Transcription du comité 1991-août-28 | Assemblée législative de l'Ontario

The Chair: We have had one problem here. We said we would start at 9:30 this morning with the cancellation of Mr Langdon, MP. It seems to be there was a mistake in the clerk's office. Information was given to us that he had cancelled when in fact he did appear here at 9:00 this morning so we are going to be running maybe a little bit behind schedule throughout the morning.

I would like to welcome Mr Langdon to the committee.

Mr Langdon: It feels a little strange to be on this side of a presentation table. It is certainly more normal for me to be sitting on that side and to be dreaming up the questions which I am sure you are going to want to throw at me. But it is certainly a pleasure to make this presentation to you this morning. It is a presentation which I make as the federal New Democrat finance critic for fiscal and monetary policy but also a presentation which I make as an economist by profession, having previously been associate director for economics with the International Development Research Centre and an associate professor of economics at Carleton University here in Ottawa.

The economic situation in Canada and certainly in Ontario has been grim since 1990. Virtually a full year of economic decline has been experienced up to April 1991. This recession and its length were not predicted by the federal government and there is wide agreement among economists that this is the first case in which Canada led the United States into recession. In the words of the famous conference board judgement, this has been a "made-in-Canada" recession spurred by very high interest rates, an overvalued exchange rate and federal tax increases, especially the GST, at the worst possible time.

There are now some signs that the decline has hit bottom and a limited recovery is taking place at the national level. Thus manufacturing shipments have grown for the last four months available -- those are the figures for March to June -- and overall gross domestic product levels have increased for the past two months available, that is, April and May. Unemployment, however, continues to run at 10.5% nationally without signs of any decrease and bankruptcies for the last month, July, have actually increased. These indicators suggest that US economic conditions plus increased UI payments in Canada continue to hold back any broadly based and rapid recovery in this economy.

There are a number of reasons why there is a logic to budget deficits in the face of that kind of poor economic performance. Such marked and ongoing economic decline indicates that overall demand for goods and services in the economy is too low to maintain reasonable levels of unemployment. The government has to fill that gap in overall demand in order to revive the economy. In a technical sense what is happening is that intended savings on the part of consumers are greater than intended investments on the part of business.

In that sort of circumstance what happens is the economy, through its indirections, brings actual savings into equality with actual investment through a reduction in overall economic activity. That reduction in overall economic activity makes the intended savings of consumers less than they would otherwise be, and thereby makes their actual savings equal to the actual investment which business is undertaking.

What a budget deficit does in these circumstances is, in effect, provide investment which would not otherwise take place, thereby providing an outlet into which those intended consumer savings can go and stopping the decrease in overall economic activity from being as great as it otherwise would be.

There is a lot of debate in economics about when deficits are justified, but there is no serious debate among economists about a view that would say deficits are justified when surpluses have been run previously and a marked economic decline and growing unemployment are occurring. That is the situation in Ontario coming into 1991.

The recession of 1981-82, and the recovery from that recession, point out dangers of certain sorts of deficit financing. Both the federal Liberal government and the federal Conservative government concentrated, in their recovery strategies, on major tax breaks for corporations and for upper-income earners in the economy. Thus, there were the Liberal moves to accelerate corporate depreciation allowances and to offer widespread new corporate grants, and there were the Conservative tax cuts for energy corporations which were part of ending the national energy policy, as well as the tax exemptions for the first $100,000 of capital gains. Both federal governments, both Liberal and Conservative federal governments, also markedly decreased income tax rates for upper-income earners.

These are the revenue losses which, in a recent feature article for Statistics Canada, in their Economic Observer, Mimoto and Cross point to in explaining the growth of the federal debt. Thus you have a situation which, as of the present time at the national level, has 47.4% of federal tax revenue coming from personal income tax, compared to just 39.3% in the 1976-81 period. Corporate tax now accounts for just 9.8% of revenues compared to 15.3% in that earlier period.

This form of what we could call trickle-down deficits does not seem to spur rapid and broad-based enough recovery to regain full employment levels and, thereby, to eliminate the deficit. Moreover, this recovery strategy increases inequality considerably, and economists have got technical ways to measure these levels of inequality which they call "Gini coefficients." The higher a Gini coefficient is, the greater the inequality. The lower a Gini coefficient is, the greater the equality.

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So if you look at this period from 1981 up to the later part of the 1980s, you see that Canadian income distribution, as measured in Gini coefficients, went from 0.437 in 1981 to 0.455 in 1982 and then 0.472 in 1983. Those are big figures actually, and big changes in terms of this particular measure. By 1988 this Gini coefficient was still at 0.470. So you had seen quite a dramatic increase in inequality as a result of the recession itself and as a result of the recession recovery strategies after 1981-82. All of which argues, I would say, that the approach to a deficit in this budget, which really sees new income generation being provided for those at the bottom of the income scale, makes much more sense.

It is also important, I think, to recognize that Ontario has faced especially difficult circumstances in recent years. As predicted by the federal authorities during their analysis of the likely effects of the free trade agreement, southern Ontario was by far the hardest-hit region as the trade deal came into effect.

Throughout these past seven months I have chaired a federal New Democratic economic recovery tour that has, like yourselves, visited many of the communities of southern Ontario. The story we have heard everywhere is a pretty sorry tale of production shifts to the United States, bankruptcies based on US or Mexican competition and shutdowns of US branch plants. The FTA, I think it is fair to say, has devastated much of Ontario at the same time as federal government changes to the unemployment insurance system restricted dramatically the help that workers could expect in adjusting to new employment patterns.

We heard, as I am sure you have heard, that welfare rolls have increased in various communities by from 50% to 80%, and many community representatives indicated to us that 70% of the recipients of this welfare were having to apply for welfare assistance for the first time. On top of this human pain, the federal government has added cutbacks in the commitments made to share Canada's assistance program expenses. It has reneged on its promises to transfer financial resources to this province for education and health. The new provincial government could have cut back accordingly, but this would have sharply contradicted its electoral mandate and would have inflicted yet more human suffering in a situation already very grim for many citizens in Ontario. The Treasurer noted in his budget speech that these unilateral moves by the federal government cost Ontario $3.6 billion in 1991-92 alone.

The strategy being followed by Ontario, of course, is possible only when fiscal flexibility has been maintained, and that is not the case at the federal level. Budgeting by Liberal and Conservative governments has left a massive national debt so that 34 cents out of every revenue dollar has to go toward interest payments. That makes it very difficult to take new spending initiatives without reducing other expenditures or raising taxes.

In Ontario, only 12 cents of each revenue dollar is going to interest charges, even after this increase in the deficit. So flexibility clearly remains. Federally, it would not be possible for a New Democratic government to follow the course which Ontario has followed after the next election.

Tax reform would be necessary to re-establish a fairer system of revenues and the fight for full employment would have to rely on monetary policy, lower interest rates, foreign exchange policy, a more competitive value for the dollar and the establishment of new institutions such as regional development banks to assist community level initiatives in poorer parts of Canada. Such monetary and exchange-rate instruments, which are available at the federal level, are not available to you at the provincial level.

The final point I guess I would make is that the strategy of Ontario's new government is just beginning to take effect. But there are already signs that the expansionist budget policy is working. Ontario is moving into a faster recovery than other parts of the country, and there are signs that the damage of the recession on people is beginning to be overcome. I do not want to pretend that there is not a long way to go, but the following signs are all positive for the Ontario budget.

First, the most recent unemployment statistics for July show the jobless rate declining in Ontario while the level stayed the same for the country as a whole. Before the budget, unemployment was growing faster in Ontario than it was nationally.

Second, in the last three months available, that is April through June, manufacturing shipments expanded in Ontario by 3.75% compared to a rate of 3.21% for the country as a whole. If we look at the period from June 1990 to April 1991, the decline in manufacturing shipments had been greater in Ontario than in the country as a whole.

Third, bankruptcies in the most recent month of July have risen more slowly in Ontario, 3.4%, than in the country as a whole where the increase was 6.7%. Again, this is in contrast to the period before the budget when Ontario bankruptcies were growing faster than the national figures.

Overall then, I hope this committee will be able to endorse unanimously the basic strategy of this budget, even if there are disagreements over details. This is the right budget at the right time and both consumers and business investors will see this to be the case, I am certain, over the year ahead.

Mr Kwinter: In this morning's Globe and Mail, in the business section it says that 37% of the largest companies in Ontario are not planning any capital investment over the next five years. This was research conducted by the University of Western Ontario's National Centre for Management Research and Development. The top five reasons reported for not planning to invest in Ontario were, in descending order of importance, Ontario's wage protection policies, the provincial government deficit, levels of Canadian and Ontario productivity, Ontario's planned employment equity legislation, and corporate income tax.

We have a situation where 37% of the largest companies in Ontario say they will not invest in Ontario in the next five years. Interestingly enough, 39.7% reported they will invest in other places in Canada. To my mind, that has to be a direct result of the budget.

One of the interesting things about it is that Dr Bergman, who is the director of this research facility at Western Ontario, said he thought it was pretty good news because he fully expected that 85% of the companies would report it, given his feedback of what is going on in the province.

Do you have any comments on that?

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Mr Langdon: I have two comments. The first is that if I read your statistics correctly, that tells me 63% of the largest companies in Ontario are planning to invest over the next five years. I would be very interested in what the figures are for Canada as a whole. We have seen a marked decrease in investment in this country, an even more marked decrease in investment intentions which large firms have reported to Statistics Canada at the national level. I frankly think that if 63% of large firms are planning new investments in Ontario over the next five years, that is a vote of confidence in the budget.

Mr Kwinter: I think it is kind of interesting that 37% is exactly the percentage that the New Democratic Party got to form the government, which means that 63% of the people in Ontario do not approve of that government. So how do you equate that? If 37% was enough to form the government and 63% was not, can you say that 63% of the people are opposed to the NDP?

Mr Langdon: I guess Mr Kwinter, I would put to you the question whether in 1985 the Liberal government, which took office at that stage --

Mr Villeneuve: Thanks to whom?

Mr Langdon: -- had 37% of the vote, had a majority in the Legislature and had a lead over the previous government of, what I believe was the case in Ontario, five to six percentage points.

Mr Kwinter: I do not understand your comparison, sir.

The Chair: I have to go on to Mr Villeneuve.

Mr Villeneuve: Thank you, Mr Langdon, for taking time from the major leagues of politics to speak to us in the minor league. I appreciate that.

Mr Langdon: Well, it never works that way.

Mr Villeneuve: I find it a bit of an Alice-in-Wonderland scenario when you say that on budget day, when Mr Laughren presented his budget, things turned around in Ontario. I have a little problem with that. You state that economic activity turned around in May and June. I say to you that might have been better had we not had the particular budget that we had at the end of April.

Leaving that aside, you state that 12% of our gross provincial revenue, after the additional deficit, will be the figure utilized to service the debt and indeed at the federal level it is 35% or almost 35%. I suggest to you that by the end of 1994, when the total debt has gone up by almost 100%, that 12% figure that you quote may well be double or close to double.

Do you think that would lead intended savings by individuals and intended investments by corporations to actually promote this, with the type of economic climate?

Mr Langdon: Two responses: First, with respect to the impact of the budget, of course I do not want to sit here and claim that everything started to get rosy in Ontario after the April budget. But I think, in assessing the budget, we have to look at the hard numbers that are available. All of us are politicians here. We are going to inevitably have our view of the budget. But at least we can put some confidence in the numbers which are provided by Statistics Canada, in the case of bankruptcies by the Department of Consumer and Corporate Affairs, as being neutral numbers. They are not something which is provided to help our argument, so I think we should look at those hard numbers. Certainly if I look at them and I see that since the budget things are going better in Ontario than they are in the rest of the country, that seems to me to be evidence that supports the budget approach.

With respect to your other point, I take it very seriously. I think it is very important that we do not get ourselves into the hole which Conservative and Liberal budgeting has created at the federal level, but to do that it is crucial that we see to it that this economy in Ontario starts to move ahead with some strength, with some real speed and with some fairness as part of it. Certainly, as I see it, the signs are there of that beginning to happen. If a year from now the signs are different and the numbers are different, I am quite prepared to admit that is the case, but I do not expect it to be.

Mr Jamison: Thank you for taking the time this morning, Mr Langdon, to come and appear before the committee. We appreciate your input.

The Globe and Mail article was referenced today. I think we should just follow through on that a little bit because certainly we tend to give only the information that is relevant at times to our own political position. That article goes on to list the most significant factors in companies' decisions to invest outside of Ontario, in descending order of importance, and the first two of course were the value of the Canadian dollar and interest rates or the cost of capital.

Having said that, there are two views on the budget situation, two very separate views. One is of course the Conservative philosophy on budgeting and the other is our philosophy on budgeting during hard times. We have seen the Conservative philosophy now in place for a number of years and yet the deficits at the federal level are going upwards and are projected to be $10 billion higher this year than they were originally projected to be. That presents an obvious concern. I wonder if you could expand on the two philosophies a little more to give us an indication why the federal philosophy is not working.

Mr Langdon: I think the federal philosophy, as I have tried to suggest in my presentation, has been a philosophy that says, "Look, if we cut taxes for those at the top, large corporations, the wealthy, if we reduce income tax rates, somehow things will trickle down, benefits will reach the ordinary person and the economy will start to move ahead again." There is in fact very little evidence that this has taken place. There has been some growth certainly in the period from 1984 to the beginning of 1990 but not enough growth to reduce unemployment rates and to increase government revenues sufficient to deal with the federal deficit. So on the level of dealing with the deficit, the strategy has certainly not worked. On the level of good economic management, what the strategy has done frankly is to bring us back into a recession, which for Ontario has been significantly worse than the recession of 1981-82. I do not see that as an approach that has any credibility in 1991.

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I think the approach which is being taken at the provincial government level cannot be the same as what you could do federally because, as I said, there are some things you do not have control over. You cannot control the value of the Canadian dollar, you cannot control interest rates, but what you can do is you can take advantage of the leverage which exists at the provincial level to see to it that hospitals continue to operate, to see to it that education continues to be supported, to see that transportation gets investment made in it. The consequence is you are spending money and getting people back to work. You are also investing in economic growth for the future. The combination of those two things, as I see it, has a much better chance of working than what has happened federally. As an economist, I have to say --

The Chair: Excuse me, Mr Langdon. I have got to cut you off. The time has expired. The committee appreciates your time spent here and the snapshot you gave on Canada and where Ontario is. Thank you.

Mr Langdon: Terrific. Thanks for the invitation.

TAYSIDE COMMUNITY RESIDENTIAL AND SUPPORT OPTIONS

The Chair: The next group to come forward is Tayside Community Residential and Support Options. The presenter is Donna Davidson, board member. I would like to welcome you to the standing committee on finance and economic affairs and the budget review. You have up to one half-hour for your presentation and question-and-answer period, if you can leave some time at the end of your presentation. You may begin.

Ms Davidson: Thank you very much, committee members, for this opportunity. I would have to say that just from what I have seen so far I am extremely impressed by the obvious breadth of input that you are getting from the province. That you would have one of our federal members of Parliament presenting and now be listening to a representative of probably one of the most grass-roots groups you will get, I commend you for really getting such a spectrum of input.

The group I represent is a very young non-profit organization based in the town of Perth. We currently operate a group home for severely physically and developmentally handicapped people. We are opening a second home. We have an 18-unit family housing project under way. We are also going to be responsible for day care in the coming year in Perth. So we have the privilege of representing some of the most vulnerable members of our community: the handicapped, the poor and children.

Because of this, we laud the provincial government in Ontario for its bold stand in not reducing payments in 1991, cuts that have been made by the federal government and other provincial governments. While we strongly support a provincial system that safeguards health and education and day care and social services, we are fully cognizant of the necessity for a sound financial base. But we do feel alarm that most of the defamation against the Ontario budget and the rallying cries surrounding the federal deficit really fail to take into account what some of us would consider the economic big picture in Canada.

The real security in the coming century for the people we represent lies in a drastic reversal of the catastrophic course imposed on us by our present federal and provincial taxation systems. However, it is not just the future of vulnerable Canadians that is at stake. Economic democracy is the underpinning of political democracy and social stability. We feel this is very seriously compromised in Canada today as the bottom 20% economically of the population has control over less than zero of the nation's wealth -- their debts are greater than their assets -- while over 50% of Canada's wealth is controlled by only the top 10%. The top 20% controls 69%. Such an unequal distribution of wealth is a recipe for our nation's quick trip to becoming a banana republic.

Central to the establishment of an economic democracy in Canada is a complete revision of our taxation system. It is most encouraging that the Ontario government is currently undertaking such a process. The cornerstone of any system is its value base. We propose to concentrate in our report on looking at the principles and values of a revised taxation system. We will also suggest some of the directions these revisions might take, feeling very much that it is these values and these directions that hold the future for those whom we serve through our organization.

The cornerstone is with the principles and values, very simple ones, the first being taxation according to ability to pay. The tax burden should be distributed on the basis of ability to pay. The greater the individual's wealth, the greater their share of the tax burden should be.

We should have a neutral and simple tax system based on probably one of the premises of the Carter commission, a buck is a buck is a buck. All revenue should be taxable. Much of the confusion and mistrust that Canadians experience today towards government is grounded, we feel, in the bizarre labyrinth of our taxation system. A system which ruled out the manipulation by tax lawyers and economically powerful would be more cost-effective to administer and it would do a great deal to restore public confidence.

Also, one of the principles we should be looking at is the reinforcement of the work ethic. If we want to foster a nation of contributors, then we should look at a taxation system that reflects this value, where not only income from labour is taxed but also revenue from inheritance and investment.

We would very much like financial bodies to take a look at the Carter commission report once more. This report, published in 1987, was centred very much on the values and principles we have mentioned. Unfortunately, its demise was rather strongly ensured by the opposition from Bay Street and the distortions that came out in the press and by the fact that the author became ill very shortly after its publication and died. However, if we look at the state of the country, where it is today as opposed to where it was in 1967, perhaps the words of Carter and the words of those who supported him tend to be rather much more of a prophecy. Perhaps it is time to look at this blueprint for taxation.

We would also like to consider an annual wealth tax. If you are looking at any taxation system, a logical direction to go is where the greatest sources of wealth are. With the wealthiest 20% of our population controlling over 70% of the nation's wealth, it would seem natural to first consider this source of wealth, yet Canada's taxation of wealth is among the lowest in the western world. An annual wealth tax is currently being collected in Germany, Austria, Norway, Sweden, Belgium and Denmark. These are countries in which there is a great deal of stability. Perhaps we should be looking at the policies in place in countries like that. The recent trends in economic distribution in Canada tend to be alarming in view of the economic polarity that is being created and the instability that ensues from such an unequal distribution.

An annual wealth tax would have the following advantages: It is where the money is. The total amount of net wealth is about twice as great as the sum total of annual income. Not only is this wealth a new source of taxation revenue, but the process of public taxation helps to remove the shroud of secrecy and silence which cloaks much of the wealth in Canada. Such silence enables it to escape from being included as a rightful component of the tax base.

Unequal distribution of wealth leads to unequal access to political power, thus undermining democracy. The present system places a tax burden on labour rather than capital. It is certainly not reinforcing to the work ethic to tax labour and not tax capital. Unequal distribution of wealth leads to distortion in market and economic development and unequal opportunity in employment. Also, the small percentages removed during annual wealth taxes are relatively quite small. They do not create any discomfort in the day-to-day reality of those taxed, unlike much of the taxes in our present system, and only the very wealthy are subject to the tax.

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I think we should look at our system, which is so riddled with loopholes on how to escape paying taxes. We employ thousands of lawyers and accountants, the sole purpose of these individuals being to help those who employ them escape paying taxes, and the results are very destructive to economic democracy in Canada, as only the rich can afford to seek out the loopholes. The taxation system is shaped by the research and lobbying of this group, making an unfair system increasingly less fair. Taxation becomes a matter of game-playing rather than having a fair, sound planning basis. The public is bereft of enormous quantities of tax from individuals and sectors most able to pay, and several of the best minds and much of the national revenue are tied up in a process which is ultimately destructive for the interests of all Canadians.

I think we would look at the statistics from a source hardly known to be a radical: Peter Newman, Maclean's magazine. In 1986, 89,000 Canadian corporations, with combined profits in excess of $22 billion, paid no taxes at all. If corporations had matched individuals in taxation since 1950, we would now have a budget surplus of $18.5 billion. In 1984, 287 Canadians making $250,000 paid no income tax. These people are just the tip of the iceberg, because Revenue Canada statistics do not include the many more wealthy who have hidden their large incomes through transfer to spouses, children or private holding companies.

In Maclean's in May 1991, Newman continues: "Canadians paid $11.1 billion more in taxes in 1990 than in 1984. Of Canadians contributing to this $11.1 billion, 85% of those making less than $25,000 paid less tax than in 1984. This is a fair move, but 85,000 families making over $100,000 a year also paid less than in 1984."

Therefore, if we look at an increase of $11.1 billion and we have a fair percentage of the bottom end being removed from the taxation and also an extremely large number at the upper end, the vast bulk of this is being paid by the average Canadian.

The federal government since 1984 has talked much about tax reform, but in actual fact, when you look at statistics like that, it shows it is a fairly smoke-and-mirrors act, because the system that is coming into place further consolidates favouritism of the rich.

Looking at the topic of fair corporation taxes, in the 1950s, Canada's tax base was 50% corporation, 50% individual. By 1987, 80% of the national revenue was obtained from individuals and only 20% came from the corporations. In the ensuing 40 years, government has directed large quantities of Canadian money to big business. Tax breaks are the most common vehicle, as they are less visible than direct grants and subsidies, but the end result is the same. Not collecting what is owed equates to giving -- an example being in 1985 the $500-million tax break to the Reichmanns to assist them in taking over Gulf Canada Ltd. -- and is the same as giving $500 million to the second-richest family in Canada. Each of us as taxpayers contributed about $30 to the Reichmanns, yet few people get to see the connection between their tax bill and the tax breaks afforded the corporations.

Perhaps most alarming of all of Ottawa's practices is that of deferred taxes. These taxes are almost never paid off, so in essence they are free gifts to the corporations. Looking at a few of these in 1987, the deferred tax bill to MacMillan Bloedel was $227 million, to Bell Canada $1.2 billion and Imperial Oil $1.3 billion. At present over $30 billion in deferred taxes are owed to Ottawa, the same amount as the deficit.

In its 1991 report on the federal budget, the Canadian Auto Workers observed that in 1984, for every dollar of corporate tax, $3 was collected from personal income tax. If you look at the projections for 1992-93, the amount from personal income tax will rise to $5.60 for every one dollar collected. Increasingly, the tax burden is falling on income and not on capital. Attempts to deal with the deficit concentrate on income and consumption taxes and ignore capital, especially corporate capital. Again, if the 50-50 split of the 1950s had continued, we would now have an $18.5-billion surplus, yet the efforts, especially of the federal government, are to guilt us into thinking that the deficit results from health, social and educational costs.

Ironically, the lack of neutrality in our tax system is not a sound economic policy, because often corporate decisions get made on the basis of tax breaks and not the financial realities without these incentives. The bottom line for most business is a skilled workforce, the stability of the country and transportation and communication. Ironically, those are the very factors that are threatened most when the revenue for their operation is in jeopardy.

Examining briefly the consumption tax approach which seems to be growing in this country, Canadians now pay 50 cents in sales tax for every $1 they pay in income tax and we pay $5 in income tax for every dollar that is paid by corporate taxes. Consumption taxes hit those who must consume almost everything they earn or receive. They are a means of disproportionately collecting revenue from lower- and middle-income persons while having minimal impact on the finances of the rich.

Consumption taxes are costly and frustrating to administer. They handicap our ability to compete internationally. Just think how quickly our cross-border shopping problem would disappear with the removal of sales taxes and the GST. Imagine the boost to consumer spending in our country. A no-loopholes, equitable income capital tax system at both the corporate and individual level would more than replace the revenue from sales taxes and GST, be infinitely fairer and simpler to administer.

While we are looking at this problem, I think we might examine the fact that since 1970, estate taxes have been abolished in Canada. This move only further consolidates the nation's wealth into the hands of a few.

Looking at getting our workforce back into full production, an adequate tax base would give us the funds for the child care and the education substructures necessary to support almost full employment. It is not an impossible goal. Sweden has a 2% unemployment rate. It does, however, require planning and the political will to fund retraining and employment subsidization and have these replace the concept that we now exist with whereby we accept that a high percentage of our population will be on UIC or welfare or other forms of social assistance. It is much more economically sound, not to mention the personal and community stability.

Looking just briefly at housing and the first points, it is very encouraging to see that these are all principles from Ontario's present housing policy. However, to bring these into effect there are going to have to be rather large shifts in the housing policy itself and the taxation as it relates to real estate.

The 1980s have witnessed owning one's own home becoming an impossible goal for most Canadians. The incredible escalation of real estate has much of its basis in the removal of the capital gains tax and in the favoured position enjoyed by capital investment in Canada. At the same time, the federal government has reduced its commitment to housing, leaving the provincial and municipal governments to cope with the escalating numbers of homeless or persons living in inadequate, unsafe shelter.

Ironically, in the 1980s, billions of dollars have been made in real estate, a great deal of it tax-free, thanks to our largess regarding capital. In her book, Behind Closed Doors, Linda McQuaig gives the example of John Turner selling his house in Toronto when he moved to Ottawa for a profit of $635,000, this all being non-taxable, just as it is for all Canadians. Our subsidized programs for housing have post-1984 been cut back by the federal government, and yet a recipient would have to live in a housing project 118 years to recoup the $635,000 profit made by this one transaction by one individual.

A study by David Hulchanski, of the University of British Columbia, reveals that for every $100 Ottawa spends directly on housing, it spends $200 and $300 indirectly through the tax system, much of which ends up in the pockets of investors, developers and land owners.

An example of this misdirection of housing funds is the multiple-unit residential building program, the MURB program, begun in the 1970s. An analysis of where this money went to shows that most of it went to land owners and developers. By 1981, when it ended, it had lost $670 million in government revenue, but because of the tax breaks in effect by this program until 1991, over $4 billion will have been lost.

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The ending of tax breaks in housing, as in all other fields, would mean that funds could be directed for their real purpose and not to furthering the fortunes of the already wealthy in the guise of serving public interests.

As we look at how to perhaps start changing this system, the quote by Carter, an attorney, in his address to the US Supreme Court sort of deals in a way with the task that seems to be an ongoing one throughout humanity of one class shifting the burden to another part of the class, and it is a rather unequal struggle, because it seems to be that inevitably it is a fight in which the rich can engage quite successfully and in which the poor always go to the wall, as James Carter has mentioned there.

We only have to look at the fate of the Carter commission to realize the obstacles faced by any group in attempting to bring about an equitable tax system in Canada. However, there are factors in 1992 that make this a little more possible than perhaps in 1967.

First of all, the 25 years of the post-Carter commission highlight the growing disintegration of our social, health, safety, cultural and transportation networks. There is no single factor more responsible than the abandonment by government of public interest, largely because of its intimidation from the private sector. Canadians value medicare, the CBC, adequate pensions, VIA. A growing number of Canadians are sensing the dangers inherent in their disintegration.

A second factor which perhaps changes the equation is that increasingly it is not only the poor who are up against the wall. The shrinking middle class and the economic vulnerability of this group creates a large pool of economically disfranchised people.

A well-planned and powerful initiative to explore the inequalities of our taxation system could wake up the Canadian electorate. Most of what exists could not measure up to public perceptions of morality and justice. It is enraging to realize that because our tax laws legitimize business expense, I as a taxpayer am buying a steak dinner for a Bell Canada executive earning $200,000 per year. In the meantime, Canadian children are lining up at food banks. That kind of Canada is acceptable to no one who really looks at what is happening because of our inequalities.

I think it is also interesting, if we look at what has happened recently in central Europe and the Soviet Union, to realize just what can happen in a country, the massive shifts that can happen when the public will reaches a critical mass. This is largely achieved by the exposure to the truth of what is going on. In the end, it is the truth that enables the public to become mobilized to the point where it is a showdown with the forces that are trying to control them.

Last, the NDP government certainly has been receiving little support from the business community. Perhaps they are not, with the ties and the connections that the Liberal government had in ignoring the Carter commission.

I would speak now as a member of an organization that daily struggles to minimally meet the needs of our most vulnerable members of the community and very much wants a government and a bureaucracy with the political courage to restore economic justice in this country. It is very hard to hear the children, the poor, the handicapped whom we serve, the money that is going to these people, being criticized as the cost of our economic undoing, and at the same time know there is this quiet sanctioning and funding of boxes at the SkyDome and bonus holidays to Hawaii, tax breaks being the same as tax handouts.

If we look at the extent of what is happening in Europe, especially recently, and see the celebration of extending of political democracy into the lives in Europe, and especially in the Soviet Union in the last few days, we can look at what would happen in the restoration of economic democracy in Canada. Right now, as we watch the death of Soviet communism, it is well to remember that the two ends of the horseshoe are very close together. We see clearly, certainly in the Soviet Union, the pitfalls of the state controlling the economy.

But I think it is important to remember the other side of the coin. Ultimately, it is equally as dangerous to have big business controlling the state. In both extremes, the individual loses. The loss of individual power and control over their own lives is behind the dissolution and alienation rampant in the Canadian electorate today. Genuine democracy gives both political freedom and individual economic control and security, and we urge this government to move boldly in re-establishing economic democracy in Ontario. Thank you very much for this opportunity.

The Chair: Okay, we have one minute per party.

Mr Sterling: I am not going to be able to ask a question, because I was, quite frankly, disappointed in the brief in that I thought we would get a brief as per the groups that you represented and not a litany of really misleading information on our taxation system.

I just wanted to say three things in terms of the area of the brief. Number one, there is an estate tax in Canada. There is a capital gains tax on everybody who dies and leaves a piece of property to somebody and who has made a capital gain during their lifetime. They have to pay 75% of the value of that and include it in their last income tax, which is a significant amount of money paid in tax when a person dies. So there is an estate tax.

Two, the reason corporate taxes have dropped dramatically in relation to personal income tax can be attributed to two things. Corporate profits have dropped dramatically from 1950 to 1990, and that was given in evidence to this committee by, I believe, one of the first witnesses. The average profit of a corporation is now 5% versus about 12% at the time you referred to in your brief. So there is a very good reason there is no corporate tax, because there are less corporate profits at this time.

Three, the federal government has lowered personal income taxes, Ontario has increased income taxes over the last four or five years. While the federal government cuts back, the provincial government has not --

The Chair: I am sorry, Mr Sterling, we have to cut you off. We have to move along with Mr Wilson. One minute is all we have.

Mr G. Wilson: I was wondering whether Ms Davidson wanted to reply to Mr Sterling. Is there anything you wanted to point out?

Ms Davidson: This could be an ongoing debate as to when and where the statistics come from, but the trends are there. They certainly bear analysis as to the roots.

Mr G. Wilson: I want to say how much I appreciated your presentation. I think it is very cogently argued and entertaining enough, supported by the references.

The Chair: I am sorry, Mr Wilson, I have to go to Mr Kwinter.

Mr Kwinter: I just wanted to follow up the comments of my colleague, Mr Sterling. You should know that last year corporations in Ontario paid $4,482,000,000. This year it is budgeted they will pay $3,170,000,000. That is not because they are paying less tax; they are making less money. There is a misconception that corporations pay no tax. That is absolutely contrary to the truth. As a matter of fact, in the article in the Globe and Mail, they were complaining about their corporate taxes. What you are talking about is tax on profits. They pay realty tax; they pay the employee health tax; they pay the corporate concentration tax, they pay workers' compensation; they pay unemployment insurance portions; they pay an incredible number of taxes, I think it is something like 27. Now, at the end of the day, with their depreciation and everything else, they may show a loss. As a result, they do not pay any tax. But that does not mean they have not paid tax all the way along the line. That is one of the problems. They are saying they are being taxed to death, so they cannot show a profit. There is a misconception. When people trot out these things and say, "My, this company didn't pay any tax last year," they did not pay any profit tax.

The Chair: Mr Kwinter, your time has run out. Thank you, Ms Davidson, for your presentation before this committee.

CANADIAN CENTRE FOR POLICY ALTERNATIVES

The Chair: The next group is called the Canadian Centre for Policy Alternatives, Mr Duncan Cameron. You have one half-hour for your presentation and you can leave some time at the end for question-and-answer period. I would like to welcome you to the standing committee on finance and economics. You may begin.

Mr Cameron: Members of the committee from the government side may remember that I was one of the first witnesses to appear in Toronto on this budget. At that time we were saying goodbye to Lincoln Alexander in the Legislature, and also to Robert Nixon, so opposition members were unable to appear. It was suggested I come back a second time for questions, so I am really here for questions. But for the benefit of those who may not remember from the transcript what I said the first time around, perhaps I could just summarize very briefly my comments.

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I did bring along just a sheet today which I think will be of some interest, particularly to those who are concerned about the health of corporations in Ontario, like Mr Sterling. If they look at this they will see there is considerable cause for concern.

The first point I made in my presentation was that I was a former Department of Finance official in Ottawa and that the budget-making process seems like a huge responsibility. How could you possibly make up your mind who is going to be taxed and how much is going to be paid? This is a huge responsibility. But in fact it is a passive process. There is a set of tax laws in place; there is a set of expenditure programs in place. Without doing anything, without bringing in any kind of a budget, you are going to have government expenses and government revenues.

The first point, which has not been widely understood, is that this is a passive budget. The current government did not make and did not take a very firm stance in one direction or another. They simply allowed the tax system to continue to function the way it was and the expenditure system to continue to function.

We are in a recession and as a result of being in a recession, the automatic stabilizers, those programs which are there to help people in time of need and to keep the spending going in the economy, kicked in and of course we had to deal with what 85% of the Canadian population believe are the wrong-headed economic policies of the federal government -- incredibly high, ridiculously high interest rates and cutbacks in transfers to the provinces and a gutting of the unemployment insurance program as we go into a recession, which is a heartless policy.

My first point is that we are not really dealing with a major government initiative here, we are dealing with a continuation of policies that were already in place.

There was a modest expenditure increase of about $1.5 billion or less, depending on how you cut it. The question then comes, and this is the second thing I guess I learned at the Department of Finance, if you are Finance minister, you have got to make a call. It is a really simple call. Where is the economy? Is it on the way up, is it on the way down or is it somehow sitting there in neutral? I think the Treasury in Ontario looked at the situation and said, "It is just not clear that we are on a recovery path here and if we don't give a little extra push to this economy it may not come out of recovery."

The Treasurer said in his speech, and I think most economists would agree with him -- in fact another witness appearing before you had a statement of 59 economists who agreed that what had to be fought in this province was the recession and not the deficit. That was the second point I made, in much greater detail of course.

The third point, and I guess the one of most concern to the press, if you pay any attention to the press, is what is the impact of this budget deficit and successive budget deficits to come on the debt in Ontario, on interest rates in Ontario and on the financial structure of the province and on future taxes?

Of course, nobody is going to argue that we should cut back spending in a time of recession, but some people are going to be awfully concerned about taking on debt in a time of recession. Can we in fact deal with it?

My answer on that one -- and I was disappointed that the Treasury documents did not reflect this more adequately; it is a failing on their part I think -- the amount of marketable securities that the government of Ontario has in fact issued as a government, as opposed to Ontario Hydro, is in fact relatively small. We are dealing with less than $10 billion here. The federal government has marketable securities out there of around $350 billion.

It is not as if the government of Ontario is overloaded with debt. In a time of difficulty, individuals can go into debt, companies can go into debt, governments can go into debt. Who is best placed to borrow? Normally, we would argue, and certainly those of us who have any experience with the 1930s would argue, that governments should go into debt, not individuals and not businesses.

The second aspect of this question is, what is going to be the view of Bay Street to this government of Ontario paper rolling out? Quite frankly, my sense is that this is going to be very positive. People are going to look at this paper and say: "This is a good investment for people in Ontario. It's a good investment for people around the world. It's going to be easy to sell."

The first story that appeared in the business press after the Euro issue that was done by the Ontario government was, "Ontario Government Issue Ravaged by European Investors." They just bought it up as quickly as they could. So we are talking about a government that has the confidence of the financial community and whose paper is respected, in part of course, because there is not a lot of it out there.

I think anybody who tries to argue that the Ontario government, by having a deficit, is sending interest rates up is simply talking through their hat. Interest rates are set just about a block and a half over here by the governor of the Bank of Canada. Every Thursday morning, he walks in with his people and they give a fairly clear indication to the market and we have had interest rate manipulation in this country for the last two years. The Bank of Canada has manipulated interest rates, not in the sense that it pushed them up but it has held them up. If they had allowed market forces to deal with interest rates in this country they would be significantly lower.

We could go into a detailed discussion of this but from 1930 to 1984 the real interest rate in Canada averaged 1.5%. The real interest rate in this country in the last two years has been in the 8% to 10% range. The gap between Canadian Treasury bill rates and US Treasury bill rates is traditionally between 1% and 2%; it is between 5% and 6%. That is manipulation and it was finally the Bank of Montreal which called a halt to the whole thing when it refused to go along with the Bank of Canada policy.

To summarize, I think a modest budget, a moderate budget, a modest spending increase to deal with the extent of the recession and the fears that are put forward about the impact of the financial markets have been grossly exaggerated.

I will just take a minute to turn to this table I brought in this morning so I would have something new to say to you. This is a table from a report which the Canadian Centre for Policy Alternatives will be bringing out shortly on the extent of the manufacturing crisis in Canada.

If you go to the last column, these are the changes in employment in Canada -- I am sorry that we do not have the figures for Ontario -- from June 1989 until March 1991, from the largest number of employed to the lowest number of employed, given our recent statistics.

In the manufacturing sector in Canada, we have lost 435,000 manufacturing jobs. That does not include service jobs or other jobs, but that is net loss of manufacturing jobs. This indicates the sector.

The next sector -- one of our biggest employers -- is the food and beverage sector. If you look at the second-last column, we have only lost 1.5% of real output in that period. That means the amount of physical food and beverages being produced is only down 1.5%. The number of people employed in that sector is down 22%.

I would just throw out for you -- and I would hope you will be investigating this in your future work because we are really counting on an active committee system as being an important contributor to democracy in this province -- then I hope you will look into the impact of the free trade agreement on the Ontario economy. My reading of that figure is a really simple one. The food and beverage production is being maintained but jobs are being lost. That means they are being moved to the United States. That of course is a major manufacturing sector.

If you just go down the list, whether it is on the output side or the employment side, you will see that in the furniture sector we are down 30% in employment, the leather sector 37% and these are, of course, the sectors that were identified as the most vulnerable sectors under free trade.

The Ontario government is facing a crisis, not of its own making, but which is the making of federal government policies: the GST, the free trade agreement, high interest rates and the cutbacks in social spending. Quite frankly, the majority of economists in this country believe the NDP government went the right way by not in fact cutting back on social spending at a time of recession.

Mr Sutherland: Thank you for appearing before the committee again and bringing forward some new information. In light of this new table you have presented to us, what advice would you be giving the government of Ontario in terms of -- given the fact of the tremendous disastrous impact of this free trade agreement and the way it was negotiated as the evidence presented here, that the agreement is in place, that we have what seems to be an unsympathetic federal government right now and at least for a couple more years, what advice would you give to the government, besides the budget policy, in terms of turning the economy around and making Ontario competitive again in the global marketplace?

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Mr Cameron: I think I would be very closely monitoring. There are a lot of economic statistics and it is hard for anybody to make sense of what we should be looking at, but I would be looking very closely at two key economic statistics: private investment and full-time job creation.

If I had a sense that private investment was not increasing I would be looking very closely at employee ownership plans or the development of a private-sector investment bank or some additional public spending mechanisms so that money borrowed in bad times is invested in Ontario's future. If the private sector is not doing it, then I think the public sector has to do it.

Mr Sutherland: Would there be specific sectors that you would recommend to the government to be investing that money in?

Mr Cameron: Far be it from me to start to suggest in which sectors we can in fact look forward to good market opportunities at this time. I think the Ministry of Industry, Technology and Trade has to be identifying these kinds of sectors. I think you have to be talking to people in factories who are working on these different products. It is quite clear that there is a limited return in the high-technology sector. There are only 500,000 jobs there, but something has to be done in high technology. I think that meeting basic needs, the construction industry, the furniture industry, is what an economy is about. So the basic needs industries have to be looked at carefully.

The trade agreement is a serious constraint on what the Ontario government can do, but I think the Ontario government should simply ignore it and go ahead and do what it was elected to do. If the Americans want to complain about it, then that can be dealt with between the federal government and the American government. I do not see any US states stepping back, because of the Canada-US free trade agreement, from helping their industries in difficult times like there are in the United States right now. I do not see why the Ontario government should do it.

I would also be tempted to play very tough with the federal government this time. The province of Ontario has played a very important role in the past in constitutional negotiations. The parties in Ontario supported the Meech Lake accord. The Prime Minister of Canada wants the support of the government of Ontario and of all the parties in Ontario on this, and I think that if Ontario is going to participate fully in this, there should be some conditions.

There have to be some changes in government policy or the Ontario government is not going to play. This is too serious. What we are dealing with here is a crisis, a serious crisis. These jobs are not coming back and these industries are not coming back unless there is a shift in public policy.

Mr Sutherland: Your overall assessment of this budget, though, would it be similar to that of Mr Frank of the Conference Board of Canada, that you feel the strategy we took in terms of maintaining the services, some extra expenditures in capital investment in the infrastructure, is one that will help stimulate the economy and bring us out of the recession quicker?

Mr Cameron: I congratulate Floyd Laughren and the people at the Ministry of Treasury and Economics for not panicking in the face of a budget deficit figure which a lot of people have tried to use to scare other people. I congratulate them for having the guts to stand up and look it in the face and say, "This is the thing to do and we're going to do it."

Mr Kwinter: Mr Cameron, I just wanted to ask you about your deduction in the food and beverage sector before I go. I agree with you, I think we are in a manufacturing crisis in this country. Ontario being the base centre of manufacturing, it is going to impact on Ontario far more severely than anywhere else in the country.

But do you not think there is another reason for it? This is a change in real output in Canada, and if the real output has only declined by 1.5% and the employment has gone down by 22.6%, it would suggest to me that it was probably as a result of automation or greater productivity or efficiency, but certainly not because the jobs went to the United States. They are not talking about North American output; they are talking about Canadian output.

Mr Cameron: If I can just respond to that, the statistical agencies like Statscan are not sophisticated enough to be able to pick up all the changes. Say there is a tomato farmer near Leamington. He produces some tomatoes, they go into a can and Heinz sells the tomatoes. But Heinz could very well bring in the tomatoes from the United States and put them in a can and you would never see the difference in the statistics, and Heinz could bring in the can and put a label on it and it could be called Canadian output.

So it is very difficult to get the precision. When we look at the statistics we look at raw data and it is very hard to know, but I find it incredibly suspicious that output is being maintained while employment is dropping like this.

Mr Morin: This is only a technical question. You mentioned the average interest rate from 1930 until today was but 1.5%.

M. Cameron : Je parle des taux d'intérêt réels, c'est-à-dire les taux d'intérêt une fois que l'inflation...

M. Morin : La seule chose qui m'inquiète, c'est que si vous regardez réellement les chiffres, les taux d'intérêt ont augmenté à compter de la commission Carter. La compétition qui existait à ce moment-là entre les banques et les caisses populaires, les credit unions, et ainsi de suite...

The Chair: Excuse me, maybe we had better hand out the --

Mr Cameron: Okay, we'll do it in English then.

Mr Morin: Okay. If you recall, the interest rate changed after the Carter commission when there was competition among banks, trust companies and credit unions, and rates of interest at that time went sky-high. I was in the bond market for close to 15 years. I sold 3.5% bonds, 4% bonds. The interest rate at the bank was 1.5% on your savings. So you have got to be careful how you play with these figures, because the true picture should look from the Carter commission until today.

In 1982 you had 18%, 20% on government of Canada savings bonds, something which had never been seen before. So I do not see high interest rates as a bad measure, if you compare, for instance, with Latin America, with Argentina and all those countries where money changes from 18% to 20%. What do you say to that? You have to be careful with figures.

Mr Cameron: Yes, I agree with you. You do have to be careful.

The Chair: May I just interrupt for a second? We do have the services of an interpreter here if you would like to --

Mr Morin: No, no, no. The committee is bilingual, so I --

The Chair: I just want to make it clear that we have got it there; we just have not handed them out yet.

Mr Cameron: The Porter commission was the commission on banking and finance. The Bank of Canada Act is changed every 10 years, and what happened in 1967 was that there used to be a ceiling on interest rates in this country --

Mr Morin: That is right, 6%.

Mr Cameron: -- a 6% ceiling and they took the ceiling off and the argument was at the time, "Well, all this competition we're now going to have with the trust companies coming in and the banks and so on, interest rates are going to come down." Anybody who believes that believes in the tooth fairy.

The competition in the banking industry is not the basis of it, nor should it be, because in an open, competitive system in the banking industry you get banks going bankrupt, which is what they have in the United States. I prefer a regulated system and I think if we had kept some kind of regulation on how much banks could charge for their loans it would have been a good thing.

I agree with you that there have been tremendously wide variations internationally, but I maintain that the two legitimate points of comparison are: the absolute rate of real return after inflation, which was constant from 1930 to 1982, and a lot of those movements you are talking about and point to, quite correctly, started in the 1970s; the second is, what is our interest rate with respect to the other industrialized countries, particularly the United States?

The governor of the Bank of Canada has been very clear. He just will not stand for anything but zero inflation. I think he is absolutely wrong, dead wrong, and I think he has caused a tremendous amount of grief in this country, and I think the federal government is dead wrong to allow him that much power.

Mr Morin: Just one little comment. There were more benefits in the United States, of course, with buying municipal bonds that are not taxable. Here you are fully taxable. If you look at the problem of the economy you have to look at the base where the real money is being borrowed, at the municipal level.

Mr Villeneuve: Mr Cameron, you have been very eloquent in your chastising of the federal government for its monetary policy, and I guess you know something about that, but in the same breath you encourage the government of Ontario to go right down the same path.

At the federal level, approximately 35% of gross revenue goes to support the debt. In Ontario it is now between 11% and 12%. In four years' time we will have doubled our debt, basically, from $40 billion to $75 billion or $80 billion. What do you feel, as a learned person who has worked in finance, will be the total cost to support the debt, not to wipe it out or lower it but just to support it, in 1994 or 1995?

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Mr Cameron: I think a lot depends on what kind of monetary policy we have. We have a serious problem. If you have a real interest rate of 6% to 8% and you have economic growth of 2% to 3%, your debt -- yours, Mr Villeneuve; mine; the company down the street's and the government's -- is going to increase by the difference between the growth rate and the real interest rate -- in this case, by 3% or 4%. It does not matter what you do on spending. It does not matter. The federal government has been cutting spending like crazy, and the debt has been going up. So the issue is not spending.

There are people who believe the government should play a very small role in society and we should reduce the role of government. With those people, let's have a discussion about the role of government. But if the issue is finance, I say that the issue today is interest rates. As long as interest rates are in the real-interest-rate range of 5% or 6% and economic growth 2%, 3%, you are going to have increasing debt. It does not matter what base you start from. So the problem is interest rates.

The government of Ontario, unfortunately, does not control interest rates, and it is being pushed by the federal government in a direction that I think is going to make the situation worse in Ontario. That is why I would argue that the Ontario government, with other provinces and with other groups, should be arguing for a major shift in monetary policy. I know that this has been said, and all I can say is, keep it up.

Mr Villeneuve: A very socialist government in France went the direction which you are suggesting for a very short time when it realized that its investors were literally leaving in droves. They came back to their senses in a hurry. Is not --

Mr Cameron: I was in France. I did my PhD work in France, and I was there when the common program was being put together by the Communist Party and the Socialist Party when they came to power. Remember that the key part of that program was to nationalize a whole series of industries in France. That has not happened yet in Ontario, and I do not think it is even on the program.

Mr Villeneuve: I am glad you say "yet" because I am afraid.

Is not one of the major culprits in increasing interest rates the borrowing of governments, both federally and provincially? You are encouraging them to double the provincial debt, and yet you say, "Bring down the interest rate." Is that compatible?

Mr Cameron: If you look at the figures, the largest and most indebted sector in society is individuals, the second is corporations and the third is governments, and the persons who are the best able to deal with debt are governments, much better than individuals or corporations.

Mr Villeneuve: I am glad you said "yet" to the previous question. Thank you.

Mr Sterling: What is the Canadian Centre for Policy Alternatives? Whom do you represent?

Mr Cameron: You will be interested to know that it is the only economic research group in Canada that does not receive its core funding from business or government.

Mr Sterling: Whom do you receive your core funding from?

Mr Cameron: We do not have any. It is basically individuals. We have support from trade unions, from women's groups, from church groups, from individual members. You could join if you want. It is a $25 membership, and --

Mr Sterling: I understand Evelyn Gigantes asked you to appear in front of this committee, and that is what I thought --

Mr Cameron: Actually, I think initially the government asked Mike McCracken of Informetrica and myself to appear in Toronto.

Mr Sutherland: Mr Chair, if I could just clarify for everyone's information here, it was agreed that each party would bring in experts at the very beginning. As Mr Cameron has already explained, he appeared before the committee once, but it was because it was the day Mr Nixon was resigning and not everyone was here that we asked him to come back again.

Mr Sterling: It was not clear here today that he was here on your party's behalf, though.

Mr Sutherland: Yes, well, he was here on our behalf as part of the experts, as each of the two other parties had their specific experts.

The Chair: I would like to thank you for your presentation before this committee this morning.

Mr Cameron: It is a pleasure to come. It is going to be a very difficult period in Ontario in the next two to four years. You have your work cut out for you, and I wish you the best of luck.

DOUG GABELMANN

The Chair: The next presenter is Doug Gabelmann. Would he come forward, please? I would like to welcome you to the standing committee on finance and economic affairs. You have up to 15 minutes for your presentation, and in that period of time if you can leave some time at the end for questions and answers of the three parties, and you may begin.

Mr Gabelmann: Thank you very much, from the macro to the micro. I represent a company of nine permanent employees, and we operate in the retail sector, in sporting goods retail. We also have a small consulting company which works in the area of transportation issues. We additionally employ seasonally approximately another 10 or 12 employees, and we think, as such, fall into the category of a small business much like many, many others in the province of Ontario.

The reason I decided to attend this committee is precisely because we have not heard our views expressed through the small business organizations to date. In our view, what they have represented has been a rather dogmatic response to the recent budget, and we would like to present a different view on that budget.

Our view of the budget is based upon our own experience, and I want to concentrate on that. I know you are getting into some more important broad issues here, as we have just heard, but we think at the same time it is important to understand what is happening on the street, certainly in the retail sector.

We have been a company which has enjoyed a great deal of growth over the years -- and increasing profitability, frankly. We had this experience basically from the last recession, when we opened, to midway through the current recession. Over the course of this winter, for the first time, we began to see a drop in the rate of increase in our sales. We began to see a tightening up all the way around in our own business, and we began to witness a different attitude among our consumers, who were becoming much more conservative, much more cautious in their spending, essentially more nervous. The consequence of this was basically for them to spend less. We are all aware of this. This is what the macroeconomists talk about, but we saw it in our own monthly reports, in our weekly sales, in our monthly sales reports and so on.

The impact of this was for us to in turn become very cautious, so that when in turn the representatives from advertising media, many of whom work on a commission-only basis, came to renew annual contracts and so on, we had to say to them for the first time in years: "No. I know we have been very aggressive in the past, but we are going to sit back and play this cautiously, just as our public seems to be playing it cautiously." We were very nervous. We were in an environment which had been battered by, I suppose, the big issues of the day, the failure of the Meech Lake agreement. All in all, as you know, there was a general downturn in the economy that had people very, very nervous; essentially a drop in real income for many people. We were in turn becoming a part of that process and beginning to affect the lives of those people who supply us with services and products.

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In that environment, we were very pleased that the provincial government decided to at least maintain the level of spending. We think that in fact it amounted to the first piece of good news that we had heard in a long time. Our response to it, frankly, was to call in our advertising people and to double our budget, which for a small company like ours represents a significant risk. As many of you would be aware, expenditure on advertising can often return improved cash flow, but with any kind of failure at all in that campaign you see your profits plummet.

But we felt for the first time that there had been a change, or there was at least one level of government that was going to make an attempt to calm the public nervousness. From our point of view, to some extent -- we sat down and analysed it from our limited experience and decided that it was going to have a positive impact. I must say that consequently we, through the later months of the spring and the summer, again enjoyed the type of increases in sales and growth that we had been used to for the past few years. That is perhaps not directly attributable to the provincial budget, but it is to the extent that our confidence was heightened by that type of budget, by that refusal to get into the slash-and-cut-back game.

We looked for evidence of the success of that type of program anywhere else in Canada, certainly at the federal level, and have not seen it. That is not to say that we do not think within the purview of the provincial government there are possibilities for a more efficient use of public moneys, areas where money should rather be invested. But we think that using the mechanism of public spending to stimulate the economy, and certainly to stimulate confidence in the economy, was a wise move.

We really do not have a lot else to say besides that, except that we are also concerned with the other aspect of the alternative policy, the cutback policy. That is that it has never really been made clear, by people who talk about the need to enter the latter part of this decade with no provincial budget debt, where those savings are going to be effectively made, on whose backs they are are going to be made.

Before our business, before myself as an individual, before my colleagues would be prepared to support an alternate program, we would like to see it laid out. We want to know whose ox is going to be gored by a program of cutbacks. In our own world, just to sum up, we certainly know that had we not had the type of budget that we have, some oxen would have been gored. They would have been those of our suppliers; they would have been some of our employees who would have faced layoff. To some extent they would have been ourselves, but the advantage of a board of directors in business, of course, is that it can really protect itself, often at the expense of others. Nevertheless, it is our responsibility to keep our businesses viable.

I do not have much else to say on this point. I hope the finance committee and the provincial government, the provincial Legislature, will spend time looking at the important issues of the restructuring of the Ontario economy in light of the changes to the international economy. We hope the Ontario government can and will be successful in convincing the federal government to live up to its promise to deal with the necessity of retraining workers who are finding themselves unemployed.

I do not know if you have any questions, but that is about it.

Mr Sterling: I take your submission as a straightforward submission, and I think it is a fair comment for a person involved in small business to make.

One of the real concerns that I have about this budget is the forecast for substantial deficits, not only this year but the next three or four years. Even with those increases, it assumes that there is going to be, I believe, a 5% increase in taxation in order to hit those deficit levels next year. In other words, to hit $8 billion -- whatever it is that the Treasurer predicts for the 1991-92 budget -- he has got to increase taxes by about 5%.

This was shown by, I think, one of the accountancy firms in Toronto. I guess it is the accumulation that -- the prediction is, in his own budget, that we are out of the recession next year; the following year we are in a positive growth area. He is predicting increased taxes and he is predicting still a healthy deficit. Some time you have got to meet your Maker.

That is, I guess, the greatest concern that I have heard in the business community. They can acknowledge that some deficit is necessary in tough times, but it is the future prediction. Have you any comments in that area?

Mr Gabelmann: Well, these have been tough times. To a great extent we have been insulated in Ottawa, but they have been tough times, and even here there have been a lot of difficulties in the business sector.

I am not clear from your comments whether the provincial Treasurer is predicting an increase of 5% in the overall growth of tax revenue or whether you are talking about each individual paying an additional 5% in taxes. I assume that what we are talking about there is that from the increased activity in the economy, there will be growth in tax revenue.

I certainly think that is important, but we have to at the same time weigh all the considerations against the alternative. Just from our own experience, we would have seen a fall in revenues to the provincial and federal governments had we not decided this May to expand expenditures rather than curtail them or to stick with our plan of curtailment for the year.

I do not know to what extent that is --

The Chair: Excuse me. Could I go on to Mr Jamison here?

Mr Sterling: Thank you.

Mr Jamison: Mr Gabelmann, I found your presentation very interesting, especially your reference to whose ox gets gored. I really think that is an important point to try and bring forward and I have tried to do that. Certainly if there are alternate budgets, we have not clearly heard that from the other parties.

The anti-recession programs, the $700 million -- $102 million of that spending in the infrastructure area of the province is being spent in eastern Ontario. I believe the amount in the Ottawa area is over $18 million. As a small business person, I know that our efforts in housing that relate to the budget announcement, added efforts in the housing area and so forth, affect small business, keep some small businesses in the construction area viable during this time. The anti-recession program, of course, supports the infrastructure, which in many cases supports business in the long term.

When you speak about anti-recession spending, a lot of it is being bidded out there in the community and the bids are coming in as much as 20% lower than they would normally cost. It is nice to hear you speak about that, but have you noticed an effect in the community and in the area?

Mr Gabelmann: I think what we look at -- and I honestly think what just about every small business looks at in any case, where we do not have the ability to engage economists, planning bureaus, and so forth -- is our month-to-month sales figures. We look at the cash that is crossing our threshold. We are in the business of turning cash. That is what we do. We turn product, but essentially we are turning cash around.

It may not be ultimately a desirable situation to have a society that is led by consumption, but I think that is what we are in. It may be that ultimately we will want to change it, but I do not think that is what we have to address in the short term. What we see, and we think people are looking at, is how many dollars they are getting paid for their services or for their products and how much of their stock they are turning over. To the extent that a slash-and-cut budget would have reduced that, we think it would have had a very, very negative effect, one that would have rippled right up and down and across the economy.

We hope the Legislature can over time address some of the broader issues. I do not think anyone considers it desirable over time that government become indebted beyond ability to pay and indebted to an extent that it becomes unable to introduce changes to existing programs or to offer new programs -- or even, as we find in the United States, they seem to be finding themselves in a position of being unable to maintain even their infrastructure.

The Chair: Okay. I would like to thank you, Mr Gabelmann. We have run out of time, and we would like to thank you for your presentation before this committee.

Mr Gabelmann: Okay. Thank you very much. I should say that we are actually on our way to another meeting to spend some more money on a new point-of-purchase system.

The Chair: Okay. That is good.

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OTTAWA DAY PROGRAM COMMITTEE

The Chair: The next group to come forward is the day programs, Mr James Gregory, and the Somerset West Community Health Centre. I believe both of you are going to share the 15 minutes.

Mr Gregory: That is correct.

The Chair: Okay. I would like to welcome you here to the standing committee on finance and economic affairs. In that 15 minutes you can leave some time at the end of the presentation, but it is not necessary that you leave a question and answer period at the end. Could you identify yourselves and who you represent for the purposes of Hansard.

Mr Gregory: My name is James Gregory. I am the assistant director of the Shepherds of Good Hope and I represent the Ottawa Day Program Committee, which has seven-day programs in the Ottawa area. I am here with Norma, who is a user of the day programs and will comment on the day programs from a user's perspective. I am going to be very brief here.

The seven-day programs that I represent -- and they are on the handout you have in front of you -- serve about 500 to 600 people a day and throughout the year a population of approximately 10,000 users.

The first issue I would like to bring forward is that we appeal to you as a committee to recommend that funds are not cut to the day programs throughout Ottawa and also throughout the province. Our own experience here in Ottawa is that one of the seven-day programs is not being funded at all with provincial funds and none of the day programs received any kind of cost-of-living increase this year.

My second recommendation is not only do I appeal that you do not cut funds -- and I know that with the cap limitations there is pressure for you to do so -- but that you increase funds to day programs in two ways: to increase the provincial limits so that the region can contribute more money as well, which it is willing to do -- there is a ratio of 20% to 80% in the amount of money the region can contribute -- and also to index the funding to day programs to the case loads of the welfare, the family benefits and the UI numbers.

Very briefly, what do day programs do? One way to describe what day programs do is that they are the living rooms and the kitchens for marginalized people who have no place to go other than a room. It is a place to drink a cup of coffee, to watch TV, to play cards, but it is very much more than that. It is often the difference between keeping your room or your place of living or losing it, a place that supports a person staying out of jail, a place where a person can get help in any number of different difficulties such as not getting a his welfare check or helping him find a job. It is also a place to connect with professionals such as welfare workers, doctors, nurses and psychiatrists. It is a place to learn life skills and, in general, it is a place to be supported in the movement towards independence.

I have a much longer list here, but Norma is here to speak briefly on what it is like to be in a day program from a user's perspective. She has used most of the day programs in the Ottawa area.

Norma: Seven years previous to that I had been connected with The Well resource on a very peripheral thing. Just over two years ago I came to Ottawa. I came with a change of underwear and an extra pair of jeans. I had no ID. I had nothing. I was physically and mentally very ill. Through the last two years, with the exception of the Caldwell Family Centre, I have used all of these programs at different times. I do not think I would actually be in this world if it was not for those programs. It was very difficult. I am still in touch with them. They are very relevant and meaningful.

I am on disability now, so I do have a very small income, but it is safe. The fact that these programs are out there means that I can actually function. I can become someone. I can feel like I am a valuable person and I am also aware that I am speaking for a great many other people who actually could not, for one reason or another, come here because they are too sick to even come. They need these places desperately, for whatever reason. Some of them have had good jobs, education and, for some reason, have lost them. Some people have never had those things. Some people will go into those services and move on and out of them and some people need them for ever. I am just asking you, please keep them open. They need more of them. Thank you.

Mr Gregory: In closing then, just to reaffirm, I would like to recognize the role the present government has played in supporting and serving the social services programs in the province and just to appeal once more that in the case of programs like the day program, they do cost money. I recognize that, but in the long run they save money. They keep people out of jail, they keep people out of hospitals and mental institutions, they reduce the demand on emergency shelters and emergency wards in hospitals and mental institutions. In the long run, prevention, although it is not as appealing or as sexy, is a better use of provincial dollars.

So we ask you that rather than cut funds, and I know there is a temptation to do that, you increase funds because the day programs are vastly underfunded now. As I mentioned, some of the programs are not even being funded at all with provincial money. Just as a thought in closing, this province has the opportunity that instead of fostering dependency on institutions, that increasing funds to day programs you can support independence and also promote human dignity. Thank you.

Mr Sutherland: Do we have time for questions?

The Chair: No, Mr Sutherland. There are two groups here and they are going to each share seven minutes to make their presentations.

SOMERSET WEST COMMUNITY HEALTH CENTRE

The Chair: Would the next group come forward please? That would be the Somerset West Community Health Centre. I would like to welcome you here to the standing committee on finance and economic affairs. For the purposes of Hansard would you please identify each person who is there sitting at the table in your presentation.

Mr McCarthy: I can introduce all the members of our panel from the Somerset West Community Health Centre. Karen Leung is a social worker in our Asian social service program at the Somerset West Community Health Centre. Cathy Munroe is a member of our board of directors and also somebody who uses the services of our centre. My name is Jack McCarthy. I am the executive director of the centre. Louise James is a senior citizen who uses the services, again one of the programs at the centre. Sally Rutherford is the chairperson of our board of directors. We will make a brief presentation to the committee.

Ms Rutherford: Good morning. Thank you very much for your time. We are going to try to be very brief here. Somerset health and community services has been around for about approximately 19 years. What we will be handing you out will say Dalhousie Health and Community Services, largely because we had a change of name at our annual meeting this year in conjunction with the move towards a larger facility, which the provincial government has generously funded to a great extent, that will permit us to continue the kind of work that we have done over the past 19 years. We hope to be able to continue to do that with your help over a lot longer period than that.

Our clients are primarily the residents of Ottawa's central west end, although we do provide some services that are region-wide. We are a multicultural service, something we pride ourselves on. We have the only southeast Asian support network in the province. We do serve a wide range of cultural groups. We have a staff of approximately 65 persons and 15 different health and social service programs, all of which are almost entirely dependent on provincial funding one way or another.

Our budget is approximately $3.5 million and our roster basically amounts to somewhere around 7,000 persons. We are the largest centre of our kind in the province. I guess the corollary to that is that our programs generally work on a "small is beautiful" basis. We try to provide very personalized service to all of our clients and run a very wide range of services, everything from our seniors' program and our southeast Asian program, to family support and enrichment programs, which you also fund. Our crisis workers are crucial to our services. We provide a very comprehensive service that includes everything from primary health care right through almost every sort of social service type of service that one could try to offer.

That is how we feel we do our best work, by being able to provide a very comprehensive service. Someone who comes into our primary health care service with a particular health problem is looked at, not just from the point of view of being given a prescription and a Band-Aid but very often being taken on down the hall by the hand to someone else who can help him get through some of the other problems he has to deal with, which are in many cases, if not most cases, with our clientele the actual cause of their physical problems to begin with.

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They are the kinds of services we are hoping you will see fit to continue to fund and to promote. Our neighbourhood -- you are in it just about here; down the hill, down the cliff -- is a fairly transient neighbourhood, a fairly low-income neighbourhood that is to a large extent a catchment area for new immigrants, for single parents and people who generally do not have the advantages other people do. I would like to hand it over to Jack.

Mr McCarthy: Again, just briefly, we like to think we are a centre where the rhetoric of combining health and social services to meet the needs of the community is met in terms of what Sally said, a comprehensive range of health and social services. But we are in the trenches, if you will. We are seeing many things happening today and these are tough times. Just to emphasize the pressure, the pressure we are trying to respond to is there. For example, in terms of the numbers of people, we have upwards to 60 people drop in a day. That is a 15% increase over the previous year. We support the local food bank. Last year, between January and July they served over 9,000 people. This year they are serving over 12,000 people, the same people who come through our doors. There is a dramatic 24% increase in the number of people who are using food bank services. These are tough economic times.

The St Luke's Lunch Club, for example, another service that we closely work with, has had a 20% increase in the number of people it is providing lunches for. Housing Help, an advocacy organization we work closely with, has had a dramatic increase, from 10,000 to 19,000, of people looking for affordable accommodation. The demands are there and they are increasing. I suspect all members of the committee know some of those broader economic realities out there that are contributing to the demand placed on our services. I know we are running out of time. I would like just to put it to a couple of other members of our committee who can just tell you in their words what it feels like.

Ms Munroe: I am Cathy Munroe. I want to identify myself as a user of the day program as well. This is a large community. This is a family for me that replaces the family that I did not have. I have used The Well, the lunch club and the Shepherds. I know these people. Like Norma, I would have been dead, I would not have survived. I have had an opportunity, both through The Well and being on the board and the committees at Dalhousie and now Somerset West, to grow. I live in danger of eviction in the next six months through redevelopment. I came from welfare up to the FBA system. I have had an opportunity to speak on Parliament Hill on the CAP thing, through Dalhousie. I have had chances to come here and talk about child poverty, about the kids I see every day in the neighbourhood at the lunch club and The Well -- my kids are grown up -- who have never been to a shopping centre or who have never been to grocery stores.

When I go into Dalhousie, I can talk to the crisis people, housing help. I have had many problems with my landlord. He is not the worst -- he is not the best. But I have also noticed, when I am in there waiting to talk to my friends at the crisis team, there are mothers who have bruises on their faces, because their husbands or their boyfriends have lost their jobs or they have, and they are taking the brunt of the economic recession.

I look at the shoe box that started as a protest to David Peterson to get the SARC reforms going. Now the shoe box -- most of the staff at Dalhousie put in their shoes that are worn out to their standards. Someone who is coming in looking for a job and needs a good pair of shoes, there is a sign saying, "Take one." I go into the washrooms, and maybe this is not the place, but I am going to say this too -- we practise safe sex, and there are paper bags with provisions in the washrooms.

Again, it has allowed me to grow enormously. I do not want to have to go back and beg for more money, but let's keep this going. This is my family.

Mrs James: My name is Louise James. I am a senior citizen. You know senior citizens are on limited finances. I am one of the fortunate ones. I have maybe a little more than others. But in the building that I am in, there are people who are living there from cheque to cheque. Some of the opportunities that I have become involved in with the Dalhousie centre are free, have been offered to me, and it is a great blessing because I would not be able to afford these things. I thank them for this.

The Chair: I would like to thank you for appearing before this committee. I am sorry that the time has run out, but we have one more presentation. After that period of time, if you want to talk to some of the members as they are leaving the room, maybe you have some questions.

Mr Morin: Mr Chairman, can I just make a comment?

The Chair: Yes, Mr Morin.

Mr Morin: I had the occasion of visiting some of their groups. I had lunch, as a matter of fact, at St Luke's. I have nothing but admiration vis-à-vis these people. They do a tremendous job. Thank God you are there. I think there is no one in this group -- I think I am quite right when I say that -- who would have any intention of cutting any of your funds. On the contrary, I think our responsibility is to help you out, because the more organizations like yours in existence, the more of the burden you take away from the government itself. I just want to congratulate you for the excellent job that you do, and keep on with the good job.

Ms Rutherford: If I could just close by saying that is exactly how we feel.

The Chair: That is why I have not made that offer to any other group -- that the members will be breaking at a quarter to 12 and that they would be able to talk to you at that time. I would like again to thank you for appearing before this committee.

CARLETON BOARD OF TRADE

The Chair: The next presenter to this committee is the Ottawa-Carleton Board of Trade. Would they come forward, please? I would like to say good morning. It is getting a little late in the morning, but welcome to the standing committee on finance and economic affairs, and on the budget review. You have up to one half-hour for your presentation, and if you could leave some time at the end for questions and answers of the committee. If you would not mind identifying yourself and your position for the purposes of Hansard, you may begin your presentation.

Mr Wightman: My presentation is probably only about 10 or 15 minutes at the most, and then you can hit me with your questions. Thank you for the opportunity to present the views of the Ottawa-Carleton Board of Trade. My name is Tom Wightman. I am vice-chairman of the board of trade, and with me is Lisa Hopkins. She is the president of the Ottawa-Carleton Board of Trade. Today I will address four issues which are of particular concern to our members.

The first is the projected deficit of $9.7 billion. I would ask that you do not read that right now. I was hoping it would not be handed out right away. Flip it over, otherwise I think people will be looking at it as opposed to listening to me.

The Chair: A lot of the members like to make little notes beside comments made to ask questions later on, if you do not mind that. They are listening, I can tell you.

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Mr Wightman: The first is the projected deficit of $9.7 billion. The second is the fact the provincial sales tax has not been harmonized with the GST -- we think it should be. The third is the Fair Tax Commission study of an alternative minimum tax for corporations. The fourth is the claw-back of the reduced tax rate available to small businesses in Ontario. Those are the four issues which I will address briefly today.

Much has been written about the proposed deficit for the current year of $9.7 billion. What I thought I would do is say what it means in real terms to the people of Ontario. The projected combined deficit over the next four years is $34 billion. That is the deficit adding up the next four years, as projected by the Ontario Treasurer for the next four years. This amounts to almost $4,000 for each of the approximately nine million people of Ontario. That is $4,000 per person in accumulated deficits over the next four years.

That means a family of four will have to carry an additional burden of $16,000 of debt as a result of the projected deficits over the next four years. That is $16,000. A family of four in Ontario will have to save $16,000 over the next four years just to equal the increase in provincial debt. That is just to stay even. If you add the federal debt to that, which would be another $16,000, a family of four has to save $32,000 over the next four years. If you do not do that, you have not even broken even.

Provincial expenditures are expected to increase by 12%, or approximately $5.2 billion, in the current fiscal year. This is simply unacceptable, given the deficit that the Ontario government is facing. The ability for the province to borrow is currently strong, but remember, the debt has to be repaid. There is a limit to how much we can borrow. It is against Canadian traditional values to spend more money than we take in. It is unfair to burden our children and our children's children with the enormous debt that is being built up.

Businesses and individuals must balance their own books. I have to do it. Everyone on this committee has to do it. The people of Ontario elect their government to take the tough decisions required to achieve a balanced budget, not to take the easy route of ever-increasing spending. And it is an easy route.

The provincial government must reduce overall expenditures, and it should slightly increase the level of taxes being collected to control this deficit. To that end, the provincial sales tax should be harmonized with the federal GST in a manner which will increase revenue. Harmonizing would have the following four benefits:

1. It would eliminate the cost of maintaining the provincial sales tax system and the cost of collecting that tax. The result would be the federal government would collect that GST and simply remit the provincial government's portion over to the province.

2. It would widen the base on which the tax is collected. This would allow the rate to be reduced somewhat, while still increasing the total tax collected.

3. The administrative burden currently placed on businesses in having to collect and remit both the provincial sales tax and the GST would be greatly reduced. For those of you who have run a business, you may know that it is very, very difficult for the small businessman today. You have to remit workers' compensation, unemployment insurance, Canada pension plan payments, employer health tax, GST, provincial sales tax. You have to file a federal income tax return and a provincial income tax return. There is an awful lot of stuff you have to do when you are in small business, and it is very difficult for those guys to do it.

The provincial Treasurer has indicated that he will ask the Fair Tax Commission to study the implementation of a corporate minimum tax. We are concerned with having a corporate minimum tax, largely because it sets up a parallel income tax system, which will in turn increase the complexity of the income tax system. In effect, corporations will have to complete two corporate income tax returns, one for the regular tax system and another for the minimum tax system. So instead of just doing one corporate income tax return, you will now have to complete two. That is how an alternative minimum tax system works. You look confused at the back there, but that is how it works.

Ontario corporations currently pay a relatively high rate of income tax as compared to our neighbours in Quebec and the United States. By implementing a corporate minimum tax system where a corporation will pay the greater of its income tax payable under the regular system and under the alternative minimum tax system, corporate taxes will increase -- which will make Ontario corporate tax rates even more debilitating than they currently are.

4. Our final point is that we disagree with the proposed claw-back of the small business deduction. Before the provincial budget, a small business corporation could earn up to $200,000 of active business income in Ontario, paying combined federal and provincial taxes at 23%. Earnings in excess of $200,000 are taxed at 44%. That is the way the system works. On top of that, when a corporation gets the income into the hands of individuals by way of dividends, individuals pay income taxes on dividends at another rate of 25% to 35%. That is the way it works. I would say small-business owners have paid their fair share of income tax by the time they get their earnings out of the company. By comparison, a business operating in the province of Quebec pays Quebec and federal income tax at a rate of 16% on its business income of $200,000, and 30% thereafter. This compares to 23% versus the 16% and 44% versus the 30% in Ontario. We in Ottawa see this as a particular detriment to operating a business in Ontario versus across the river in Quebec. This has implications not only for those who are thinking of starting a business in one province versus the other, but also for our ability to compete with our neighbours across the river, who enjoy a substantially lower income tax rate and consequently have more after-tax funds to reinvest in their businesses. It just becomes tougher and tougher to compete.

In summary, we have concerns in four areas. The size of the deficit -- a projected increase by $34 billion, or $16,000 per family of four, over the next four years. The fact that the provincial government has not moved to harmonize the provincial sales tax system with the GST, with the associated savings in the cost of collection and the larger tax base on which revenue can be raised. The study of a corporate minimum tax system, which may lead to even greater corporate taxes and a much more complex system. Finally, the claw-back of the reduced income tax available to small business, which would widen the discrepancy which already exists between Ontario and Quebec, not to mention our neighbours in the States.

Thanks for your time. We really do appreciate being able to sit in front of this committee, and I will certainly entertain any questions.

Mr Sterling: Thank you very much for making your presentation. It seems that most businesses have not had an opportunity or the time to come down and make their thoughts heard.

Yesterday we were in Cornwall. There was a concern over cross-border shopping in particular, which was brought to the fore by the mayor of Cornwall, Mr Poirier. We, in my party, have advocated a merging of the GST and the PST, because we feel that it would be easier for business people. That would be one of the benefits.

Mr Wightman: Good.

Mr Sterling: I guess the other benefit would be that there would be an advantage, I think, to the government in total revenues, because of the savings in their costs. However, we suggested in our report on cross-border shopping that the benefit not be to reduce the overall sales tax of 15%, but that the gas tax be reduced specifically, because we view that as being the primary cause of cross-border shopping, as evidenced in front of this committee. Would you care to comment on that at all?

Mr Wightman: I was really looking more to Ottawa, as opposed to the cross-border shopping. It is a problem in Ottawa. We do have a lot of people who go south, particularly on Sundays, who go down and shop across the border. We agree with you on the gas tax. We agree with you 100% on the gas tax.

Mr Sterling: I tell you, it is an issue in Manotick, where I reside. In fact, the retailers are losing business there to cross-border shopping. They talk to me about it all the time.

The other issue I would like to talk about is, have you gathered any statistics on how cyclical the businesses at the board of trade are? One of the problems I find with the minimum corporation tax is that if a company loses money in year one, it is still going to pay tax. We have, in the past, allowed that loss to be carried forward to year two, so that in year two, even though on a two-year basis they might have broken even, the person is faced with the problem of not being able to carry that loss forward. In my view, if you lost money in a particular year, you would have to cut staff immediately. You just have to be merciless in how you would scale down your business. Do you have any statistics or have you tried to carry any statistics about the cyclical nature of your businesses and what effect it would have in terms of minimum corporate tax?

Mr Wightman: We do not have any cyclical statistics on that. I cannot help you there. I know currently you can carry losses forward for seven years and back three years. My concern with the alternative minimum tax is what they do. They will take taxable income or, say, a taxable loss, if you have, say, a $50,000 taxable loss, and they add back certain items, such as that you cannot depreciate items, you cannot deduct certain expenses and so on. You may end up with a company paying tax on $20,000 when it really lost $50,000. It will kill businesses that are just starting out, because usually in the first two or three years, you have got losses. So I agree with you, but I do not have any cyclical statistics.

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Mr Villeneuve: Thank you both for your presentation. Your job has been made rather difficult, because in 1985 we did have a 10% tax advantage over businesses and residents in the province of Quebec.

Mr Wightman: Absolutely.

Mr Villeneuve: In the last six years, we have lost that advantage, and we are actually at a disadvantage vis-à-vis the province of Quebec. We have had an accountant come to another presentation in this city and advise us that if he were to advise a client, he would say if you have no ties to either province, you are by far more advantaged to go to the province of Quebec than the province of Ontario. I think the fact that you say $4,000 of debt provincially per resident, the fruition of the projections, we now presently have $4,000 carrying at the federal level per person, per resident of Ontario, I think the picture is very bleak. Could you comment to some degree on what you see happening with new businesses when they have a choice between going on the north side of the river or coming to Ottawa? That precludes the cross-border shopping, because we are in an area where we can go to New York, we can go to Quebec. So we are pretty vulnerable. Could you just comment on that?

Mr Wightman: In my non-volunteer life as a partner with Peat Marwick Thorne, people come to us, and they are going to start a business. If they are indifferent, there is absolutely no question about it, you are better off, from an income tax point of view, to reside in Quebec as opposed to Ontario. The discrepancy is so great, now, that they will say, "I guess I'll go across the river." You are right dead on the money. There is no doubt. It is not only the $4,000 per person over the next four years; it is currently you can save 7% on your tax rate between 23% and 16% on small-business earnings. You can save 14%, the difference between 44% and 30%, on your earnings over $200,000. It does not make sense to do business in Ontario if you are indifferent. It just does not make sense.

Mr Villeneuve: I find it amazing --

The Vice-Chair: I am sorry, Mr Villeneuve, your time is up. Mr Jamison.

Mr Jamison: I have a couple of questions for you. The first one deals with the direction in transfer payments that the federal government made and how those transfer payments to municipalities where many of you do business and pay municipal taxes. What effect would there have been if those transfer payments had not been made and the federal freeze basically applied at the provincial-municipal level? Would that have increased the cost of doing business for many of your members?

Mr Wightman: With the provincial payments to the municipalities being reduced, the overall result is that the mill rate has to increase at the municipal level, which means that businesses pay more municipal tax and individuals pay more tax. So our biggest concern in Ottawa is that our lot levies have gone way up, such that if you now want to develop a piece of land, the lot levies are going to kill you. The regional lot levy charges -- school boards are now going to start putting on their own lot levies, such that it does not make sense to construct buildings. If you are not putting up houses, it means you are not employing people to build them, you are not selling as many refrigerators and stoves and so on. It has an incredible effect.

We do not see it so much in municipal tax rates going up, because they have kept a handle on them fairly well within the city of Ottawa. I think the federal government has to get its own house in order, and they are doing their best to do it. It affects us, but people are not really crying too much at the business level on transfer payments, probably because it has not had enough press.

Mr Jamison: To go on from that, we have decided as a government to fight the recession. By doing that, anti-recession programs that affect small business and small construction people and so forth I believe have had their effects. You mentioned the GST and combining the GST with the PST. Our government, by not so combining, effectively left $470 million this year in the pockets of consumers, which again in the tax coalition situation, leaves moneys in the pockets of the consumers who again affect your business or many of the businesses of the people you represent. Beyond that, I understand what you are saying about cutting. The problem that I guess a few presenters previous to this have indicated is that is a fine approach, but in the end result whose ox gets gored? We were headed for an $8-billion deficit by standing pat in this province. You are talking about debt load and a lesser deficit. What is your indication there?

Mr Wightman: There are a couple of things. First is if the provincial sales tax was harmonized with GST and we kept the same rate, another $470 million would have been collected, which is the $470 million you referred to. We could have made it dead even by reducing the rate somewhat; instead of 8% GST it could have been 7%, which would have been a break-even from a revenue point of view, except you would have saved an awful lot of money, because that whole team of sales tax collectors would basically have been eliminated. You could have disseminated them throughout the rest of the government. So I am still very much in favour of a GST as opposed to a provincial sales tax.

What was your other point?

The Chair: I am sorry, we have run out of time. Mr Kwinter.

Mr Kwinter: Mr Wightman, we had a presentation this morning and we have had several during the course of these hearings. The thrust of their argument is that business is getting a free ride, they are not paying enough taxes, that there are too many, as they call them, corporate welfare bums. What is your reaction to that as a member of the board of trade, as a professional in the field? How do you respond to that?

Mr Wightman: There is no doubt in my mind they just do not know what they are talking about. They do not understand the tax system; they do not understand how corporations pay tax. I think if you went to them with this simple page 2 that said a corporation pays tax at 40% of its income -- a corporation is not a person, it is just a corporation. It then distributes the money out to individuals. Individuals pay tax at an additional 25% to 35% in the dividends. They want to tax it more. I just cannot comprehend that. It just does not make any sense to me to come up with that conclusion. Perhaps through the press or whatever they have the misconception that corporations do not pay enough tax, but believe me, it is a misconception. I do not know what else to say.

Mr Sterling: I think it was pointed out the number of taxes that corporations have put in. Has there been a great cost in terms of dealing with the various labour legislation -- Bill 70 that we have recently talked about in the Legislature which basically the government gutted after it was attacked by the opposition and by business.

Mr B. Ward: Come on, Norm.

Mr Sterling: Well, it is true. I mean, the whole bill is gone.

Mr Wightman: I think I know what you are getting at. Is that the legislation which would have made directors personally liable?

Mr Villeneuve: Yes.

Mr Sterling: No, directors are liable now and still will be, but it was managers and going down below the board --

Mr Villeneuve: And charitable corporations.

Mr Sterling: -- and making many of the people who work for the corporation as well. The employment equity and the equal pay for work of equal value, has that had any impact on the cost of doing business?

Mr Wightman: The biggest concern we have with the labour legislation is that it scared off a lot of people who might have thought of coming to Ontario. They said, "Geez, if the Ontario government is looking at making people personally liable for that sort of thing, who are managers up to directors" -- it scared a lot of people off, so it did have that effect.

On the pay equity legislation, we do not totally disagree with that because there are some real problems out there. However, we are a little concerned that if it gets out of hand we are just going to have one big provincial union that is controlled by someone in Toronto who does not necessarily understand the economics of a particular situation. That is a concern, yes.

The committee recessed at 1140.

AFTERNOON SITTING

The committee resumed at 1319.

OTTAWA-CARLETON DAY CARE ASSOCIATION

The Chair: I would like to welcome you before this committee. For the purpose of Hansard, could you state your name and the association you are representing at this hearing.

Ms Blenkiron: My name is Diane Blenkiron. I am the president of the Ottawa-Carleton Day Care Association. This is a group of not-for-profit child care programs, approximately 43 of them, including family home day care, group care, all licensed. We tried to get on the agenda and could not, so I am rather thrilled that I am able to come today. I think you have probably heard some of the comments that I wanted to make through some of the other day care groups that have been presenting, but we really felt it was necessary to get an Ottawa perspective. I do not know that it is different from across the province, but our needs are quite great here.

First, I would like to preface my remarks by saying that we were really pleased -- I have got to get my thoughts together -- that Mr Rae had said that the recession was not going to be carried on the backs of the poor in Ontario. So many of the poor, as so many of our citizens in Ontario, do have children, and one of the greatest things that we have been finding in this community and in others is that parents want to break out of a poverty cycle or they want to improve their status or a woman has an opportunity to go to work, or both parents do, or to go back to school, but because of the long waiting lists in day care, they are unable to.

The NDP government, with its expansion basis of 5,000, attempted to redress this somewhat. It had promised us 10,000 spaces and 10,000 more every year, and we were hoping and we are still hopeful that this government and the people of Ontario will stop looking at child care solely as a support system for people working and for people going to school, but as an entity unto itself, because what we find with child care is that if we think of it only as a social service and we do not think of it as providing for the children's developmental needs as well, what happens is that people begin to use other services, and that is what is happening across the province at the present time.

With these 5,000 expansion spaces, the expectation, I believe, of the government was that the municipalities would pick up these spaces happily and that there would be 5,000 more people able to use them. I understand that is not the case, because with the tax base being property and with municipalities' mill rates going up, they have not wanted to take these spaces, because they still would need to pay the remaining 20%. As you may or may not know, with the Canada assistance plan sharing formula, the federal government pays 50%, the province 30% and the local municipality 20%. In this community of Ottawa-Carleton, we were very fortunate that our councillors did see child care as a priority and so they did apply for those spaces. We do not see that happening across the province.

We would really like to see a turnabout in child care so that it was not just thought of, as I say, as a social service, and one that is dependent upon whether or not there is welfare money left over. We really feel that when you look at education, when you look at people's futures and you look at children's futures, unless we can provide a good basis for those children in the early years, then we are going to be defeating what happens in the later years.

Basically what I am saying to you is that we really feel the government has made beginnings with this. We do realize their intentions are to have an accessible, affordable system.

My feeling, as president of Ottawa-Carleton Day Care Association, and the members of our group, is that for it to be an accessible system, we need to be working towards a universal system. We really cannot say we have to wait until we have dollars. It is a philosophy statement first. We need to believe that first there is the system, then we have to figure out how we are going to pay for the system. As someone said at a national conference we had in Prince Edward Island in July, they were able to find money for the war within three days; why can we not find money for children?

I have not followed any of my notes. I have a tendency to get carried away, but children are our priority and children are our future. We do believe as a community that this budget is really important. We would really hate to see that people would suffer. To me and to us, it is a beginning of a movement towards a child care system. There has been talk; there has not been too much action. We would like to see some action implemented as well. I think I will stop there.

Mr Sutherland: I was just wondering if you could give us a little clearer picture of the day care situation here in Ottawa. You mentioned that the city council or the regional council felt it was a priority. Give us some sense of maybe where waiting lists are for day care in general, subsidized spaces. Could you go into that a little more?

Ms Blenkiron: For the last five years, we have been applying for so many day care spaces and not being able to get our complement when we have applied for them. This year, we had applied for 1,000 spaces for Ottawa-Carleton and we received I believe 500 spaces. We have applied for the additional 500 spaces, but we have not received them at the present time.

We do not have a centralized waiting list as they have in the Toronto area. There is a reason for that. Our feeling is that parents need to have choice, and the feeling was that if you have a centralized waiting list, that does something to the choice that the parent can have.

We have, though, a method of measuring what the need is. We believe it is around about 4,000 to 5,000. The reason we know that is that each day care centre of course has its own waiting list, and I am a director of a day care as well and we have a waiting list, but we have an agency called Child Care Information in Ottawa which maintains statistics of calls that come in for people looking for child care.

The biggest group of course that they are looking for is the infant-toddler area, and I have so many people really upset on the other end of the line because they are not able to find this care. What I am finding happening in this community, and I am sure it is happening in others but I am finding it right across the board, especially in the infant-toddler area, is that people are looking to the informal sector more. I do not think this is all bad, but I do think people need to have choice, and the situation in Ottawa right now is that there is no choice in the infant-toddler area.

We have about -- I am using approximate figures -- 12 infant centres in the city and each one of those has about 10 spaces in them. If you can imagine, if I have a waiting list, which I do, of 150 people on my infant list, there is no way. I am going to be able to accommodate 10 of those people. What is going to happen to the other 90?

What I am finding is happening is that they are using the informal sector, and in many cases that is fine, but in many more cases it is not fine, because -- and I have said this in my brief and you will get a copy of it tomorrow -- I really think what is happening in Ontario is that people are thinking of child care as a cottage industry. If you remember England and how they manufactured goods and how people were able to have a factory in their own home, we are using children as goods.

Mr Villeneuve: As chair of the Ottawa-Carleton Day Care Association, I am sure you have run across a number of situations. When you say "the informal sector," you are speaking of private day care?

Ms Blenkiron: I am talking about unlicensed private day care.

Mr Villeneuve: Could you give us an idea as to the fee structure of your particular association? Do you have a rigid fee structure? Just give us an idea.

Ms Blenkiron: Every day care in the city, and I think this is why we need an overhaul of the child care system, has its own fees, depending upon what its budget is. In my particular day care centre, our fees are $915 a month for an infant, $630 a month for a toddler and $535 for a preschooler.

I do not know what they sound like to you. In this community, they sound low. The majority of fees in this community are over $1,000 for an infant, probably around $800 for a toddler and somewhere around $550 for a preschooler.

The only reason I am able to do that is that I happen to work for an organization which is subsidizing my rent and we are not having to pay rent. Our salaries are not wonderful. We were waiting for -- we were hoping -- the pay equity adjustment which still has not come through. But that is what is happening; 80% of our incomes goes to salaries.

The Chair: I would like to thank you for your presentation before this committee. I am glad we were able to accommodate you.

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CANADIAN COUNCIL ON CHILDREN AND YOUTH

The Chair: The next group to make a representation before the committee is the Canadian Council on Children and Youth. Welcome. You will be allowed up to one half-hour. After your brief, try to leave some time for questions and answers from the three parties on the committee. For the purposes of Hansard, please identify yourself and your position.

Dr Walker: My name is Dr Robin Walker. I am the president of the Canadian Council on Children and Youth. Mrs Landon Pearson is our past president and chairperson. Murielle O'Hara is a member of the staff of the council.

We are not bringing any written materials to you today. We wanted to make some general comments about the direction of the Ontario budget and we also wanted to make some suggestions for the direction the government might consider taking in relation to children in the future.

The first thing I should say to you is a little explanation as to why we should be here in the first place. The Canadian Council on Children and Youth is a national organization. It is a national, non-governmental, voluntary organization committed to research and analysis of policies that affect children throughout Canada and to educating governments, public, corporations, the whole population in ways which will develop policy to help children and to accommodate their needs.

The reason why we are here is that we see the Ontario budget as being of great importance not just to the province but also to the whole country. It quite clearly sets a different direction from all the other provincial budgets and from the federal budget. It quite clearly is based on a different philosophy towards dealing with a recession and dealing with social problems. As such, it may at some point serve as a model for other provincial governments. We felt that as such it has national significance which requires us to make a response to it.

What we are going to do, therefore, is I will start with some general comments and then Mrs Pearson will speak a little bit to our philosophy towards helping children and what we see as being the directions the government might wish to take in the future.

I should mention to you, just as background, that professionally I am a physician. I work in paediatrics. I have recently moved from Queen's University to the University of Ottawa where I work out of the Children's Hospital of Eastern Ontario in the field of neonatology; that is, newborn babies. As such, my contacts are predominantly with the children of poor families, of socially disadvantaged families, of families which are disadvantaged socially, economically, culturally, politically. The reason for that is that a very significant proportion of small and premature babies are born to such families. Those are the patients I care for. I think that knowing that background may be helpful to you.

Let me just look at what this budget has done and give you the pluses and minuses. Those of you who are government members will be delighted to hear that my analysis will be much more favourable than the Fraser Institute's, but then we do come from rather different backgrounds, I guess.

What did the budget try to do? It tried to maintain a lower tax burden on low-income families. That merits a checkmark from me. It is of great importance to children because the proportion of our poor who are children is very high. Although Ontario is a little better than the national average in this respect, we are still talking about one in six of our children who are in families below the poverty line. If you are talking about under-six-year-olds, it is one in five. That record is the third worst in the industrialized world, according to the Senate committee on social policy and is not a record of which we can be very proud.

What else did it do? The budget put some money into housing, particularly into affordable housing. One of the crucial aspects of development of children is the kind of housing they are in during their early years. Again, a checkmark for that.

Another checkmark for the work on social assistance reform. We were very disappointed when the previous government put this on hold. We are very pleased, even though it is a fairly modest beginning, that the process seems to be under way again. This is of vital importance to children. Children in families on social assistance are particularly disadvantaged. Some very good Ontario work from Dan Offord at McMaster University has shown the extent to which welfare children are disadvantaged, even compared with other poor children.

There is a continuation of investment in services such as the health system, which is important because many other provinces have chosen to cut back and those cutbacks have often impacted negatively on children; for example, the Newfoundland budget which withdrew coverage for some services for children. There has been an attempt to address some special-needs populations. I think of particular merit are the attempts to address the needs of some aboriginal communities and some northern communities.

Finally, there has been an increase in funding for programs to help those who are the victims of violence, women and children. It is important to deal with violence against women because that impacts very directly on children as well as violence against children themselves.

We also note that this philosophy, this approach, has continued some earlier initiatives which are valuable in terms of investing in children; for example, the continuation of the Best Start initiative, which is directed towards prenatal prevention, the fact that there are at least no cuts to funding in child care and the direction towards things like training programs, literacy programs and so on, which at least have not been cut back, unlike, again, the situation in some other provinces.

These are all laudable, particularly in light of the federal government's capping of the Canada assistance plan and the decrease in transfer payments, which are obviously going to impact particularly importantly on the Ontario fiscal situation.

What more needs to be done then? You have already a report, by a group which included among its members a member of cabinet, called Children First. This is a very important report which deals with an approach to many of the needs of children throughout the province. It recommends a co-ordinated multiministerial approach, which is something which has not been the case either in this province or indeed in any other. It recommends some kind of responsibility centre to deal with the issues that affect children.

It is notable that the federal government has in fact already created such a centre in the form of the children's bureau within the Department of National Health and Welfare. While it remains to be seen how effective that bureau will be, they do at least deserve our congratulations for creating such a responsibility centre for children. There is a need for a similar responsibility centre within the Ontario governmental system.

We see other special-needs communities whose needs have not yet been adequately addressed. While we applaud the direction towards aboriginal peoples in Ontario, which is of enormous importance in this province, as well as towards northern communities, there are other very high-need communities who deserve attention; for example, the multicultural communities of many of our major metropolitan centres, including this city.

We see a further need for attention, particularly at a time of recession, to issues of youth employment, which, other than in the form of training programs, which are laudable, do not yet seem to have received sufficient attention. But quite frankly, an awful lot of what needs to be done is in the Children First report. If the government commits itself to implementation of that report, it will have done an enormous amount of what we are looking for for children.

Where we come from is basically the need for us to recognize that the kind of society we have in the future really depends on how we deal with our children and youth today. If we want to avoid the kind of disaffected young society we see south of the border, if we want to avoid criminalization of our young people, if we want to avoid the handicaps that come from being born too small because of social and economic deprivation, then we have to be willing to invest in programs towards children now, because what we do now in terms of investing in children and in programs towards children, particularly towards disadvantaged children, directly impacts on the kind of society we have down the road. Quite frankly, if that requires the continuation of a modest deficit at this point in history, it will save us many times that kind of money 15 or 20 years down the road.

Mrs Pearson has long and very wide experience of many areas that relate to investment in early childhood development and she is going to continue talking along those lines.

Mrs Pearson: I will do as Robin did and give you a bit of indication of where I come from. I have been interested in issues to do with children for many years. I was the vice-chairman of the Canadian Commission for the International Year of the Child, I have been working with the council for a long time, I was a leader in setting up a coalition on the rights of children, which is a national coalition to promote the convention, and I initiated and have been working for many years with the primary prevention project in the Ottawa school board.

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I would like to speak just briefly about the convention, because that is another question. Ontario is not creating any problems with respect to the ratification, but I think it is very important for you all to understand the value of this particular convention, the UN convention on the rights of the child, which was adopted by the United Nations in November 1989 and which was entered into force in September of last year after the requisite 20 countries had ratified. Canada has signed, as you know, and has not yet ratified because we are waiting for all the provinces to send in their letters saying they reviewed legislation and have seen that it conforms or have changed the legislation, as has been the case in a couple of provinces.

The importance of this convention is that it puts the child first. It says the child is a person. I think that like the movement that has preceded this, the movement on equity for women, it started with the recognition of women as persons, as legal persons at the early years of this century. Recognizing children as persons has come later and I think it is very important that we all begin to think about what that means to us, both as individuals and as decision-makers. It means that as you are looking at some of the policies that you promote financially and fiscally, there sometimes need to be decisions as to whether or not this one benefits the child first or another portion of the population. Because the child does not vote, the temptation is sometimes to benefit another part of the population. This has been my experience over many years, which is how to get the voice of children heard at the political level.

Because of my experience as a child educational psychologist and with a background in child development, I feel that increasingly, just as Robin has said, the investment of money into children is one which probably has the greatest return of almost all the investments any government can make and the knowledge that is required to know how to make that investment is the kind of thing I hope your government is prepared to take a good look at.

Another one of my hats is I am the vice-president of the Child, Youth and Family Policy Research Centre, which is located in Toronto. It is partly funded by the Ministry of Community and Social Services and has been supported by the present government because there is the understanding that policies to affect children are not always easy. It is not always easy to know what is the best thing, just as many of us bringing up our own children have found it difficult to know sometimes what is the best thing. It is usually not the easiest thing. One of the things that is terribly important is research and support of research on what kinds of policies work and what do not and what unintended effects may occur when you implement a policy you think is going to benefit children and, somewhat to your surprise, you find it does not.

Just a brief issue on the question of equity: It is a very important policy for women, but some of the standards that have been set up to decide what is work of equal value have completely neglected what it is sometimes that women do best, so that in an incident I have been involved with, in work to do within a school system, not the teachers but non-affiliated staff, the fact that you work directly with children has absolutely no value in pay equity, so that certain types of workers who work directly with children find themselves equated with a computer analyst, which is not to say I do not admire computer analysts, but I feel the categories that have been used to establish pay equity are often negligent of the importance of children. It is just an example of the kind of thing I would like to put forward.

I will not say much more because, like Robin, I have been impressed with the direction of this budget and feel that at long last there is some real move being made on issues to do with children. But I would also like to underline the need I see for greater interministerial co-operation. If you put the child first and work out from the child, you can bring groups together. When you start from the minister and work down to the child, a lot gets lost. If there are any questions, we are glad to hear.

Mr Villeneuve: Dr Walker, Mrs Pearson and Ms O'Hara, thank you for your very interesting presentations. I have two short questions. Dr Walker, you referred to a modest deficit. In your opinion, what is a modest deficit?

Dr Walker: I think the best way to answer that is to use the same kinds of terms I would use in terms of a deficit in my own finances, which is something with which I am extremely familiar. The usual standard by which personal finances are judged is how much of your dollar is being spent on financing your debt. Under those terms, the current deficit of the Ontario government is significantly less punishing than the debt of the federal government or indeed the debts of certain other provincial governments in history. Although it is being painted as historically large and may be so for Ontario, it is still within the bounds of what has occurred in the past or in the present in terms of government spending. It depends on where you come from, whether you consider that modest or not. I appreciate that if you are in the business community, you have a different perspective than if you are dealing with poor families, for example. I think the point we are making is not so much the size of the deficit, but if you do not pay now you pay later, and if you do not pay now you pay later several times over. There are many examples of this.

The council has been involved in advocating for prenatal prevention programs. The Ontario government is funding community research programs in prenatal prevention called Best Start, which were aimed at developing the best models for prenatal prevention. Ultimately it may be for province-wide application, but right now these are specific projects that are being developed in different communities. We know that about $1 spent prenatally results ultimately in a saving of about $5.50 in subsequent services to handicapped children. That is a pretty good return. I think even a business person would probably think of that as a pretty decent return.

The council has also looked at the impact of early childhood programs on criminalization of youth -- very similar figures. There are a number of studies and different models, the Perry preschool project in Boston, some Canadian models and some California models. They do different things, but each of them comes in with the same kind of return. A dollar spent in early childhood in prevention, in dealing with issues that relate to disadvantaged families, saves you about $4.50 to $5 in services down the road.

What we are saying is that if you do not pay now you pay later, so why not do it now. When you pay now you not only save money down the road but you also save families, you save children and lives. You create normal lives out of the debris of a disadvantaged situation. We see that as being an absolute social priority if we are going to maintain the relative advantage Canada still has socially over some of its neighbours.

Mr Villeneuve: Certainly Kingston's loss is CHEO's gain. As you can see, this tie was given to me by CHEO.

Dr Walker: I noticed it.

Mr Villeneuve: I am a very strong supporter, as is the entire constituency I represent and I am very proud of that. Just as a supplementary, is the doubling of the Ontario debt in four years a modest increase to you?

Dr Walker: I think what you have to do is to look at what has been added into the debt that was not already in the debt before. A continuation of previous programs would have increased considerably the deficit anyway, just on the basis of the recession, decreased income from taxes and so on. What we are looking at here is not really a doubling of the deficit. What we are looking at is to what extent new policies and new programs have increased what would already have been a large deficit. The same thing has happened in other provinces. They may have cut services, but their deficits have still increased. The extent to which the deficit, as it would have been projected, has increased is quite modest, I believe. It is by no means a 100% increase.

Mr Villeneuve: Mrs Pearson, the right of the child is a very noble thing. Does that include the unborn child?

Mrs Pearson: The convention is aimed at children. The definition of "child" is every human being under the age of 18, and that is who it is aimed at.

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Mr Villeneuve: That is a very political answer.

Mrs Pearson: I am concerned about living children. I do not want to lose their rights.

Mr G. Wilson: My colleague asked my question too, so I will look for a short answer here partly because in my view the presentation by both of you has been excellent. You have certainly underlined the importance of making these investments now because of the costs later on. Robin, I have to agree with my colleague Noble Villeneuve about Kingston's loss, but I am hoping maybe you will have a little larger influence. I think some people here need some more help.

I would like to ask you, Mrs Pearson, what your feeling is from the work you have done, whether the importance of children's rights is gaining more recognition; and if it is not, what can be done to promote it in the community. My daughter was born in the Year of the Child, for instance, in 1979, but it is true that when I look back at that, it seems to have been lost in some way. There is not that same impetus that led to that naming.

Mrs Pearson: I think it is very interesting. I think there has been a slow shift just begun really to recognize the child as a person in ways that were not true in 1979. The convention would not have been adopted in 1979 because of this need for education. To me one of the important things about the convention is that there were so many different countries involved in it whose people are now in Ontario, so when you look at cultural differences you can say, "But your country, the country of your origin, has adopted or has ratified the convention." It is not just an imposition of values from the west on the rest of the world. It is the general world consensus that there is a new way of looking at children.

If you look at a child as a person, there are a whole lot of things you do not do to start with. You do not abuse a child if you look at a child as a person. You may, but that is another whole issue. The questions of treating a child as a possession or an object stop a lot of behaviour that becomes unthinkable when the child has a new perception. It also helps you to understand that every child is in some ways a citizen of our country, and therefore we all share in the responsibility for looking after that person just as we do in looking after our handicapped or other portions of the population. It helps to spread the sense of general responsibility. I think that is slowly beginning to happen. There is a long way to go in understanding this.

I spent three years in the Soviet Union and wrote a book called Children of Glasnost. You can imagine what last week was like for me. In a sense I was seeing, with the children I was writing about, that there was the beginning of this being respected, that they were having a chance actually to make decisions for themselves and to look at the world in a different way. You can begin to see what that does and what emerges as a result of that. To me this is what is important about children's rights. It is not that the child has the right to do what he or she wants; that is not at all what I mean. It is that the child has the right to be respected. When you respect your children, you find in the end that they respect you and you have a wonderful time and when they turn out to be 37 they start looking after you.

Mr Sutherland: Thank you very much for coming today and again outlining the point I think we have been hearing in community after community, that while this budget has attempted to meet some of the needs by maintaining the level of services, there is still a lot more that needs to be done.

I want to focus my question to you, Dr Walker. You made some reference in your comments in terms of the work you do. I take it many of the children you see are premature children who come from low-income families and that type of thing. Can you give us some idea of what some of the other common characteristics are? Are these generally people with lower levels of education? Is it nutritional problems that are causing some of these prematures? If you can just elaborate a bit more.

Dr Walker: It is actually very complex, as you can imagine. I should stress that not all premature and not all low-birth-weight babies are born to disadvantaged families. I have had two myself, so there is a wide mix, nevertheless there is a high proportion. My guesstimate is that at any time in our neonatal intensive care unit, up to one half of those babies may be the products of disadvantaged families. That is obviously a very high proportion.

The factors are complex. Some of them are environmental, some are cultural, some are economic and some purely social. There is no doubt that single individual factors like nutrition may sometimes be significant. Some of the most interesting work in Canada has been done by the Montreal Diet Dispensary which, while it has not only dealt with nutritional issues, has certainly concentrated on those and shown that supplementing the diet of low-income families can make a statistically significant difference to the incidence of at least low birth weight caused by undergrowth.

We also know there are other individual factors. Some are lifestyle factors, the use of a variety of substances. Tobacco is certainly the most widely used and the most significant in terms of size, but alcohol, and increasingly in recent years, cocaine, are also of considerable significance and very significant throughout this province. We know other lifestyle factors, such as working history, exercise and so on, but there are many individual factors one can pull out. If you pull out all the individual definable factors, you are still left with a much higher proportion of low-birth-weight babies coming from socially and economically disadvantaged families. There are clearly factors which have a broader impact and which we probably do not understand very well.

What this means is that there are two approaches to prenatal prevention. The first is to look at the things we know and to try and deal with them, so you look at families where there is substance use, be it tobacco or others, and you try to deal with that. But we do not do any of that very well. For example, I have done a lot of work in Kingston and now in Ottawa with mothers and babies, mothers who abuse cocaine. There is almost nothing available to help a mother identified prenatally as a cocaine user get off the cocaine. Sure there are rehab programs available, but they are not geared towards this population, they are not geared towards pregnant women and they are not geared towards young, single, low-education women. There is often a deficit of programs for specific areas.

For the other part, prenatal prevention, you are never going to prevent all of it or even a large proportion of it without a much broader societal change. While initiatives such as Best Start are superb because they will direct attention towards the knowns, towards the things we can do now and the things we can do for disadvantaged populations -- I should stress, by the way, that the Best Start proposals are all being drawn from disadvantaged communities. The Ottawa proposal, for example, looks at the Vanier east-end population which is significantly disadantaged, not at the whole city at large, which may be less so --

The Chair: Dr Walker, I am sorry, I am going to have to cut you off, but for information purposes for this committee, when you are saying, "Pay now or pay later," maybe you have some papers or a short brief that you can send in to the clerk that could be distributed to this committee.

Dr Walker: Yes, I will do that.

The Chair: If I did not cut in, you could talk for another couple of hours on that particular subject.

Dr Walker: Without any difficulty at all.

The Chair: If you can send something to the clerk for a little background for this committee, I thank you for appearing before this committee with the information you brought forward.

OTTAWA AND DISTRICT LABOUR COUNCIL

The Chair: Next to appear is the Ottawa and District Labour Council. Welcome to the committee. You will have up to one half-hour for your presentation and at the end try to leave some time in that half-hour for questions and answers on the three parties on the committee. You can take your coat off, sir; we are not going to grill you that much, but if you would not mind identifying yourself and your position for the purposes of Hansard, you may begin.

Mr Dale: If you will just give me a half a minute here to get organized and calm down a bit. I hope those of you who came up from Toronto hoping for some more temperate summer weather were not too disappointed. This is not the sort of thing you would like to do outdoors on a day like this.

Good afternoon. My name is Anthony Dale. I am the executive secretary of the Ottawa and District Labour Council. I am joined this afternoon by Clarence Dungey, who is a national representative of Canadian Union of Public Employees, Local 503, which represents employees of the city of Ottawa, the regional government, the humane society and that is about it. He has joined me this afternoon and he will be saying a couple of things later on, specifically about matters relating to children's aid and homes for the aged.

I thank the members of the standing committee on finance and economic affairs for inviting me here today to convey the views of the Ottawa and District Labour Council on the April 29 budget of the government of Ontario.

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Much attention has been focused on the increased deficit which is projected to result from this budget during the coming fiscal year and I understand that the deficit was a primary reason for these hearings being held today. I hope for those of you who demanded these hearings you are not terribly disappointed by the fact that a lot of people do not seem to be particularly upset by the deficit. The deficit is not the most interesting aspect of the budget. Indeed, its importance has been greatly exaggerated. What is much more interesting and much more exciting for progressive social forces in this province is the long-term vision which the budget expresses.

The Ontario government's vision of sustainable prosperity is one which is vital in order for Ontario to meet the challenges of the 1990s while expanding upon this province's proud tradition of providing some minimum of social and economic justice to all of its citizens. But since many people are concerned about the deficit, I think I will deal with that right up front. Very few people will discount the importance of the deficit issue. It is an issue which concerns those of us who like the Ontario government's budgetary approach as much as it concerns those who oppose that approach, because we recognize that it means that future revenues will flow to debt service charges rather than program or other spending. Where many people differ, however, and where some members of this committee will disagree with me today, is that they would favour cutting spending during the current recession in order to reduce future and present deficits.

Let me remind the committee of the findings of the 59 economists who spoke to you last month. They examined the government's projected spending and revenue and found that much of the projected deficit could be attributed to increased reliance on social assistance due to job losses and changes in the unemployment insurance program and to decreased tax revenues which are to be expected in a recession and to reductions in transfer payments from the federal government.

These findings are supported by a Globe and Mail report last weekend that revealed that fully 10% of Ontario's population currently relies on social assistance payments. The fact that a great majority of these new cases are general welfare cases, meaning that they are employable people who have exhausted their UI claims, is indicative of the number of people in this province who have lost their jobs this past year.

The 59 economists also found that the federal government should shoulder a greater share of the blame for Ontario's projected deficit. The federal government is transferring 1.5 billion fewer dollars to Ontario this year than would have been the case if it had honoured its previous commitments. This comes at a time when the number of people on welfare is soaring, as I have mentioned before. Despite federal government policies such as the GST, such as high interest rates, such as free trade and others which have contributed to the rapid evisceration of Ontario's economy, in particular the manufacturing sector, the federal government itself is backing away from its obligation to help. In effect, the federal government is shifting its deficit to the province and the provincial government is feeling the heat.

We need to pay more attention to these factors as we examine the budget in order to keep the deficit issue in perspective. These factors are not lost on the ordinary working people of this province. When Bay Street brokers start demonstrating against the government and its budgetary deficit, the ordinary working people of this province are aware of the fact that blame must lie with the policies of the federal Conservative government. When the provincial opposition starts to protest about the deficit, the ordinary working people of this province remember that a balanced Liberal budget during last year's election campaign soon turned out to be a $3-billion deficit in hiding.

I want to emphasize one more point about the deficit before I move on -- and that is the familiar point that has been made, I am sure, in front of you in previous days and previous weeks -- that the deficit, as a proportion of the province's wealth, is neither unmanageable nor unaffordable. Compared to the federal government, Ontario's deficit remains more than manageable. Canada spends 34 cents of every revenue dollar servicing its debt. Ontario currently spends 11.6 cents, and even if the ongoing recession makes this figure rise higher than the government's projection of 12.3 cents, we will still be dealing with a manageable figure.

We are confident that the government's long-term fiscal strategy is a sound one. We believe that the decision to borrow in order to fight the recession was a sound decision and we are confident that as the recession ends, the government will take appropriate steps to ensure that its deficit-reduction targets are met.

Moving away from the deficit issue for a few moments, I would like to draw the attention of the committee and its observers to a few of the aspects of the budget which were especially welcomed by many of the people I represent today. Before doing that however, I would like to convey to you some of the experiences which I have been part of in the course of organizing and attending several events sponsored by the Ottawa and District Labour Council in recent months. These events provided members of our affiliated unions and members of community organizations with an opportunity to gather together and analyse the economic policies of the federal government.

On February 26 of this year at a labour-council-sponsored budget watch, a number of representatives of the unions and community groups watched Michael Wilson ignore the economic crisis in this country. He told us that day that he supported social services, at the same as he was limiting transfers of funds that would enable the provinces to supply those services. He told us that he had the interests of ordinary people in mind when he drafted the budget. At the same time, Wilson failed to restore adequate funding to the unemployment insurance program, a move which has forced an unprecedented number of people in Ontario and other provinces to rely on social assistance.

I remember particularly that day how absurd it was to hear Michael Wilson talk about how the medicare system was in sound hands under Tory control, and at the same time he was limiting the amount of money which was going to the provinces to provide that medicare. The logic there was that they were requiring the provinces to provide a service and yet they were not providing the funds to allow the provinces to provide those services.

Later this year at a job loss forum on May 2, a panel heard submissions from affiliated unions, from the social planning council of Ottawa-Carleton, from regional politicians and others which described the impact of the federal government's economic policies on them and the people they represent. An Ottawa Civic Hospital worker described how the members of his union faced layoffs because of the contracting out of work. Budgetary restrictions at the hospital had compelled the hospital to reduce costs, and those employees were the first to go.

The social planning council described that evening how children in the national capital region literally go hungry on a regular basis. Social assistance simply does not meet the needs of these many poor children.

A worker representing the people at federal employment centres described the frustration they feel when they are unable to help the unemployed because of cutbacks in the unemployment insurance program. These are the sorts of things we heard on that occasion and these are the experiences which affect the way in which the Ottawa and District Labour Council has analysed the Ontario government's first budget.

The labour council and its many social allies who have joined us in our political activities in recent years were pleased by, among other things, the decision not to piggyback Ontario's sales tax on top of the federal GST, as other provinces have done. This avoided the imposition of $470 million in new taxes on the people of Ontario. We were particularly pleased that the Ontario government did not resort to the tempting prospect of reaping the rewards of this most regressive of taxes.

The allocation of $215 million to get social assistance reform back on track is also a measure that was welcomed by many people. It is imperative that these reforms not be derailed by the current massive increase in the demand for social assistance.

The elimination of Ontario income tax for Ontarians with very low incomes and tax increases for those with very high incomes was another welcome move which makes the tax system more progressive. We were also pleased by the establishment of the Fair Tax Commission, which will provide the government with an opportunity to seek advice on new and innovative ways of meeting its revenue requirements. It must be particularly concerned to find new ways of making the tax system more progressive while being aware of the impact of taxation on the creation of social wealth.

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The allocation of $175 million to an employee wage protection fund to protect the incomes of employees of bankrupt firms will provide important benefits to many of the workers who have been hit hardest by the current recession. Another positive measure was the allocation of $100 million to provide funding to universities, hospitals, municipalities and school boards to pay for pay equity awards to an expanded number of Ontario women. This was an equally welcome move.

At this time I would like to call upon Mr Dungey, who is going to describe some of the other aspects of the budget which he would like to focus attention upon. I do not know if he is going to speak of them in completely glowing terms, but I will give him a few minutes to fill you in on a few of his views.

Mr Dungey: I have been involved in the municipal scene for about 36 years, so I have seen some changes and I have been on that roller-coaster many times.

We represent approximately 4,000 people who deal with the homes for the aged, the social services and all of those organizations that are embraced by municipalities. I just want to bring to your attention some of things that we faced last year, which was a devastating budget in the sense that the municipalities, for reasons on both sides of the fence, felt that they had to come down with a budget that was going to see, in a sense, the elimination of a lot of services.

Some of the comments and some of the complaints that they have are very interesting. I just want to read very briefly to you one of the comments made by Jacqueline Holzman, who is running for mayor, in response to the thought of eliminating a whole floor in a home for the aged: "We're going to have to do exactly what the CBC has done." That was her response to the reaction of the budget that they were dealing with, and laying much of the blame on the province. We spent a great deal of time reminding her that the existing government inherited the budget problems it was having.

Let me just give you one more illustration: "Garry Armstrong said major savings had to be found to rein in the region's extra spending on the homes, caused by Ontario's cap on its subsidies. Ontario is supposed to pay 65% of the $30 million in operating costs in 1990. In fact, it covered about 50%, and the region had to make up the $4-million shortfall."

I just mention those two things because from a personal point of view, I have been involved in the municipalities across this province and across this country for many years and have always been concerned about the formulas. When you look at 30 and 70, when you look at 60 and 40 and so on and so forth, when you look at the problems that are facing the children's aid societies and the municipalities with the homes for the aged, these are the kinds of things that we are concerned about as well. Indeed as we look at the formulas and as we look at the budget, as you people are dealing with it and as we see it on an annual basis, we may well have to come back and say perhaps there are certain services that are now shared responsibilities; they may have to be incorporated into a provincial basis or a national basis.

We simply wanted an opportunity to say to you that the whole business of the deficit is one that cannot be reviewed or viewed as something we cannot live with, because if we do not continue with that fashion, if we continue with the kind of subsidization we are getting now, then all of those services are going to disappear.

Mr Dale: The specific aspects of the budget which we have talked about are important and were welcomed by a great many people in this province who are concerned with social and economic justice. But even more important than these specific measures was the basic theme which underlies the entire budget. This theme is the idea of having a new economic vision for Ontario which has been expressed by this government in its budget document and particularly in the budget document E.

This vision is one which has as its central concern the development of a sustainable prosperity, a prosperity which is concerned not only with the quantity of economic growth but also with the quality of that growth. This encompasses a concern with greater equity, which is demonstrated in the specific items which I referred to previously and also in a concern with one's coping with and leading the current process of economic restructuring which promises to produce radical changes in how our economy and our society operate.

Among the most important aspects to this commitment to sustainable prosperity is a commitment to ensuring that working people alone do not share the costs of economic restructuring. Policies which address the changing economic environment are predicated on ensuring that legal protections of workers' rights are not diminished in favour of greater efficiency or heightened competitiveness.

The Ontario government's assumption of the obligation to ensure that the rights of working people are protected before any program of economic restructuring can be undertaken is an encouraging one. Working people, and more specifically organized labour, are on occasion accused of possessing a Luddite mentality with regard to economic change, the idea that we would resist any change because it is necessarily a bad thing.

This is a perception that exists in some quarters, that labour is an impediment to progress. This view must be rejected outright. The reason that perception exists is that too often working people are forced to bear a disproportionate share of the costs involved in economic restructuring. Those costs often include an abuse of labour laws and employment standards, rejection of health and safety protections and the closing of factories and other work sites without compensation to workers or their communities. This is an especially tragic consequence in single-industry towns and cities. Workers should not have to bear these costs alone.

We are encouraged that the Ontario government has decided to recognize the fact that successful economic change must be accompanied by a sincere commitment to protect those who are most susceptible to harm. The Ontario government's approach is one which will provide Ontario workers with the security which is necessary before our willing participation in economic restructuring can be possible.

In particular, one of the things which most impresses me about the budget is the government's willingness to promote the idea of social partnerships, the idea that government can lead business and labour together in a way which will result in more co-operation and a way which will result in less conflict, if possible, and one which will result in a greater sense of participation by all sectors of Ontario society. This is something that has been missing from governments for too long and one which is linked to an awful lot of the problems which we experience these days not only in Ontario but across the country.

This submission I have made today has been more accepting of our government's policies than is normal in Ontario labour circles. It is not often that we come out in favour of a lot of things that governments do. I could have been more critical of the budget for not doing enough of some things and for doing too much of some other things. For the moment, however, I will say to this committee explicitly that the blunt support of the Ontario government's budgetary approach is deliberate.

Since the budget's release, corporate interests which previously determined the political agenda in this province have been vocal in their denunciation of the deficit in particular. In my view, this protest does not damn the government's approach as much as it praises it. I am much more comfortable embracing the Ontario government's budget than I would be in embracing the budget of a government which was controlled by corporate interests.

Let's remember again what the 59 economists associated with the Canadian Centre for Policy Alternatives told you last month. Those who have criticized the budget deficit or who have called for a smaller deficit are calling for spending cuts. They have been silent, however, in one important regard, because they have not said what they want to see cut.

Those who have denounced the deficit so loudly ought to spend some time coming up with a list of the hospital beds that they would have closed and the health care workers whom they would have laid off. They should come up with a list of the college and university students who would have been victims of enrolment cutbacks if education spending had been cut.

They should come up with a list of the programs and services that municipalities would have had to slash as a consequence of being denied increased transfers from the province. These are the unspoken consequences of the approach which critics of this budget demand. Thanks very much for your time this afternoon.

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Ms M. Ward: Thank you for your presentation. I would like you to comment a little more on the co-operative effort. Different groups have said -- business groups have commented on it, that there has to be better co-operation between business and labour, and you have made some mention of it too. We also have had such comments from other labour councils. How far along do you think we are there? Is this still just an ideal or do you see such actions being taken by both sides? What can government do to help that out?

Mr Dale: I will be very frank in that area. I think that both business and labour have got some learning to do. Labour is not used to having a government which is as responsive to its concerns as the current government. At the same time, business has got some learning to do, because it is not used to having to share the corridors of power.

It has been suggested that, in particular, some of the central labour bodies in this province have a virtual veto over some aspects of legislative programs. If that is the case, then that is wrong, and I would not support that any more than I would support any particular business group, any board of trade, any chamber of commerce having a veto over legislation.

I think we really do have to move in the direction of social partnerships, as the budget outlines. This is an approach which has worked very well in some other countries and the experience of other countries is not necessarily directly transferable to the province of Ontario; I understand that. But we do have to move beyond constant conflict and constant damning of one sector by another. It is simply a counterproductive strategy.

We have to evolve social partnerships so that the major sectors of society, and particularly the major economic players, labour and business, have to be able to sit down and talk to each other and determine useful productive strategies for sustainable prosperity in this province.

Ms M. Ward: I do not recall right now what the percentage of organized labour is. About 30%? Am I anywhere close there?

Mr Dale: I think it is in the mid-30s nationally, possibly slightly higher in Ontario.

Ms M. Ward: Do you have any suggestions for the unorganized sector, how we could get things working there?

Mr Dale: I would like to make one comment and this is going to be a contentious issue in the future, I know. One of the things which is mandatory for this idea of social partnerships to work is that the proportion of workers in this province who are organized has got to increase. This is something that we are going to have to see in the upcoming reforms to the Labour Relations Act, and it is an appropriate subject for this committee to look at, because it does have a direct impact on how this budget is going to work. If workers are not organized, their voices are not going to be heard adequately to counter the voices of other sectors. We have got to move towards an increased rate of unionization in this province so that those voices can be heard.

Mr Kwinter: Mr Dale, I just want to make a couple of observations. On page 3 you say, "The ordinary working people of this province remember that a balanced Liberal budget during last year's election campaign soon turned out to be a $3-billion deficit in hiding." Do you have any understanding at all of how that deficit came about? Do you know that as a result of the final report on the budget, 1990-91, of which six months was in the hands of the NDP, the actual operating budget had a surplus of $192 million? At the end of March 31, 1991, there was a surplus of $192 million. There was a deficit in the capital fund of $3,221,000,000, which wound up with a total deficit of $3,029,000,000, which means that the government had every opportunity to control the capital fund.

It had nothing to do with operating, and it made a conscious decision to prepay some educational costs, to pay down the UTDC obligation and to write off the SkyDome. That was done by the government so it could offload that deficit onto the previous budget so it would not have to include it in this budget, because they were afraid of going over the $10 billion. So you should know that, and that is in the Treasurer's report that just came out in July.

The other thing that I would like to comment on is that on the top of page 4 you make the common mistake that virtually every labour group that has come forward has made, and you say, "Compared to the federal government, Ontario's deficit remains more than manageable," which assumes that the federal government's debt is not manageable, but what you do not acknowledge is that we only have one taxpayer. The same taxpayer that has the unmanageable federal debt has what you consider to be the manageable provincial debt. That is the problem.

The 34 cents of every dollar is not someone else's dollar out there, it is your dollar and my dollar. When you add the 12 cents, that just compounds it and by the end of this government's term, by its own admission, it is going to double the debt, which means it is going to double what it costs to service the debt, and when you compound that with the federal debt and the provincial debt, it is going to be almost 50% of the total revenues that both governments receive in total is going to go to service the debt.

How do you respond to that? You cannot say the federal debt is out of hand and it is unmanageable but provincial debt is okay because it is only one third, but we only have the same taxpayer. The only time you can make a comparison is you can say that Prince Edward Island has got less of a debt, you can say Nova Scotia. That is a fair comparison, but you cannot compare it to the federal government.

The Chair: I am sorry, but your time has run out. Time is up.

Mr Dale: I do not get time to respond to that tirade? I thought the questions were supposed to leave space for answers. I do not think that is terribly fair.

The Chair: Yes, but it is among the three parties and it wound up that he spent three minutes on his preamble to the question.

Mr Dale: I understand that he has years of experience in the Ontario Legislature.

The Chair: Okay. I would like to thank you for --

Mr Dungey: For clarification, I take it he will be given an opportunity, if we want to add to this submission.

Mr Kwinter: Absolutely.

The Chair: I would like to thank you for appearing.

Mr Dale: How time flies when you are having fun.

ASSOCIATION OF ONTARIO HEALTH CENTRES

The Chair: The next group to appear is the Association of Ontario Health Centres. I would like to welcome you here to the standing committee on finance and economic affairs and the budget review. You will have 15 minutes for your presentation. It works the same as the other group that was just in here. At the end of your presentation the time will be split equally among the three parties. If you would identify yourself for the purpose of Hansard, you may begin your presentation.

Ms Muckle: I am Wendy Muckle. I work at Sandy Hill Community Health Centre here in Ottawa and I am here to represent the Association of Ontario Health Centres.

The Association of Ontario Health Centres represents over 55 member centres funded through the Ontario Ministry of Health. Whether community, physician or university sponsored, these health centres are throughout Ontario, representing rural and urban areas, ethnic communities and people of all socio-economic levels. The thrust of the member centres is to improve the health of the communities they serve and work with through a range of appropriate services and approaches.

The approach to health supported by the association and its members is reflected in a number of government documents published by all three political parties, Conservatives, Liberals and New Democrats, both at the federal and provincial levels.

For example, under the federal Conservative Minister of Health, Jake Epp, the report Achieving Health for All identified three major health challenges: Disadvantaged groups have significantly lower life expectancy, poorer health and a higher prevalence of disability than the average Canadian; various forms of preventable diseases and injuries continue to undermine the health and quality of life of many Canadians; and many suffer from chronic disease, disability, or various forms of emotional stress and lack of community support to help them cope and live meaningful, productive and dignified lives.

In the province of Ontario, the Premier's Council on Health, under the Liberal government, produced A Vision for Health: Health Goals for Ontario. The goals stressed: health promotion and disease prevention; strong and supportive families and communities; a safe, high-quality physical environment; and an increased number of years of good health.

It is clear from documents such as these that poverty, unemployment, family violence, inadequate housing and lack of community supports cause ill health and prevent people from contributing fully to society. All levels of government must respond accordingly and, thus, in complement to these two well-known and well-supported documents from two of our major political parties. The third, the New Democrats, brought down in Ontario a spring 1991 budget which sought to actually implement and operationalize these concepts and goals.

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The provincial budget has attempted to respond to many of the factors which impact on health status. To do otherwise would be to ignore the understanding all of us have as to what contributes to a healthy and dignified life and what people need in order to participate in life. We have an example in the United States, where a national priority to reduce the deficit at the expense of a wide range of human services has accomplished, in fact, the largest deficit in that country's history, with more than one third of their children growing up below the poverty line and more people with no health insurance than there are people in Canada. Let us not make their mistake.

A major concern to the association and its members is the effect of the federal legislation, Bill C-69, which limits transfer payments to the provinces. Thus, at the June 1991 annual general meeting of the Association of Ontario Health Centres, the following motion was approved:

"The association is fundamentally opposed to federal cuts to the Canada assistance plan and other cost shared arrangements and will formally advise the federal government of this fact and urge them to restore a commitment to full cost-sharing and will request all member centres to commit themselves to oppose Bill C-69 and other federal, provincial and municipal legislation which adversely impact on health and to commit themselves to develop educational strategies with their communities to promote understanding of and action on Bill C-69 and related social policy issues."

With regard to this, we would like to remind the committee that much of the budget and its deficit is a direct result of cuts in transfer payments to Ontario by the federal government. In addition, federal decisions to change criteria around eligibility criteria for unemployment insurance have directly led to higher welfare case loads in Ontario municipalities. The financial cost of this now rests increasingly with the regions and provinces, while the resulting health and social costs are being seen in our member centres now and will be felt by all of us in the long term.

We support and strive for healthy communities in Ontario, but our work in the health field must be complemented by employment strategies, housing options, adequate financial support for families to feed and clothe themselves, security from the trauma of unemployment or chronic illness and support services for us when we are in need. To this end, the federal government must reinstate its commitment to national health and social service standards and the provincial government must, especially in these times of a recession, provide for the public good and the health of its citizens.

Mr Sutherland: Thank you very much for coming before us today and for your presentation -- twofold, in terms of some support of the government in carrying out directions and guidelines and objectives that were developed by the previous government. If I read your presentation correctly, I think you were giving credit to all three parties here -- that two previous governments had worked on it and then we were the ones who are attempting to carry it out.

You talked a little bit about health prevention. One of the earlier presenters, Dr Walker, was here talking about health prevention, neonatal. I was wondering if you could give this committee some sense of where you feel that is at. I think we heard in a couple of other communities some criticism that maybe not enough funds were specifically directed in the area of health prevention in some of the budgeting that did occur. I was wondering if you could comment on those two areas.

Ms Muckle: Can I just ask you to clarify? Do you want me to address my comments to disease prevention or to health promotion, or perhaps both?

Mr Sutherland: Talk both, and then in terms of direct money towards health prevention.

Ms Muckle: Disease prevention. I think everybody here is probably in support of good health. When we first got into a national health care system in the province of Ontario, we had a very strong belief that if we could give everybody access to hospital services and to physician care, all of us would be a lot healthier, that our communities would be healthy and that we would really have overcome some of the problems that we were facing. In fact, that just simply has not been the case.

We have an extremely good health care system in Ontario, but it is a system that is meant to stabilize us, to restore us to the status quo. It is not a system which takes us beyond that. It is not a system that makes our communities healthier places to work. It is not a system that makes our citizens more productive. What we are now realizing in health and where the thrust currently is in health is not simply in bringing people back to the status quo, not simply in preventing them from becoming ill, but also in addressing the things that happen within our lives and within our communities that make people ill. We know that no matter how good our health care system is, if we do not live in a safe community, if we do not have enough to eat, if we do not have the education we need to get a job and to support our families, we cannot possibly be healthy. Physical, emotional and spiritual illness is not just a result of a lack of health care; it is a result of living in communities that cannot support our needs. Does that answer your question?

The Chair: We will have to go on to Mr Sterling. Three minutes each.

Mr Sterling: We heard this argument about federal transfers a number of times. I have been in politics for a long time now, maybe too long, 14 years. I notice Norm Jamison agreeing with that statement. That is the first thing he has agreed with me on at these hearings, actually.

At any rate, the problem I have with the present arrangement between the federal government and the provinces is that back a long time ago they entered into an agreement and they said, "We will pay 50%," but they did not say 50% of what. In other words, it is like you and me writing a blank cheque to another person. I do not mind people expressing their concerns about health care services or whatever it is, but do you not think it is unfair that the federal government is required to write a blank cheque and have to go out and collect those taxes and allow another level of government to spend them, basically without any accountability? That is what the deal was. I have a great deal of difficulty with that. I think that if the provincial government spends the money, they should have to go out and tax for it, if that requires a transfer of taxing power from the feds to the provinces, which will probably occur during our present constitutional talk as well.

Now, the thrust of your presentation is to say that the federal government should not require that accountability.

Ms Muckle: I do not think in our presentation we have mentioned anything about accountability. As a taxpayer myself, I have a great deal of problem with any government spending money and not being accountable for how it is spent. I believe, though, that the federal government has in fact set forward some fairly stringent conditions under which it transfers the payments and that it does require the provinces to meet those standards in order for the transfer payments to continue. I guess the example of that is the Canada Health Act in 1984 and the fact that when the federal government felt the provinces were out of line in terms of how they were delivering the services, it did in fact re-enact legislation to enforce what it believed was the national will, which supported universality and the other conditions of the Canada Health Act.

Mr Sterling: But we have both governments operating at a deficit, so it does not matter to me as a taxpayer whether I pay to those guys or I pay to those guys, the federal government or the provincial government. It seems to me it would be more logical and more democratic and more accountable to say, "Look, the federal government shouldn't give you any money in an area where you are responsible for providing that service." If we are providing health care services here in Ontario and we are responsible for that system, we should tax for it. If we are providing a social welfare system, we should tax for it. Does that not seem logical to you?

Ms Muckle: I can agree with the logic, except that, of course, I bring my mind back to what happened before we had medicare and before we had CAP. Across the provinces of this country, there was certainly tremendous variation in what was available to people in terms of health care and social assistance. I believe that through the political process over a period of time, much of it before I was even born, it was sorted out that in fact Canadian citizens, not just Ontario residents, wished to have national standards for what kinds of assistance they would be willing to provide to individuals with regard to health care and social welfare payments and various types of human services, and that this responsibility was considered to be the federal government's, to, in fact, develop national standards and to maintain them.

Mr Sterling: So you are saying you do not trust provincial politicians to make --

Ms Muckle: I guess I would say that I trust that in Ontario we will be able to continue to provide the high quality of services that we have in the past because we are a relatively rich province.

Mr Sterling: You are not trusting provinces to make the decisions --

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The Chair: Mr Sterling, time has run out. I allowed the presenter to give an answer to you there.

We would like to thank you for appearing before this committee with your presentation.

The committee recessed at 1441.

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UNITED STEELWORKERS, DISTRICT 6

The Chair: The next presenter is the United Steelworkers of America, and one of the presenters, Mr Michael Lewis. You will have one half-hour for your presentation. In that half-hour, you can leave some time at the end of your presentation for some questions and answers from the three political parties here. I would appreciate it if you could identify your partner there for the purposes of Hansard.

Mr Lewis: Certainly, I will do so. We are very glad to actually have made it here since our plane was cancelled and we barely made it on another airline flight. I knew this was going to be the highlight of your political experience, so I am glad we have not disappointed you and that we made it here.

On the statement you have, it says that this is being presented by the director of district six, Harry Hynd. You can tell, since I do not have a Scottish brogue, I am not Harry Hynd. He is involved in some very serious and heavy negotiations which went on most of the night, and asked me this morning if I would be so kind as to come up here. My name is Michael Lewis and I work out of the district office with Harry Hynd. On my left is John O'Grady, who is an economist and researcher for us and helped us put together the document you have before you. I do not intend to read that lengthy document word for word, I will leave that for you to do, but I do have a summary of it which follows more or less in the same order as the major document.

First, a little bit about District 6 of the Steelworkers. We represent approximately 70,000 working men and women in this province. The vast majority of our members are employed in the private sector, principally in primary steel production, secondary metal-related manufacturing and mining, but I would like to add that we are into various other sectors as well. We have nursing homes, hotels, security guards, hospitals, clothing manufacturers, legal aid clinics, printing companies, etc; sort of the whole gamut.

We appreciate the opportunity to present our views on the provincial budget. I have circulated copies of our written submission. As I said, I do not intend to go through it word for word.

The April 29 provincial budget was dominated by two major themes: The first of these was countering the recession; the second was continuing the process of framing a strategy to preserve a high-wage economy in this province. That process had begun under the Premier's Council established by the previous government. The members of District 6 looked to the budget for an indication of how the provincial government was going to counter the recession and how the government was going to move forward the social dialogue on economic restructuring.

I want to begin by reviewing the financial and economic situation faced by the Treasurer when he was preparing his first budget. I want to do that in order to set out clearly the real choices that were available to the government.

As members of this committee are aware, the construction and manufacturing sectors of the Ontario economy began to slow down in 1989. By 1990, the level of activity in those sectors was well past the slowdown stage and had moved into the contraction phase. As we moved into 1991, the recession had spread from the construction and manufacturing sectors into the business services and retail sectors of the economy. Virtually the entire private sector in Ontario was caught in the recession's grip.

While this recession may not prove to be as serious on a national level as the recession of 1981-82, it will probably prove to have been more severe for Ontario and certainly for Ontario's private sector, and boy, do we in steel know that. As we note on pages 10 and 11 of our brief, the loss of full-time jobs in Ontario is substantially greater in this recession than it was in 1982. Between 1981 and 1982, Ontario lost 124,000 full-time jobs; between 1990 and 1991, our province lost 291,000 full-time jobs. In provincial terms, this recession is far more serious than the 1981-82 recession.

Inevitably, a recession of that magnitude affects the financial position of the provincial government. The 1990 budget, the last budget tabled by the previous government, had forecast a modest surplus. By the fall of 1990, it was clear that those forecasts were no longer valid. By the spring of 1991, the deficit flowing from the previous fiscal year was estimated at $3 billion.

On page 8 of our brief, we have set out a table summarizing our estimates of the real financial position faced by the Ontario government in the spring of this year.

1. The tax base and other revenues such as the Lottery Corp and the LCBO were clearly going to be affected by the recession. This revenue base would have had to increase by $2.1 billion simply to keep pace with inflation. In fact, the revenue base was expected to be stagnant. In short, add another $2.1 billion to the deficit of $3 billion.

2. The Conservative caucus's friends in Ottawa did not ease these budget problems. Indeed, they compounded them. Had federal payments to Ontario merely kept pace with inflation, they would have increased to $6.1 billion. Instead, the fell to $5.3 billion. Add another $800 million to the Ontario deficit, courtesy of Mr Harris's friends in Ottawa.

3. The federal Conservative changes to the unemployment insurance system have also affected the financial position of the Ontario government through their impact on social assistance obligations. Members of the committee will recall that the two key changes made to the unemployment insurance system were to reduce the duration of benefits for a large number of workers and to tighten initial eligibility criteria. The effect of these changes is to significantly increase the number of unemployed unemployment insurance exhaustees and also to increase the number of unemployed workers who are unable to establish even initial unemployment insurance claims. The recession has added a further $1 billion to provincial social assistance costs. That brings the deficit up to $6.9 billion.

Finally, to that $6.9 billion, we must then add debt carrying costs of another $400 million, bringing the deficit to $7.3 billion.

In short, a deficit of roughly $7.3 billion was unavoidable. That deficit does not allow for any increase whatsoever to normal operating budgets or transfers to hospitals and local authorities. Even members of the Conservative caucus are likely to acknowledge that a policy of zero increases in operating costs, capital budgets and transfers to hospitals and local authorities is implausible. Had the provincial government followed the federal formula of 3% increases, the deficit would still have risen to $8.7 billion.

The provincial government therefore faced four choices: to retrench to the core deficit of $7.3 billion by carrying out a zero increase policy in operating budgets, capital expenditures and transfers to hospitals and local authorities; or to retrench to a lower deficit by cutting social assistance in the middle of a recession; or to retrench to an $8.7-billion deficit by holding to a limit of 3% increases in operating and capital budgets and transfers to hospitals and local authorities; or to pursue a deliberate countercyclical policy of injecting new demand into the economy in order to arrest or retard the forces of recession.

The provincial Treasurer clearly decided to pursue the last of these options. We fully support this decision. For Ontario to have joined in the Conservative strategy of retrenching public sector spending during the recession would have both deepened and prolonged the recession.

I urge the members of this committee to recall the progress of the recession in the Ontario economy. The recession has moved through the economy like shock waves emanating from an epicentre. The recession originated in 1989 in the sectors most sensitive to high interest rates: housing, autos, furniture and appliances. By 1990, the momentum of the recession had spread to the building supply and basic steel industries, which were already under pressure from the high dollar. Until approximately the late summer of last year, the recession was largely confined to the construction industry and the manufacturing sector. In the last three months of 1990, the recession spread to the business services sector and then to the retail sector.

The question in the spring of 1991 was whether the recession should be allowed to move into the public sector. Had no corrective measures been taken, local authorities and hospitals would have been forced to administer serious cuts in their spending during this summer and fall. Because of the Ontario budget, those cuts will not have to take place and we can anticipate the forces of recession exhausting themselves by the end of this summer.

Approximately one worker in five is employed in the broader public sector. To have deliberately brought the full force of the recession into the public sector would have only given further impetus to the decline in aggregate demand. Public sector workers who are being laid off or who are fearful of layoff respond in the same way as private sector workers: they curtail their demand for housing, for furniture, for new appliances and for autos. A policy of retrenchment in Canada's largest province would have added significantly to the forces causing the economy to contract.

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Steelworkers support the Treasurer's decision to arrest the spread of this recession. Had he not done so, the recession would have grown more serious during this summer and into the autumn. I draw your attention to page 13 to, I am sure, a comment that you have heard before, made by James Frank, the vice-president and chief economist of the Conference Board of Canada -- his statements supporting what we have just stated. As a result of Ontario's actions, we can now hope that the recession will have burnt itself out during the summer.

One of the points that are sometimes raised by critics of the budget is its impact on Ontario's debt rating. I draw your attention to page 17 of our submission. You will see there a table comparing the yield on Ontario Hydro bonds and federal government bonds. The bonds have comparable maturities and coupons. If the predictions of the bond rating agencies had been well founded, the spread between Ontario Hydro bonds and the federal government bonds should have widened after the provincial budget. In fact, the reverse was true. The prediction of the rating agencies appears not to have been borne out by actual events.

I want to turn now to the budget's second theme: building new social partnerships. The members of this committee are well aware of the forces of globalization and the new competition that Ontario's trade sector faces. Ontario cannot disengage from the international economy. To seek to restore the shelter of the 1960s and the 1970s is a futile strategy. We have no choice but to adapt to the new economic forces. We must ask ourselves: What will a high-wage economy look like in an era of globalized product and capital markets? Steelworkers agree with the Treasurer that a high-wage economy in the 1990s will look quite different from the high-wage economy of the previous 30 years.

We also agree with the Treasurer that to preserve a high-wage economy will require a substantial investment in skills by business, by society and by workers. We also agree that to carry out a substantial investment in skills will require us to establish new mechanisms at the level of the enterprise, at the level of the sector, and at the provincial level. Indeed, steelworkers have been in the forefront of building these new sectoral institutions in the steel industry, in the mining industry, and in the electrical and electronics industry.

We agree with the Treasurer that a significant feature of these new institutional mechanisms to deal with increased investment in skills will be new social partnerships involving business, labour, government and the community. The term "new social partnership" is not one over which we have apprehension.

We also agree with the Treasurer that if our manufacturing sector is to undergo a shift towards greater skill intensiveness, there will have to be changes in the way in which workers organize at the plant level.

And, finally, we agree with the Treasurer that economic renewal will entail transferring capital and labour out of some industries. We know that this will impose significant adjustment costs. We also believe that, in large measure, these adjustment costs must be assumed by society.

We want to stress to the Treasurer and to the members of this committee, the importance of the labour-management relations dimension in economic renewal. In the traded sector of our economy, upwards of 70% of non-office workers are unionized. There can be no solution to the problem of economic renewal in Ontario which does not incorporate workers and their organizations as full and equal partners. All too often, workers and their unions find themselves in a situation in which it is the new machine or the new technology that threatens economic security. That threat is real.

Members of this committee should review the Statistics Canada report that we referred to in our brief. The report documents Statistic Canada's findings and what happened to the roughly one million workers who were permanently laid off during the period 1981 to 1984: (1) After two years, only 57% of those one million workers had found permanent, full-time employment; (2) of those who found re-employment, 45% experienced a wage loss and the average reduction among the 45% who suffered a wage loss was 28%, excluding the effect of inflation; and (3) of those who were permanently laid off, only one worker in 20 reported receiving government-assisted retraining.

As long as the labour market functions in that manner, that is to say, as long as the cost of economic change is borne disproportionately by workers, our system of labour-management relations will not make the same contribution to economic renewal that has characterized northern Europe. You cannot have American labour relations laws and American managerial philosophies on the one hand and European labour-management relations on the other.

Workers and their unions both know that jobs are killed by the lack of investment, not by new investment. Workers and their unions also know that it is not the new machine or the new technology that threatens our prosperity; it is the old machine and the old technology. But workers and their unions also know that the terms of the existing unequal bargain in the labour market are that the costs of economic change will be borne disproportionately by working people. If there is to be a new partnership, then it cannot be on the unequal terms of the current labour market bargain.

For Steelworkers, economic renewal and a new partnership are part of a coherent whole. That whole includes: (1) labour law reform; (2) the adoption of active labour market policies to deal with adjustment and training; (3) a new deal on the management of pension funds; (4) a commitment to use worker ownership and labour-managed investment funds where these are appropriate; (5) new sectoral institutions involving labour and management; and (6) a commitment to dismantle outdated forms of work organization and move to a skill-intensive production model.

We in the Steelworkers read budget paper E as an invitation to join in a dialogue with business, government and the community over what a high-wage economy will look like in Ontario in the 1990s. We know that there are many in the labour movement, as well as in business, who are wary about discussing a new partnership. In our view, there is no alternative to such a dialogue. I want to affirm squarely our support for the Treasurer's budget and our support for the new partnerships which he and his government are seeking to establish. I thank you for your attention.

Mr Kwinter: I just want to question your methodology and your figures. On page 3 you use figures. I do not know where you got them, but they have no relationship to the real figures in the budget. The budget statement that I have that was issued by the Treasurer of Ontario and Minister of Economics for the first quarter shows in fact that the provincial sources of revenue from all sources is going to be $43.56 billion, not $37.7 billion.

Mr Sterling: You are including the federal transfers.

Mr Kwinter: No, no. I am just talking about their revenues. So that is not the figure.

The other thing that is quite interesting -- I really take exception to your chart on page 8, because what you are really doing is you are sort of taking it both ways. The way the budget works is that at the end of every fiscal period, whatever the deficit is, it is transferred to the debt. It is taken off the books. You do not carry it forward and say: "Here's our core basic budget. We've got the $3 billion from last year's deficit." That is gone. The only thing that you put in is the cost of carrying that, which you have done, so you have got it in there twice. You have got the cost of carrying the debt at $0.4 billion -- and by the way, the figure is not $0.4 billion, it is $685 million, so it is $0.685 billion, not $0.4 billion -- and that $3 billion is gone. It goes to the debt, and that is why that figure is in there where you are carrying the debt.

Something that I have noticed everybody has talked about is they said, "If we do nothing, here are the costs that we're going to have to incur." I do not think a government, any government, is elected to do nothing. What they had to do was to do something. They had to take a look at the costs and say, "We've got to do something."

I will give you an example. I have been calculating in the operating expenditures, and I know this is just a little item, but the executive offices, which are the Premier's office and the cabinet, have increased their expenditures by 90%. If you want to do something, you could start there. You could start in several other areas that are non -- Everybody says: "What are you going to do? Are you going to cut the hospitals? Are you going to cut the welfare payments?" There is lots more to government than hospitals, welfare and education. There are lots of areas that they could have taken a look at and said: "Hey, we're in tough times. We're going to have to cut some stuff."

Everybody, particularly labour, comes on the assumption that: "If we do nothing, here's what we have. Zero-based, we still have all these costs." I think that is the fallacy. You have got to look at those things and say -- it does not mean that you have to cut welfare, hospitals, schools, but there is a myriad of other ministries in this government that, if they were cut back, the ministers might be unhappy, some of the people in the ministry might be unhappy, but the impact on the average Ontarian would be negligible.

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The Chair: You have one minute, Mr Kwinter.

Mr Kwinter: Those are areas that could have been addressed. It does not necessarily mean that the only ones you have to cut back on are social services. I would like to get your comment on that.

Mr Lewis: I think I will let our economist talk about the figures.

Mr O'Grady: The point I would like to take a different view on is the proper response of a provincial government when the economy is in recession and when the essential driving cause of that recession is demand efficiency. When your party was in power, the response of your Treasurer to those circumstances was to inject new public sector demand into the economy, and then as the economy recovered, he moved his budget back into balance. I am surprised that you have abandoned that view. I am surprised you do not see the comparison between the recession we are in right now and the same -- rather not, because it was a less serious situation at that time, but the difficult situation the Ontario economy was in when the policy of your own Treasurer was to inject demand into the economy through deficits.

Mr Sterling: I would have liked an answer to Mr Kwinter's question. I have met with the president of Stelco and I am going to be meeting with the president of Dofasco in a very short period of time, along with the leader of my party. My understanding of the problem with the steel industry is that we are just not productive, we are not competitive with our American counterparts. How are we going to become more productive?

Mr O'Grady: Mr Sterling, I am surprised that you would have that impression of the Canadian steel industry. By North American standards, the Canadian steel industry is in fact one of the most productive, significantly more productive in terms of the standard measures of output by various classes per worker than is true of its American competitors. By international standards, it is in the upper tier but it is certainly not the most competitive steel industry on an international basis.

The central problem of the steel industry in this country is the macroeconomic policies that are being pursued by the federal government. The high dollar and the high interest rates are killing both the export market as well as the domestic demand for steel. If cars are not being made, then the demand for steel declines. If new construction has gone through the floor, then demand for structural steel clearly contracts. The problems of the steel industry in this country are rooted in the macroeconomic environment of this country, which are directly the consequence of the policies being pursued at the national level.

Mr Sterling: Your complaint about the high dollar is an admission that we are not productive.

Mr O'Grady: Not at all. If you look at the IMF data series and compare 1991 to basically 1975, and the IMF uses a category of analysis called the real exchange rate, the real exchange rate of the Canadian dollar on a weighted basis has increased by over 60% in that period of time. That is what is driving the problems of the steel industry.

Mr Christopherson: Michael, I want to thank you and the Steelworkers for an excellent presentation, excellent analysis, and very perceptive, I think. What I would like to ask you about is a report yesterday that came down by the Fraser Institute, an institute that the Premier is reported as having called a privately funded fat-cat economic institution, which gave this government a failing report card. I think one would characterize that as a business report card. I would appreciate your thoughts from a labour point of view on their report and on their comments.

Mr Lewis: I am going to let John. I have comments on that, but I am going to let him. It is juicy for him.

Mr O'Grady: One of the observations I would start with is that when I was in school, you used to get your report cards at the end of the term, not at the beginning of it.

One wonders what the Fraser Institute will say if the following scenario unfolds. Keep in mind that the premise, the objective, of the Treasurer in this budget was to arrest the forces of recession in Ontario and to bring about an earlier recovery in the Ontario economy so that Ontario would experience a faster rate of economic growth. If Ontario in fact leads the national economy out of recession, if Ontario in fact enjoys in the coming 18 to 24 months a higher rate of growth than other regions of this country, will the Fraser Institute revise the grade? Will it acknowledge that the Treasurer's strategy worked?

It is significant, it seems to me, that every single reputable macroeconomic model in this country has endorsed the Treasurer's strategy. You cannot find one that does not endorse it. That is what Jim Frank was saying. The Conference Board operates a macroeconomic model, and the conclusions of that model were crystal clear, categorical, and that is why he wrote what he did. The same is true with Informetrica -- both in the private sector. Their conclusions are categorical that the Treasurer's strategy, on the basis of their models --

Mr Kwinter: Yes, but Frank is wrong 67.2% of the time.

The Chair: I am sorry, Mr Kwinter, you lost the floor a few minutes ago.

Mr Lewis: Where did you get that figure from?

Mr Kwinter: Right here. I will show it to you.

Mr B. Ward: I would like to ask you to get your comments on the last part of your brief on the need for new social partnerships. I know the Steelworkers union is very active in many communities throughout the province of Ontario.

Interjection.

Mr B. Ward: He is distracting the presenter there, Mr Chairman.

From the perception of steel, do you find there is a greater willingness among labour, business and government to work together? I guess Elliot Lake and Algoma Steel may be prime examples of communities with business, labour and government all coming together. Do you think that there is that co-operative effort beginning to develop? We are not there now. Do you think that we are starting along the road of building the trust that is necessary for us to be successful in the 1990s as a province?

Mr Lewis: In general terms, yes, I think it is beginning to happen, very much driven by the present government, obviously, in terms of Elliot Lake and Algoma. But even before that, as we mentioned in our brief, we have been involved in relationships like that, such as the Canadian Steel Trades Employment Congress, which is the steel industry organization that management and labour are involved in together and have been for a number of years and have done some very good things together. But yes, I think the basis has been set and there is a real future for this kind of relationship.

The Chair: Okay, Mr Lewis, I would like to thank you and your colleague on the presentation you have made before this committee. Maybe if you are available in the hall, Mr Kwinter can give you some additional paper there and clarify some points that he disagrees with. Thank you.

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ASSOCIATION OF COMMUNITY HEALTH, RESOURCE AND SERVICE CENTRES

The Chair: The next group to make a presentation to this committee is the Association of Community Health, Resource and Service Centres. Would you come forward, please? Do you have a colleague with you?

Ms Dowler: I am the colleague.

The Chair: You have one half-hour for your presentation, and I would like to welcome you here to the standing committee on finance and economic affairs on the budget review. If you would identify yourself for the purpose of Hansard and your position, you may begin your presentation.

Ms Dowler: My name is Judith Dowler. I am the president of the Association of Community Health, Resource and Service Centres board, which represents the boards of directors of 12 centres in Ottawa-Carleton: Carlington, Centretown, Cumberland, Gloucester, Kanata, Lowertown, Overbrook-Forbes, Pinecrest-Queensway, Sandy Hill, Somerset West, South East Ottawa and Vanier. These centres provide over $18 million of programs in the area of health and social services to 12 different communities within Ottawa-Carleton.

I am one of 100 community volunteers who are members of the boards of directors of these centres. We are taxpayers, and the majority of us are home owners. We are spending our volunteer time in the community making it a better place to live. We would like our tax dollars working to provide support to our communities by providing financing for programs such as those provided by the centres, especially in social services and health services. That is my presentation.

I did have another colleague who was going to come, but she was ill, so I am finished. You have heard from some of the resource centres today, and you will be hearing from some more tomorrow individually, but I am just to make the presentation on behalf of the boards of directors.

Ms M. Ward: What types of services are you involved in at your resource centres?

Ms Dowler: We have a number of walk-in health clinics. We have a large women and violence program. We provide counselling services. There are employment programs to help people gain skills to go back into employment; homemaking. We also provide services at the centre such as space for things like a legal aid clinic. We co-locate workers from the Children's Aid Society of Ottawa-Carleton, Catholic Family Service of Ottawa-Carleton, the Family Service Centre of Ottawa-Carleton and a number of other agencies that are funded by the United Way or by the region to provide those kinds of services. We have our own staff but we also, as I say, have staff from centralized agencies that are located, decentralized, in the community.

Ms M. Ward: And you no doubt refer people to other services in the community.

Ms Dowler: Yes, we do.

Ms M. Ward: During the last presentation my colleague here was asking the presenter about a comment of the Fraser Institute. I was reading one of their publications recently, and there was an article in there about food banks. Basically, their argument was -- in this article; I cannot say it is the opinion of the whole Fraser Institute -- that food banks are an efficient form of food distribution and that we should not worry about it. I would like to get a comment from some people who see the needs of the community on that type of philosophy and what it would do to people out in the community if more of us subscribed to it.

Ms Dowler: I represent the Gloucester Centre for Community Resources. We have established as a spinoff of the centre because of so many requests for assistance with food, particularly at the end of the month, the Gloucester Food Cupboard. It stands apart from the centre now. I guess food banks started as an emergency service; that will not go away. We see that the need is growing and that the need is spreading throughout the community so that it is not just people who are on benefits but people who are unemployed or people who are the working poor and really a very broad range of people, and in particular people who never came before. I guess you have heard this before, but the same thing is happening in Ottawa that is happening in other cities.

Mr Sutherland: We had a question earlier with the provincial organization that was here about -- sorry, I had better not say health prevention again -- disease prevention in terms of preventing problems specifically. I was wondering if you can comment or elaborate a little more how you see that not only in the health aspect of the organizations but maybe in some of the other aspects of the organizations you represent.

Ms Dowler: We see that those work together, but very often in resource centres we have crisis intervention, and that very often is trying to match people with the services they require. Prevention of disease or health promotion is somewhat long-term. I would suggest that we do have long-term programs that address that, but in our immediate crisis intervention we are dealing with trying to help people solve problems that are immediate like violence, hunger or lack of money. But there are long-term programs, particularly on the health side of the resource centres, that address that.

The Chair: Okay. I would like to thank you for your presentation before this committee.

The committee recessed at 1537.

1600

CENTRETOWN COALITION

The Chair: The next group I would like to welcome here is the Centretown Coalition. You have one half-hour for your presentation here. Could you identify yourselves and your position for the purpose of Hansard? I see you have a video there; I guess it is loud enough there so Hansard can pick up.

Ms Barton: My name is Debbie Barton and I am a member of the Centretown Coalition. I am a staff member at Centretown Citizens (Ottawa) Corp, which is a private non-profit housing corporation.

Just to give you a brief introduction of the coalition before Sandy Scott and Brenda Buckley speak, I will just introduce you to the coalition in terms of who we are. We represent a variety of service agencies located in the central core of Ottawa and we are dedicated to making our community, Centretown, a safe and healthy neighbourhood. Our main focus is on serving the needs of those people who have become marginalized in our community both socially and economically.

In keeping with our goals as an organization, we are generally pleased with the direction of the provincial budget in that it recognizes that in times of recession it is important to maintain that safety net. We are supportive of the goal of stimulating the economy. This demonstrates commitment by the government of public investment in its greatest resource, that of people and community.

By placing emphasis on creating a more skilled labour force through retraining and literacy programs, through improving the public infrastructure and establishing more jobs and through welfare reform, all of these items seek to improve the quality of life and develop healthier communities.

In this budget you as politicians have demonstrated that you have accepted the appropriate role of government -- that is, being the guardians of the public wellbeing.

Mr Scott: My name is Sandy Scott and I am the staff associate at McLeod-Stewarton United Church, which is a United Church in the central core of Ottawa.

In our church we house the emergency food and clothing centre, which is an emergency food program sponsored by the Centretown Churches Social Action Committee, and we hand out enough food to feed up to 20,000 people a year. Here in fat city, central Ottawa, poverty is a very real thing. We have a day program there, a drop-in centre for people who live on the street or very close to the street, and we see on an average of 65 people per day.

We are happy with the direction the government chose to take with this budget, but we are very concerned that there is not enough being spent at this time in the midst of a recession for those people who are particularly affected by the downturn in the economy. We support the fact that you are spending $215 million to implement phase 1 welfare reform, but the total cost, the other $240 million, has to be spent as well and it has to be spent, we think, immediately. There needs to be a commitment to spending that money and implementing phase 1 welfare reform as it was proposed in the Back on Track document.

We also support the phase 2 planning that is going on and we encourage you as a government to tell the public more explicitly what is going on around welfare reform, the committees that have been established, the dialogue that is going on. It is virtually unknown among the public what you are doing and the changes that might come in the future. If we are going to bring about changes, you as a government and we as a community working with you to bring about those much needed changes, we need to begin the public education now. While $215 is a step in the right direction, it is not enough and we need to start moving very quickly around welfare reform.

We are happy that you are going to build 35,000 units this year. We hope you are able to do those social housing units and we encourage you to make further investments in social housing in the future. Most people who use an emergency food program use an emergency food program because they do not have adequate housing. I do not want to take any more time, or not very much more time, talking myself. Today, in our drop-in centre, we spoke with our clients and people who use our program and we asked them three questions: How has the provincial budget affected your life? How would you spend provincial funds if you could do that? What would you say to Mr Rae if he were here? On this seven-minute video are some of the answers our clients gave.

[Video presentation]

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Mr Scott: Generally many of our clients feel the way those people in the video feel. While they welcome the budget, they have not really felt the effect of it yet and they are still waiting to see what kinds of reforms are going to happen in the welfare system if we are going to move towards an social services system that integrates social services, health services, education, retraining and housing. We need a radical and extensive change to our system at present to help the folks we saw in the video today.

With me today is Brenda Buckley. Brenda Buckley is a client of our drop-in centre and has been very active in lobbying government since the publication of the Transitions report in 1987. She took part in the march to Toronto. I would like to turn it over to Brenda now.

Ms Buckley: Just to give a brief overview of where I am coming from, I am 22, I am on family benefits, I am a full-time student at Algonquin College and it is my second year in a course.

Over the last five years that I have been on assistance, I have seen improvements and I am glad I have seen them. One good thing I have to say about your government is it is the first I have seen come in that is people-oriented. We really needed that. But still there are the concerns of where your next meal is coming from or, if you have to move because of some problem with the apartment, where you are going to move to, will this person accept me because I am on welfare or FBA, how much is it going to be, am I going to have enough money? Just from my view, I look at it that I should not have to be worrying about where my meal is coming in, my rent and my bills. I want to be able to put all my energy towards finishing school so I can get off the system. That is really difficult to do right now.

With regard to one thing Ben, the last fellow who spoke on the video, was saying about programs coming out, I think a lot of people feel that once they are on welfare they are trapped within it because they do not have the educational background to go out and get a full-time job to support themselves. Going off it would be a worse benefit than staying on it, yet at the same time they want to get off it. These people do not want to be on welfare. They are looked down on, they are teased, they are made fun of. It is degrading for us. It is degrading for us to have to go to a food bank and say, "I need food." No one likes to do it, no one wants to do it.

There was one thing I was going to say and I cannot remember what it was now. Give me a second here. I cannot remember. If I do, I will let you know.

Ms Barton: I think that certainly those people who are in need whom we just heard from are the best people to be telling their stories. What I am bringing to you now is from the perspective of a housing provider in Centretown. We have been providing non-profit housing since 1974 in this community. Centretown Citizens presently has 800 housing units and we are developing 426 housing units by the end of next year, so certainly we have reaped some of the benefits of the present government.

I want to really point out to you that Centretown is a community that is under stress, like most downtown cities. Unfortunately, Ottawa tends to be perceived as being a place, as Sandy said, that is a fat-cat city. When you look at the data, the statistics about the city, because average income is used, it tends to get very skewed. There are a lot of people here who have very high incomes, but there are also a lot of people who have very low incomes. Unfortunately, those people get lost in those statistics.

The child poverty rate in Centretown is at 41%. The welfare rolls for Ottawa increased 25% in 1990 and they are expected to increase 40% this year. Centretown has more single parents -- 20% -- than corresponding provincial and national figures. Provincially it is 16% and national figures are 13%. Some 70% of Centretown residents are tenants. Only 12% of the tenant households aged 20 to 44 could afford to buy a starter home last year, according to CMHC affordability measures. In December 1990 there were 4,235 households on the waiting list for social housing; that is, City Living and Ottawa Housing. Our housing waiting list is 800, so that is 800 additional. There has been a 75% growth in emergency shelter usage between 1985 and 1990.

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As of October 1990, the average rent in Centretown for a one-bedroom was $528 and for a two-bedroom was $742. People who are on assistance, either family benefits or general welfare, receive a maximum shelter benefit of $350 for a single person and $550 for a family of two. If you compare those figures in terms of what people who are on assistance are actually getting and what the average rents are in Centretown, there is a wide gap there.

Also, over the past few years, there has been a substantial loss of affordable housing in Centretown due to conversion. Where does that leave us? What can the province do? What future priority should you have? We are here to discuss a budget that has already been passed, but I would like to encourage you to look at what the future priorities for your government should be.

First and foremost, it is very obvious to us that the right to housing does not exist in this province, nor does it exist in Canada as a whole. With the further erosion of the federal role in housing there is even less opportunity to ensure that housing as a right is a priority of our Canadian government. So therefore, we would strongly encourage you, the province of Ontario, to take a lead role in lobbying the federal government to have the right to adequate housing entrenched in the Constitution. Canada has agreed internationally that housing is a right through our signing of the international covenant on economics, social and cultural rights. We have yet to guarantee such a right to our own Canadian citizens, so we need to secure the legal basis for claiming the right to housing and we encourage the province to take this up in its constitutional talks in the future.

Second, non-profits, like private developers, want to develop housing in the downtown core. Our organization is Centretown citizens. We came out of the community. We are a community-based organization, but we are finding we have had to go further afoot from Centretown because we can no longer afford to develop in downtown. For us to develop housing in downtown, we need the provincial government, through the Ministry of Housing, to take on a strong regulatory and advocacy role. Through the Planning Act, the province has at its disposal the mechanism to ensure that municipalities comply with the Housing First policy and the affordable housing requirements of all new development in municipalities.

Also, the province needs to take on more of an advocacy role with respect to the promotion of social housing within neighbourhoods. The government has been really successful in using the media to get its message across when it comes to drinking and driving, mental illness and multiculturalism through the use of various media ads on television and in print. We would strongly suggest that this same focus be used on social housing. It has been very effective in changing public attitudes and I think this approach is very important to us who are developers of social housing, because the not-in-my-backyard syndrome is very strong in our communities and we need your help in educating the community that everyone has the right to quality affordable housing. We believe that communities should be involved in the planning of social housing, since they are the community themselves, so we are not against involving the community. Since we as an organization, CCOC, are community-based, we always involve the people who live there in the planning process and in design and such.

Environmental concerns and land use dictate a better use of existing serviced land and this equals intensification. Our recent regional housing statement identifies -- that is our locally based regional housing statement -- low-density development in urban centres outside our green belt as occupying 25% of the urban land in the region and it is the largest single use of land. We find this is not a very good use of land at all when we need to intensify development. Land is just too sacred. So the province, through the Planning Act, has to ensure that municipalities have intensification as a priority in their official plans. Recently, CMHC announced that it has a plan to purchase a number of granny flats. This is all fine and well, but these kinds of housing types are not permitted in many zoning bylaws throughout the province.

I just have a couple of other points. The province needs to revise the definition of affordable housing that was brought in under the previous government. Under the present definition of rent, up to $1,440 would be considered to be affordable in Ottawa. The existing definition is based on the 60th percentile of average income. What we would suggest would be that the definition be based on 40%, the 40th percentile of the average tenant income. So we would strongly suggest a movement of change there.

Also, maximum unit prices: Ottawa did not receive any increase in 1990. We did receive one this year, so we feel we are far behind because certainly our land costs, I am sure you have heard from the private development sector that land costs have gone up substantially in this area over the past few years, yet the increases in the maximum unit prices have not kept abreast of the land cost increases. In fact, Ottawa has the third-lowest maximum unit price overall. Just as an example, Toronto receives $161,000 for a MUP on a two-bedroom row house development, whereas Ottawa only receives $95,000.

The restructuring of the whole maximum unit price system has meant for us, as developers in downtown, that it is virtually impossible for us to develop downtown. When you are providing housing and parking together, we just cannot do it because it has been restructured so that the parking premium is now a part of the maximum unit price, whereas the parking premium was separate. When we were developing downtown we could apply for the extra parking premium, but it is no longer together and it is a lot less money and it is very difficult for us to develop. Also, because of the restructuring of the maximum unit price structure, we are only able to develop high-rise development and that is not always the most appropriate form of development in downtown, especially when we always house a mix of families and seniors and couples. We do not just have seniors' housing or family housing. We always have mixed-income housing and mixed household types.

In closing I want to say that housing is more than a roof over one's head. Certainly, when Brenda was talking about housing and other people on the video were talking about housing, they do not have access to good, affordable housing. Housing gives us our sense of wellbeing. It is one of the main ways that you as a government have to combat poverty. As your own document states -- the Ministry of Housing has recently released its document for consultation in the community called A Housing Framework for Ontario -- it is preferable and most cost-efficient to invest in community-based forms of housing which support individuals and households than to deal with the consequences of failing to do so. Our experience in operating community-based non-profit housing tells us that once people do have a stable home, there are so many other aspects of their lives that they are able to address.

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The Chair: We are running out of time. Your half-hour is up. There were not too many questions. The presentation that you made here seemed to cover all the bases of your group, the Centretown Coalition, so it was a very good presentation and it gave us a good insight travelling around the province to hear the concerns of people in Ottawa on how the budget affected them.

Ms Barton: I was told that --

The Chair: Do you have a copy?

Ms Barton: This is just a list of our coalition members.

The Chair: If you would give it to the clerk he will hand it out to the members.

ADVISORY GROUP ON NEW SOCIAL ASSISTANCE LEGISLATION

The Chair: The next group we have here is the Advisory Group on New Social Assistance Legislation. I would like to welcome you. You have one half-hour for your presentation. In that one half-hour, at the end, if you could, leave some time for the three parties to ask questions of your presentation. You may begin now by identifying yourself and your position for the purposes of Hansard.

M. Moscovitch: Bonjour. Je m'appelle Allan Moscovitch et je suis président du...

The Chair: Excuse me, sir, we will have to hand out the interpreters.

Mr Moscovitch: All right. I will speak in English.

The Chair: No problem, whichever way.

Mr Moscovitch: It is okay. I am président of the Advisory Group on New Social Assistance Legislation, chair in English. That is a committee which is advisory to the Minister of Community and Social Services.

Just to give you some background on what we have been doing and what we are about, the committee was appointed in May 1990, which is to say about a year and a half ago. We were appointed then by the previous government. We are a committee of 12. Our mandate was and remains to provide to the minister advice on the creation of a unified system of social assistance in the province of Ontario.

You will recall that in 1988 there was a major report from a provincial commission of inquiry which was known as the Social Assistance Review Committee. That committee was chaired by Judge George Thomson. It took roughly two years to complete a report which was called the Transitions report. It was the first time in many years that social assistance received this kind of investigation.

The present legislation, or the legislation then which remains the legislation now in Ontario under which social assistance is made available, dates from, in one part, 1920 with the Mothers' Allowances Act, and in the other part, 1935 with the Relief Land Settlement Act. This is essentially the same legislation that we have now. It has been revised twice, once in 1959 with the General Welfare Assistance Act and once in 1967 with the Family Benefits Act. So you see, the 1920 Mothers' Allowance Act became the 1967 Family Benefits Act and the 1935 Relief Land Settlement Act became the 1959 General Welfare Assistance Act. That is the legislation which prevails in Ontario today.

The review which took place in 1986 and 1988 was a rather comprehensive review. It involved, in fact, on the part of the committee, some 23 days of public hearings and the receipt of 1,500 individual and group-related briefs, which, if it does not set a record, was certainly one of the largest such public consultations ever undertaken in the province. The report contained 274 recommendations on the reform of the social assistance legislation.

In 1989, the then Liberal government began the process of responding to what was, in the province, a great deal of expectation among community groups for substantial reform of what had simply become an extraordinarily outmoded piece of legislation which was in desperate need of modernization, not only from the point of view of the clientele, but from the point of view of those who were charged with administering the system.

The consequences of no amendment of the legislation meant there were an enormous number of regulations and we have of course a two-tiered system of administration so that individuals who are charged with administering the system have an enormous number of regulations and administrative guidelines which they have to take into consideration in determining eligibility for individuals.

In 1989 the province brought in what is known as the STEP program or in French, le programme PISTE, the supports to employment program which invested approximately 221 million new dollars into the system and enacted several of the recommendations which existed in the Transitions report.

If I can just explain it in words rather than reviewing what was actually done, the primary purpose was to break down what had historically been a barrier between work and assistance. Essentially, in the past you either were on assistance or you worked to support yourself and there was very little in between the two. In other words, there was a very small margin of earnings which was permissible under the system, at which point taxation kicked in at very high levels dollar for dollar, in other words, 100% tax level, and for every dollar earned above the minimum exemption level, there was a dollar removed from assistance. This was not, from my point of view, a very substantial incentive system for people who could be employed to be employed.

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The other thing that happened in the 1980s was that there began to be, particularly with the impact of the tax system, a reversal of the traditional relationship between social assistance and the minimum wage. This happened largely because the minimum wage was not increased to keep pace with inflation. The consequence was that when you examined the after-tax rates of assistance, what you found was that the relationship was such as to provide little financial incentive to people to leave assistance for, for example, a low-paid job. This is not to say that this did not occur. In fact, it continued to occur in large numbers, and all the more surprising because it violates in fact what I think tends to be or is considered to be primary motivation that people have in society. But in fact what you find when you look at the numbers is that there was a considerable motivation on the part of people simply to be employed and support themselves even though in fact they may have had to pay a financial penalty to do so.

That is the situation that remains without a substantial increase in the minimum wage. We have changed, when we could take the tax system into consideration, what was the traditional relationship between the minimum wage and social assistance rates. The STEP program was intended to break the barriers down by reducing the tax-back rate, for example, down to 80% by permitting the deduction from gross income of a number of items that relate to the cost of work. Remember, for example, that in the income tax system the maximum is $500 that is permissible for work-related expenses, and that is actually a relatively new innovation in the income tax system which was historically not permitted.

Of course when it comes to investment income, that is different; or income from self-employment, one is permitted to deduct a wide range of expenses; but a person who is an employee is not. Under the welfare system, this has been changed in order to create a broader incentive structure so that it would not in effect cost people a great deal in order to leave assistance and move into full-time or part-time paid employment.

Among the other items was a deduction for child care which exists in the welfare system independent of what exists in the tax system. In fact, in recent amendments announced by the minister in May, there has been a further change to enhance the possibility of child care deductions.

With the election, as you know, came a new government last September, and in October the new minister requested of the advisory committee a report in the short term as well as the report which had previously been planned on the unification of the system into one somewhat more modernized piece of legislation. That report appeared in March of this year. It was known as the Back on Track report in English, or in French, Relance. It contained a series of 88 items.

Why was it necessary to do a second report when we already had the Transitions report? The purpose was to look at how many of the good ideas in the Transitions report could actually be implemented, to provide some details on how that could be done, and to provide some costing of those items. When we did our review of those items which could be undertaken in the short term, unfortunately replicating in some sense the past in that we had only to work through regulatory reform -- change of regulations and not the legislation itself -- what we found was that a substantial number of those could be implemented without substantial cost. About 49 of those 88 items were relatively low-cost items. However, the remainder did imply some cases of substantial costs, and the total estimate that we put on those numbers was $451 million, of which some were intended to be one-time only expenditures, that is, for 1991-92 alone, and some would of course potentially be ongoing expenditures depending upon the size of the case load. But there would be permanent reforms to the system, and our estimates were contained in the report of what that would cost on the basis of our projections of what the case load might look like.

In the budget, which is what I am leading up to and which we are all here to discuss, the government responded to our report by an infusion of some $216 million into the system. That is $216 million for reform. It does not account in any way for the cost of simply running the system, and the $216 million is a relatively small portion of the total expenditure which was projected for 1991-92 for social assistance which will run something in the order of 10% of the Ontario budget, that is, roughly $5 billion. I think that was the projection contained in the budget itself.

What accounts for, first of all, the additional funds and why such a substantial increase in social assistance expenditures, which is reflected in what was taken to be a considerable increase not only in the budget but in the budget deficit? First of all, let me give you a few of the items that were in the $216 million. Off the top, the first roughly $15.5 million to $16 million has to do with social assistance for aboriginal peoples in the province of Ontario.

When I refer to aboriginal people, I am talking about people who live in defined first-nations communities as opposed to aboriginal people who are in fact residents of urban or semi-rural areas but not in fact in a particular community or have been in that community within the previous year. That is the legal definition that we are talking about. There are roughly 130 such first-nations communities in Ontario. There are, when you examine the circumstances of those communities, many who live in considerable poverty, in conditions that we tend to associate with countries in what is known as the lesser-developed world. In some cases we have communities in which there are extremely few jobs of the sort that we come to understand in urban areas or even in smaller urban areas and rural areas, and much of the income in the community comes through social assistance.

That $16 million was also in recognition of many grievances which reappear and reappear in report after report on the social assistance system in regard to native people for the last 15 to 20 years; grievances which were not recognized by previous governments, at least not to the extent that they were prepared to put money into the system. The irony of it, of course, is that what we are looking at when we count $216 million, and agreed when we count $5 billion as well, is the total cost of the program on the basis -- and this is traditionally the way in which Ontario has made its accounting, and that is, that it accounts for everything that has to be expended regardless of its sources. This makes sense because once it commits itself to making the expenditure, it carries the risk of doing so, and if the expenditures do not come from one source, they must come from another.

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In this case, roughly 97% of the $16 million will come from the Department of Indian Affairs and Northern Development. The other 3% has to do with the differences between what Indian Affairs will recognize as an expenditure and what Ontario pays in its package of social assistance. So much of that is money that will come back in.

Let me look at some of the other things. I think it has been agreed pretty widely that the appearance of food banks, the overusage of shelters, the appearance of soup kitchens, has been a blot on our society in the 1980s, shocking to see their reappearance after 50 years. I think most people have understood that with the advances of the welfare state in the postwar period we would never again see the kind of relief lines that appeared in the 1930s, but yet we are now into the 1990s and we still have considerable lines in front of food banks and soup kitchens in Ontario.

Part of our purpose, and certainly part of what the government directed us to do in October last year, was to look at those whom I would term to be in profound poverty. That is, those people of all of the people below the measured poverty line, who are in the most profound poverty, who have the least. Among them are people who live in institutions, not only shelters, homes for battered women, but other kinds of institutions -- homes for developmentally disabled persons, for example.

So part of our purpose was to try to direct money to those people who are in the greatest need to try to reduce the obvious disparity between those people on the street and the rest of society. A number of items were directed that way, one of which is what is known as the comfort allowance in the social assistance business. That is the amount of money a person can have in their pocket after, in effect, their room and board or their per diem is paid for, because they do not get that money directly. That money goes to the institution.

A shelter does not collect money from individuals. A shelter gets a per diem from the province in recognition of the fact that those people would have collected assistance. They come away with nothing in their pocket, people who live in what we used to call room and board and lodgings. Clearly, the numbers of lodgers have declined considerably with the gentrification of urban areas. None the less, there are a large number of people who live in room and board. When they come to receive assistance, they get a special room and board rate. That is all they get. They do not get anything in their pocket, or in many cases they do not.

More recently, they have gotten a small amount in their pocket, and part of our purpose was to increase that amount in the hope that those people, and those are many of the people who do appear in the queues at food banks and soup kitchens, would not have to be there so often. They could, in fact, cover their expenses in other ways. When you see people appearing it is not always because they would literally starve to death; it is because if they do not take food in that way then they have to pay for it with everything else, and that leaves them nothing left over. So their only means of supplementing their income is to take a bag of food in order not to have to spend a little bit of money on the food so they can pay for something else that they are not getting. It is a survival mechanism. No one should fault them for it, because they receive a meagre amount of income.

We also talked in our report about greater fairness and we went to great lengths to look at what could be done in the short term to correct for some of the problems of fairness in the system. For one example, women who have been subject to abuse, to violence in the family, if they leave the family home which is unfortunately all too likely, they would have been, until the changes effective this month, only eligible if the combined income of themselves and their spouse, the spouse who was responsible for the violence, was below the levels necessary for eligibility. Otherwise, they would be deemed ineligible even though, for example, this might have been somebody who was substantially at home without any income. So they are left without any income, nowhere to turn.

What we recommended is that they have a grace period where we simply will not look at what their income is and ensure that in the short period of time until their life can be regulated, will have some form of support. We also looked at expanding support for self-employed persons. As you know, there are lots of people in this province who run corner stores. If you look at the income statistics by category of occupation, one of the things you realize is that people who run corner stores not only work long hours but they take, in effect, very low pay for what they do.

As you know, I do not have to tell you, there are an enormous number of bankruptcies among self-employed persons. One of the things we recommended is relaxing the rule on self-employment. Previously, you were simply, categorically ineligible if you were self-employed. In other words, it does not matter what your income is, you were ineligible by virtue of the fact that you were self-employed, but you could have been receiving, in effect, less after your expenses than the minimum wage, less in fact than social assistance recipients receive.

So we have recommended opening that up. We have also recommended a number of other changes having to do with assets that people need in order to earn a living. Does it make sense, for example, to tell a carpenter who is self-employed or who is employed on a seasonal basis to sell his tools in order to receive assistance, and then he is not able afterwards to work? Similarly, there are other examples where people hold assets of greater value, but those assets have to do with their employment. They do not have to do with the accumulation of luxuries.

Those are some of the examples of the kinds of things that we were trying to do to rationalize a system which had not been rationalized, had not been looked at systematically, and to make more sense out of it. We are also in a situation where there have been vast increases in the numbers of people who are receiving assistance, and our numbers have gone up dramatically. We have more than doubled the number of people who are receiving assistance in little more than two years.

What we are witnessing in Ontario is something that perhaps we are not used to -- we are witnessing the effect of a major recession. The numbers of people now who are receiving assistance as a percentage of the population in total is roughly about 8%. If we look at those people who are of working age, that is, under the age of 60 in order to exclude, for example, people who are receiving support on pensions, it is over 11% of the remaining part of the population. That is the highest level that it has been in the last 11 years, and it is roughly double what it was in 1981.

We pointed out in the Back on Track report, and there is a chart which I would refer you; it does not contain the 11% figure because that is of 1991 and this chart only goes to 1990. It is again quite worrying. The chart is on page 36, for your reference, and I would be happy to ensure you have copies if you do not already. What is very worrying is this: We had a recession in 1981-82 as you know, and what we expect to see is, after a lag -- because we have a three-tier system; we have supports through employment and we have the second tier down which is unemployment insurance for those people who have insurable earnings, which is in fact most people now, and thirdly we have the assistance system -- we would expect to see after some lag, because people bounce from employment to unemployment to unemployment insurance and then to assistance if they are still unemployed after some period of time, we would expect to see an increase manifesting, say, in 1982 or in 1983 and then a decline as the growth hits, right? We all know there was a growth period, a growth spurt, roughly between 1984 and 1989. I know there were certain points in that period when in Toronto, for example, it was difficult for employers to find workers, and the effective minimum wage went to more like $7 simply because of the labour shortages. But we did not see a decline in our numbers, we saw a levelling off.

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There was 4.5% of the population dependent on assistance in 1980 and it goes to 5.8% in 1983. It stays roughly around that level through 1986 and goes to 6.2% in 1987. So it is still at a plateau, well above where it was in 1980-81, and then begins to really shoot up after 1989. There is something happening that has to do with underlying structural changes in the economy. We are losing jobs. We have been losing jobs faster than we have been gaining them. The nature of jobs is changing also from better paid jobs, from what was traditionally known as the job triangle -- am I running out of time?

The Chair: Yes, you are. You have about a minute and a half just to sum it up. I do not believe there will be any question time, but maybe there are some important facts you want to get out in that last minute and a half to two minutes.

Mr Moscovitch: -- to what is known as the hourglass shape. The consequence of the hourglass shape is that what we have is a lot of low paid jobs and some high paid jobs and not a whole lot in between. What it means is that the traditional promotional route within a corporation, for example -- start at the bottom and work your way up -- becomes more and more problematic. We are now into another recession and the numbers have shot up even more.

The last point I want to make to you is this: Whereas in 1981-82 we did have a three-tier system, now we have what I might term a two-and-a-half-tier system. The federal government has made substantial changes in unemployment insurance to reduce the length of time that people are eligible for assistance and to increase the length of time it takes to become eligible. The consequence of that for us in what has always been known as fat Ontario and Canada is that we have been getting more and more people going straight to assistance and bypassing unemployment insurance. Later this year we are expecting a rush of people, unemployment insurance exhaustees, on to assistance. So the numbers we have now, which is close to 500,000 cases in the province of Ontario, is going up even further as a consequence of changes initiated by the federal government.

When you add to that -- and this is my last point -- the recent decision by the Supreme Court of Canada in regard to payments under the Canada assistance plan, what you realize is that, first of all, the base of payment for the Canada assistance plan in the province of Ontario as a consequence of that decision is not 1990-91, it is 1989-90. In other words, it is the year that the recession began to hit, not the year in which the recession is really hitting. So the base is substantially smaller for the 50% payment. That is the base on which the 5% is added, not 1990-91. So I do not know how many minutes we got into the year before we used up the 5%, but it was not very many. What has happened as a consequence of the changes being wrought by the federal government is a substantial shift of the cost of unemployment on to the province from the federal government in those two different ways.

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

The committee adjourned at 1704.