deal with the affordability problems people have. That's why we feel it has to be done
in conjunction with income supports at the same time, to be
equitable.
Mr
Christopherson: Two quick things: I would imagine, given
the growing number of people who are paying a greater percentage
of their income for shelter-and it's amazing the numbers you've
got: 85%, 90%-that's got to mean there are a whole lot of folks
who perceive themselves to be in the middle class or were
previously in the middle class who are sliding down. These
growing numbers have to come from somewhere. I don't imagine that
the super-rich in Ontario are suddenly becoming super-poor
overnight. It suggests to me that what we're seeing is a draining
of middle-class income into what we would call modest or lower
income, ultimately into poverty. Is that your sense of
things?
Mr Fraser:
Definitely that could be one of the explanations. I also think we
have to recognize that there were massive cuts to social
assistance benefits in 1995 and that's had a huge impact on the
affordability problems of low-income people in Ontario. Also, the
reality is that a lot of jobs are being created in Ontario but a
high proportion of those jobs are low-paying service sector jobs.
More and more people are having to rely on a minimum wage income
and support a family on a minimum wage income.
Mr
Christopherson: Yes, and you've raised it. This is the
first time ever that I can recall-I've been sitting in these
kinds of hearings for an awful long time and three or four times
now we've heard minimum wage raised as a key issue. It's just
mind-boggling that the government refuses to accept the fact that
they've got an obligation to raise that minimum wage at least to
the level of where the American minimum wage is, as a bare
minimum.
I also want to ask you
about the role that eliminating-the government still says they
have rent control, but you and I both know the reality is that
it's not there. I would assume-and correct me if I'm wrong-that
the reintroduction of real rent control would play a positive
role in keeping prices at an affordable level?
Mr Fraser:
We definitely believe that. We would support that. We feel that
vacancy decontrol or the removal of rent control on vacant units
has contributed significantly to the rise in rents that we've
seen in the past years.
Mr
Christopherson: Thank you. I can assure you we'll
continue to do what we can, but it's good that you were here
today making the case. A good presentation.
Mr
O'Toole: Thank you, Mr Fraser, for your presentation and
for your statistics. No one would disagree about the basic
necessity of shelter and the importance of providing some
platform of stability in one's life-a family or an individual-so
you won't find any disagreement with that. The solutions and
policies certainly will differ, but I suspect the rent control
argument could be cast over the history and would say that we
probably ended up with a decline of landlords or developers in
rental property because of the controls.
There were issues.
Infrastructure, balconies were in some need of repair, and they
couldn't pass those real costs on. Some of the revisions to rent
control were intended to address that. I think you've mentioned
that some of the numbers reflect the fact that if you stay in
your accommodation, there is still a cap on rent increases.
That's part of it.
1750
I have a couple of policy
questions that you may want to respond to. I'm just going to go
through them. Even when I wasn't in the room, I was in an office
and I was watching and listening. The fact that municipalities on
multi-residential have a tax rate that's higher than residential
and it is consumed in the rent, and that factor is 1.4 or 1.6
times residential, perhaps you could look at that in some way
that could provide relief at another level on the assessment base
and spread it over other property classes. That's a choice that
Mel and other municipal politicians have to directly affect the
actual cost of rent.
Then there's the issue of
paying rent and subsidies directly to the landlord, so you have
these disputes of who gets the rent and evictions and the legal
implications of costs. There seems to be some resistance to
paying the legal subsidies or rents directly to the landlord on
behalf of the social assistance recipient. Certainly if there was
this translation of more dollars into rent subsidies, that would
be one way of making sure it was spent on accommodation and
shelter. That's not to question that people don't have other
commitments, but certainly we've established that having proper
and adequate and safe shelter is a platform or starting
point.
The other thing is the
whole issue of apartments in houses and being legal or
non-conforming. I know personally in my area there are a lot of
apartments in homes that don't fall into this market kind of
dimension, and they do fill an important need, so you may want to
comment on that.
My last remark, all looking
for some response, is that I'd be alarmed if the $200 or $300, if
that was the number that came out sometime-with the proper
conditions I suppose something could and should happen. Would it
not just pass on into the market rent equation? If landlords saw
there was more money there-it gets consumed by the market
pressures themselves. How do you suggest we somehow get into
controlling so that we don't have a massive move? Say we wanted
to subsidize a particular market. You mentioned that Ottawa was
the worst for vacancies. What if we did put a special subsidy in
there? There potentially would be an exodus of people to where
they got the shelter subsidies.
So there are some policy
questions all lumped together there-other than just a direct
infusion of money.
Mr Fraser:
With respect to your last comment, that's why I think this does
need to be done in conjunction with supply side measures.
Particularly in regions like Toronto and Ottawa, that have very
low vacancy rates, a lot of effort will also have to be put in on
the supply side to make sure there is an infusion of new rental
housing so you don't get that problem that you're discussing.
What was your first
question about?
Mr
O'Toole: Multi-res tax rates.
Mr Fraser: Right, exactly. We
support that completely and, again, we think that would be part
of an overall strategy, that renters should not be paying at a
higher municipal tax rate than homeowners. That makes total
sense. We definitely support that and think municipalities should
be charging multi-unit residential buildings at the same tax rate
they are charging homeowners, and not at an inflated rate.
In terms of the idea of the
rent supplement targeted to housing costs and being paid to the
landlord, as opposed to being paid to an individual, our view is
that housing is a fundamental necessity; it's not something
people would really scrimp on. So we don't see it as being this
big problem that people are going to get a $200 or maybe $300
housing allowance per month and this is not going to go toward
making their life more livable, given the housing circumstances.
It's not going to suddenly make people rich. I don't think that
would really be a problem in terms of concern that this money is
not being directed actually to housing costs. Again, given the
fact that low-income people's monthly income is just so out of
whack with what rent levels are, I don't think you have to worry
about it not going to the right place. I do think there is a
concern about it being given directly to landlords, because of
the issues you raised earlier. I think that is a concern and I
also think it severely restricts the choice of the people who are
looking for housing. It restricts their ability to find the most
appropriate housing for them and locks them into the particular
private units that would accept rent supplements or would have
rent supplements.
The Chair:
With that, Mr O'Toole, we have run out of time.
On behalf of the committee,
thank you very much for your presentation. I would also like to
thank all the committee members for being here on time and for
the way we've handled the questions and conducted the meeting on
time today.
This committee will
reconvene tomorrow morning at 10 o'clock. We are now
adjourned.
