PRE-BUDGET
CONSULTATIONS
CANADIAN ORGANIZATION OF SMALL BUSINESS
FEDERATION OF WOMEN TEACHERS' ASSOCIATIONS OF ONTARIO
ONTARIO ROAD BUILDERS' ASSOCIATION
CANADIAN LIFE AND HEALTH INSURANCE ASSOCIATION
NATIONAL ACTION COMMITTEE ON THE STATUS OF WOMEN
MUNICIPAL ELECTRIC ASSOCIATION
ALLIANCE OF SENIORS TO PROTECT CANADA'S SOCIAL PROGRAMS
ADVOCACY RESOURCE CENTRE FOR THE HANDICAPPED
ONTARIO COALITION FOR BETTER CHILD CARE
UNITED SENIOR CITIZENS OF ONTARIO INC.
CONTENTS
Thursday 8 February 1996
Pre-budget consultations
Canadian Organization of Small Business
Les Solomon, tax counsel
Federation of Women Teachers' Associations of Ontario
Sheryl Hoshizaki, president
Ontario Road Builders' Association
Arthur Ryan, executive director
Bruce Flowers, second vice-president
Ontario Hospital Association
Brian McFarlane, board member
Ron Sapsford, chief operating officer
Canadian Life and Health Insurance Association
Jim Witol, vice-president, taxation and research
National Action Committee on the Status of Women
Vuyiswa Keyi-Ayema
Municipal Electric Association
Elvin Martin, chairman
Jim MacKenzie, president
Alliance of Seniors to Protect Canada's Social Programs
James Buller
Alex Gorlick
Advocacy Resource Centre for the Handicapped
Ron McInnes, president
Giselle Cole, board member
Harry Beatty, staff counsel
Daily Bread Food Bank
Gerard Kennedy
Ontario Coalition for Better Child Care
Kerry McCuaig
Martha Friendly
United Senior Citizens of Ontario
Al Smith, president
Jane Leitch, past president
Wally Connon, director
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président: Chudleigh, Ted (Halton North / -Nord PC)
Vice-Chair / Vice-Président: Hudak, Tim (Niagara South / -Sud PC)
Arnott, Ted (Wellington PC)
*Brown, Jim (Scarborough West / -Ouest PC)
*Castrilli, Annamarie (Downsview L)
*Chudleigh, Ted (Halton North / -Nord PC)
*Ford, Douglas B. (Etobicoke-Humber PC)
*Hudak, Tim (Niagara South / -Sud PC)
*Kwinter, Monte (Wilson Heights L)
*Lankin, Frances (Beaches-Woodbine ND)
Martiniuk, Gerry (Cambridge PC)
*Phillips, Gerry (Scarborough-Agincourt L)
Sampson, Rob (Mississauga West / -Ouest PC)
*Silipo, Tony (Dovercourt ND)
Spina, Joseph (Brampton North / -Nord PC)
*Wettlaufer, Wayne (Kitchener PC)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Bassett, Isabel (St Andrew-St Patrick PC) for Mr Arnott
Carr, Gary (Oakville South / -Sud PC) for Mr Sampson
Gilchrist, Steve (Scarborough East / -Est PC) for Mr Spina
Marland, Margaret (Mississauga South / -Sud PC) for Mr Martiniuk
Clerk / Greffier: Carrozza, Franco
Staff / Personnel:
Drummond, Alison, research officer, Legislative Research Service
The committee met at 0928 in committee room 1.
PRE-BUDGET CONSULTATIONS
CANADIAN ORGANIZATION OF SMALL BUSINESS
The Chair (Mr Ted Chudleigh): I call the meeting to order. We have with us this morning the Canadian Organization of Small Business. We have 30 minutes for a presentation and questions.
Mr Les Solomon: Good morning. I've put out a memorandum. It's only a short two-pager. I think everybody's got a copy of it.
I'm a chartered accountant. I'm tax counsel to the Canadian Organization of Small Business. We've been asked to make a submission which we've done over the last number of years. I'll briefly touch on the points which we've raised. This is not going to take long.
Essentially, we have two problems: One is high taxes and the second is the high cost of regulation. I haven't really detailed regulation because I wanted to talk about it. Possibly I'll get to that at the end of these points.
The first point is high personal taxes. Our taxes are higher than any other jurisdiction near us. That means all the US jurisdictions which abut us. Although Quebec's taxes are coming down, our provincial taxes are going up. So there has to be some look at the high personal tax cost.
We specifically haven't mentioned corporate taxes, which are in the main reasonable. The small business tax is slightly higher than Quebec's but well in line with the US small business tax. The problem is that most small businessmen will have to live off their businesses and take the income all the way through, and the high personal tax cost flows through to them anyway.
One of the things we thought, in fact this was discussed way back when the GST was imposed, and the feds actually promised this -- I remember a meeting with Michael Wilson where it was actually a tradeoff for support of the business community -- was that the GST would reduce high personal taxes. That obviously hasn't happened.
One of the suggestions at the provincial level is the synchronization of the two taxes, which means the provincial sales tax would be on services as well as on goods. Somebody's done calculations. There are a whole lot of economic studies. Somebody's got a 11% or 12% combined rate, which would bring in the same amount of money. Our suggestion is that this be seriously looked at again. I know that the feds are into this; I know that the previous government had looked at it. I stand corrected if that is not the case, but I thought they had, arising from previous meetings. It would be a source of funds.
We would actually want to widen this. The GST or combined VAT -- I think we should get off the GST nonsense and call it what it is; it is a value added tax -- should be on everything. If VAT was on everything, as you have in most European countries -- the move in Europe is lower personal taxes, higher consumption taxes -- you eliminate all the nonsense about abuse.
The abuse in the system is rampant, particularly in the GST system -- all small operators and their $30,000 limits. Compliance is difficult to measure. If it was on everything, it would be very simple because nothing more than the sales for the year would be subject to tax, period, and it could be picked off the actual federal tax return.
We've covered capital tax in the previous meetings over here. We think it's a counterproductive tax. We've given you examples, particularly in the tourism industry. Where you spend a lot of money, where you have very big mortgages, you're not making any money. You've got a break-even situation, or worse, you're losing money, and at the end of the year you're into $10,000, $15,000 in capital tax -- punitive. The same thing applies in fact in large supermarkets, startup situations, car dealerships; we can give you a whole lot of examples.
The employer health tax is a tax. It's a tax on business. It was put in by the Liberal government. We at the time protested it. We thought it was a move in the wrong direction. The initial method was not even to tax professionals, which was absurd. They rectified that. They still have a $40,000 base on professionals. Essentially, this is really something which has got to be covered by the whole health care costs. Health care is your biggest budget item. We think the method the government's going about is wrongheaded. You may be constrained by the Canada Health Act, and we think that it's time -- we know Alberta's been trying to do this -- for all the provinces to stand up and get their Canada Health Act changed.
This may not be popular, but some kind of user fee is probably going to be necessary. Some kind of co-insurance is going to be necessary. Some type of co-insurance on procedures may be necessary. It may be that if you want to have a certain kind of procedure, you pay part of it. We're not talking about catastrophic health care, which obviously must be covered, but there can be something done in the system.
We think the system which is saying, "We'll cut the number of doctors or we'll make the doctors pay and that'll reduce health costs," is doomed to failure. It's just going to degrade the system. We mentioned this.
We also think that employer health tax should be abolished and it should go back to a cost, to a premium. It is an insurance. People should buy the insurance. It should be compulsory. It should be a deduction from your salary. In the case of welfare recipients it will be a deduction from the welfare payment. People will buy it. It is insurance. Once they pay it they would know what the hell it is. At the moment there's an assumption that this is something that's provided free, but it isn't. The employers are paying for it.
Provincial finances. This is something that's worried us. This is just numbers again. The previous government led us to believe in the last economic statement that there was a plan to balance the budget, and they were into fairly meaningful spending cuts already. I think Mr Laughren was going to balance the budget roughly over exactly the same time frame as we now propose.
Our question is, given the more serious spending cuts that we now propose, why are the numbers still so fluffy? We just don't seem to see that this thing is real, that the deficit is going to be reduced, that the budget is going to be balanced. We have a question as to whether there's going to be a tax cut in these numbers. If so, fine. We are in favour of a tax cut, but it needs some more clarification of the numbers that came out of the minister's last statement.
Just as an aside, we think the minister's last statement could have been put out in January and not in December. That might have helped business at the time. It was a terrible Christmas and there was no need for it, particularly in the retail sales end.
Mr Gerry Phillips (Scarborough-Agincourt): I'm sorry. What did you say there? I didn't get you.
Mr Solomon: That was an aside. That was only a point. The point is that the economic statement of doom and gloom in December hardly helped Christmas sales.
My next point is on waste. We think the underground economy is strengthening. We think the attempts at controlling it are not working. We notice that Revenue Canada stepped up the amount of auditing, which I suppose helps. In our opinion, the only time you're going to get a meaningful move away from the underground economy is if you have a system which is perceived to be clear.
We're not advocating some kind of nonsense of a flat tax, but we are suggesting that the more you move to consumption taxes and away from very high personal taxes, the more you'll move away from this underground economy. The more you have an easily verified sales tax system, which is tied into the amount of your sales -- in other words, your sales are X, the taxes Y and you should have collected it and you can measure it.
Under the existing system some goods are taxable and some goods are not taxable. With the GST you've got the patent absurdities of tax-free and tax-exempt. For example, medical supplies are tax-exempt, which means you do not get any tax credits. Other things are tax-free completely. We need a simpler system. It's quite possible to have a simpler system.
We've had discussions at the federal level. We understand that they are sympathetic to it. I think a meaningful VAT is what is needed. It's what's done in Europe. I don't say Europe is the absolute example, but the taxing there is moving in that direction with lower personal taxes, which is something we're going to have to face up to, particularly with the move in the United States for lower taxes. I don't know how they can do it, but they're moving in that direction.
People have brought up in the past at a previous meeting a tax on financial transactions. I know the big business community is against this. We are loath to discuss it because we really haven't explored it. We wanted to cover it because it seemed to be some kind of money spinner. We think that as a consumption tax, even at a very low rate, it may be the kind of thing that governments are looking for and we suggest that at least it be examined.
We also cover the use of RRSP funds directly in small business. This is going back over the years. In fact, I remember a petition to Marc Lalonde, when he was still federal Finance minister, to do something in this regard. We got other feds with some kind of convoluted nonsense which basically said that you could invest $25,000 in the business of the neighbour three doors down, of which you knew precisely nothing, but you couldn't put your money into your own business. But it was okay for Bay Street to take millions and billions of dollars and throw it against the wall. That was in order; that didn't hurt you. For you to buy the most shaky of stocks on the Vancouver Stock Exchange was in order, but for you to put your money in a business where you probably had a fair chance of doing something with it was a no-no.
0940
I know there have been some regulations and there has been some slight relaxing at the federal level. Apparently now, provided you own less than 10% of a business, you can put in up to $25,000. In most small business situations, everybody owns more than 10%. That's why they're in the business. They started the business, they own the whole business or there are a couple of partners and they all own a third or half.
We know that, given the problems of the Canada pension plan, governments are looking for retirement savings to be the mainstay of people's retirement planning, so they don't want these things wasted. We nevertheless feel that some kind of arrangement whereby you could put up to, say, 25% -- the average RRSP, if somebody's been in the system from day one, is in the order of $300,000 which, if somebody's been contributing and earning, I get from my practice, is pretty normal. If somebody could say, "I'm taking $50,000 or $75,000 out of my $300,000 to put into my business," I don't think he's worse off than having a bad deal on the stock market or putting the money in some kind of cottage. You can put it in a convoluted way. You can place a first mortgage on your own property. I urge the government to negotiate with the federal minister to relax the rules in this regard. We really think there's a very big source of funds.
Something which is allied to this which I haven't detailed is sources of funds. It is impossible for small business to get adequate financing. The Small Business Loans Act only allows it on fixed assets. If you require funding for an ongoing business, particularly if it's a goodwill situation where you develop a computer software business or you develop any other kind of service industry, the chances of the bank's lending you money are zero unless you put up your house and everything else, and very often these situations are by entrepreneurs who do not even have equity in their houses. This is a source of funds; it is one source of funds. We could tell you to put the heavy on the banks, and all that's being done, but we have to come up and there has to be some kind of method of financing small business.
Quebec came up with its Quebec fund a couple of years back. It has been, actually, fairly successful. A lot of the small startup situations in Quebec have gone public and have been fairly useful. Something in the line of the Quebec stock purchase plan -- I don't mean the trade union stock purchase plan, which has worked to some extent, but it's been an RSP deal, and frankly I don't know how much money it's really put into small business. We're talking about letting startup situations on small Ontario corporations get some kind of public funding or some kind of tax break. This is something you may want to explore. We would be pleased to explore this with any budget committee and come up with further ideas.
Finally, I just wanted to talk about regulation, which is something you haven't covered over here. The average small business has corporate taxes, has provincial taxes, has EHT, has GST, has PST, has workers' compensation, has a myriad of other damned stuff and it's becoming intolerable. Again, some move on a meaningful, smooth VAT would help regulation.
On workers' compensation, I don't know what to say. It seems to be all over the map. It's not a matter for this committee. I gather other committees will look at the workers' compensation situation, but there is overregulation; there's an overabundance of paperwork. We've mentioned this before and we really think it's time. If the government's talking about common sense, please, let's look at that one.
I thank you. That's basically our submission. I assume there will be questions.
Mr Phillips: Just quickly on the funding of health care, you're recommending here a move away from the employer health tax and on to premiums, I think, if I read your proposal correctly.
Mr Solomon: Correct.
Mr Phillips: Right now, the employer health tax funds about 10% of the health spending in the province. The plan is to move that down. The government has announced it will be cutting -- I don't know the number. We will eventually find the number, I guess, but they're going to cut probably $600 million or $700 million out of that $2.6 billion and bring it down to maybe $2 billion out of a total health bill of about $28 billion in the province. Do you still think that, as a percentage of the health funding, is too high?
Mr Solomon: We think the health insurance plan is an insurance plan. It should be actuarially calculated as to what the funding should be. The government should say what it can contribute towards it in a finite number, and the balance should be funded by insurance. In other words, OHIP premiums may have to go up. If you want to call it a user fee, if you want to call it premiums, call it what you may, but we're saying that it's impossible to continue to run a health care system where you are constraining it from the top.
Obviously, if you're moving in the United States -- I'm not saying these are models of efficiency, because I think they're wrong, but the average health care facility, what they call them over there, they're putting the pressure on costs in exactly the same way as we're trying to put the pressure on costs. This has to be done, but there has to be another method of funding this thing and we're saying there has to be some kind of user funding.
Mr Phillips: I appreciate that. One of the challenges, I think, if you look at one of our major competitive advantages for attracting manufacturing and other operations in Ontario versus the US, is that they look at their health costs and they run 7% or 8% of their payroll; here it runs 2% to 3% of their payroll.
Mr Solomon: A very good point. As a matter of fact, I heard Lee Iacocca make that exact point on American TV as to why they're building cars in Ontario as opposed to Michigan. A very good point, but we're saying the spread doesn't have to be 8 to 2; maybe it's 8 to 4. We're just suggesting that maybe we're giving them too much. That's a very good point. I think we're giving them too much.
Mr Phillips: That's one of the reasons that it's funded in the way it is. I would just say that that's a big decision, because if you say move it to premiums, guaranteed the experience is that the employees and the employers will sit down and find a way that that becomes part of the remuneration package. So you inevitably add payroll costs heading in your direction. Now, it may be wise. I have some question about it.
With the underground economy, your solution is to apply a consumption tax. Most people who have looked at the underground economy believe that when the GST came in, it accelerated the underground economy to a significant extent. Have I misread what you're recommending here?
Mr Solomon: No, that's a very good point. In fact, you're partially right. Our point is that the GST was so badly constructed that it left itself open to abuse. I agree with you the GST is being abused, and probably that's the worst possible area. I think the PST is being abused as well, if you want to ask me.
Mr Phillips: I'm sorry. What kind of a consumption --
Mr Solomon: We're saying that if it was on everything, it would be easier to police. At the moment, you've got too many excuses. For example, I gave the $30,000 floor on GST. If you were running a small business and you were selling less than $30,000, you don't charge GST. Now, the guy who's selling $31,000, he's supposed to charge GST. So everybody makes sure they're below $30,000. I think this is artificial.
Ms Frances Lankin (Beaches-Woodbine): I appreciate your presentation. I wanted to ask you about some of the statements you've made on levels of taxation, starting with your first point on high personal taxes. I was interested in that because I think if you look at Ontario's PIT, at the top marginal rate there is no doubt we are, I think, second highest in Canada. If you're looking at international comparisons, particularly if you're looking at our main trading partner, the States, there's a very different social structure paid for by the taxes; that's true. But my understanding is -- and I'm wondering if you know any figures -- that if you look at the middle-income earner or if you look at the low-wage earner, in fact we are more than competitive, ie, we would be down in the lower first quartile of provinces, provincial jurisdictions, for example, in terms of taxation, PIT rates.
0950
Mr Solomon: You're probably right. I would say you're absolutely right. We think the top rate is too high.
Ms Lankin: The top marginal rate.
Mr Solomon: It's only the top marginal rate.
Ms Lankin: That's where over the years we've looked at those people who have the highest incomes, at putting the additional surcharges on, which is what's brought our top marginal rates up.
Mr Solomon: Absolutely correct.
Ms Lankin: Okay. Personally, if we're going to have most of our taxation come from personal income tax as opposed to consumption taxes -- I understand the point you're making around that -- it seems to me that this kind of progressivity, though, is a fair way to do it. Or would you like to see a more compressed PIT range?
Mr Solomon: We'd like to see a more compressed range. We do not favour the flat tax that's been proposed, but certainly something that's more compressed.
Ms Lankin: I noted that you did indicate that in terms of corporate income taxes we are generally competitive now. I know Mr Wettlaufer doesn't believe that; he challenged a presenter yesterday. But I've been spending time looking at the interprovincial comparisons, the G-7 comparisons, the US Great Lake state comparisons, and by and large we are competitive, if not slightly ahead. Is that your perception, if you look at all of the payroll tax and corporate taxes brought in together and compare that on a fair basis to the point, actually, that you were just discussing with Mr Phillips around the other kinds of payroll taxes they might have in the United States, which are employee health benefits etc?
Mr Solomon: I'd imagine that's a fair statement. We've compared it in client situations with US corporations that have branches over here, and there hasn't been any great feeling that the corporate tax was too high in Ontario, that you had to start playing games with fees and everything to move the income back to New York state. These are New York state and Pennsylvania, which are fairly high-tax states over there; perhaps Florida is a bit lower. But I don't think that's a problem.
Ms Lankin: It's interesting just on the health issue. In fact, the comparisons that I have seen indicate that in the US, a medium-to-large employer pays on average about $4,200 a year per employee for health care costs; the cost to an Ontario employer is about $700. So there's an advantage there. But it also actually feeds into issues of competitiveness outside of taxation. I think employers also look, if they're considering where to invest or where to site new locations, at the dollar exchange rate -- all of those things are going to factor in. But so is the education system, the quality of worker that's produced, the health of the population; those are all also factors that would go into decision-making for investments.
Mr Solomon: A good point, but I think we're too competitive at the moment. I think with a low dollar and these ridiculously low charges, we're probably subsidizing big business. I'm saying it should be at the employee level, that they know what they're paying for. Obviously it would be part of the wage package. But we're saying you don't need to go anywhere near what we're doing. There has to be a higher payment for health costs.
Ms Lankin: Tell me just a bit more about your concerns on the capital tax. In particular, I know that you're representing small business, and my understanding is that small businesses and I guess companies with gross revenues up to $1 million are exempt from the capital tax, so it's more a larger enterprise that you were speaking on behalf of?
Mr Solomon: It's easy to get to the situation; it basically comes in at the $3-million to $4-million business. You buy a couple of buildings to put a plant in, you're there very, very quickly. You can put an industrial plant over there doing a couple of million dollars a year, they buy a building for $1 million, they have a bank loan of $1.5 million, suddenly they're into $2.5 million worth of mortgaging and they're paying capital tax. We're not talking big dollars here. I don't think this tax brings in a lot of money.
Ms Lankin: I think it's 0.3% for that kind of an enterprise.
Mr Solomon: It's 0.3%, so they'd be paying $7,500, and actually in a formative stage they're losing money. I think this is what's really upsetting them.
The Chair: Thank you very much, Ms Lankin. If we could move to the government side for questioning. Ms Bassett, did you pass?
Ms Isabel Bassett (St Andrew-St Patrick): Yes, I thought I did. We were going to hand it to the small business PA.
Mr Joseph Spina (Brampton North): As the PA for small business, Mr Solomon, thank you, because I very much liked some of the comments that I was hearing coming out of your presentation and look forward to expanding on that, perhaps getting some of those things implemented if possible when we can.
There are two elements that I wanted to ask you about which you may have alluded to, and it may have surfaced as part of the earlier conversation. Could you clarify for me: Is there a tax rate jump that takes place in provincial tax on small businesses that's based on revenue level as opposed to a profit level? Am I correct in understanding that there is such a jump?
Mr Solomon: There's a new tax on large corporations now, but that involves a combination of sales and assets. It's a new tax and it's a combination of $10 million in sales and $5 million in assets. If you have both, there's a new tax.
Mr Spina: This is a federal tax, though, is it?
Mr Solomon: Yes, which wasn't there before. That's probably what you're alluding to. We haven't felt that really hurts small business. It hasn't hurt our constituency in any meaningful way.
Mr Spina: The other element was, and this was cited to me as a restriction to growing: a typical small business: 40, 50, 60 employees. They had a fairly good profit. He said to me that he was subjected to paying tax on the entire amount of that profit, regardless of whether a portion of that was reinvested back into the company, which would give him the opportunity to expand the plant, hire more employees, that sort of thing. Is that a realistic comment on that business owner's part?
Mr Solomon: That's a realistic comment. What would help him, actually, was if he did buy a plant, he would get the amortization of the plant. What the federal government has done from time to time is it has upped the write-off rate, if you want to put it that way, on new equipment. We had a couple of years when it was up to 50%. So reinvestment on this basis is useful. That's something that should be a federal initiative, whether they want to get the reinvestments the opportunity for tax write-offs. But otherwise, his point is correct.
Mr Spina: Is there room for us to do that as a province?
Mr Solomon: Yes, it would help somewhat, I suppose, if we allowed a fast write-off of new equipment or new investment in a business. You may have to be careful how you define "new investment," that it really is going into increased inventory or increased receivables or increased equipment. Maybe stick to equipment, that they're actually putting something into the thing, and give some kind of a write-off. It's certainly possible, yes.
Mr Spina: Would it be better for us to give these kinds of incentives rather than cash grants and subsidies?
Mr Solomon: Yes.
Mr Tim Hudak (Niagara South): Thank you, Mr Solomon, for an excellent presentation, especially in terms of the burden of taxes and regulations that have been ratcheted up in the last five or 10 years at least.
A direct question: This government will be permanently lowering the level of taxation. What will be the impact of that on small businesses and also in terms of the number of employees that small businesses have?
Mr Solomon: If you can lower taxes and still balance the budget or reduce the deficit, it obviously is going to be advantageous. Lower taxes means the businesses have more money, and it's probably a generality that if you have more money, if you make $100 and you end up paying $25 out instead of $50, you're more anxious to put the other $25 back into growing. We think it will create jobs.
The Chair: Thank you very much for your presentation, Mr Solomon.
Ms Lankin: Could I ask a clarification? Was that the personal income tax cut that you're referring to?
Mr Solomon: We were talking about personal income tax.
Ms Lankin: And not corporate taxes?
Mr Solomon: Not a corporate tax; we're talking about the tax all the way through.
Ms Lankin: Right, not just what you're intending to do, which is income tax.
The Chair: Thank you very much, sir.
Mr Phillips: You know this won't be confidential any more, now it's on the record.
1000
FEDERATION OF WOMEN TEACHERS' ASSOCIATIONS OF ONTARIO
The Chair: We now have with us the Federation of Women Teachers' Associations of Ontario. Good morning. Identify yourself, please, for Hansard when you begin. We have 30 minutes and we look forward to your presentation and questions to follow.
Ms Sheryl Hoshizaki: You have before you a brief that's presented by myself as president of the Federation of Women Teachers' Associations of Ontario. We have approximately 41,000 members, women who teach in the public elementary system. I'm not going to read the brief to you, but I would like to highlight particular aspects of it. Although I feel like I've repeated --
Mrs Margaret Marland (Mississauga South): Sorry to interrupt. Are you Sheryl?
Ms Hoshizaki: Yes, I am, Sheryl Hoshizaki. Sorry, I forgot to give you my name.
I've presented these concepts before, before other committees. We believe the theme is rampant in what's happening in Ontario today, and that is, that there's a pattern emerging in the cost restraint measures, that this will impact on children and support services for families most drastically, and therefore affect the quality of life for children, not just today but in the future.
I will try to just outline as we go through the brief and make comments. What we'd like to say is that cutting costs in the area of children's services will not translate into savings. It will only create a society where some children will have privileges and other children will not. Unfortunately, what this government is proposing is ensuring that more children in this province will have less opportunity to lead a fulfilling and a participatory or contributory life in Ontario. This saddens us as teachers in Ontario, especially as women elementary teachers, because we feel we have the responsibility to tell you this and that you, as leaders, have the responsibility to respond to it.
As a government and as a committee, you are the leaders who must recognize that you have the sole responsibility in that you are a government of all the people who live in Ontario. You're a government for young, for old, for rich and for poor. We believe Ontario must be a decent place for all of its citizens.
Poverty is a form of violence. In fact, we believe it is the worst kind. Children who live in poverty lose hope and that is their future. They will not have opportunities to lead productive lives. It is not so simple to suggest that their parents or the adults who care for them -- that all they have to do is become motivated and that children have to have the will and then that will be the opportunity for success. It's not that simplistic. There is no will to learn if a child is hungry or cold or not knowing where they will sleep at night. As teachers, we see this loss of will in children's eyes every day. Unfortunately, we see it now in more children's eyes and we see it in younger children every year. As Ross and Shillington put it, "Poverty is deprivation." When children live in poverty they cannot learn to their full potential.
We know that in assisting emerging countries, Canada has had the intelligence to set up educational programs. Why are we so hesitant in our own province to invest in the same concept at this time?
I'd like to talk a little bit about the deficit and economic recovery, and we've outlined our point of view. We'll say to you right up front that we're not economic experts, but we would also like to say, neither are you. You depend on counsel, like we do. You have opinions about economic recovery, and so do we, and I'm sure we differ on these opinions.
What we are expert in is in our field, and that is education. We say to you that to drastically decrease the cost of education will not result in the outcome you're hoping for, the simplistic view, that is, cut spending and the government will save costs, return a tax credit and stimulate the economy. In 1991, a Statistics Canada study found that it is not the expenditures that are to blame for the deficit, but the revenues, and the decrease in revenues will only result in a province with increased disparity or a range of those who have and those who have not. Yes, we want a more secure and prosperous future for our province and our children, but you do not secure the future by cutting off the present.
In our brief, we have outlined fiscal restraint comparisons of Ontario policy with other neo-conservative strategies, in particular Alberta, New Zealand and Britain. We have presented to you some examples that we hope this government is not aiming for. On page 4, we talk a little bit about New Zealand. In 1984, the unemployment rate in New Zealand was 4%; today it stands at over 16%, and it would be much higher if 120,000 people had not left the country since then to find work. Over half the country's manufacturing jobs have disappeared. Now New Zealand leads the world in incidence of violent crime and youth suicides.
A 25% cut in welfare rates drove poverty rates up by 40% overnight and one in every four New Zealand children now lives in poverty. Teachers report that thousands of them cannot concentrate because they live in poverty and are hungry. Parents must now pay for part of their children's schooling. This has created a two-tier system with inferior schools in poorer neighbourhoods and better-funded ones in more affluent sections, and it goes on. We hope again that these are not the results this government is aiming for.
We then would like you to consider other models, European models, that recognize that all people must share in the good times and the bad times equally and that there has to be a period of time for the adjustments to deal with restraint measures.
What we would like to say to you is that massive layoffs will redefine communities in Ontario. There will be no places to go to find jobs, and most of you who return to your communities will know of neighbours or friends who do not have jobs. When Mr Harris referred to this province's reckless spending, we believe this was a subjective opinion and was based not on calculation but on simple observation. We say there's just no evidence that supports this analysis of Mr Harris's, because program spending, not including capital expenditures and debt financing, by the Ontario government increased by 66% from 1986-87 to 1995-96; over this time, inflation increased by 37% and the population increased by 17%. Thus, taking inflation and population growth into account, program spending increased by 3.5%.
Our organization fails to see how this can be described as reckless spending. What has increased over this time period, however, is real interest rates, seriously affecting the cost of servicing the debt. This, coupled with continuously high unemployment rates, has meant that revenues have not kept pace with the needs of Ontario.
1010
On February 6 it was stated that many of Canada's blue-chip companies are reporting substantial profits and yet are continuing to cut jobs "as if the recession never ended."
I was talking to a person from the bank yesterday -- and it's a bank that has been well known to have boasted of very large profits this year -- and I said to him, "Has your employee base decreased in the last month?" He said, "Yes, we're continuing to have massive layoffs." I find that interesting because it obviously fits the pattern of the larger companies in Canada.
But more importantly, David Crane states: "Anyone who cares about the future would surely know that programs for children are much more important to our future society than tax cuts for the wealthy. There are fundamental questions of priority here."
The most important part of our presentation is meeting the needs of children and early childhood education programs. Children have been described by politicians, this government and previous ones, and ones even before that, as truly Ontario's most valuable resource. Children are not renewable resources. If we don't invest in them at a young age then we lose them, in part, and as part of an educated workforce in the future.
We cannot make the mistake Alberta did when it came to kindergarten. Too many children are sacrificed. Children cannot wait for the government to make up its mind and find out a year or two years later that it should have maintained a program, for two reasons: First of all, it costs too much money to reinstate a program, and secondly, those children who would have had the opportunities to participate in that program are truly sacrificed with that poor judgement.
What we're saying to you is do not cancel junior kindergarten, and although the government will respond and say, "We're not, we've changed it to a granting formula," that leaves it to a local option. We now know that most school boards in Ontario have made the decision that because of the funding they will be forced to cancel the program. The parents of Ontario do not want to see our junior kindergarten program sacrificed in the name of fiscal restraint. It would be foolhardy, as I said earlier, and very expensive to eliminate junior kindergarten and then find in a couple of years that you would like to return to it.
The debate and the research is really clear, and that is that programs for young children make pedagogical, economic and moral sense. We have examples of the impact that the loss of kindergarten has made in Alberta, and on page 8 we have stated once again that we know what early childhood education programs do. They improve school success. The cost of public schooling is ultimately reduced. The cost reduction was found despite a lower dropout rate for those who attended preschool. The cost of adult education, when needed, was reduced. Juvenile delinquency and crime were reduced. The cost of welfare payments and Medicaid expenses were reduced; it gives you the cost of $2,193 per person through the age of 27, and $460 per person beyond the age of 27. These are the results of the well-known Perry preschool program, which is an American study that took place in Michigan.
Over the last decade, we have learned more about how young children than about almost any other aspect of education, which basically states that when children come to us we can identify earlier now when they are having difficulties, and we can put into place programs to ensure they get the opportunity to get assistance early enough so that they can start reading or working with numeracy much earlier in their school life. We know that this early identification is key to success at school. Those are the biggest advantages we have made in the publicly funded education system, and we plead to you that the early childhood education programs, junior kindergarten and kindergarten, are key aspects of that process.
We refer to the European attitude towards young children and the importance of young children within their governance structure. On page 9 we have outlined the investments that European countries make in young children. It is unfortunate that we have to look across the ocean for examples of adults who will make decisions on behalf of children, instead of looking in our own country.
As the Federation of Women Teachers' Associations we have advocated for a long time an integrated and long-term approach to children's services. In fact the standing committee on social development of the Legislative Assembly of Ontario issued a report in 1994, Children At Risk. This report called for a new vision in providing children's services, recommending the services that are preventive and integrated. Although it makes such common sense, it is so unfortunate that we have not yet seen a government that has had the will to serve children in a horizontal manner and not a vertical manner, because we know children's needs are horizontal and not vertical.
As we pass the care and the responsibility of children from one agency to another, from one ministry to another, the cost increases. We know that your investment in children through the Ministry of Education is at one level. If we lose children in the education system and they also become wards of the Ministry of Community and Social Services, we know the cost increases because it's duplicated. If we lose children under the care of Community and Social Services and they move into the Solicitor General, the costs are increased even more.
What we're saying to you now is, understand that your best investment is in education. At the same time, however, we know that an integrated approach is one in which the different aspects of children, be they social, physical, emotional or educational, are best served when you integrate services. What we're saying to you right now is that, as educators in Ontario, we have yet to have the opportunity to work with agencies, partly because of the mandates that ministries are given and partly because there has not been given the opportunities for agencies to speak with each other, develop relationships and ensure that children's needs are met.
Throughout the brief, on pages 12 and 13, we have outlined some examples and samples of programs that are already established in Ontario, where communities have taken the initiative to bring together agencies and different ministries to work on behalf of children. However, what sometimes causes the barriers is that ministries have not been encouraged nor have they been given the paths or the avenues in which they can share financial resources to ensure that programs that are developed for children are done collectively and collaboratively.
We see this as key to serving children. We believe that integrated services for children in Ontario would be a key solution to part of the bureaucratic expenses that are now costing this government an incredible amount of money in an area that has yet to be addressed in a serious way.
We would also like to ensure that we mentioned that it's preventive programs that make a difference for children. Unfortunately, when cost-cutting occurs, preventive programs are the first to go. We have an example on page 13 of behaviour adjustment classes, preventive programs for young children, and the impact of that.
In conclusion, we would like to say that the major responsibility in raising children belongs to the parents or the adults who have the responsibilities for these children. But we know that families don't live in isolation, they don't exist in isolation, they need support systems. As parents, those of you who have experience know there are times when we need more help than others, but it doesn't mean that we exist alone. We need the assistance of agencies and of programs to help us ensure that our children grow up ready to face the world that will obviously greet them in the next 10 to 15 years.
There is a strong statement that the Metro Task Force on Services to Young Children and Families made on a commitment to children on January 11, 1996. We wholeheartedly endorse this statement and we urge this government to listen to these experts.
1020
When I was younger I remember talking to my mother -- I grew up in Dryden, Ontario -- and she would always remind me to stay in school, partly because there wasn't a lot to do in the winters in Dryden. But mostly I can remember, from a very young age, my mother would say to me that education is so important. She said it doesn't matter what the problem is, it doesn't matter what the question is, whether it's racism, violence, ignorance or illiteracy, education is the answer. It's what gives you and what gives people in Ontario their opportunities, and they give people in Ontario what publicly funded education gives people in Ontario, equal opportunities.
What we're saying to you today is that when children are sacrificed in a society, everyone pays, even though it appears only certain children may be sacrificed.
Mr Tony Silipo (Dovercourt): Thank you very much, Ms Hoshizaki, for the presentation and for reminding us once again that whatever actions any government takes, it really does come down to a question of priorities. If we're serious about dealing with questions of deficit, as I think we all are -- and in your presentation you state that we're not here arguing about whether we should be addressing the deficit, but we are in fact arguing very much about how that should be tackled and what services this government is prepared to sacrifice, particularly when it comes to children.
We are seeing the astounding situation develop in which the Minister of Education himself and the government first said they would not be making cuts to education that affects the classroom and now admit that a $400-million cut is in fact at least an $800-million cut. The minister said that the other day in estimates committee, and I think went as far as indicating that it would be very difficult, if not impossible, for those cuts to be absorbed without affecting the classroom, and therefore without affecting kids.
I know one of the areas the government continues to harp on, and I'm sure we'll see in the next round of cuts they'll announce next week, is attacking such things as preparation time. Again, the illusion they'll try to create is that somehow that doesn't affect kids. I wonder if you could talk a little bit about what it means when you take a chunk of time out of preparation time, what that translates to in the effect of cuts in teachers and, more important, what that means for kids in the classroom.
Ms Hoshizaki: First of all, I'd like to respond to the comment that certain cuts would not touch classrooms. I don't think that is really what the government meant. I would hope it isn't, otherwise it shows an incredible lack of intelligence around what happens in schools, if you think you can isolate classrooms from what really affects learning and teaching. I would like to presume that what the government meant was that they would decrease the cost of education with minimal impact on the learning and teaching that occurs in publicly funded education systems. I would like to add that type of intelligence to the statement.
That's why, when we extend the argument into preparation time or program planning time, that that in effect is so key to the role of the teacher and the relationship between the teacher and the student, because we know there are many things that occur during the school day. One in particular would be that of one-to-one in student assessment. The preparation time or the block of time in which teachers are given to work not only on preparing lessons, which probably is the most simplistic definition of preparation time, but on the counsel with students, with parents, and the one-to-one assessment and observation is absolutely necessary and essential to the achievement and the potential that's recognized for students in Ontario schools.
I think this government must recognize that diminishing preparation time or program planning time will in effect impact on the learning the children have in Ontario schools and that the overall outcome will be a lower standard or achievement level for students without that opportunity, where you get the one-to-one or the lower ratio of working with children.
Mrs Marland: Thank you for being here today. It's an excellent presentation. I think you're aware that the Premier, all the time he was the leader for the previous five years, was trying to establish a children's breakfast program, because he too shares the concerns about children going to school hungry. I just want to clarify, before I ask you a very brief question, you are acknowledging that the deficit is a problem?
Mr Silipo: He's the Premier --
Mrs Marland: Excuse me, Mr Silipo. I think I have the floor.
Mr Silipo: I'm talking to one of your colleagues.
Ms Hoshizaki: I think there needs to be some classroom management in this committee, but I will respond to it.
First of all, I would like to comment on the breakfast program, because that's very important. We are going to lose what we refer to as feeding programs in schools, and I apologize for that title, but that is really the title of programs. These are most often reciprocal agreements. They're with municipalities, they're with other ministries.
I can tell you very bluntly that in decreasing the transfer payments to municipalities and to other ministries, breakfast programs and other feeding programs are going to go in schools. So although Mr Harris may have been a strong advocate behind establishing children's breakfast programs, I can tell you right now there would be no hope of any crusade on behalf of these programs, considering the decrease in funding.
We have stated in the brief that we believe the deficit does have to be addressed, but what we're saying to you is that the amount of money in the short period of time will dismantle what publicly funded education means in Ontario and there will be no hope of recovering what we now have. What we're warning this government is that the risks are too high.
Ms Bassett: If I could just follow up on where you talk about the deficit reduction, you say it should be shared 50% by spending cuts and 50% by increasing taxes. Which taxes would you increase and which spending cuts would you make? The minister wants advice and that's why we value the input and suggestions you're giving. I'd like to take that back to him as his parliamentary assistant.
Ms Hoshizaki: I think what is really important is that not only should we have input but that other parts of society and other citizens should at the same time have input. What we would like to emphasize would be the process as to what part would be -- we would like to share, I think, in the ideas behind what areas might be cost-effective, but what we would like to ensure is that with discussing with other partners, your stakeholders in education, that we wouldn't impact on other families just by our own decisions. What this government has done is in isolation made decisions on where in fact the cuts should be made. What we're saying is that there should be a consultative process.
Ms Bassett: You don't have a list right now.
Ms Hoshizaki: What we have provided to you is an area of integrated services that we believe is a very key solution to saving some money when it comes to cost reduction.
Ms Annamarie Castrilli (Downsview): Ms Hoshizaki, let me comment on your presentation. It was as thoughtful and well-researched a paper as I've seen, and I thank you for bringing it to us.
I was particularly struck by and I hope the government will heed those sections of the report that deal with the New Zealand experience and the conclusions drawn by the Canadian Centre for Policy Alternatives, which you cited in that study, and also with the European documentation you presented, which clearly shows that education is an investment. It's a long-term investment and in fact it is an economic lever for future progress.
The conclusion I draw from that is that if Canada wants to be globally competitive, it starts now. It does not take a short view, it takes a long-term view, and views education as a principal building block in providing that economic competitiveness.
My question to you, because time is short, will be brief. You've heard undoubtedly that the minister is now considering cuts of as much as $1 billion in the educational sector. Could you comment on what the effects will be, one, of the $400-million cut and, two, if that $400-million cut is indeed extended to $1 billion?
Ms Hoshizaki: I'd like to make two statements. First of all, I think that the Environics vice-president, Jane Armstrong, said exactly where voters are in the province and she has stated that people believe cutting government spending is critical, but they have trouble understanding how deep cuts to education and health will actually make their lives better, and I think that's very key.
1030
Those kinds of massive decreases in costs in education will, as I said before, redefine what publicly funded education means. To put it very simply, I'll paint a picture for you. A family gets up in the morning. Their children have to get to school. They go out to get the bus -- no bus comes. Why doesn't it come? Because transportation cuts are going to occur. There won't be a school bus and there may not be in fact public transportation. So children have to somehow get to school.
When they do get to school, the school may be farther, because we know schools are either closing or amalgamating. If they want to see a principal, the principal could be twinned with another school or he or she could be the principal of two or more schools.
If they have a disability or the child needs help, there will be no services for children, because those are the teachers who apparently do not have classroom responsibilities and therefore they will be reduced. If the child needs a feeding program or has a lunch program and the parents are not financially able to pay to stay for lunch then some kind of arrangement will have to be made for that child at school. And it goes on and on and on.
The after-school program, the after-school care program, all those things will no longer exist. That means that family life for children, and school life, will change dramatically with those kinds of costs in Ontario.
The Chair: Thank you very much for your presentation. We'll now move on to our next presenter.
Ms Lankin: Mr Chairman, on a point of privilege -- two points actually: Yesterday, after a presentation that was made by a group on behalf of children's mental health -- you were out of the room at the time, sir -- I indicated that I thought it might be worthwhile for the committee to consider an all-party request to invite Dr Fraser Mustard to come before the committee and talk to us about, with a shrinking pie, the importance of investment in children.
I have been informed by the clerk that the appropriate way to do that would be to ask you, as Chair, to either convene a meeting of the subcommittee or to talk to subcommittee members to be able to give the clerk direction. I would like to raise that issue and have Ms Bassett and Mr Phillips think about that. Perhaps they could inform you whether they would be in agreement with that and then the clerk could be so directed.
The second point of privilege is -- and I say this with great respect to the point that Ms Bassett made or the questions she asked. Those are useful questions to ask presenters in terms of their advice on these specific areas, but I point out again that in previous years, committee members and presenters were provided with pre-budget consultation guides which gave them information about expenditures in various areas, about revenue projections, about expenditure projections, and questions about what areas of taxation could be changed and what areas of expenditures could be changed. In a sense it's unfair to expect presenters to be able to provide us with that kind of feedback if we can't give them some of the basic detail. I'm concerned about the informed participation --
The Chair: Ms Lankin, I'm not sure this is the place for this debate. We're holding up a presenter.
ONTARIO ROAD BUILDERS' ASSOCIATION
The Chair: I welcome the Ontario Road Builders' Association, Mr Ryan and Mr Flowers.
Mr Arthur Ryan: I'm Arthur Ryan, executive director of the Ontario Road Builders' Association.
Mr Bruce Flowers: I'm Bruce Flowers, the president of Fowler Construction in Bracebridge and a vice-president of the Ontario Road Builders' Association.
Mr Ryan: With your concurrence, Mr Chairman, I'd like to read a very short brief into the record and then take questions from the committee members.
Introduction: The Ontario Road Builders' Association represents virtually all of the major firms involved in constructing and maintaining Ontario's provincial highways and municipal roads. The association was formed in 1927 and now comprises more than 170 companies in over 50 communities across Ontario. Our members represent a large labour-intensive industry, both union and non-union, working in an area which has a substantial impact on the quality of life of Ontarians and the economic viability of the province.
We welcome this opportunity to present our views to the standing committee and trust they will be given due consideration in the preparation of the 1996 budget.
Economic development: The roadbuilding industry is an important segment of the Ontario construction industry, which latter is the province's biggest industry, its largest employer, Canadian-owned largely by small entrepreneurs, pays the highest wages and is the province's largest taxpayer. These facts cause our industry to have a substantial impact on all segments of our society.
Infrastructure investment: The present financial crisis has forced governments to look at every form of cost-cutting possible. Within the framework of cost-cutting, governments have become increasingly aware of differentiating between cutbacks in capital and operating expenditures.
Infrastructure expenditures -- roads, bridges and sewers -- constitute capital investment and any reduction in that investment must, for the following reasons, not be considered an easy method of cost control.
Economic benefits: Expenditures on infrastructure are a significant investment in Ontario's economy. The investment of Toyota and Honda and other major manufacturing facilities in this province was contingent upon the maintenance of a superior road and highway system which would promote both economic export of products and fast delivery of company parts. I think we've all heard of the phrase "just-in-time inventory," which is one of the common concerns that industry has today, particularly in these tough economic times.
The Common Sense Revolution plan is to generate economic growth and investment in Ontario and create more than 725,000 new jobs. Reduction in capital investment and resulting job losses seems inconsistent with that strategic plan.
Failure to develop and maintain what is currently in place will become a barrier to further economic development.
Maintaining the present system: The Provincial Auditor's 1995 annual report confirmed the province is not spending enough to maintain the existing infrastructure.
Currently, 60% of highways are considered to be poor or substandard as compared to fewer than 40% in 1979. The report confirms that the cost to renew and rehabilitate a road at its practical life expectancy is $80,000 per lane-kilometre. If left beyond that, the cost of total reconstruction is $250,000 per lane-kilometre.
Public safety: Poorly maintained roads are unsafe. This increases the number of accidents, which in addition to the human toll further drains our tax dollars and increases the cost of owning and maintaining a vehicle.
I think you've probably all heard, just digressing for a second, comments that have been made by the Better Roads Coalition of Ontario Inc which represents the users of the system, which effectively is the Ontario Trucking Association and the Canadian Automobile Association, and I think we've all been aghast at what's been happening in terms of truck safety and truck wheels coming off, but in all honesty some of those problems, as much as the burden's been placed on the trucking industry, are caused by the quality of the highways and the roads we have in place right now and this was never the case in previous years. So it's very important that we address that problem and understand that from the safety aspect the condition of the highways in this province right now is a major consideration to the public at large.
Economic impact: Infrastructure investment as a percentage of total expenditures by governments has decreased continually over the past years as governments have apparently taken an easy method of cost control. The road-building industry directly employs 20,000 people in Ontario. These are full-time jobs that add a significant purchasing and tax base to this province.
Multiplier effect: Every dollar spent in construction results in an additional $1.50 spent in the general economy. This is a multiplier effect of 2.5. No other sector of our economy has such a significant, labour-intensive, immediate effect.
There are certain statistics to relate to investment in manufacturing facilities and they have a certain multiplier effect, but nothing as large as our industry has. The beauty of our industry in a sense is that it has an immediate impact. When you build a new highway system, immediately those jobs are created. When you build a new manufacturing facility or lend moneys to companies who are going to invest in this province, it's a long-term process. When you spend moneys on highways, it has an immediate economic impact. It generates jobs and it generates an extraordinary amount of jobs in ancillary industries in an immediate sense.
Private sector: The anomaly of our industry is that we are the private sector working with public funds. Our industry produces at an extraordinarily low cost. The Ontario Ministry of Transportation's tender price index shows that prices have only increased 17.7% in the last 14 years. This is in spite of the ministry turning over more responsibility to contractors, in spite of major inflation costs of approximately 70% over those same years and in spite of additional government-legislated costs.
1040
We have details here, and I won't burden you by specific details, but looking at the price increases of 17.7% over the past 14 years I've made reference to, for the first six or seven years prices were dropping because of the shortage of funds and because of the competitive nature of our industry. They have gradually come back a little, but the moneys being spent by the road-building industry are still on a comparable basis much far below the inflation factor that has been accumulated over the past 14 years. That's very important. In other words, any money spent by the government which goes into our industry which is in effect the private sector is an excellent return on investment at a very, very low cost.
Summation: The government's commitment to cost reduction is commendable and we support that view. However, as an industry of primarily local entrepreneurs operating in the private sector, which has over the years developed and maintained a highway and road system which is the envy of the continent, we are confused when an administration promotes "open for business" and at the same time creates an aura of uncertainty which will result in unprecedented layoffs in our industry.
At this point in time, for the current fiscal year our industry's contract awards are at the lowest they have been in the last many years. In appendix A you will see the breakdown of comparable allocations of moneys that have gone over the past five or six years. As a province, we must not allow our highways and roads to deteriorate. We must heed the warning of all sectors -- the industry, the Provincial Auditor and the safety advocates. Investment in infrastructure is not an expense. It is a capital investment in our future with tremendous economic benefits.
"Open for business" of necessity requires a first-class transportation network. We urge you to provide and maintain that network.
Now we'd like to take any questions you may have.
Mr Douglas B. Ford (Etobicoke-Humber): Welcome, gentlemen. I see in your summation here that the government's commitment to cost reduction is commendable. Our opposition doesn't think there's any problem with the debt in this province.
Ms Lankin: Oh, Jesus.
Mr Ford: Maybe you have different opinions of this because they created that huge debt, and we are saying this to you this morning that --
Mr Silipo: When did we say that?
Mr Ford: May I have the floor, Tony, please?
Interjection.
Mr Ford: Tony, you get your turn and I'll interfere with you.
The Chair: Could we have order?
Mr Ford: We were supposed to have a meeting at a quarter after --
The Chair: Excuse me. Mr Ford, you're asking a question, please.
Mr Ford: Yes, I am. What I would like to say is, we are trying to reduce this debt so we get the economy back in good shape. I would ask you if you think that is a fair assumption to try to get the debt under control.
Mr Ryan: Yes, I'll answer what our industry's view is. First of all, we're committed to a reduction of debt, but when you reduce debt, there's a difference between the amounts of reduction, whether they're a reduction of operating expenses or a reduction of capital investment. There are only two ways to reduce the debt. The first step is to reduce costs. The second step, which is more important by far, is to create jobs. You can only go so far.
I'll give you an analogy. If I lost my job tomorrow, and I went to my wife and said, "I'm being fired," the first comment that's made and the first approach anybody would take is we have to cut costs. We can only cut costs for so long and at some point in time --
Mr Ford: I realize that.
Mr Ryan: -- your wife will say, "You have to get out and get another job." That's the problem with this administration at this point. They have a cost-cutting strategy, but at this point we have not seen the job creation aspect of the second phase of their promotion.
In our industry, which is a capital industry, which spends money on capital -- it doesn't spend money on operating expenses. We are the private sector. We create jobs. What this administration has done to date, if we look at the tender awards, is that they've reduced commitment to our industry on the same basis that they've reduced commitment to welfare payments and any other operating expenses within the government. We say to the government, you should not do this. When you reduce commitments to our industry, which are a capital investment, you're not reducing operating expenses; you are reducing a capital investment in this province, and that's our concern.
Not only that; what happens is that not only do these reductions in expenditures not create jobs, they lose jobs. For the first time in our industry to my knowledge in the past 10 years, our members are looking at laying off people they've had working for them for the past 10 or 15 years, simply because of the uncertainty of what this government is going to do in the upcoming budget. It's very important that our industry know exactly where this government lies in terms of its commitment.
Mr Ford: I agree with that you're saying, but in your statement here you say that these roads haven't been kept up in the last 10 years. Is that right?
Mr Ryan: I think we've all read the auditor's report of 1995, and always there's a shortfall in maintenance and investment in the roadbuilding industry, but what has happened in the past couple of years unfortunately is that situation has deteriorated further and further. We've invested in new roads but we haven't maintained what we have in place. There's a shortfall in both aspects of what we're trying to address. There's a shortfall which is critical right now, frankly, to the industry if we don't maintain -- if you look at the schedule we've presented of tender totals, since the election of this government there's been effectively no moneys being spent on the roads in this province, on the highways in this province, and this is unbelievable. It's never been faced with that before.
Ms Bassett: The minister, of course, is interested in suggestions from people such as yourself with ideas that will fit into our program, which we don't have the money to spend. What interests me is that I haven't heard anything from you about the private sector, not those such as many people in your industry dependent on government money, but a lot of private companies are building roads, setting up tolls. Look at Highway 407, and Nova Scotia or New Brunswick, where McKenna has done a deal, totally private --
Mr Ryan: We fully support that.
Ms Bassett: Have you looked in this direction?
Mr Ryan: No, we are the private sector. We are building the 407. It's not the private sector -- our contractor members are building the 407. Our contractor members are fully conversant dealing with the MT on a daily basis to get more and more involved in the private sector. We have the minutes of that.
Ms Bassett: Okay. Do you not see a role for the private sector to take over and fix the highways, which are important, no question? It's just how we're going to do it. We are committed to the highways.
Mr Ryan: Absolutely.
Ms Bassett: How can we do it?
Mr Ryan: We support that. We have met the Premier many times, and he fully knows where we come from. We support fully the commitment of our industry dealing with the private sector, which we did on 407. When you refer to 407, our members are building the 407 right now, not with private sector funding, unfortunately. Initially that was the concept, and it changed in midstream --
Ms Bassett: I know. I'm just looking at new ways we can go with only private money, no government investment. Is that feasible?
Mr Ryan: Absolutely.
Ms Bassett: Why aren't we doing it?
Mr Ryan: We support that, and the Ministry of Transportation is working towards that, and we as an industry are working on a partnership basis to develop that.
Ms Bassett: Do you think that we can then fix the roads and keep them in a manner that you --
Mr Ryan: Ms Bassett, the problem is, there's no question that's the way to go and that's the way we'll be going. The question right now is what's happening today. In other words, when you get the private sector involved in that kind of a process, it takes a long time. It's a longer-term process to develop, and what is happening unfortunately is that we almost have a situation where we have to sort of stop so that we get organized and develop this. We're meeting on a daily basis, frankly. Our industry is meeting with the ministry, with all segments of your government to develop a private sector involvement.
But we still must contain what we have in place, and don't forget that when you get the private sector involved, by nature, because of the structure of our industry, which is small entrepreneurs, there's only a certain number of our membership that can get involved in the private sector involvement, because it means obviously a big capital investment, big resources to deal with high financial sort of strategies that are being developed. There's no question about it then, we support that, and I think the previous administration supported that too, and the Liberals did. We all understand that this is where we have to go, towards more privatization. In the interim, unfortunately, we cannot afford to leave what we have in place, and that's our concern.
That's why we didn't present a brief full of statistics. Our concern as an industry right now is not so much the cutbacks; it's the insecurity and the lack of knowledge of exactly what the government is going to do in the future, and that's what we're really looking for.
1050
Mr Phillips: First an observation: The 1995-96 numbers are quite shocking. I had not seen them until you presented them, but I can't imagine there's been a month in the last 20 years when there was no contract let or no tender let.
Mr Ryan: Mr Phillips, we've never had a situation as we're faced with right now. It's never been as bad as it is at this point. It's not only bad in the sense that if you look at it since this current administration came into power in June we've gone from $140 million to $179 million -- $30 million -- which is absolutely nothing. We're fully concerned about that. We've expressed our concerns to the government.
But we're more concerned, Mr Phillips, with the fact that we still don't know at this point what is going to happen between now and the end of this fiscal year, or in the current year, which effectively means that our membership has to then make a very strategic decision whether to lay off people, which is what's been happening, which has never happened before. I'm only reflecting 1991-92 here. You go farther back and we still didn't have the volumes we're faced with right now in this fiscal year.
Mr Phillips: The thing I can't quite understand is that the government has cut its capital budget from $3.8 billion to $3.4 billion, but the road portion looks like it's been sort of completely eliminated.
Mr Ryan: Totally decimated; totally wasted.
Mr Phillips: Why would it be that the roads sector of the capital spending has been so decimated? I gather the other sections have been barely touched.
Mr Ryan: I don't know, but I know that Mr Harris's government, with his Common Sense Revolution, had a group of people that made some analyses of what were felt to be the most politically astute moves to make, and I guess the group he had talking to him before the election effectively stated that investment in roads and infrastructure was not a high-priority item. Frankly and unfortunately, I think this government has followed that sort of thinking. It's hard to sell them on the fact that if you adopt that kind of approach in your thinking, you're probably so far out in terms of what every other administration thinks, in this country and in the United States and Europe, because there has to be a commitment to infrastructure investment to maintain what you have and to develop your economy.
Mr Phillips: Just as an aside, there's an interesting article today on the rail cost likely going up, which will put more pressure on the roads and what not.
This is a mildly political question but they always say, "You understand that the deficit is a big problem," and everybody says, "Yes, we understand the deficit's a big problem." The solution they have, however, is one that is a bit unusual in that the deficit is a big problem, which we all understand; they've got to cut $8 billion out of spending, but $5 billion of that $8 billion is going to then be put in the form of a personal income tax cut.
I guess my question for the road builders' association is, has your organization debated that issue at all and do you have any advice for us on the relative --
Mr Ryan: Yes, we have actually said to the Premier, at our first meeting, that we support his commitment to deficit reduction but we don't really support his tax cuts. We don't think both of them go hand in glove. To us, it's inconceivable. It doesn't work that way.
Unfortunately, this administration has a view that all you have to do is cut costs and make some comments about being open for business, cut labour legislation and things of that nature and all of a sudden there's going to be an influx of investment in this province.
We don't see that. That's a long-term process, and to make those cuts in tandem with tax cuts doesn't make any sense. We told him that specifically, so we have no problem with that. We don't support a tax cut at this point. We don't think it's going to generate the revenue or the economic viability in this province that this Conservative administration believes it will.
Frankly, I think we're getting to the point where we have to make some quantitative points. We have to sort of sit back and say, "What's happening here?" We're talking as an advocacy group in a sense, but as to the nature of our presentations in the past, I think you'd all agree, even though we represent a specific industry, we've always tried to speak on what we believe is in the best interests of this province. We're very concerned at this point of what's happening in this province.
Ms Lankin: I'd like to follow up on Mr Ford's and Ms Bassett's questions. I hope that the points you just made are ones the government members will take back to the Treasurer. I think there were some very important issues you touched on.
First of all, I want to underscore your opening statements about the importance of infrastructure, and particularly our roads infrastructure, to economic development. Companies, more and more reliant on just-in-time delivery, need good, reliable roads. I want to pick up on your exchange with Ms Bassett about the involvement of the private sector, because I didn't quite understand what the question was leading to. The private sector is predominantly the group that is involved in the major maintenance repairs and certainly in new road construction. There have been, in terms of large projects like the 407, attempts at innovative financing, which in this case moved then to public sector financing because it turned out to be cheaper, but with tolls that will pay that off.
The Conservative Party made it very clear on the record many times that it opposes tolls for road repairs and ongoing maintenance. They only support tolls for new road construction. So I don't know where Ms Bassett is suggesting the private sector get their money for doing this work. If you're not going to put up tolls, then presumably the other alternative is dedicated road tax, gas tax, which the private sector isn't in a position to collect efficiently; it would be the government that would have to collect it and hand it over. So I'm not sure where the private sector source of funding is and who pays for it. Isn't it the taxpayer in one form or another?
Mr Ryan: That's a good question because I had some confusion there with the question. As an industry, we support the concept of tolls, but we only support the concept of tolls on new highway systems. We do not support the concept of tolls on maintenance and general --
Ms Bassett: I wasn't suggesting tolls.
Mr Ryan: I understand that too, but I'm just making clear where our industry comes from and why we support the privatization. We support privatization as a principle, but again I make the point very strongly that we are the private sector in terms of the construction aspect of the --
Ms Lankin: Mr Ryan, let me interrupt you for a moment, because we heard that the question wasn't about tolls, then. What else is there? Who's going to pay the private sector? The private sector's going to build these roads, and if we're not talking about tolls, who's going to pay for it?
Mr Ryan: There are lots of means of funding a new highway system without going through tolls. In other words, the ancillary services built on a highway will then contribute. If you look at the European experience, what they've done there is they have a phrase -- I can't think of it right now -- which is they used a way of tolls but it's sort of an ancillary kind of toll in the sense that the people who are the beneficiaries of that particular highway system will then contribute to the funding of it.
Ms Lankin: Would that be like the arrangement I negotiated with the Palladium in Ottawa, that they paid for the access ramps to --
Mr Ryan: Absolutely, 100%.
Ms Lankin: That sort of thing is actually being done in the province of Ontario already. That's an interesting new idea.
Mr Ryan: The concern we had, unfortunately, with your administration, going back to the concern with the 407, was that if the funding had gone to the private sector as was originally contemplated, and I know the cost factor was a concern, but I believe that in the future when you build any more new highway systems or when you build the extension to Highway 407, the private sector has to be involved in that process, in other words, from a financing point of view, and that's economically viable both from the government's perspective and from the private sector industry's perspective.
We say to the government simply, in very simple terms, spend more money on the maintenance of what we have in place, build the smaller roads. We have a concern, frankly, with the transfer payments to municipalities, but that's another issue. If you're going to move into the bigger highway projects, which are going to be tolled or financed in other ways, go to the private sector for the financing.
Ms Bassett: Why can't you --
Ms Lankin: My last -- Ms Bassett.
Ms Bassett: I'm getting like you, Ms Lankin.
1100
Ms Lankin: My last question has to do with how government looks and accounts for its finances. I know that this government is very committed to, they call it, one set of books and to the consolidated deficit number.
Mr Ryan: It's crazy.
Ms Lankin: I would like you to address this concept, which I became converted to, the idea that our capital spending should be moved off book; it shouldn't be part of what we look at and count in terms of our general revenue stream and our general expenditures, and it should be amortized, because it's like a mortgage for a house --
Mr Ryan: Absolutely.
Ms Lankin: -- versus your operating expenditure for your food and clothes. Could you comment on that?
Mr Ryan: It's an important issue. I'd like to address that for a few minutes. We supported that concept from day one. We supported that concept with Bob Nixon, the Treasurer of the Liberal Party. We convinced them to differentiate between capital and operating; we convinced Bob Rae to do the same. I'm not saying we convinced them, but we really took a position and they supported that. There's no question in our mind that that's the only way to operate. You have to differentiate between an investment a government makes in capital and then operating expenses.
Again, using a personal analogy, if you have a home and you lose your job and you have a mortgage, for Christ's sake, this is a commitment you have to maintain; you can't just walk away from it. When you sort of lump everything in on the same basis, when no matter what expenditures you have, whether they're capital or operating, you throw them all in the same pot and say we have to cut back on them, that devastates the whole economy.
There's absolutely no reason why a government cannot take the capital portion of its budget, or what is deemed to be -- when you play political games, you call it off-book accounting. That's nonsense. You transfer it to another agency, be it a crown corporation or anything else, and amortize the cost of those new highway systems over the life of the project. Everybody's happy.
The people at large, we've had so many polls over the years and asked people if they would be willing to support and pay for new highway systems as long as the moneys they contribute are going to a dedicated funding system. There are so many methods to finance a new highway project and to develop this economy outside of government expenditures. It's not just our views. It's the United States' views, it's happening in Europe, it's happening all over the world. We have to take our commitment to capital away from the operating expenses of government and at least understand that there's a different process there. But you, as a group of different parties, have to agree in principle that that's the way we should be going.
The Chair: Thank you very much, Mr Ryan. We appreciate the Ontario Road Builders' Association coming in and presenting to us.
ONTARIO HOSPITAL ASSOCIATION
The Chair: The Ontario Hospital Association, Mr Ron Sapsford and Mr Brian McFarlane. Welcome, gentlemen. Identify yourself for Hansard records, please.
Mr Brian McFarlane: My name is Brian McFarlane. I'm the president and CEO of the Doctors Hospital and also a member of the board of the Ontario Hospital Association as a past chairman. With me is Ron Sapsford, who is the chief operating officer of the Ontario Hospital Association. We are pleased to have the opportunity to make this presentation today as part of your pre-budget consultation process.
When the Minister of Finance tabled the government's fiscal and economic statement in November, he repeated the government's commitment to protect health care spending so that at the end of the government's term of office it will be no less than $17.4 billion. It is unclear, however, whether that represents a commitment that health care spending will not drop below $17.4 billion or a promise that when the government faces re-election that level of funding will be restored. OHA is therefore deeply concerned about the uncertainty this creates for all transfer partners and providers, and urges the government to clarify its intentions.
In making that promise, the Finance minister warned that "this is not a commitment to maintain the status quo. We need to find savings in some areas in order to meet new health care needs in other areas, for example, to provide new technologies, to reduce waiting lists and to meet the needs of an aging population."
OHA too is an advocate for change. We have consistently urged the government to provide stable, multi-year commitments for transfer payments to hospitals. We are pleased, therefore, that this government continued the practice of making multi-year announcements. However, the drastic reduction of $365 million, $435 million and $507 million respectively in each of the next three years will pose significant challenges to all hospitals.
When Mr Eves made the multi-year funding announcement, he painted a bleak picture, but he painted it with a very broad brush. That picture involves a reduction of $1.3 billion in transfer payments to hospitals over the next three years, a cumulative cut of approximately 18% in base funding, reducing the hospital allocation to $6 billion. We have some appendices to our presentation which illustrate those numbers. Many questions remain for which hospitals require immediate answers in order to plan effectively. This is a reduction of unprecedented magnitude which poses daunting challenges for the hospital sector. We are confident that the hospital sector has the will to meet these challenges; however, there are many unresolved issues and tools which we need.
Individual hospitals do not yet know what the actual funding impact will be on their organizations. Furthermore, it is unclear how these successive annual reductions in transfer payments of 5%, 6% and 8% will relate to restructuring and other reforms -- for example, hospital closures, mergers and amalgamations -- or what will happen to the savings generated by these types of restructuring activities.
OHA has for several years said that the status quo is no longer sustainable. OHA's continued partnership with the Ministry of Health through the joint policy and planning committee, the JPPC, is an important part of our efforts to contribute constructively to restructuring of the health care system. The JPPC has recommended to the Health minister that funding reductions be calculated using a formula developed collaboratively with hospitals. OHA supports this formula, which would result in the application of funding reductions to individual hospitals in a way that reflects their actual cost of delivering services or care. We urge the government to accept the recommendations and to announce the allocations for 1996-97 as soon as possible.
Simple across-the-board cuts of 5%, 6% and 8% will have serious negative consequences for hospitals in Ontario and the millions of Ontarians who receive inpatient and outpatient care every year. In order to cope with the across-the-board cut, hospitals with below-average costs would be most likely to reduce services, since operating efficiencies and non-clinical staffing cuts would have already largely been made. OHA therefore recommends that the committee urge the government to accept the recommendations of the JPPC in allocation of funding reductions for individual hospitals.
OHA further recommends that the announcements regarding transfer payments to individual hospitals be expedited. We are very close to our year-end; 1996-97 starts April 1 and we still don't have specific funding allocations to our institutions.
Other hospital funding issues: Growth funding. Some regions of Ontario have experienced rapid and substantial population growth. Hospitals in such areas are hard pressed to meet the growing demands for services in their communities, particularly in light of having had their budgets flat-lined for the past three years. Further budget reductions will inevitably result in further cuts to services. The JPPC has recommended that the Ministry of Health set aside a pool of funds, as a component of its reinvestment strategy, to disburse to hospitals experiencing service pressures due to growth in the populations they serve. The OHA urges the government, through this committee, to endorse the concept of a pool of funds to offset hospital costs associated with population growth.
Life support funding is another issue. The OHA commends the government for recent announcements of funding for new dialysis programs, which fall under the life support designation. However, we wish to point out that maintaining funding to cover the operating costs of existing life support programs is just as important. We recommend that the committee endorse the continuation of life support programs during 1996-97 and beyond.
1110
Chronic care copayment is an issue that's been outstanding for a long time. The application of the current copayment structure is inequitable, discouraging the transfer of patients to the most appropriate setting for the care they need. The OHA recommends that the committee endorse the implementation of changes to the chronic care copayment structure so that hospitals are permitted to charge copayments for alternative level of care patients in acute care beds.
Collective bargaining process and pressures: Approximately 72% of hospital budgets goes to salaries and benefits. As a result, any salary increase, whether achieved through a collective bargaining settlement or arbitration, would have a significant impact on hospitals' operating costs. Each 1% in employee compensation has a $52.4-million impact on the hospital system. Any such increase would seriously compound the difficulties posed by an 18% cut in funding over three years.
Usually, transfers from government take into account these collective bargaining pressures when it comes to funding increases. Alternatively, when funding levels are constrained, governments have often imposed wage restraint measures such as the Social Contract Act in order to equalize revenue and expenditure pressures on transfer partners.
Bill 26 calls on arbitration boards to take into account a public sector employer's ability to pay in making awards. However, we do not believe the new legislation will have the desired effect. Unfortunately, many of Ontario's interest arbitrators have in the past not applied legislation which attempts to limit their jurisdiction in awarding compensation increases.
OHA has previously called for a review of the Hospital Labour Disputes Arbitration Act, HLDAA, and proposed changes which would address our concerns. We have submitted to you a written detail of that proposal. OHA therefore urges the government to endorse through this committee a review of the HLDAA as proposed by OHA.
Pay equity: The goal of pay equity has largely been achieved in the hospital sector, at a cost of approximately $635 million in adjustments to date. However, pay equity maintenance is closely intertwined with interest arbitration. Continuing maintenance past January 1, 1998, the latest date that equity can be achieved in our sector, is unnecessary and would result in costs over and above those incurred through the normal collective bargaining process. OHA recommends to the committee that the Pay Equity Act be amended to state that maintenance is not required for a given group of employees once pay equity has been achieved.
In addition, the Finance minister announced in July that the government's pay equity funding assistance, approximately $175 million to date in the health sector, was capped through the fiscal overview and spending cuts. The government subsequently indicated that a funding formula to redistribute the existing base funding is under development. As a result, some hospitals may lose funding which is currently in their base. This potential clawback represents a new cost pressure over and above the 18% for hospitals and is another unknown factor as we do our budgets for 1996-97 and beyond. OHA recommends that the committee urge the government to reverse its decision to impose a cap on pay equity funding.
Hospital operating and capital planning requirements: The government has stated that hospital restructuring is a priority. OHA supports the principle of restructuring but cautions that there must be a recognition that a capital investment will at times be necessary for successful restructuring in order to achieve operating savings. For example, Essex county has determined that it needs $72 million in capital investment, two thirds of which would come from the Ministry of Health, to upgrade the local infrastructure; in Metropolitan Toronto capital investment requirements are estimated at $350 million.
OHA recommends that the government urge the committee to acknowledge the need for and financially support the capital investment required to support restructuring of the health care system and to achieve operating savings.
Labour adjustment: In addition, there must be funding available to cope with the serious labour adjustment pressures that can be expected from restructuring.
The present health sector training and adjustment panel, HSTAP, is uniquely positioned to meet the needs of the health system as restructuring continues. However, current funding mechanisms for worker redeployment are inadequate for the challenges of the next three years. Dedicated labour adjustment funding will be required on an ongoing basis. Adjustment funding should not have to come from individual hospitals' base budgets and thus from the health care delivery system.
OHA urges this committee to advise the government that HSTAP should be maintained and that additional funding for HSTAP should be made available.
Crown foundations: For a number of years we've been an advocate for enabling legislation for crown foundations and we recommend to the committee that it endorse legislation to permit hospitals to establish crown foundations and that such legislation be enacted as quickly as possible.
In conclusion, I should make you aware of some recent findings that were announced at our OHA convention in November from the Environics research public opinion survey. Among other things, we found that nine out of 10 Ontarians believe the government should maintain or increase current levels of spending in hospitals. In order to maintain government spending levels on hospitals, eight in 10 people were willing to forgo the tax cuts promised by government.
This demonstrates the gulf between the views of the public on the one hand and the recognition on the part of hospitals, OHA and the government that fundamental restructuring is inevitable. However, the public is not yet ready to embrace sweeping change.
Issues of access to service and quality of care will dominate in the public's mind as restructuring is implemented in the communities throughout Ontario. The next three years will present tremendous fiscal and programmatic challenges to hospitals and to the hospital system. Hospitals can say with pride that the system as a whole supports restructuring if it is done fairly and equitably and at a pace which will accomplish the goals of preserving and improving patient care.
Hospitals have lived with flat-lined budgets for three years and are prepared to do the best they can to cope with unprecedented reductions in funding. However, it is imperative that the government quickly clarify its intention regarding its commitment to preserve the $17.4-billion envelope of health care funding over the next four years, what will be funded by the envelope and at what levels.
Any reductions to hospital transfers over and above those already announced will severely compromise the ability of hospitals to continue with restructuring initiatives which, as mentioned, will also require significant capital investments and investments in long-term care and community health services.
The recommendations we have made here today represent tools that the government can give us as providers to assist in the massive transition that hospitals continue to face.
Ron Sapsford and I would be pleased to address any questions you may have at this time.
Mr Phillips: We'll make your request for you on the intent of the $17.4 billion. I assume your interpretation was that it was going to be flat-lined.
Mr McFarlane: That's right.
1120
Mr Phillips: We'll ask them to clarify that. I assume that's what they mean if that's what OHA thought.
I just want to make sure I interpreted your message to us right. Essentially, we look to the OHA as the voice of the hospitals. The OHA is saying that you can manage with the cuts that have been announced. Have I interpreted that properly?
Mr McFarlane: What we're saying is that we need certain tools in order to manage. We need tools to deal with labour adjustment issues; we need tools to deal with the retraining and redeployment and funding for that over and above health care funding; we need capital investment in order to help change the infrastructure to create the operating savings, in order to live within the reductions in funding.
Mr Phillips: That's an interesting comment. I look forward to future meetings with the OHA.
Ms Castrilli: One issue that isn't addressed in your presentation which of course is on the minds of many, given the reports of the district health councils, in particular Metro Toronto, is what your association's position is on some of the recommendations that have been made, the closures of hospitals that have been recommended. Has that been debated in your association, and what are the conclusions?
Mr Ron Sapsford: The hospitals of region 3 of OHA, which are the hospitals in the Metropolitan Toronto area, reviewed the report and there was general support for the directions of the Metro DHC report. We're now waiting anxiously to discover the intention of the government with respect to that report with the fiscal plan as it's laid out over three years.
There's of course a great deal of interest in understanding the directions, because the achieving of the fiscal goals to a large measure depends upon decisions around restructuring. So the hospitals as a community, not just in Metro but across the province, are quite anxious to move forward with these decisions so that they can begin the work of restructuring in order to attempt to meet the fiscal goals as they've been set out.
Ms Castrilli: I note in your submission that you would view that there need to be some initiatives --
The Chair: Ms Castrilli, I'm sorry, the time has expired. We'll have to move on.
Ms Lankin: I don't know, Brian, I think in retrospect you must look back on our professional time together with great fondness now. Things have changed, eh? Amazing. Anyway, let me get this straight. February 6 you're still writing the minister asking to find out what the differential levels of transfer payment cuts are going to be to hospitals?
Mr McFarlane: Hospitals have not yet been informed of their specific funding levels for 1996-97.
Ms Lankin: So we know that the overall cut is how much for next year?
Mr McFarlane: The 5.5% is the general reduction.
Ms Lankin: That's the average reduction, so for some hospitals it could be 5.5%, for some it could be as much as 8% and others as little as 2%. We don't know that yet.
Mr McFarlane: We don't know, but that's the potential.
Ms Lankin: I think anyone who's had any experience in trying to deal with a budget can imagine the stress that hospitals must be under right now, not knowing if in fact it's 5.5% for them or whether they should be planning for 8% or 10% or whatever.
Some of the suggestions that you are making, recommendations that you're making, deal with requesting tools to deal with the reduction in transfers. Interestingly, in your comments on the Hospital Labour Disputes Arbitration Act, the government -- I sat through days and days and days of hearings on Bill 26, and the government members said over and over and over again that those were the tools that you needed that were in that bill. Did that not provide you with the tools you need?
Mr McFarlane: The OHA proposed amendments around those sections of Bill 26 and they're essentially contained in the submission here today. The actual wording of the final act does not include some of the clauses that we felt were essential to give effect to the issues around ability to pay. So we will work with the legislation as it is and we're getting ready to sit down with all of our labour unions in the very near future as the social contract expires. There is a difference in view as to the effectiveness of the act.
Ms Lankin: As you know, actually I'm not supportive of ability-to-pay criteria in the world of arbitration. However, I sympathize greatly with the box that you're placed in, so I understand why you would be looking for those kinds of tools. I would suggest that, contrary to including some of your suggestions in the Bill 26 process, the amendments they did make to that section probably make your problem worse because they included an amendment which says, "Nothing in this section affects the powers of arbitrators."
I don't know what you think arbitrators will do, but my experience with arbitrators is that this will allow them to exercise their judgement on the criteria, as they have always believed and as I believe they should have the right to do, in an unfettered way. So I'm not sure that this didn't make things worse from your perspective.
The Chair: Was there a question?
Mr Sapsford: I believe we would share your view on that.
Mr McFarlane: We agree with Frances's summary of the impact that arbitrators could have on us.
Ms Lankin: So --
The Chair: Thank you very much and --
Ms Lankin: This was the zinger, Mr Chair.
The Chair: Oh, was it? I saved us a zinger.
Mrs Marland: But, Frances, at the beginning of the week you said he was a good chairman.
The Chair: Yes, I've been paying for that.
Ms Castrilli: He is equally unfair to everyone.
The Chair: That's the umpire theory of chairmanship.
Mr Wayne Wettlaufer (Kitchener): Thank you, gentlemen, for your presentation. I am very interested in health care, coming from a riding where hospital restructuring was ahead of government plans and started a number of years ago in Kitchener. I'm also very involved in the ICU/CCU concerns. One of the hospitals in our area had been held up by the previous government after receiving private moneys to improve theirs and we got that through.
One thing I am particularly concerned about is the chronic care copayment method. We have private nursing homes and we have other long-term-care facilities as well as the hospital chronic care facilities. Do you have the figures? What is the copayment from the government to those three different institutions?
Mr Sapsford: I can't give you the exact figure.
Mr Wettlaufer: Close.
Mr Sapsford: The copayment is governed by regulation and is geared to old age incomes and old age guaranteed income supplement. It has moved in direct lockstep with those federal and provincial programs. The copayment is the same for extended care and chronic care, but the application of it is different. In a chronic hospital there is a much longer waiting period before the copayment can be implemented, whereas in an extended care facility the payment starts on day one of the admission of the resident to the home.
We have a problem in the hospital system inasmuch as people who are designated waiting for placement in long-term care are in both chronic hospital beds and acute care beds and there's a disincentive to the movement of people through the system because in an acute hospital, notwithstanding the fact that they may be designated for long-term care, there is no copayment. There's a resistance to moving because as someone moves to another location, the copayment becomes applicable.
What we're arguing is that the copayment should apply to the clinical condition of the patient as opposed to the specific type of institution that the patient resides in. We believe that this would do something for, first of all, revenue generation for the hospital but, secondly, would also improve the movement of patients to the proper level of care for their particular condition.
Mrs Marland: As the advocates for all the hospitals in the province, I realize you have a formidable responsibility and I know that you're well aware of the problems in the growth areas such as Durham, York and Peel. I'm just wondering whether you have advice for us, and indeed for our Minister of Health and the Minister of Finance, in terms of whether you support a growth factor being included in the proposed hospital funding formula, and if not, why not.
Ms Lankin: It's in the brief.
Mr McFarlane: In the comments we made, we indicated support for a pool of funds for the growth areas.
Mrs Marland: I'm sorry, I was out of the room when you made that comment.
The Chair: Thank you very much to the Ontario Hospital Association for your presentation today.
1130
CANADIAN LIFE AND HEALTH INSURANCE ASSOCIATION
The Chair: We now have the pleasure to hear from the Canadian Life and Health Insurance Association. Welcome to the committee, gentlemen and lady.
Mr Jim Witol: My name is Jim Witol; I am the vice-president of taxation and research at the Canadian Life and Health Insurance Association. Joining me today is Gord Graham, who is our vice-president of provincial affairs, and Peggy McFarland, who is our director of corporate taxation.
We have already provided the committee with a written submission, so I just propose to review briefly its main points. Before I do that, though, I'd just like to provide a short profile of the Canadian Life and Health Insurance Association and the industry we represent.
The Canadian Life and Health Insurance Association, or the CLHIA, has 91 member companies accounting for over 90% of the life and health insurance business in Canada. The CLHIA represents an industry that is highly competitive, with 146 companies in Canada, 103 of which have their Canadian head office in Ontario. Our industry offers a wide range of financial security products to over 20 million Canadians, including individual and group life insurance, individual and group annuities, including RRSPs, RRIFs and pensions, as well as health insurance supplementary to public health plans. Our industry pays over half a billion dollars a week in benefits to policyholders. Our industry is one of the country's most important sources of long-term investment capital. It is internationally successful, with over 43% of its revenues generated abroad. Our industry is a significant contributor to public finances, paying $1.3 billion in taxes in 1994, of which over $400 million was paid in Ontario.
Turning now to the province's overall fiscal management, we support the government's broad plan of action for fiscal restraint. Given the financial situation in Ontario and the country as a whole, there's no option but to reduce expenditures and target scarce resources on programs of higher priority. We urge the Ontario government to continue making the spending cuts necessary to reach its deficit reduction objectives and ultimately a balanced budget. Corporate and personal taxes are very high in this country, especially compared to the US, so there's no scope for higher taxes.
Now I'd like to discuss a tax issue that is largely within the federal domain: the taxation of private health care plans. I mention it to provide you with a more complete picture of our position on taxation, especially as background for any federal-provincial talks that might take place on taxation and finance.
The possibility that employer contributions to private supplementary health and dental plans might be taxable to employees has come up for speculation during the federal pre-budget consultations for the past couple of years. One concern that was raised by the federal Minister of Finance last year was that there may be a large group of Canadians, up to eight million or nine million, who do not have supplementary health and dental protection because they cannot benefit from current tax treatment. In order to track this issue down, the CLHIA, in concert with several other organizations, conducted a study to determine the true extent of supplementary coverage in Canada and to assess whether tax unfairness plays a role.
A key finding of the study, which is attached as an appendix to our submission, is that 25.6 million Canadians, or nearly 88% of Canada's population, have supplementary coverage above and beyond the basic hospital and medical services provided through medicare, under special government or private supplementary plans. This leaves, though, 3.6 million without supplementary coverage, and they fall into three groups.
The first group, about two million in number, consists of employees and their dependants in workplaces which could but do not currently provide a supplementary plan. The workers in this group are subject to the same tax provisions which apply to the supplementary private plans which currently cover 20 million Canadians. So this group's lack of coverage can't be attributed to tax factors.
The second group, about a million in number, consists of the unincorporated self-employed and their dependants. The workers in this group, unlike their counterparts in incorporated small businesses, cannot deduct the cost of their own supplementary coverage as a business expense. For them, a simple change in the tax deductibility of premiums would put them on the same footing as the incorporated self-employed.
A third group, about 600,000 in number, consists of Canadians with little or no attachment to employment. Changes to the tax treatment of employer contributions to private supplementary plans would do nothing to alter this group's lack of coverage. The basic problem for this group is lack of employment.
These results regarding the extent of coverage underline the importance of supplementary private plans and their current tax treatment for the vast majority of Canadians. Clearly, an initiative to tax employer contributions in the hands of employees would only serve to increase the size of the uncovered employed while doing nothing to reduce the size of the other two groups that don't have coverage; namely, the unincorporated self-employed and the unemployed.
Furthermore, the ability of private plans to pick up the slack arising from the retrenchment of public plans would be seriously eroded. The ultimate result would be a lower standard of health in the country and its associated implications for productivity and future health care costs.
I would now like to make a few comments on the premium tax on insurance premiums collected in the province. In recent years, this has been the primary source of provincial tax revenue from our industry, and in 1994 it amounted to $150 million in Ontario. The premium tax has adverse effects on our competitive position in certain markets. For example, many Canadians save for retirement through the buildup of cash values in permanent life insurance policies which are subject to the premium tax. Other financial services, such as deposits held by banks and trust companies, are not subject to such a tax, and the provincial capital tax burden on these institutions is quite small in comparison to the insurance premium tax.
1140
Any action taken by a province to increase the premium tax also has a significant impact on the competitive position of insurers headquartered in the province in their business in the United States, which is where the bulk of the Canadian life insurers' international operations take place. This competitive impact occurs because nearly all the US states have retaliatory laws that impose additional taxes on an insurer whose home jurisdiction, such as Ontario, imposes higher taxes than the state imposes. In 1976, for example, Ontario raised its premium tax on life and health insurers to 3%. The negative impact of the competitiveness of Ontario-based insurers in the United States as a result of retaliatory laws prompted Ontario to repeal the tax measure two years later. So we would urge the Ontario government not to increase the premium tax on life and health insurance companies.
A related tax issue that concerns us a great deal is the measure in Ontario's 1993 budget, now incorporated in the recently passed Savings and Restructuring Act, which applies the retail sales tax to group life and health insurance premiums. Most of this tax is payable by employers and unions as sponsors of group benefits. Given the current level of economic competition and the need to control expenditures, this tax could very well force cutbacks in group insurance -- health insurance in particular, as it is more costly than life insurance -- because many hard-pressed employers and unions simply cannot afford higher costs.
The most vulnerable will be employees in small and medium-sized companies. Those with the most to lose are the lower-income groups, because unlike life insurance or pension plan arrangements, the level of private health insurance benefits does not usually vary with income. It seems perverse that the tax applies to insurance for dental services, prescription drugs, eyeglasses etc, but not to the goods and services if directly purchased. More generally, it just seems unreasonable that life and health insurance intended to protect workers and their families is the only financial service that is targeted by the retail sales tax. We strongly urge the Ontario government to give serious consideration to repealing the retail sales tax on group life and health insurance premiums.
That is the end of my prepared remarks. We would be pleased to try to answer any questions the members have.
Mr Silipo: Thank you very much for the presentation. I guess I want to start by dealing with one of your basic assertions that there's already, in your view, a higher than acceptable level of taxation as it affects the corporate sector. I continue to be puzzled by this assertion in that when we look at chart after chart that comes out of the Ministry of Finance -- not partisan numbers but numbers that clearly come out of the bureaucracy in the ministry -- it shows, whether you look at corporate taxes as a percentage of GDP in various countries, within Canada but also in the G-7 countries, whether you look indeed at statutory corporate income rates for the manufacturing sector, which I know have been the benchmark in the corporate sector, between Ontario and many other jurisdictions around us and the US particularly, Ontario has the lowest rate, as we are among the lowest in terms of corporate income tax as a percentage of GDP. Even when we look at payroll taxes, Ontario compares pretty favourably with other jurisdictions. So I don't quite understand where this assertion comes from that corporate taxes are too high.
Mr Witol: I guess the way I would respond to that is that it's the federal Department of Finance itself that has made comparisons of both corporate and personal income taxes across various OECD countries and it's their assertion that corporate taxes are quite high in Canada.
When I refer to a heavy tax burden on our industry, I'm not referring just to corporate income taxes. Corporate income tax is perhaps the most visible tax or the tax that most people are aware of, but there are many other taxes on financial institutions, life insurance companies in particular, including payroll taxes, capital taxes, investment income taxes, real estate taxes. They add up to a very high number. The Conference Board of Canada has made a study of the tax burden on financial institutions for four or five years now and has concluded that there is a very heavy burden on financial institutions.
Unfortunately, one of the aspects of the overall tax burden is that, by and large, it is not sensitive to corporate profits. The study they've done indicates that there is a slow increase in the overall tax burden irrespective of how much real income has been earned by the financial institution. So the tax burden certainly on life insurance companies and financial institutions as a whole is quite significant.
Mr Silipo: I actually have some sympathy for some of the particular points you've made with respect to some of the particular taxes on your industry, but just to come back to the broader issue, because you do address it in that way at the beginning of your presentation -- again I'm looking at statistics not that I've made up or that have been made up for any party caucus but statistics that come from the same bureaucracy that has advised Liberal, NDP and now Conservative governments in terms of what the numbers show. The reality I would throw into it is that if we look historically at what has happened in terms of corporate taxation versus personal income taxation, clearly there has been much more of an onus put on personal income taxes as opposed to corporate taxes.
The other question I want to address is the link between taxation and jobs. One of the things we've also been probing is, as you know, this notion that if taxes were reduced on the corporate side, that generates in and of itself a number of jobs. The minister's own assertion is that anything that comes out of the personal income tax cuts is not going to generate jobs for at least a couple of years after those cuts are made. We heard yesterday from another sector where they're looking at profits having continued to increase but jobs having continued to decrease in that industry.
I just wondered if you could talk a little bit about that issue. Where are the jobs going to be created if even the variety of statistics we are looking at indicate that those kinds of tax reductions are not resulting in jobs being created? Yes, we have to have industries in the various spheres that are more competitive, but presumably as a society what we want at the end of the day is to have more people working, and it doesn't seem to me like any of these measures are getting us there.
Mr Witol: I can't speak from experience in our industry since our tax burden is going up all the time. There's been no reduction in taxes at all. The employment in our industry has been going down slowly because of the greater competition for the savings dollar and the demographics of the country are such that people are more interested in saving money for retirement than purchasing insurance. Our industry has just had to face the banks head on for the savings dollar. As a result, we've had to become more efficient and the jobs are going down a bit.
I really don't have an answer to where the jobs are going to be created should there be some reduction in the tax burden on employers, and therefore perhaps leave a little bit of room for increasing employment as opposed to just socking it away in terms of greater profits. It's a very, very complex issue and tax is just one small bit of the overall worldwide competitive issue.
1150
Mr Silipo: We're discovering just how complex it is.
Mr Hudak: As I'm sure you're well aware, this government has been given a mandate to create a positive economic environment to help the private sector create jobs which you speak to very well in your presentation. Earlier today we heard from the Ontario federation of women teachers who suggested that a good way of eliminating the deficit would be to increase taxes across the economy. In your opinion, what kind of effect would that have on employment, not just in your industry but broadly across Ontario?
Mr Witol: I don't agree with the premise, I guess. I don't see how increasing taxes is going to achieve the results that were mentioned.
Mr Hudak: In fact in your presentation, I note on page 3, "The ultimate goal must be to lower the overall burden of taxation in Canada." This government as well will be balancing the budget at the same time as reducing the overall level of taxation. Will that strategy have a long-term impact on employment in your industry and broadly across Ontario?
Mr Witol: I'm not sure that taxes are going to determine employment in our industry, but I think it is reasonably well accepted that things like payroll taxes do reduce employment. Certainly the greater the employers' costs that are directed to taxes, it just leaves that much less room to hire people and pay salaries. I just don't see how increasing taxes helps at all.
Mr Hudak: In fact, decreasing taxes, as you said, will help employment and the economy.
Mr Witol: Yes, that's our view.
Mr Hudak: Thank you. That's all for me, Mr Chair.
Ms Lankin: What kind of tax? Be specific about which kind of tax.
The Chair: Mrs Marland.
Mrs Marland: I'm yielding to Mr Wettlaufer.
Mr Wettlaufer: In the property and casualty industry, when the retail sales tax was imposed on the insurance premiums, there was about a six-month lag and then there was a pretty severe reduction in demand for the product and, as a result, jobs were lost. Did you notice the same thing in your industry? Was there a lag and then a lessening in demand for the product?
Mr Witol: We don't have 1995 figures yet, but I don't think the same effect was experienced, at least to the same degree, because in health insurance there is an implied contract between the employer and the employee for benefits, so one has to negotiate with the employees to make changes in plans. If there are plans that straddle provincial borders, it's very awkward to change the plans in one province, Ontario, and not in the others, so it's just a more complex thing to adjust for.
But there is definitely a movement within the health sector to fine-tune, to target the benefits better, to even reduce the employer's costs by providing the benefits, perhaps even on a semiselective basis that employees want, a sort of cafeteria style of benefits. I just don't have hard numbers to back that up.
Mr Wettlaufer: You haven't seen a lowering in the average premium for small businesses?
Mr Witol: I don't have any figures for that, sir.
Mrs Marland: If we have some time, I will go back. I have to assume, when you represent as many people in the industry and through your industry as many of our Ontario residents as you do, that you have a very real concern about the deficit in this province. Am I correct?
Mr Witol: That's correct.
The Chair: We'll go to the opposition.
Mr Phillips: Well, I'm shocked by that answer. That leaves a whole lot of questioning.
Mrs Marland: I'm never sarcastic about your questions, Gerry.
Mr Phillips: We're trying to get an idea of the structure of health cost in Ontario. You've indicated that a surprising number of people actually have supplementary health benefits. It's much larger than I thought. The $17.5 billion roughly of the funds for spending on health come from the provincial government in Ontario. How much does your industry provide annually in the form of annual Ontario costs for health benefits?
Mr Witol: I don't have an Ontario number handy. The private sector health insurance premiums in Canada amount to, are in the order of $7 billion or so, and probably 40% to 45% of that would be in Ontario.
Mr Phillips: Let's say $28 billion are spent on health care in Ontario, $17.5 billion funded by the province, and if I interpret you right, you're saying another $3.5 billion might come from funding from your organization. How would that break down in terms of major categories like hospitals, drugs?
Mr Witol: Probably about 40% of our total would be drugs, another 40% would be dental, and the remainder would be the various supplementary hospital benefits.
Mr Phillips: Semiprivate sort of thing.
Mr Witol: Right.
Mr Phillips: Has that $3.5 billion grown substantially, stayed the same, shrunk over the last two or three years?
Mr Witol: It has grown more rapidly than the rest of the life insurance business in the past number of years. Health care costs increasing more than the rate of inflation has just meant higher premiums.
Mr Phillips: It would be interesting to pursue it in more detail. Annamarie?
Ms Castrilli: You might get back to it, Gerry. I notice in your executive summary your very first statement is, "We strongly recommend that the government address budgetary deficits solely through a reduction in program expenditures." I can't imagine you really believe that. All the information we've had is that to address deficits, because deficits have been caused both by decrease in revenue and increase in expenditures in some cases, you also have to look at the revenue side. I assume this is an inconsistency that you didn't mean in your report.
Mr Witol: Perhaps through ignorance, but we did mean what we said, that we didn't think taxes should be increased.
Ms Castrilli: I understand that, but surely you're not saying that's all that's required. You yourself point to 600,000 individuals that you quaintly call "Canadians with little or no attachment to employment," which to me means they're unemployed, virtually. They're certainly unemployed to the extent they can't pay for extra insurance benefits. Clearly there needs to be something done on the job creation side, on the revenue-generating side. That's why I find your first statement at odds with the rest of your presentation. You don't see that inconsistency?
Mr Witol: No, I don't see a real inconsistency there. I think that if the province is spending $50 billion or so, there's probably some opportunity to shift costs from one sector to another.
1200
Ms Castrilli: You would not urge the government, therefore, as part of its economic plan, to also look at job creation as part of the equation to resolve the problem?
Mr Witol: I'm certainly not against job creation. If that can be done without imposing additional taxes, that's just great.
Ms Castrilli: One quick question. With respect to the 600,000 unemployed individuals, do any of the recommendations that you make in here address the issue of how these individuals might obtain additional insurance, the insurance that obviously the rest of Canadians obtain?
Mr Witol: All these numbers relate to group insurance and the involvement of an employer in paying part of the premiums for that. Obviously, these individuals can on their own seek to obtain non-tax-assisted individual coverage. Some of these people are older family members. These people are not on social assistance. We've taken the position in the study that those that are on social assistance already have coverage under the provincial plan. It's hard to pin down exactly who these people are, but they would certainly be able to obtain private coverage on their own. They're simply not part of the group insurance mechanism, where there is an employer involved, because they have no connection.
Ms Castrilli: Nothing here addresses that.
The Chair: Thank you very much. We appreciate your participation, Mr Witol, Ms McFarland and Mr Graham. We thank the Canadian Life and Health Insurance Association for appearing before us.
I understand that we have a bit of housekeeping to do before we recess for lunch.
Mrs Marland: Are we back to my original tabled motion, then?
Ms Lankin: What tabled motion?
Mrs Marland: Well, tabled discussion.
The Chair: I understand that we have a motion about to be put, or put by Mr Phillips.
Ms Lankin: Could I ask a question first before that happens? Is there any information from the Ministry of Finance to be tabled with the committee today? The clerk hasn't received anything?
The Chair: No, none has been filed with the clerk.
Mr Phillips: Well, let me move the motion, then. I think the members have it.
Mrs Marland: On a point of order, Mr Chair: Mr Phillips, before you deal with a motion, I had requested yesterday that we deal with the letter to Mr Gourley, dated February 6. That was the discussion, in fairness, that Ms Lankin asked last night be postponed until this morning. Am I correct?
Ms Lankin: Right, at 9:15 this morning.
Mrs Marland: Yes. I understand it wasn't dealt with.
Mr Phillips: We were waiting for you.
Mrs Marland: So I'm suggesting that we deal with the letter first, since that was my request prior to Mr Phillips's motion being circulated.
Mr Phillips: I was here at 9:15 to deal with that.
Mr Wettlaufer: Gerry was here; so were we.
Mr Chris Stockwell (Etobicoke West): Give him a star.
The Chair: Shall we deal with Mrs Marland's motion?
Mrs Marland: Well, simply to suggest that the letter to Mr Gourley, which I understand has gone, says, "I have been directed by the standing committee on finance and economic affairs to request the following information." What I understood was that this was a request from the opposition for this information, which they are entirely free to request at any time. But I think it's correct to suggest that it was not requested by the committee as a whole, it was requested by the opposition, and I think the letter should have been worded that way.
The Chair: In my recollection of the discussion we had at noon, I asked the committee if that letter would go forth. No one suggested that there would be a vote or that there would be any discussion on it and the clerk followed my suggestion.
Mrs Marland: Right.
The Chair: If there was a fault involved, it is mine.
Mrs Marland: No, you said could that request go forward and there was agreement that the request would go forward, but not on behalf of the committee. That's the only point.
The Chair: I might have misunderstood that.
Mrs Marland: Because we're not interested in that question --
Ms Lankin: That information, we know that.
Mrs Marland: We're not interested --
Ms Lankin: In the answer to that question. We know that, Margaret.
Mrs Marland: You're not allowed to impugn what I'm saying. You know that.
Ms Lankin: Okay. I'm sorry.
Ms Castrilli: She is, but not on the record.
Mr Phillips: Can we move on my motion, Mr Chair?
The Chair: Yes.
Mr Silipo: Maybe Ms Marland might want to complete her sentence, then we'd know what it is she's interested in or not interested in.
Mrs Marland: I beg your pardon?
Mr Phillips: I'd like to move that whereas the minister said he is looking for the committee's advice in meeting the deficit targets; and
Whereas the single, biggest issue for this committee to comment on is the planned tax cuts; and
Whereas for the committee to comment on the tax plan, we need to have some indication of the cost; and
Whereas these tax decisions represent a total decision of approximately $6 billion and we currently have been given no government estimates,
The committee requests the Ministry of Finance to provide the following:
1. An estimate of the cost of implementing the following:
Mr Eves on his presentation on Monday said, "We will eliminate the first $400,000 of payroll from the employer health tax."
I think members will recall in the Common Sense Revolution the promise was: "We will eliminate the employer health tax on small business with payrolls less than $400,000. This tax cut will save Ontario's small business sector an estimate $400 million."
The reason I think this is important is that it is quite a different plan by the government and I think something that has a cost of --
The Chair: Mr Phillips, are you reading the motion or are you debating it?
Mr Phillips: Okay, I'll keep going on it.
2. The estimate of the cost of implementing the fair share health levy. The Common Sense Revolution said: "`Fair share' will generate $400 million in revenues for the health care system. This will completely offset the $400 million lost by abolishing the payroll tax on small business."
So it was spelled out quite -- I'm not reading it, but there's the table that I think will give the indication of what we need.
3. An estimate of the cost of implementing the following statement: "We will cut your provincial income tax rates by 30% in three years. Half of the cuts would come up front...in year one."
While the government clearly has not made any final decision, we suggest simply using the assumptions from the Common Sense Revolution that produced the following tables -- and you've got the table there.
If I might speak briefly to the motion, Mr Chair, because I think it will probably not have difficulty in getting the committee's agreement, first, let me say that I've been on the committee for some years now. When you're in opposition, you sit on these committees; I've been on them for many years now and without exception the Ministry of Finance gave us this sort of information as we requested it. In fact, if you go back and look at Hansard, the Minister of Finance would always come and go through all of these. If we asked any question like this, they'd say: "Fine. We'll get back to you." I've got all the background information on it to reassure the members who weren't here that that was the case.
I think the second thing is, I guess all of you have been business people at some time. If you're going to comment on a budget and give advice, you need some information. As I said here the other day, you couldn't have taken what the minister gave us on Monday to any bank and get a $10,000 loan, let alone provide advice on a huge deficit. I think that if you can just for a moment take off the defence of the minister and say, "Listen, we're here to give advice and when we're talking about the possibility of giving advice on $6 billion worth of information, we should have the information."
I think the third thing is, the information is readily available. This is not complicated stuff. It's all done. It's sitting over there. It was provided before the election, all done, so it's equally available after the election. I would just go through each of the three areas.
1210
One is there is a big difference on the promise on the employer health tax. I have no idea how much that's going to cost, I really don't. I don't know whether it was a mistake in the Common Sense Revolution, the estimate; or if it wasn't, then we're talking about something well in excess of $400 million now. The CFIB was in here yesterday, the Canadian Federation of Independent Business, advocating this. The restaurant association I think was as well. Before we can endorse it, I think we should at least know what the number is.
On the fair share health levy, because in theory that's designed to offset the commitment on the employer health tax, once again we should have that estimate. It was all there before the election; I see no reason why it isn't there now.
On the tax cut thing, frankly, let's all be honest with ourselves. The minister was saying, "Well, we're not sure what the promise was before the election." It could not have been clearer. It was down to the nearest dollar, the promise: "You will get $934 in 1996-97 if you're making $50,000." So this is not a mystery. It wasn't sort of, "Well, we're going to give a tax break." My opposition was holding this thing up and saying, "Listen, if you're making $50,000, you know what you're going to get? $934" -- and by the way, it cranks up April 1. I know legally you can't do that, but that's what the expectation was, it would be adjusted so that the total year's benefit for fiscal 1996-97 would be $934. Then below there, as you can see, the marginal rates are down to not one decimal, but two decimal points.
The promise in the Common Sense Revolution on the tax cut was about as definitive and as detailed as you could imagine, as you all know. You all ran on it. You must have been using this and saying at coffee parties: "Listen, you're making $50,000. Come with us. You're going to get, in year one" -- well, you can see it right there -- "you're going to get $934." Now you may want to change your promise. I don't know. It may be different when the budget comes out, but at least I think the assumption we have to make is that it is the government's intention to at some stage implement this, as I think the government members have asked everybody who's come in here: "Do you like the idea of a tax cut? Are you in favour of it?" I think by doing that, we should have a cost estimate.
I'm spending more time than I think I need to on this just because I want the members to understand. The background is that in every other year whenever we asked a question, frankly, it gets answered. Floyd Laughren used to accuse me of being in his office more than he was, because it is public domain, public information. This doesn't belong to Ernie Eves, this belongs to the public.
I say just in closing, I think the government members have got a fairly important decision, because if you don't insist on having this kind of information when you're considering the budget this year, you might just as well sort of just send in your ballots each time there's a vote in the House, because you will have virtually no input.
I think we can deal with it fairly quickly, Mr Chair. The reason I'm doing it today, by the way, is because we are going to need this detailed information when we write our report, which we will be beginning shortly.
The Chair: We'll go to the other parties for comments. Shall we proceed with the NDP? Ms Lankin.
Ms Lankin: I could be very quick. I would like some indication -- can you sort of just by nodding tell me -- are you intending to support this, because we don't need to debate it at length if there is all-party support?
The Chair: Ms Bassett, would you like to make comment for the government?
Ms Bassett: The government members are not going to support this motion. The motion certainly is not required. If you want to get information, you know full well, Mr Phillips, that you can give me the question and I'll relay it to the minister and he will, I hope, endeavour to answer what he can or what he chooses.
Mr Phillips: May I respond to that?
Ms Lankin: I guess at this point in time, I will add a few words to the record and I'll save time for Mr Phillips to wrap up, because in fact it is his motion.
I find that answer unacceptable, as I'm sure you would assume. Let me tell you that this is the first time in four or five years that this committee has entered into pre-budget consultations without having been provided with some very baseline information with respect to the state of affairs of the finances of the province, as they are today and as they are projected in the medium and long term if no further action is taken.
None of the information we're asking for relates to decisions that are being made. We're not asking for information to be revealed that should be subject to budget confidentiality. We're asking for some basic data that have been provided in every other year -- I've made this point a couple of times so I won't belabour it -- things like medium-term and long-term projections on revenues, on the expenditure lines, on what the gap is in terms of where your deficit projection is and on where the lines are taking us if you don't do corrective action. Those are the things that have always been provided, and then the committee is able to provide advice on that basis.
May I say that information was always provided as well to the presenters who were coming before the committee. They were given a baseline set of circumstances to respond to and to advise you on. This is a very empty process we're going through in hearing interesting ideas but not often getting specific responses to anything that's been set out by the Ministry of Finance, because nothing has been set out by the Ministry of Finance. I find that very frustrating.
For example, on the question on the employer health tax, Mr Phillips has already asked that of Mr Eves and Mr Eves has refused to provide us with any information. The information I have from the ministry suggests that 90% of the employer health tax is collected from employers with payrolls over $400,000. Your original promise in the Common Sense Revolution was that you were going to eliminate the employer health tax for those businesses with payrolls under $400,000 and that this would cost $400 million in lost revenue.
The employer health tax produces $2.6 billion or $2.8 billion in revenue to the province. If you're going to cut off 10% of it, that's not $400 million. The costs don't add up. So it is reasonable to ask. Maybe the number was right and the description was wrong. Maybe that's why the promise is being changed now, I don't know, but that's a reasonable question to ask.
With respect to the lost revenue on various models of the 30% income tax cut, we're not asking for information that would be subject to budget secrecy or that would have any impact on markets, for example, because the commitment is already out there. You've already indicated that you're going to do this tax cut and you've already given a fair amount of detail in the Common Sense Revolution. You may be looking at other options. We're saying, "Give us some information around the options and the cost and we can provide you with some advice on it."
I just want to remind you, from Hansard from Monday, that I specifically requested this of the minister. I said:
"Let me turn to some specific questions and perhaps we can find out if any of this information will be forthcoming. You've said on a number of occasions today that you have not made any decisions with respect to the tax decrease, and I believe you on that, that there are a number of options of how the Common Sense Revolution promise could be interpreted. Would you provide this committee with a range of options of how you could accomplish an average 30% decrease in personal income tax and what the lost revenue projection would be so we can provide you with some feedback on that?"
The minister answers, "If Finance officials are able to do that, I certainly have no problem with exploring that dialogue with the committee."
We've not received anything. I think that commitment was made to the committee, and you are all part of this committee. The minister made a commitment to us -- not to me, to us as a committee. It is, I think, appropriate for us as a committee to request information of the minister.
You do have some role, as members of a committee that is somewhat independent of the whole process of what's going on over in the Ministry of Finance. You're not going to be making those decisions, but you are being asked to provide advice. I suspect your advice will be quite consistent with what the Finance minister is thinking of doing, and that's fine, but you should at least be giving that advice based on some information.
I find it very difficult to accept from individuals comments like, "This is fine; we have sufficient information," only I guess because of the experience I've seen in the past in terms of what has been provided. I don't know whether you would like to look at the comparison. All of the comments I've heard from folks about levels of taxation -- I have chart after chart after chart -- don't you think you should take a look at some of this information? Don't you think it would be useful? This is from the Ministry of Finance, by the way. Don't you think that would be useful? This was produced September 1995 under your government.
1220
I really think this is an important motion for the committee to support and I urge you to rethink that position. I don't think they should be independent requests from individual members; the request should go to the minister from the whole committee.
The Chair: Further debate from the government?
Ms Bassett: There's no debate from the government. I made the statement; it hasn't changed. We're not going to support the motion.
The Chair: Do you wish to have a further, short summing up, Mr Phillips?
Mr Phillips: Let me be very blunt. I asked the minister for this information in writing, fundamental information for the public to know and we've been stonewalled. There's no other term but "stonewalled." I tried to do it politely in a way that we did it every other year, in a non-partisan letter, copies of which you all had, asking for something the public has a right to know, and you're stonewalling, the minister's stonewalling.
I don't have any faith at all, if I simply say to the parliamentary assistant, "Please, please, please go over and see if he won't give us this information." He's stonewalling and it's not acceptable and it can't go on; it really can't. This is not some private, little business that he's running -- he and his partner Mike -- this is the public's business, so it's unacceptable for me to sort of ask on bended knee that we get the information.
Now you're going to be part of the stonewalling. You're buying into it if you don't change your mind right now. I just say to you that if you buy into this it's unacceptable; it won't stand. The public won't stand for it. The public has a right to know this information.
You came here, presumably, to make a contribution. Do you really think you don't need this information to comment on the budget. Have you any financial experience at all? Are you just going to salute and say, "Go ahead with the tax cut; I don't care what it costs"? Are you going to go ahead with a promise that you didn't even know you'd made, without knowing the cost of it? You look foolish on this.
It's not unlike, frankly, what we saw on Bill 26, and it became known as the "bully bill." This is similar. The problem is, you didn't have a choice on Bill 26, they introduced it and told you to defend it, but now you're buying into this problem. I would just say to you that if you don't change your mind now on this, insist on the information and have it before us when we make our decisions, you and the whole government become part of what I call stonewalling, hiding fundamental data from the public, and it will not stand.
The Chair: I'll put the question. Should Mr Phillips's motion carry?
Ms Lankin: Recorded vote, please.
Ayes
Castrilli, Kwinter, Lankin, Phillips, Silipo.
Nays
Bassett, Brown (Scarborough West), Carr, Ford, Hudak, Marland, Spina, Wettlaufer.
The Chair: The motion is defeated.
Ms Lankin: Given that the Minister of Finance won't provide any information and given that I requested information around various types of per-point yield and various types of taxation, and given that the comments of the members opposite day after day have made it clear that they don't know what the tax policy is in the province of Ontario in the different rates, I would like to provide the committee with information from the Ministry of Finance, an overview of Ontario's tax system, 34 pages of good data about Ontario's tax system. This is not all we need but this will at least be helpful, and it's a damned shame the government members don't think it's important enough to be asking for this information of the minister themselves.
Mr Ford: You have it already.
Mr Wettlaufer: You have it already.
Ms Lankin: No, you don't understand what we're not getting.
Mr Phillips: No, you don't have it. You guys are foolish. How could you even comment on a budget when you don't know anything you're talking about?
Ms Lankin: It's crazy.
The Chair: The clerk will distribute that information to the committee.
Before we recess for lunch, we have the issue of rescheduling the presentations from yesterday afternoon of the Older Women's Network and the Toronto International Film Festival. I understand we could do that next Wednesday afternoon.
Mr Stockwell: How's Saturday?
The Chair: Next Saturday afternoon, or if there's any open slot, we could slip them in. Would this meet with the approval of the committee? Agreed.
Finally, can the subcommittee have a meeting at 12:30 pm on Monday, February 12, to finalize the agenda and the travel arrangements of the auto insurance inquiry?
Ms Lankin: I was just going to ask if you would speak to the subcommittee members of this committee about my request on Dr Fraser Mustard.
The Chair: We are recessed till 1:30 this afternoon. We have a full agenda this afternoon.
The committee recessed from 1226 to 1332.
NATIONAL ACTION COMMITTEE ON THE STATUS OF WOMEN
The Chair: I see a quorum. The National Action Committee on the Status of Women will be presenting to us, Ms Vuyiswa Keyi-Ayema.
Ms Vuyiswa Keyi-Ayema: My name is Vuyiswa Keyi-Ayema. I am a member of the National Action Committee and I'm on the executive of the National Action Committee. We wanted to come and make a presentation here because of our concerns around the financial decisions that the government makes and the direction that it takes, and the impact particularly on women. For me, our main issue really is to be here to remind the government that the provincial government is also bound by the commitments that the federal government makes internationally around what they're going to be doing with other governments in the world to protect citizens and residents in their countries.
In the recent Fourth World Conference on Women, in Beijing, the Canadian government made commitments, alongside other governments, for the advancement of women's equality, which they reaffirmed at that conference. These commitments require that Canada, among other things, ensure that women are not adversely affected by policies introduced to respond to changes in the global economy, to ensure that economic and financial policies not adversely affect poor women, to support publicly funded quality child care as a fundamental premise of society. Alongside these, the financial decisions that the government makes impact on other areas of women's lives, including their health, their social services support, their ability to work, their ability to support their families, their ability to function and to attain equality in Canada. We have real concerns around the way the budget has been decided and has been carried out so far.
Part of our main concern is that we are worried about the impact this will have on women, particularly on poor women. The tax cuts that have been proposed are not really going to support and serve women as well as the government claims they are going to, because what's going to happen is that these tax cuts are going to go across the board and support other people who already have more money than women have.
The way in which Bill 26 was railroaded into policy and into legislation has left a lot of people without any resources or any supports or any ability to challenge any situations that are going on in their lives. We would like to submit that women and children stand to lose the most through the proposed budget cuts and through the proposals that are contained in the bill just mentioned.
We want to draw the committee's attention to the submissions of the Ontario Coalition for Better Child Care, which we endorse, for more elaboration on the impact on women and children. I think it is really important for this government to take the responsibility to evaluate and examine any policies that it comes up with for the gender impacts they may have, for the disproportionate impacts these policies will have on women particularly, because there is a link between the structural restraints arguments that are being used here with the structural adjustment programs that have been implemented in Third World countries, where again and again women and children have suffered the most from the structural adjustment programs that have been designed by governments that include Canada, the US and other countries of the G-7, to look at how they contribute towards the support for countries in the south. The same impact will happen for women who live in the lower-income brackets in Canada right now with the kinds of restraints and the kind of support that the government is talking about.
We are also concerned that there's a lot of talk about the deficit itself which does not take into account the compounding interest that has been gained by banks and other relatively modest program deficiency expenditures. The need to deal with the deficit should not be centred around the need to deny people programs and services and support and financial resources, because that is not where the expenditures have been in the past in terms of where the moneys have been spent the most. The Canadian government federally has spent a lot of money on the military, on defence, on a lot of other issues that have not been looked at to see what else could be cut in there before people decide to cut social services in women's lives and impact on women in that way.
That basically is the gist of our proposal, of our concern to the government around the budget and the process that is going to be used, that we would like to see the government take a look at the impacts on women. We would like to see the government review the process it has been using so far and start to implement a new process and a different process that is more inclusive, that is participatory, that allows for more consultation with everybody so that people have input into exactly how the government is going to make decisions about finance changes in the system.
Ms Bassett: First of all, thank you for your presentation. I'm the parliamentary assistant to the Minister of Finance and I want to say he's most interested in getting suggestions that everybody has who's making a presentation, and what we want to do is take back your ideas.
What I could ask off the top, what I didn't hear: Do you think the problem of the deficit is a major problem facing us, or is it just how we're dividing up the pie that is a problem?
Ms Keyi-Ayema: I'm not denying that there is a deficit. I think globally there are deficits in all governments internationally. We have a problem with these proposals to deal with the deficit itself in terms of their impacts on lower-income people. We feel the proposals that have been suggested, the cuts that have been made to social services and so on in an attempt to come up with some financial restraint system, are impacting on people who have the most to lose already.
Ms Bassett: Where would you make the cuts? It's always a hard thing to do.
Ms Keyi-Ayema: I think the provincial government should really be fighting with the federal government instead of the people in the province. I think the provincial government should be dealing with the federal government around how the transfer payments are being made, around how the federal government is making expenditures in particularly the military and defence and in those kinds of different areas, and look at those and look at how the banks are structured and how that's working and how that impacts on provinces and how the money gets divvied up among the provinces. That's where the debate should be, as opposed to provinces turning back. It becomes a pecking order from the way we look at it, because rather than deal with the federal government and make changes at that level, the changes are being imposed on people who have the least to give to make the system more viable financially.
1340
Mr Wettlaufer: You say we should approach the federal government about how it could be divvied up, but assuming that all governments are going to be cutting costs -- and this is going on worldwide -- assuming that the federal government isn't going to revise how it's going to divvy up the federal pie and that we are going to have to continue to cut our costs, where could we cut them? I think we're looking for help from the people coming in making the submissions as to where they would recommend we make the cuts. Where would you?
Ms Keyi-Ayema: We would have to have a bit more time to go through and figure out exactly where the cuts would be, but I think there could be more cuts in looking at, for example, the whole tax cuts that are being proposed, the structure of how that's going to be done. I think it needs to be reviewed and looked at in terms of, does it really benefit the people and is it going to make that much of a difference? Are the people in the higher echelons of economic possibilities in life -- I don't know the language for this -- are we taxing enough in that area to make sure that we divide up the money properly?
When we say we're going to give people a tax cut and then turn around and say to them they have to pay for certain health services and other things, they end up without very much in their hands to use to cover the support that they need. The tax cut itself is not going to be enough. If somebody's only making $15,000 or $20,000 a year and they have a tax cut, even if it's a tax cut of 30%, and then they have to pay for all kinds of different health services for themselves -- particularly, for example, in social services, in child care -- in order to be able to work and even earn that kind of money, the tax cut itself is going to end up not meaning much for them. It will end up, all of it, going back again into not supporting any of the other things they may need in their own lives as opposed to just supporting those already making enough money in the system.
So I think it needs to be reviewed and I think time needs to be taken to review these with all the parties and have everybody sit down and take time to do it, rather than rush into making changes that have serious and gross impacts, particularly on women and children.
Mr Wettlaufer: We have received some input from different proposers, some saying that the tax cut is going to be beneficial and some saying the tax cut won't be beneficial, so I guess it's a matter of conflicting testimony and it depends on where you come from, but we are looking to achieve efficiencies in government, and that means we do have to cut spending. I guess we're hoping that people will come forward and recommend to us areas that we can reduce our spending, because obviously that's what our mandate is.
Ms Keyi-Ayema: I think one of the biggest concerns we have had is the process itself. People have not been given enough time to work through these issues and to make the changes that are made. In a sense it kind of makes a mockery of the government's own commitment to participation and full consultation and full participation by everybody in the system when you give people only two or three weeks to participate and make change and review all the changes that need to be made in the system.
The process itself is flawed and is problematic. It is not allowing room for participation that's going to make sense for everybody. There's a sense of panic that is being imposed on everybody that makes it really difficult for people to work through and make the changes together with the government that need to be made. I think that, to me, would be the biggest problem that we see with the process itself as well as the kinds of suggestions that are being made that have not been made with full consultation at the beginning.
We appreciate that the government has to make a suggestion and put forward an idea and ask people what they think makes sense out of what they see, but when you've only got less than a month or less than two months to respond to a proposal that has such a major impact on everybody, it really makes a mockery of the whole process that says: "We are working with everybody and we are encouraging participation and we want to work with everybody. We want to hear what everybody says, even those people who are saying the tax cuts are going to help. We would have to sit down with those who say they don't help and look at where they help and where they don't help, because obviously they probably help in some areas but they definitely do not help in all areas."
We see the direct impact on women. I work in a community health centre for women right now which is the only community health centre for women funded by the provincial government, Women's Health In Women's Hands. Immediately since the summer we have seen an incredibly high number of women who are coming in facing a lot of real problems with the kinds of cuts that have been made to their family benefits cheques, to their welfare cheques, to the way in which they're being treated and how they are going through getting some -- you know, their lifestyle. So the mental health of women, the lifestyles, just all those different things are directly impacting on people before they've even had a chance to sit down and say, "Okay, what is really going to make sense for all of us, that's going to make sense for everybody?"
It's one thing to react and say, "We came in here to cut the deficit," but it's another to say, "This is what we're going to do and you've only got one month to respond to it." It's very problematic to do it like that.
Ms Castrilli: You made a statement earlier on that cuts will affect women and children disproportionately. I wonder if you might elaborate on that for the committee. How would they affect women and children disproportionately?
Ms Keyi-Ayema: In the last few decades we have seen, for example, an increasing number of single-parent families, most of them largely run by women. We have seen a large proportion of women who are not able to access child care services for their children so that they can go to work or go back to school in order to get the qualifications to get work. So when we look at the disproportionate impact and we look at the changes and suggestions that are being made and the cuts that are made to several services -- to social services, to health services, to costs for prescriptions and so on -- there is going to be a direct correlation of that to women's lives and what women are able to afford; women coming out of divorce, women who are on their own, older women who are now living on their own who have to pay for health care and have to pay for a whole host of other things that they didn't have to pay for before.
Those are the kinds of things I'm looking at: women who don't have the possibilities or the opportunities to raise enough money to pay for the kinds of services they are now being told they have to pay for on their own. To be forced now to make choices, what is a healthy choice to make, what is a healthy diet, right down to nutrition and all those different things begins to impact directly on women and children in that context.
Ms Castrilli: I'm looking at some figures which the government presented in its Common Sense Revolution. It looks at incomes of $25,000, for instance, and looks at the tax change implication for those individuals. It looks like the first year, for instance, they would receive $425 in tax savings, $638 the next year and $850 the next year, which is roughly about $1,800 or $1,900. You indicated earlier that you felt that some of the savings that people would receive in tax reductions would in fact be eaten up by additional fees that individuals would have to pay. Would you say that many of your groups would exceed the $25,000? People whom you represent, would they be in that range of $25,000?
Ms Keyi-Ayema: Most of them not. Some of them are on family benefits, so they're not making that. If you're on family benefits and you're getting $20,000 or $22,000 a year, that's not taxable income, that is not considered income, so you don't even benefit from the tax that other women are getting. It makes no change, and yet they still have to pay for all these services beyond that.
Ms Castrilli: So in fact even the minimal savings that would be indicated here would not affect a great many of your members, who would at the same time have to pay all the additional services of people who would be making twice that much, or even more, because the services are flat-lined. They're not according to income; they're the same for everyone.
1350
Mr Silipo: You mentioned that you endorsed the positions taken by the Ontario Coalition for Better Child Care. We'll be hearing them later on this afternoon, so we look forward to their presentation with respect to child care. I'm familiar also with a number of the decisions they have taken and understand the importance of child care as one of the key issues for women, and indeed families, in terms of being able to get and keep jobs.
One of the things I'd like to pursue a little bit more with you is this notion that has been very clear from the government side. You heard it again today in the questions around the fact that they clearly have accepted and we see that their mandate is to make cuts to the deficit, to bring the deficit down. What I didn't hear and what you won't hear them also talk about is that while on the one hand they say they're very concerned about the level of debt that we have in this province, the actions they want to take to put in place a 30% tax cut are going to actually increase the debt by about $20 billion over the next four or five years. I just wanted to make that point.
But coming back to the tax cut, as you just said, many people with low income -- and that includes, unfortunately, many women -- many single-parent families will see very little benefit by way of those tax cuts either because they're on social assistance or unemployed or because their income is so low they won't see the benefits.
One of the things we've been striving to try to get across to the government is that while there is agreement on the need to bring the deficit down and to bring the deficit under control, what they are doing seems to us to be somewhat backwards. What they seem to have done so far in a number of actions they've taken is to hit hardest those who are among the lowest in terms of income across the province, whether it's the welfare cuts, whether it's the cuts to child care, whether it's the cuts in education now or many others. I guess I'd just like you to talk a little bit more about that.
In effect, everyone understands the need for government to be spending less, but what we seem to have a lot of trouble getting government members to understand is that what they have done so far and what they presumably will continue to do is not going to be felt equally across the board. In fact, people of middle- and low-income backgrounds and people who live in poverty are going to bear a much harder brunt of those cuts. I just give you the chance to talk a little more about that reality because it's the only chance we have to get some of the government members to listen to what that actually means out there.
Ms Keyi-Ayema: I don't even know where to begin. For example, the cuts, all those cuts that are being made right now, the direct impact that we're actually seeing at the local service level is to women who are losing their housing, women who are not able to pay for their housing any more because they've had either their welfare cheques cut or they've now got to pay for child care that they didn't pay for before, that they were not able to access before. The waiting lines for women to get child care to be able to go to work have always been long in Ontario. Women have lost homes. Women living in violent situations in their lives, and there's a very high proportion of women who are living in violent situations, who end up having to go to shelters have no access to second-stage housing because that's been cut. Women who have serious health problems that they cannot have access for, some of the processes of treatment for things like cancer and so on, are now also being put aside for people to have to pay for themselves; different types of chemotherapy are being charged for separately. There's a whole host of different areas that women's lives are being impacted on directly.
We get calls from women who are falling through the cracks because of no support in different places. They've no access to education; they've no access to language training any more. Job training programs are not adequate and they're not available any more because those are being cut as well. So as the government is talking about people going back to work and people becoming self-sufficient, a lot of women have continuously volunteered for years and years and for decades and we've always done that. But the amount of stress that's being put on women now to do extra pieces of work without any remuneration, without any support in terms of food, financing for their education, for work site support, for child care, for clothing -- all those fundamentals that are not luxuries at all are really critical.
This year, 1996, has also been declared the year to eradicate poverty. Yet, the financial restraints that the government is taking are increasing the poverty of women, particularly the poverty of people in low-income brackets.
People come to Canada because Canada has always had the reputation for being the place where you've got the opportunities to do the support. A lot of immigrants, and refugees particularly, who come to this country don't want to go on welfare. They come to the offices and they say they really don't want to be on welfare because they feel like they're no one. They came from places where they worked before. They want to continue to work. They have no access to jobs, no access to job training, no access to their professions being validated. So they end up being on welfare.
Everybody says, "You're going to get a 30% cut." When you're on welfare you don't get a 30% cut, so when you get a job that's paying even less -- sometimes they end up in jobs that pay less than minimum wage -- women who are working in restaurants, who are working in factories, who are getting less than the minimum wage that everybody else is entitled to -- because they don't even know they've got the rights to that. There are no supports in place for women in those kinds of situations, for women who are coming out of divorce, for women who have children.
The education system, class sizes, I could go on and on, but the upshot of all of this is that the target for the cuts that the government is making is the wrong people, because the people who are going to suffer the most from these cuts are people with absolutely nothing to give any more, who volunteer and volunteer until there's nothing else they can volunteer to give to anybody else. So those kinds of things are really, really problematic with the process that is being used in the changes that are being made in the financial system.
The Chair: We appreciate your presentation to the committee. Thank you very much.
MUNICIPAL ELECTRIC ASSOCIATION
The Chair: The next group that we have is the Municipal Electric Association, Mr MacKenzie, Mr Jennings and Mr Martin.
Mr Elvin Martin: Thanks for the opportunity to appear before this committee. My name is Elvin Martin. I'm the chair of the Municipal Electric Association. I am also the chairman of Waterloo North Hydro. With me is Mr Jim MacKenzie, our president, and also general manager of Guelph Hydro. Mr Tony Jennings, our executive officer, sends his regrets. He was called away on other business at the last minute.
The MEA represents Ontario's municipal electric utilities. The MEA's role is to help our members provide quality, cost-effective service to their customers. We help utilities speak for those customers.
To give you a sense of our work, the majority of our staff and volunteer committees help utilities control costs through the joint provision of up-to-date trades and non-trades training; educational conferences; insurance services; labour relations assistance; guides, manuals and advice on customer service, rates, energy management, administration, human resources and engineering. Another part of our activity is devoted to representing members in discussions with government, Ontario Hydro and other industry-related groups. With the changes that are coming in the electricity industry, this representation activity has taken on a higher profile.
Our members deliver electricity as a local service on a full cost recovery basis, with no recourse to taxes. These municipal electric and public utility commissions operate on a not-for-profit business basis, responding to the needs of local residential and business customers. About a third of our members deliver services other than electricity, most commonly water.
We welcome the opportunity to meet with the members of the standing committee on finance and to participate in the pre-budgetary process. Through this process, we want to encourage the government and Legislature to consider all electricity customers, both in the budgetary exercise and in related changes you will be considering in the electricity system and local government reform. We would like to spend about 15 minutes on our presentation and then open the floor for other dialogue.
I'm sure we all agree that electricity plays a critical role in the health of our economy and in our daily lives. Historically, Ontario's safe, reliable supply of electricity at low rates has given us a competitive edge in attracting capital investment and contributing to industrial expansion. Within the last few years, the Ford Motor Co acknowledged that a reliable, inexpensive supply of electricity was a major reason for choosing Oakville over St Louis for a half-billion-dollar expansion. This same type of investment decision is reflected in Toyota's Cambridge car plant and Honda's investment in Alliston.
1400
Ontario has traditionally enjoyed very competitive rates; however, in recent years Ontario's rates were losing their competitive advantage. Residential and commercial electricity rates in the nearby US states such as Illinois, Indiana, Michigan, Minnesota, New York, Ohio and Pennsylvania are still well above those in Ontario. Although industrial rates are more comparable, Ontario still has among the lowest rates in this category. Nevertheless, the widespread surplus of electricity has allowed many US utilities to introduce special rates to attract and retain customers. Ontario Hydro has responded with their own new rate strategies. MEA has supported the new rate strategies where Ontario Hydro has done the analysis necessary to ensure that other customers are not adversely affected.
The provision of economically priced electricity is important for the health of Ontario's economy for two key reasons: to attract and retain large industrial customers, and to provide relief to residential customers and small and medium-sized businesses.
In the Common Sense Revolution, the provincial government acknowledged the need to put more money back into the pockets of individual Ontarians. Just as the promised cut in the provincial income tax rate is supposed to stimulate the economy through increased consumer spending, lower electricity rates will contribute to a similar outcome. What good is a reduction in personal income taxes if that reduction is eaten up by higher rates for services such as electricity?
Low electricity rates are also essential for small and medium-sized businesses which create 80% of the new jobs in Ontario. If 725,000 new jobs are to be created over the next five years, small and medium-sized businesses will have to be given the tools to create those jobs.
Talking about jobs, there is one way for government to reach us all and contribute directly to the economy through small and large businesses. Currently, the government charges Ontario Hydro, and thus all electricity customers, rent for the water flowing through hydraulic generating stations. At the beginning of the decade, the provincial government began charging for the guarantee on Ontario Hydro's debt. Together, the debt guarantee and water rental charge cost the electricity system and our residential and business customers $284 million. Removing these charges could provide an immediate decrease of almost 3% in the cost of electricity.
We would like to acknowledge that the government has directed Ontario Hydro to freeze average rates for five years. In this connection, we are pleased to see Ontario resisting harmonization of the sales taxes. When the GST was introduced by the federal government, our residential customers saw a real increase in electricity costs. Applying the provincial sales tax or some higher, blended tax to electricity would similarly increase electricity rates.
It is clear to municipal electric utilities that change to the current electricity system is inevitable and in fact welcomed. In any restructuring process, the first steps are most important. In 1992 the MEA began to look at industry reform. We drew on expertise from within the province and consulted with knowledgeable people from around the world. We recognized that electricity rates in Ontario were losing their competitive edge and that there was a need for real change. We have included a chart, which is at the back of your copies that you received today, that demonstrates the impact of escalating rates on our customers. This chart that you have received is from Guelph Hydro, but is typical of any municipal electric utility.
The provincial government also recognizes that there must be changes in the electricity industry in Ontario. As you are well aware, the government has appointed the Macdonald committee to evaluate options for phasing in competition in Ontario's electricity industry. It is to report by April 30, 1996. Last week the MEA made its formal presentation to the committee. We are leaving copies of our proposal with you today.
At this point, I would like to invite Jim MacKenzie to review the highlights of that model for restructuring the electricity industry. We believe this model will bring rates down; other proposals on the table we believe would increase rates.
Mr Jim MacKenzie: Good afternoon. Our proposal to the Macdonald committee recommends significant changes to all aspects of Ontario's electricity industry. It contains 29 recommendations. We don't intend to go through all 29 this afternoon, but we'd like to touch on some of the highlights of our model and some of the key points.
Firstly, we believe that the electricity industry should be vertically unbundled. There are three distinct parts of the electricity system: generation, transmission and distribution. We believe they should reside in separate entities with independent governance. The generation, transmission and distribution functions currently performed by Ontario Hydro should be transferred to separate corporations. We say more about Ontario Hydro's distribution function later on in our presentation.
We also recommended that there should be horizontal deintegration of existing generation. In order to facilitate competition, generation currently owned by Ontario Hydro should be separated into multiple nuclear, fossil and hydraulic generating companies.
We also recommended to the Macdonald committee that the transmission company, which is a natural monopoly, should be publicly owned. There are no apparent benefits to be gained through private ownership of the transmission system. Private ownership would increase rates through the higher costs associated with capital, taxes and a requirement for a return on equity. More vigilant regulation would be required to protect against monopoly profits and to ensure fair access to the transmission system. By contrast, public ownership protects against reintegration of competitive portions of the industry with monopolistic ones, which by way of example is occurring right now in the UK where distribution and transmission are in the private sector.
We have also recommended that a competitive wholesale market should be established. Our association believes that all private and public generators should have the opportunity to supply the wholesale market for power on a non-discriminatory basis. Electricity would be purchased by the pool, through the transmission company, on a competitive basis from least-cost suppliers. In turn, all electricity customers would benefit from the least-cost electricity.
Further, the power pool concept should be retained. The presence of a wholesale power pool is fundamental in that it provides equitable access to reasonably priced electricity to all distributors and therefore to all end-use customers. It will also act as a vehicle for pooling risks which may be associated with uncertainties in the price and availability of electricity. There are a number of benefits to maintaining the pool.
We've also recommended that distribution companies should be locally owned and locally controlled. First, distribution is a local natural monopoly, and second, local ownership is a means of ensuring responsiveness to local needs and is shown to be the most effective way of serving local customers.
Many may assume that private sector services are cheaper. For electricity, the opposite is true. By way of example, in the US there are some 2,000 municipal electric utilities publicly owned, and the number is increasing. The average residential customer served by them receives electricity at rates 30% below those from investor-owned or private utilities. Commercial and small industrial businesses, on average, have rates from municipal electric utilities that are still about 15% below those of the investor-owned utilities. We have attached a chart from the US Department of Energy which outlines the difference in rates in the United States. To make the record complete, I should note that average electricity rates for large industrial customers are about the same from either public or private utilities in the US.
The customers' interests in low-cost, reliable service must remain the primary focus in Ontario. Privatization of municipal electric utilities is inconsistent with the interests of their customers. To ensure that customers continue to enjoy reliable electricity at the lowest price, we would recommend that municipal electric utilities remain locally owned and locally controlled.
We also recommend that retail access should be rejected. Ontario Hydro and large industrial users are promoting retail access, which would require individual customers to compete for their own electricity supplies, on the basis that it offers customer choice. We believe this will have a negative impact on residential customers and on small and medium-sized businesses in this province. The fact is that choice would not be a reality for most customers. It might become a reality for the large customers, but at significant cost to everyone else.
We've also recommended that the distribution of electricity should be separate from transmission and generation. Distribution currently performed by Ontario Hydro should be assumed by local distributing utilities. In particular, we submit that responsibility in remote and unorganized territories in the province should devolve to separate, unrelated, independent, customer-governed utility commissions. These commissions would operate under the same conditions that apply to all utility commissions.
1410
We also recommend that the electricity distribution system should be restructured once it is separated from generation and transmission. Our association and our members acknowledge that new efficiencies can be realized at the distribution level. To that end, we suggest that once distribution is separated from transmission and generation, the distribution system should undergo restructuring.
Uniform utility structures, in terms of size and types and levels of service, throughout this province are neither necessary nor desirable. Nevertheless we suggest that distributing utilities should be no smaller than a municipality, no larger than a region, county or district. Distributing utilities should be shoulder to shoulder, contiguous across the province.
Locally driven studies paralleling municipal restructuring are proposed. If our timetable is accepted, these will occur in the three-year period from January 1997 to the year 2000.
A recent study performed by Coopers and Lybrand did not find any significant unexploited returns to scale in the distribution sector. The study's results are consistent with studies of distribution performed in Norway and Sweden, both of which have over 200 distributors. We would also point out that Germany has over 800 municipal utilities and is considering municipalization of about another 100 to 150. New Zealand also has a large number of distributors under local control.
This study tells us two things: first, that Ontario is not unique in its use of municipal electric utilities, and second, that small and medium-sized utilities enjoy efficiencies which are unmatched by very large utilities.
We have also recommended that a merger of distributors with Ontario Hydro should be rejected as it is anti-competitive and anti-customer. We believe that such a merger would be fundamentally anti-competitive and anti-customer. Any merger would only further strengthen the monopoly power of Ontario Hydro. Finally, it would require regulatory acrobatics to protect the customers.
Obviously one of the reasons that Ontario Hydro supports a merger is because that corporation believes it will solve its financial problems. We don't think that's a likely outcome. In fact, a merged organization would eliminate the threat that the municipal electric utilities might seek supplies elsewhere and thus remove any incentive for Ontario Hydro to put its own financial house in order. Instead, the objective should be to maintain the pressure to be competitive on the generation side of the business, through the municipal electric utilities and their customers.
One last point on the question of the so-called merger: Frankly, we're astounded that Ontario Hydro seems to believe it can expropriate the municipal utilities' $6 billion in assets with the stroke of a pen.
In summary then, our model recognizes that generation is no longer a natural monopoly and consequently should be subject to competition; that transmission is a natural monopoly and should be under local control; and that the power pool principle of uniform wholesale rates at cost should be maintained and retail access should be rejected. Our association and our members believe that this model represents the best way to accommodate sound industry reform in a way that will protect the interests of all electricity customers and benefit the Ontario economy.
Elvin will offer some conclusions.
Mr Martin: In closing, let me repeat that electricity plays a critical role in Ontario's economy and in our lives. A secure and accessible supply of competitively priced electricity has always been a key economic driver in Ontario.
Earlier this week, the MEA representatives met with the Advisory Group on Municipal Government Reform, chaired by Mr Ernie Hardeman MPP. We reviewed the electricity restructuring issues which Jim presented. We also discussed the continued use of local public utility commissions. These standalone, self-supporting, not-for-profit, municipal businesses serve customers with no recourse to taxes. With the fiscal challenges facing governments at all levels, we believe this public utilities approach can continue to serve Ontario well. I won't go into any of the details of the material, but we have attached some of the information that was provided to the Hardeman advisory group. That's part of your package.
In order for Ontario to continue to enjoy the benefits of a reliable supply of electricity at low rates, major restructuring of the electricity industry is required. The MEA and its members have developed a model which allows Ontario to continue to enjoy the economic advantages from electricity. We urge you to support our efforts to serve our electricity customers and our communities even better.
Thank you very much and we would be pleased to answer any questions you may have.
Mr Monte Kwinter (Wilson Heights): Thank you very much for your presentation. I was very interested in your analysis of what was happening. I want to talk about the whole thrust of privatization of Ontario Hydro.
In the chain of delivery you talk about generation, transmission and then distribution. Your position is that you would not be averse to competition at the generation level. If you have cogeneration, if you have people who have private generating plants, they could sell into the grid. There is a natural monopoly as far as the transmission is concerned and then you feel that the utility commissions, MECs, are probably, because they're not for profit, the most efficient way to get the power to the customer. In Ontario, we've always had that as a competitive advantage.
If that is the case, why would there be any case for privatizing? Other than that, as you say, in the competition for generation, how could the private sector do it any better considering they have to have a for-profit kind of input into whatever they do?
Mr MacKenzie: First of all, our model talks to reforming the industry first; in other words, separating generation from transmission and distribution, separating it into component parts. We address industry restructuring in that point of view before we feel there should be any discussion about privatization.
We think it's important that the monopoly that exists with Ontario Hydro be broken up and that that corporation be unbundled and that separate generating companies be formed out of Ontario Hydro. Those initially could be maintained as competing generating companies, publicly owned. In terms of private sector capital in the generation area, there are some independent power producers now and we would see that as new generation is required in this province, it's likely that private sector moneys can introduce new generation capacity as it's required and, in that way, you introduce private sector risk capital into the electricity industry.
Mr Phillips: On Bill 26, one of the things that I felt was happening there was that the skids were being greased for municipalities to essentially take over the local electrical organization and then to sell it off. It looked to me like that at least there was the potential for some short-term gain on selling off some assets. Obviously then the users pay off that debt. But was I interpreting the bill properly, that that's at least one possibility as a result of the bill?
Mr Martin: Yes, I think you've interpreted that correctly. I think you were in Windsor when we made our presentation there and we were strongly recommending that an amendment be made to Bill 26 to leave in place the issue of the referendum where the people who receive the electricity --
Mr Phillips: It didn't carry.
Mr Martin: -- I realize that -- the people who receive the electricity would have a say in who supplies it to them and have a say in how it's controlled.
Mr Phillips: My concern right now is, I have a feeling that the Hydro thing is on an awfully fast track and that the experience that I've had with this government is that it may very well bypass any public input and just -- snap -- it'll be done. I would think one of the things that at least we might try do here is to ensure there is a very reasoned debate around any plans for Hydro and that may be one of the recommendations we can get in this report.
I gather from your report that the studies that have been done would suggest that it's a little bit difficult to find where privatizing at the local level has been to the taxpayer's advantage. Are there any studies that would suggest that it is to the taxpayer's advantage to privatize at the local level?
Mr Martin: I don't believe there are any that we are aware of. We have the experience of private versus public in the US, but I don't think there's any experience that you can draw on here in this province that would indicate that it would be advantageous to privatize.
1420
Mr Phillips: You mentioned a $6-billion asset, I think, that you feel maybe Hydro has its eyes on. What are the components of that $6-billion asset?
Mr MacKenzie: The $6-billion asset, that's the collective sum of all the plant and equipment that municipal utilities own across the province. I think Ontario Hydro have more than just their eye on it. It's quite clear in their presentation to the Macdonald committee that their proposal is to have all of the municipal utilities merge with their transmission and distribution.
Mr Phillips: Is that $6 billion net of debt or is that $6 billion with a certain debt against it?
Mr MacKenzie: Municipal electric utilities have very little debt. In fact, many municipal utilities have no debt at all. That's the net figure.
Mrs Marland: Like Mississauga.
The Chair: A unique concept. That was almost partisan.
Mr Silipo: Like Mr Phillips, I heard your presentation in Windsor and I can tell you, as I kept making reference a couple of times throughout the balance of the hearings on one of the basic points that's remained with me from your presentation, which you make again today, which is that as you look at other jurisdictions, particularly the US, there is really no economic sense to privatizing public utilities. In fact, in terms of what is presumably most important at the end of the day, which is how can we offer a product to the consumers, that could be done a lot more cheaply by maintaining utilities within the public domain.
I wanted to understand more. It really is a genuine wish on my part to understand more what leads you to, as you split up the three parts of the system, as you suggest, within the first part, the generation, that there you do see that there could be privatization. Is that because you think there is something inherently useful about the competition that might come or is it because if it was kept in the public domain there would be more of a reluctance for investments to be made in the various generating systems that you refer to here, nuclear, fossil and hydraulic? I just want to understand the rationale behind that a little bit more.
Mr Martin: One thing we haven't talked about here is the issue of stranded assets and stranded debt which would have to be taken care of over a period of time. During the transition period hopefully some of that would be taken care of and at some point in time existing power plants will have to be either refurbished or mothballed. Also, technology today allows for smaller size generation units to be built, fired by natural gas, and would then offer the opportunity for other people to get into the market on a much quicker basis. And as need requires, it would be opened up for people to supply that generation and that could come from either the public sector or the private sector as well.
Mr MacKenzie: Just to add to that, generation represents about 70% of the cost of electricity in this province, and when we reviewed the system we felt that the largest potential for reduction in costs was in the area where costs are greatest -- in other words, generation. Our reform model focuses on introducing competition into the generation sector because we feel that is where the greatest cost reductions and the greatest reduction rates can be achieved most quickly. Not to say there are not efficiencies in all other parts of the system, but that is where you are going to receive the greatest impact on rates.
Mr Silipo: Are there two or three main factors that would lead to the greatest potential for a cost reduction there, if there was competition or if there was privatization?
Mr MacKenzie: I think you can have, and I expect you will have, competition between publicly owned, independently governed generating companies, along with privately owned, investor-owned generating companies all competing to supply the grid.
Mr Wettlaufer: Thank you, Elvin and Jim, for coming up here today. I appreciate your submission. The minister is looking for some concrete suggestions in so far as reducing costs and I particularly address my remarks to page 3. I won't get into the issue of privatization. I know some of the others in my caucus might want to.
You say on page 3, "What good is a reduction in personal income taxes, if that reduction is eaten up by higher rates for services such as electricity?" Then halfway down the page you talk about the debt guarantee and water rental cost in the amount of $284 million and that removal of those charges would equate to a 3% immediate reduction in the cost of electricity to the business and residential customers. Of course, if we went along with that, that would mean taking $284 million out of government revenue, which means that we would have to reduce our costs that much more.
I am putting words in your mouth, maybe, but I would like to know whether or not you would support reducing our costs by that much more, as a government.
Mr MacKenzie: I think we're here to present to you our views on how we can reduce electricity rates in the province, and how a reduction in electricity rates would help to stimulate small and medium business. We think that in terms of job creation, most job creation is through small and medium-size business. Frankly, we believe that a reduction in electricity rates will help to stimulate small and medium-size business activity in this province, help to generate jobs. That may -- I'm not an economist so I can't tell you -- help to offset any reduction you might have in the provincial treasury in terms of the water rental and the debt guarantee. I don't know; we haven't studied that.
Mr Wettlaufer: So what you're saying is, it would be very similar to the reduction in personal income taxes, that there would be a regeneration of the economy.
Mr MacKenzie: I don't believe I can comment on the impact of personal income taxes because, again, I haven't studied that, and that's not an issue specifically for our association in terms of what we're trying to present to the committee.
Mr Martin: If I may, I think there could be another factor here as well, and that is if the electricity system as it now exists were unbundled and we did with Ontario Hydro what we're proposing in our model, that may also eliminate the need for that debt guarantee.
Mr Steve Gilchrist (Scarborough East): Gentlemen, I'd just like to pick up on one comment you made in your submission here, namely the privatization of the generation side. Unlike some members opposite, I do believe there will be the opportunity for public debate on the whole subject of the potential privatization of all or part of the hydro service in this province.
One item that I'm sure will come to the fore will be the old chestnuts about the concerns we should all have on the nuclear side. In your submission you suggest that the three aspects -- the hydro-electric, the coal and the nuclear -- be broken into different generating companies. Do you share the concerns held in some quarters that we should in any way be concerned about privatized nuclear generation in this province?
Mr MacKenzie: I think experience in the United Kingdom might suggest that the private sector would be unwilling to take on all of the downstream liabilities that might be associated with nuclear. I think that's one of the reasons that in England and Wales the government and the electricity authority did have trouble trying to privatize nuclear, was the downstream liability. I understand that that's now an issue again in England in terms of the government looking at that again but, based on what I've read, I would assume that very few private sector investors would want to take on the decommissioning costs and the potential environmental liability costs downstream, so I suspect that that's why it would remain in public hands.
Mr Gilchrist: If I were to tell you that there are already companies approaching the government with a view to purchasing the nuclear assets if they were to ever become available -- so, clearly in their minds, they have determined that the risk-reward ratio works out in favour of private investment -- from a practical or a safety or a technical viewpoint, would you have any concerns?
Mr MacKenzie: Provided we have appropriate licensing through the Atomic Energy Control Board and all of those safety procedures are in place, no, but I would want to know from any private sector group that was looking at that how they want to handle downstream decommissioning and potential environmental liabilities because I think that's one of the keys to all of the nuclear industry.
The Chair: Thank you very much, gentlemen, for joining us today. We appreciate your submission.
1430
ALLIANCE OF SENIORS TO PROTECT CANADA'S SOCIAL PROGRAMS
The Chair: Our next group is the Alliance of Seniors to Protect Canada's Social Programs. Mr Buller.
Mr James Buller: In addition to the submission, I've included one set of documents for each political party. This is an alternative federal budget put out by the Canadian Centre for Policy Alternatives and a working paper that goes with it. I think it has some relation to the events in Ontario. Also, dealing with the unemployment insurance issue, I have the little red book -- and it doesn't only deal with the federal Liberals; it also deals with the federal Conservatives and the cuts made to unemployment insurance and the impact -- as well as a front-page analysis on the last federal budget and its harmful effect on dragging down the Canadian economy.
The Alliance of Seniors to Protect Canada's Social Programs is an advocacy body working closely with the Ontario Coalition of Senior Citizens' Organizations and the United Senior Citizens of Ontario, which represent more than half a million seniors throughout Ontario.
Seniors are especially concerned with policies of governments which adopt reduced block funding transfers of funding to the provinces, thus creating funding problems for local government and a reduction of services. This occurs when the provinces have reduced block funding for the municipalities.
The downgrading of available medical services, prospects of hospital closures, user fees for prescriptions affecting seniors and the needy, and cutbacks in public transit in many communities are viewed as attacks on seniors and ordinary Ontarians. Many are growing increasingly angry.
Canada and Ontario are in the grips of a worsening economic depression. The current policies of this government will weaken the economy, which needs stimulation rather than downsizing in order to create much-needed jobs. These in turn would generate income tax revenue and promote consumer spending, thereby reducing the deficit.
There is an alternative to the proposed 30% tax cut which would mainly benefit the wealthy. The affluent have already received personal income tax cuts of as much as 53% from the federal government, which has reduced the number of tax categories from 17 down to three in a number of steps, shifting the tax burden to the lowest-income taxpayers. Therefore, the tax cut idea should be scrapped forthwith as it will enormously increase the provincial debt, with the province having to borrow in order to pay for this tax break which they, the wealthy, have already received from Ottawa. This will save the provincial treasury billions of dollars and enable the province to initiate job creation measures.
Some 21% of profitable corporations, many based in Ontario, pay no corporate income tax. The remaining profitable corporations pay as little as 1% or 2%, according to the Globe and Mail Report on Business. A minimum provincial corporate tax of at least 10% would help generate the needed revenue to deal with the provincial deficit while enabling the provincial Treasurer the opportunity to reconsider the drastic cuts in transfer payments to the municipalities.
The ideological reasoning on the causes of the deficit are flawed and erroneous. The Canadian Centre for Policy Alternatives has published an invaluable booklet entitled 10 Deficit Myths: The Truth About Government Debts and Why They Don't Justify Cutbacks. In summary, it states:
Myth 1: The overriding objective of government must be to eliminate the deficit. Fact: The irony is that those who say this favour policies that will increase the debt.
Myth 2: Governments waste and go into debt, funding programs that are either unnecessary or should be privatized. The fact: Note that even when a government is forced to borrow and go into debt to maintain essential services, this should be considered a wise investment, as is the borrowing by a company to modernize its plant or equipment.
Myth 3: The government shouldn't run high deficits any more than the average Canadian should keep running up his or her credit card spending. The fact: A drop in government program spending of $1 billion leads to a loss of between 20,000 to 30,000 jobs elsewhere in the economy.
Myth 4: As a result of massive government overspending in the past, we can no longer afford the generous social programs. The fact: In 1994 and 1995, for example, the federal government collected $123.9 billion in revenue, while spending $119.1 billion on services and programs, leaving an operating surplus of $4.6 billion.
Myth 5: Without drastic cuts in government spending to reduce the deficit, we risk hitting the debt wall. Fact: The chief culprit is the Bank of Canada and its high interest rate policy, which forces governments to run up deficits because of the effects of compounding interest.
Myth 6: The deficit causes recessions, high interest rates and high unemployment. The fact: The truth is the exact opposite. The deficit is caused by recessions, high unemployment and high interest rates.
Myth 7: The deficit can't be reduced by lowering rates. Fact: The exact opposite is true. During and after the Second World War, the Bank of Canada provided low-interest -- 1% and 2% -- loans to the federal government which virtually eliminated the federal debt. The province can also help repatriate the provincial debt by offering Ontario debt reduction bonds to the public regularly, rather than dealing with foreign money speculators.
Myth 8: The deficit can't be reduced by raising taxes, because the tax burden is already too high. Fact: Canada has the lowest percentage of corporate tax contributions of any G-7 country, including the UK and the USA.
Myth 9: Canada's foreign debt limits our options and puts us at the mercy of foreign money lenders. Fact: While 20% of federal debt is held by foreigners, virtually none of it is in foreign currency.
Finally, myth 10: The deficit can only be reduced by cutting government spending, not by creating more jobs and bringing down unemployment. The fact: Creating jobs would have more Ontarians earning salaries and paying taxes, thereby helping reduce the provincial debt. Note: the real rate of unemployment, when workforce dropouts, college graduates and part-timers are factored in, is closer to 16% unemployment, rather than the 9% we're told.
The following recommendations are designed to benefit Ontario:
(1) Provide full extended funding to all municipalities as in the past and do not institute regressive block funding cuts to the municipalities. The federal government example in the 1995 budget should be rejected. I've enclosed that front page from the CCPA Monitor, which analyses the federal budget.
(2) Inasmuch as more affluent Ontarians have had their personal income taxes reduced substantially, by as much as 53%, the proposed 30% tax cut should be scrapped, as it would substantially increase the provincial debt as the province would have to borrow to finance the tax cut.
(3) Scrap all drug user fees or copayments for seniors and the needy, and regulate, not deregulate, all drug prices. Incidentally, Ontario would be the only province in Canada to deregulate drug prices under Bill 26. Press the federal government to amend the patent drug act to end the 20-year monopoly for patent drug companies. Reduce the period of patent drug protection from 20 to five years. This concept has also been endorsed by the pharmacists' association.
(4) Enact legislation to create jobs by amending the Employment Standards Act to reduce the work week to 35 hours. Overtime permits should be sharply restricted to all companies that have instituted layoffs until employees are recalled. See the recommendations in the Donner report submitted to the federal government and the provincial government. This was authored by Arthur Donner, the noted economist. Also, enact an Ontario infrastructure program to improve roads and bridges with long-lasting benefit to the province and an aid to kickstart the economy.
1440
I might add that this week on Monday, Premier Harris, in Davos, Switzerland, spoke up on the question of the long hours being worked and the work week. This is David Crane's article in Monday's Toronto Star:
"In fact, he said, the real concern seems to be that `it's 60 hours or nothing.' And governments have to consider whether their policies affect this -- do they discourage job sharing, do payroll costs and severance costs have an impact."
He also stated, "Harris said, he found `real concern that...while technology allows people to produce twice as much, they're working 60 hours a week instead of 40.'"
This is exactly what I said when I appeared before the committee on Bill 26. I said exactly that when I pointed out that technological change and automation destroy jobs. We're actually losing more jobs than we're creating in this country. I'm glad that Premier Harris has endorsed this completely and I trust all the members on the government side will support our submission and amend the Employment Standards Act. Let's create some jobs in Ontario and reduce the hours of work.
(5) Abandon staff layoffs of provincial employees by offering voluntary early retirement with financial incentives. Do not contract out services performed by provincial employees to the private sector.
(6) Protect the pension funding of the OPSEU pension plan and comply with the letter and spirit of the court decision in support of OPSEU.
(7) Stop private medical laboratories from bleeding the health care system of $400 million per year. Have the lab tests done by the hospitals at lower costs. I have a petition here endorsing that concept.
(8) Do not privatize Ontario Hydro or the LCBO. Look at the harmful Alberta liquor privatization experience, which resulted in higher prices and poorer selection. Also, consider the revenue the province gains from the LCBO.
(9) Adopt a fair tax system for Ontario. Inasmuch as most corporations pay little or no corporate income tax, we recommend a minimum corporate tax of at least 10% on profits. Press the federal government to have the Bank of Canada extend low-interest loans at 1% or 2% rates, as done during and after the Second World War, to reduce the provincial debt. I'd ask you to refer to William Krehm's book. It's a paperback entitled A Power Unto Itself: The Bank of Canada. It's published by Stoddart. It's still in print and it's a very valuable document as to the role the Bank of Canada can play to help reduce government debts.
(10) Restore all funding to the Toronto Transit Commission, as the drastic cuts in service are harming seniors and all residents without cars who rely on public transit -- a vital, essential service. Do not privatize the TTC. The TTC, despite a farer increase, still has a $22-million shortfall.
(11) Due to higher food and shelter costs, restore the 21.6% cut in welfare payments. The cuts are proving very harmful. I might add that the Fraser Institute, which you've all heard of, a very reputable think tank, had an analysis, and this is contained in a document put out by the Social Planning Council of Metropolitan Toronto, talking about the new shelter ceilings. They do not even meet the shelter standards set by the Fraser Institute when it attempted to define the poverty line based on the notion of absolute poverty or the minimum necessary for bare subsistence. According to the method established by the Fraser Institute, a single person in Metropolitan Toronto requires $465 per month for shelter, $51 higher than the current maximum and $140 higher than the new maximum. For a two-person household, the Fraser Institute standard calls for a shelter allowance of $577 in Toronto, compared to the $511 allowed for in the new shelter maximums. A two-parent, two-child family will receive only $602 under the new ceilings, compared with $841 called for by the Fraser Institute standards.
(13) We urge you to keep rent controls in place to prevent rent-gouging by developers and landlords.
(14) Education funding is essential if young Ontarians are to be adequately trained. The province pays nothing to the Metropolitan Toronto board of education, even though education is under provincial jurisdiction. We oppose a two-tier education system. Take education funding off the backs of the homeowners. It should be funded as part of the provincial income tax. I understand that in Ontario at Waterloo University they've had reductions of up to 300 staff because of funding problems.
(15) Exercise strict guarantees to all Ontarians for full medical and hospital services without making arbitrary exclusions as to what medical procedures might not be necessary, in opposition to a competent doctor's recommendation for the patient. Exercise extreme restraint on any hospital closures. With our present economy, people's health is already being undermined.
(16) Provide funding to care for the homeless, some of whom are freezing to death.
I'd be only too happy to answer any questions you might have of me.
One final word: I urge every member of the Legislature to get a copy of this booklet, 10 Deficit Myths, because it has, in addition to what I've said, 10 recommendations at the back which will help any government greatly in dealing with the deficit in a rational manner. It can be obtained from the Canadian Centre for Policy Alternatives. I have their address, their phone number and their fax number. It's worthy of very careful study by every member of the Legislature and their staff. It's invaluable material.
If you have any questions, I'd be only too happy to attempt to answer them.
Mr Silipo: Thank you very much, Mr Buller, for your presentation. You've given us a lot of information and a number of useful materials, and I thank you for that.
I'll start with the first point that you make, coming out of the last booklet that you referred to from the Canadian Centre for Policy Alternatives, the first myth that the overriding objective of the government must be to eliminate the deficit. We've had, and continue to have, a lot of discussion around this table about that issue. I think it's fair to say that my sense is that there is a fair level of agreement about the need to address the deficit. There is of course wide disagreement on what the government is doing.
I think the point that you're making here is something that even the government members seem to be reluctant to admit, which is that their own actions in favour are going to increase the debt. They seem to be oblivious or not wanting to pay much attention to that. The tax cut will add about $20 billion to the debt.
When we tried to probe the Minister of Finance, both here and earlier on in the Legislature, about how it is that that tax cut, which is, as they say, their primary job creation scheme, is going to create the 750,000 jobs that they promise, I think it's fair to say the best answer we would manage to get from the Minister of Finance towards that objective was an acknowledgement that there wouldn't be much in the way of positive impact for the first couple of years. Down the line, yes, there might be, and we'll have to wait and see of course.
That is really one of the points I just wanted to stress and get your further comments on, that is, even with all of this pain that people are being asked to absorb, even with all the cuts that people are being asked to absorb, the government's own figures indicate that the level of unemployment next year is going to be about the same as it is this year, and even slightly worse the year after that. So we keep asking, where is it that the jobs are going to come from? I just want to put that to you and see if you have any further comments on that important issue.
Mr Buller: Your point is correct. The Conference Board of Canada has predicted a bleak economic future this year and next year without some efforts to stimulate the economy. We are in touch with the federal government on this almost on a day-to-day basis as well, because they have responsibility. I've spoken to a number of members of Parliament as recently as today and we're very concerned at what the federal Finance minister is liable to come up with early in March.
I might add that when we lobbied the federal Liberal caucus in Toronto last February, when they had their meeting at the Howard Johnson hotel, we presented all the Liberal MPs with an alternative budget, prepared by the Social Planning Council of Metropolitan Toronto, which would have reduced the deficit and the debt by more than Mr Martin's figures without cutting social programs.
It was a balanced proposal. I personally handed it to Mr Martin -- he had already seen it, but I thought I would hand it to him in front of the TV cameras -- and I said, "Mr Martin, we're prepared to meet with you any time while you're in Toronto, day or night, at your convenience, to explain it -- to reason with you." He said, "I'll send down my appointments secretary." She did come down, and we weren't able to get the meeting we had hoped for, even though we were ready to meet at 7 o'clock in the morning. But he did send an emissary to Toronto, whom we did meet with.
1450
We feel that both the federal and provincial governments can do a great deal to deal with the deficit and the debt in a rational manner. I pointed out the role of the Bank of Canada. It can play a tremendous role in reducing the provincial debt and the federal debt. They've done it before. The fact of the matter is that the Bank of Canada, which is an adjunct of the government of Canada, although the governor, Mr Thiessen, meets with Mr Martin regularly, Mr Martin has not used enough clout in having them lower interest rates further. Actually, the dollar didn't drop very much when they lowered rates recently; it stabilized quite well. They could lower interest rates further. This would help the provincial governments and federal government enormously. It can be done; it has been done before.
I think the social programs are the fabric which holds Canada together. Why would the people of Quebec, where you have massive unemployment, be particularly enamoured with federalism when their UI benefits are cut? You saw the television coverage of the events in New Brunswick and Cape Breton and what's going on in Newfoundland now. In my representation to the federal government, and some of the ideas are contained in this little red book, by cutting UI benefits, making it more difficult to get benefits, a longer waiting period, a shorter benefit period, less money, you have a situation where people have to go on social assistance earlier, which is a burden on the province and the municipalities. So we have an interrelationship here, and I think a lot could be done to improve the situation.
Mr Gilchrist: Mr Buller, I certainly appreciate that these are convictions that you firmly hold. However, as I look at your final two pages, an appropriate heading might be to scrap all announcements that our government has made since June and return to the status quo prior to June 8. At the same time, I believe you have a number of factual errors in here concerning the highest marginal tax rate is still 54% and if that had been reduced --
Mr Buller: That's not what I said.
Mr Gilchrist: If the highest marginal tax rate is still 54% and they, presumably as the wealthiest, have been reduced by 53%, that would mean the original tax rate was 107%, and I don't think any government in this country has ever gotten that high.
Let me just ask you, very simply: If you don't agree with everything that the government has announced, if you don't agree with the changes that we're proposing, our vision, the vision supported by the majority of people in this province, then I guess you're telling us you agree with the status quo that left one out of eight people in this province on government assistance, that left more seniors and children on welfare than the entire welfare population in 1985, that saw food banks proliferate across this province over the last 10 years, when you couldn't even name one in Scarborough, where my riding is, 10 years ago -- are you telling us that you are satisfied with the status quo that existed June 8 and there's no need for change?
Mr Buller: Absolutely not. I have always been an advocate for change, and I still am today. I don't disagree with all the measures of the provincial government --
Mr Gilchrist: It's a pretty comprehensive list.
Mr Buller: -- just a minute -- for instance, suspending a driver's licence if he's convicted of drunk driving. I support things like that. I support Premier Harris's views on shortening the workweek and eliminating excessive overtime -- I agree with the Premier of Ontario on that -- to kick-start the economy. I also agree with the conservative Fraser Institute, with their figures on welfare.
I was just in touch with a federal MP today who told me that child poverty in the greater Toronto area is now at epidemic proportions. This is Dennis Mills, very concerned about it. I said to him, "Your government in Ottawa can help to reduce child poverty." The House of Commons unanimously adopted a resolution to reduce child poverty, but it's going up, it's not going down.
So we're proposing changes. I don't reject everything the government is doing. I understand that they're going to have to have a look at hospital funding, as to what hospitals are operating below capacity. I realize changes might have to be made in that area. We're not taking a hard line of rejecting everything the government is proposing.
I've dealt with Conservative governments in Ontario in the past. I led delegations to Dr Robert Elgie when he was the provincial Labour minister, and I should tell you that he would listen. He said, "If this is doable, if it's logical, if it makes sense, we'll adopt it," and he did. But your government has amended and abolished things in the labour act that were in effect by previous Conservative governments.
I am open to change. I am open to acknowledge every positive, progressive move this government makes, when it makes it. I'll give you full marks. So I wouldn't suggest you put words in my mouth.
Mr Phillips: I really appreciate your thoughtful brief. You're an individual who probably spends more time thinking about issues in Ontario than almost anybody, and the brief reflects it. So from our caucus, the Liberal caucus view, we appreciate your coming here. I don't view this as a "bashing the government" brief but rather trying to be constructive.
I was interested in the Premier announcing that he plans to have something on hours of work, and maybe the government will want to put something like that in the report. I was interested in the Fraser Institute's numbers around shelter. Both those were very helpful to us.
My question, though, is on the drug user fees. I think many of us were surprised that after the election the government was introducing user fees on drugs, when before the election I think most of us took at face value the Conservative platform. Is your organization concerned -- I see you scrapped the drug user fees -- about the drug user fees that they're planning to bring in in the next few months?
Mr Buller: I have the chairman of our alliance here. Mr Al Gorlick is a pharmacist. You might like to hear his response to your question.
Mr Phillips: That would be very good. An expert witness; another expert witness.
Mr Alex Gorlick: Well, I wouldn't call myself an expert. However, traditionally pharmacy has been against the user fee because it has been proven in many other jurisdictions that the user fee does not cut down on the abuse of the system by people who are in the system, and that is those who are senior citizens and people who are on supplementary income. The user fee will disadvantage the poor enormously.
You cannot control the abuses in any system by a $2 user fee, which is what we're talking about, because what will happen, ladies and gentlemen, is that at some point in time down the road the user fee will be absorbed by the discount pharmacy and by the other pharmacies which want to be fiercely competitive. The client, the recipient of the medicine, will not be paying that fee at some point in time. I'm not talking from day one, but competition being what it is, it will force itself down to the lowest level, the lowest unsustainable level, by the way.
What the government has tried to do, and that is to reduce the prescriptions being dispensed -- because that's the only function of the fee; it can't have any other function, because as a revenue raiser it's insignificant -- what good will it do?
1500
There is something else as well. Our alliance firmly believes that the hard work that has to be done to reduce the cost to the taxpayer has not been done. We have people who abuse welfare. Get after the welfare abuser. Don't penalize the decent person who needs the money. There are prescription abusers. Get after the prescription abusers. Get rid of them. Find them out, search them out. That's hard work, but that's where the abuse is and that's where you can cut down on the expenses.
There are many things that can be done by an honest government that sincerely wants to do a good job. Get rid of the cheaters. You'll be saving millions of dollars, far more than the pennies you're going to save or raise by this mean-spirited $2 fee and $100 deduction and all that garbage, which will not get rid of the abusers because they're going to work the system every time. If we get rid of the abuses in the system -- in the hospitals, in the doctors, in the dispensaries -- we're going to come out laughing. Don't use penalties of this nature which won't accomplish anything.
The Chair: I'd like to thank you both from the Alliance of Seniors to Protect Canada's Social Programs for your presentation today.
ADVOCACY RESOURCE CENTRE FOR THE HANDICAPPED
The Vice-Chair (Mr Tim Hudak): Our next group is the Advocacy Resource Centre for the Handicapped. Good afternoon and welcome.
Mr Ron McInnes: My name is Ron McInnes. I'm the president of the board of ARCH. Giselle Cole is on the board of directors of ARCH, and Harry Beatty is a lawyer on staff with ARCH.
As many members are aware, ARCH is a legal centre that's been serving persons with disabilities in Ontario since 1980. ARCH is accountable to disabled persons through 54 disability organizations that are represented on its board of directors. We've appended a list of those member organizations to the back of our brief if you want to look at it.
ARCH is a legal aid clinic, and as such it provides poverty law services in the service of its community, and that community is disabled persons. We've also appended a list of some of ARCH's accomplishments to the back of the brief, if you're not familiar with our organization already.
We're here today to submit a brief that we hope will lead to a deeper understanding of the role government plays in the lives of persons with disability and some thoughts that we feel are necessary to be kept in mind as we go through the budget process.
We're centring our comments today around what we're calling the "disability explosion" in an aging population. If you go back to 1986, you find out that persons with disabilities represented 15% of the population. This is according to the Health and Activity Limitation Survey of Statistics Canada. By 1991, that had grown to 17%. One of the major reasons for that growth and why we say the rate will continue to increase into the next century is the aging of the population.
I think most people are aware that there was a baby boom following the war and that it's a bulge that is working its way through the system and is now getting up to the point where it's getting into the seniors' area. We've noted that this bulge has had major implications for pension plans, for the Canada pension plan and many others.
We're not certain it's well understood that this bulge is also affecting demand for disability programs and will continue to do so in the future. There are wellness programs and preventive medicine, things that have enhanced the health expectations of seniors, but the fact remains that the incidence of disability increases drastically with age.
It's not just an issue for seniors; it's already having an impact on programs for working-age persons with disabilities because as we get more people into the area where they need the disability programs, it's going to affect everyone in that, not just the seniors.
We have a few figures that show that between 1993 and 2015 the youth population will increase only 5% whereas of the older age groups, 45 to 54 will increase 115% and 55 to 64 will grow 194%, and the incidence of disability is five times greater among those in the 55 to 64 age group than among the younger people. It's not difficult to see how the aging boomers are going to increase that demand for disability programs.
We have a couple of graphs that had been prepared by Cam Crawford of the G. Allan Roeher Institute appended to our brief to illustrate the point, but I think most people are probably familiar with the concept. These again are figures taken from the HALS, and he has indicated that the picture in Ontario is not likely to be different than in Canada as a whole. His projections show that the number of low-income disabled seniors and seniors requiring at least some community services will double in the next 25 years and approach three times the current level in the next 40 years. The rapid increase in this group is starting now. There are significant increases for the under-65 disability group, but they're not as dramatic as yet as they will be for the over-65s.
We'd just like to run through a couple of examples. I'll deal with one, Ms Cole will then refer to a couple of others and Harry will give a few suggestions as to what action might be taken.
I want to look at public transit. Public transit is usually in this province inaccessible to persons with disabilities, either because they're unable to get to the bus stop or they're unable to mount the steps into the bus or the streetcar, whatever it is, so we have parallel transit systems in many municipalities. We have Wheel-Trans in Toronto, the one that's of course most widely known and widely reported in the press.
According to the data provided by the TTC, the demand for Wheel-Trans has increased 87% over the past seven years and they project it will increase 41% in the next four years. Projections based on Statistics Canada figures suggest that the demand from 1995 to 2025 will increase a total of 89%.
In his July financial statement, the Treasurer imposed a 6.2% cut and committed in his November statement that the remaining provincial fund levels be maintained for two years. Notwithstanding this commitment, the Toronto Transit Commission recently proposed new eligibility criteria which would remove 50% of the current riders from that system, basically all those who are non-ambulatory, those who are not in wheelchairs.
These people who are being cut off are still unable to use the conventional system. They'll be in danger of being institutionalized, of losing their jobs, of having their health care discontinued. All of these outcomes clearly relate to increased demands that are going to come on that system and generally on Ontario's health and social services system.
There are other things I know under discussion, but any of these things are just going to move the costs from one area to another.
1510
Ms Giselle Cole: It is important to note that living with a disability is a very expensive, tiring process, and when you're dealing with an aging population, it is often forgotten that those who are already disabled or living with a disability are aging just as rapidly and oftentimes more rapidly than the general population.
One of the things that has always been very important in terms of maintaining an independent lifestyle, or as independent a lifestyle as one can achieve is long-term care and self-directed attendant care. In 1984 the Canadian Medical Association released a report entitled Health: A need for Redirection written by a task force on the allocation of health care resources.
The task force retained the services of a consulting firm to consider the impact of demographic changes on the demand for long-term-care facilities and at-home services. The assumption was made that all the eligibility criteria would remain static and, therefore, their projection was that increased demand between 1981 and the year 2021 for long-term-care facilities would increase by 110% and home-care services would increase by 121%. Canada's population as a whole is expected to increase by approximately 55% over the same time period. We can see that to maintain independence and to look towards the quality of life, this is something that is of great importance to many people with disabilities.
Another example of some of the things that are concerning people with disabilities are the income programs. While it's often difficult to make comparisons, it is possible that Canada has the highest unemployment rates among its disabled people of any industrialized nation. Assuming Canadians are not becoming disabled at an exceptional rate, it is reasonable to assume that our high levels of dependency on disability income programs is a direct result of our high rate of unemployment among this group.
Why the rate is so high can be revisited at another time, but at this point it only needs to be said that the rate of unemployment and the degree of unemployability is directly related to the costs of disability income programs. For example, the Canada-Quebec pension plan disability has paid out pensions to twice as many 55- to 65-year-olds as was the case 10 years ago. A recent study by Human Resources Development Canada officials has revealed that the startling percentage of over 17% of Canadian men outside of Quebec between 60 and 64 are CPP disability pensioners.
As the baby-boomers now enter this age range, the projections are that the demands on the system will continue to increase. The same is true of family benefits, Gains-D, workers' compensation, private long-term disability insurance and auto insurance. The demands on these programs will increase unless ways can be found to support an increasing number of persons to the workforce. Another alternative is to slash benefit levels, but this would punish innocent people who are genuinely unable to work due to their disability and simply because of a demographic bulge that is making fair treatment for them almost unavailable and expensive.
Persons with disabilities have been trying to draw the government's attention to this impending crisis, and to possible potential solutions, for decades.
They have sought to have barriers to their full participation removed. In the area of employment, the government repealed the Employment Equity Act one day before the federal government gave royal assent to the federal Employment Equity Act, which was virtually identical to the Ontario statute. Most other competitive industrial nations have a comprehensive legislated approach to the employment of persons with disabilities, including the Americans with Disabilities Act in the United States.
The oldest barrier removal legislation in Ontario is the Ontario Building Code. Since the mid-1970s, it has required that new buildings be made accessible in a manner which imposes minimal costs on the builder and the owner. In a discussion paper entitled Back to Basics released recently by the Minister of Municipal Affairs and Housing, it is stated that accessibility was not a core goal of the code. That frightens me, actually. The consultation paper states:
"[The suggested principle above] would lead to the increased scrutiny of [the access provisions], where it is found they go beyond the main focus of health and safety. If this principle were adopted, existing provisions in these areas would possibly be reduced or eliminated."
Many concerned people with disabilities and their families have been calling anyone who will listen to inform them of the consequences of this proposal.
During the election campaign, this government made election promises, including the legislated barrier removal through passage of an Ontarians with Disabilities Act. To date, the ODA committee has not seen any action on this proposal. If no steps are taken to ensure barrier removal in Ontario, the result will be continued dependency of those who should be working.
Mr Harry Beatty: I'm going to mention briefly three tax credits or claims that are of importance to the disability community, recognizing of course that the cooperation of the federal government and the other provincial governments would be required to make significant changes.
First, there's the area of the tax relief provided to businesses and employers who make accessibility improvements. A few years ago, around 1992, the Income Tax Act was amended to provide that these accessibility improvements could be written off in one year. While that is some tax relief, we believe that more could be done in this area as an effective way of promoting the cost-sharing of barrier removal between governments and businesses without getting into the administrative cost or the inevitable delays of a new administrative program.
A second credit of importance is the medical expense credit. The medical expense credit has likewise been improved over the past decade to include more disability-related and health-related expenses. The problem is that the amount of the credit is inadequate in those cases where the disabled taxpayer or a taxpayer with a disabled dependant is paying big costs related to disability out of his or her own pocket, such as a major home renovation, a modified van, or attendant or nursing care. In these cases where the disability-related costs to the individual are in the thousands of dollars, and obviously we're talking about people who have some financial resources to pay it, because of the way the system works, the value of the credit is often only in the range of 10% to 20% of the person's total expenditure. An improvement would help people who are trying to be independent but are unavoidably, because of the nature of their disability, faced with very high costs.
The third item, and I think the one that I'm hearing the most about now from disability organizations, individuals and their families, is the disability tax credit. Again it's a federal issue, but there is no doubt that the federal administration has very much restricted eligibility for this credit. Cases brought to our attention have included denials of claims for people with cystic fibrosis, cerebral palsy, thalidomide victims and many others.
I haven't seen the 1995 credit form. In 1993 the tax credit form said that for a mobility impairment, the person was ineligible if he or she could go 100 metres on level ground, even with crutches or braces or a walker, and in 1994 the federal officials reduced the test to 50 metres. I'm a little bit nervous about what we'll see this year.
1520
So people with a very, very significant mobility impairment are being denied the credit. It's obvious that our whole world isn't level and that 50 metres isn't very far, especially since there's no test as to how fast. Basically, people who I think would be regarded on any fair test as being severely disabled are being denied this credit, physicians are being placed in a very difficult position with respect to certification, and while we recognize that this is federally administered, as a partner in the income tax system we would request the provincial government to raise the issue with the federal departments of Finance and National Revenue.
Mrs Marland: Nice to see you, Mr McInnes. You and I have worked together for very many years with a common cause and I'm pleased that you are here today informing us of your concerns that I know are ongoing, and certainly your points about the aging population are very significant.
I wanted to say to you, when you were talking about Wheel-Trans and the decision of TTC initially not to take the $7 million that we gave them for Wheel-Trans but to put it into their general revenue and affect the Wheel-Trans program, that you know we were tremendously concerned as a government that they played that little game with us. The new eligibility criteria I think can work to the advantage of our disabled community as long as we put in the alternative transit such as the low floor entry for the buses and the disabled taxis, because both of those programs are working in some parts of our province, as you know, Ron, very successfully.
I wanted to ask you what you would suggest we can do with doing things differently in terms of specific funding programs. You have generalized about where the needs are, and they're the same needs that have been ongoing; they haven't just started on June 8. So where would you suggest we make cuts? Mr Beatty was here yesterday with another group, and we can't be in a position where we take from one group and give to another, so we need your advice about how to cope in order that we do have money for programs that are needed in the future.
Mr McInnes: I can't point to a program that can be cut. I think the basic point we wanted to make today is that in the budget process, you've got to look at the increasing needs in all of these areas, that by rights, if we were to maintain the status quo, there should be increases rather than cuts. By maintaining even present funding there are going to be decreases in services because of the increased demand; I think that's the basic point. We can't point to any area where we could really say there's something here that can be cut, and it's something that's going to be ongoing over the next few years.
The other side of that is that if some of these people, by reasons of cuts or staying at the same level in these areas, become unemployed or require institutionalization, there are just going to be expenses transferred to another area of government expenditure.
Ms Castrilli: Mr McInnes and Ms Cole, let me first congratulate you on having Mr Beatty on staff, who in my short experience of the Legislature appears to be the most hardworking Ontarian. He's appeared before so many legislative committees with groups.
Mr Phillips: How much did you pay her for that?
Ms Castrilli: I know what voluntarism is about.
I want to ask a slightly different question. You're a legal clinic and I notice from your appendix B that there are just a host of members that you've helped, many of whom would not be able to get legal assistance without the existence of ARCH. I wonder if you might comment on the state of legal aid in particular, because that's an area that's being cut, that the government is looking at cutting, perhaps. Could you comment on that aspect?
Mr McInnes: I think that is something that ARCH is very concerned about at this point. At this point there have been no specific announcements of cuts to the clinics, but the magnitude of cuts to legal aid certainly makes us fearful that there are going to be some cuts to the clinics. Being a specialty clinic for persons with disability, as opposed to strictly a general community poverty law walk-in operation, we wonder if that might be an area that gets singled out. If so, it would certainly be to the detriment of disabled persons and would eliminate all the things that we have set out in our list of accomplishments. So it is certainly a great concern to us.
I thought when you were commenting on Harry's work that perhaps we could arrange for an increase in our budget so we can give Harry a much-needed raise.
Ms Castrilli: Try and take it up with the government.
Mr Phillips: You've got our approval. I appreciate the comment on the building code, by the way. It's the first time I'd heard it, I think. Yesterday the home builders were in, kind of rubbing their hands in glee at the changes coming up, because they view it as being able to reduce their costs. I think it's certainly a caution for us, and hopefully we can get something in our report on it.
My question is on the transit thing. I think the government has a dilemma that transit is theoretically a municipal service, partially funded by the province, but they really tend to have responsibility for doing it. Is there something more the province should be doing to set provincial standards for it, or should it be left to the local municipalities to handle this?
Mr McInnes: I think there should be some provincial minimum standards. I've been involved with parallel transit since the days when I was chairman of the Ontario advisory council on disabilities, and we came out with a report in this area in I think 1983.
Certainly the needs vary in different parts of the province. The same system that's useful for Toronto and needed in Toronto is not feasible in a small rural centre. But certainly some minimum provincial standards, some eligibility guidelines that are realistic but applied across the board, and some reciprocal usage arrangements are things the provincial government could well be doing.
Mr Silipo: I certainly would concur with the comments made around Mr Beatty's contribution, having dealt with him in my previous life on many occasions.
I actually would be interested in pursuing one point in particular, given the shortness of time, and that is what happens as a result of the government's repeal of the Employment Equity Act. We had, as has been mentioned, another organization yesterday that talked to us about this. Rather than going back over that -- although I'd welcome any comments that you have about what that is going to mean for people with disabilities, not having that legislative protection there. But more importantly, because I don't think there were many comments in your brief about what the government's actions after that in terms of some of the guidelines they are looking at or have issued would do around questions of accessibility to employment, is your sense that there are any significant actions that the government has taken there? They look to me to be pretty tiny measures by comparison with what was in the Employment Equity Act, but obviously I look at it from a particular perspective from where I sit. I'd appreciate very much your thoughts on that.
1530
Ms Cole: In terms of repealing the act, the question of accessibility and the question of accommodation within the workplace is greatly, shall we say, hindered, because if you are disabled and you are capable of work, it may not require millions of dollars to accommodate your disability within the workplace, it may only cost $500 or $600. But an employer will no longer be interested in providing that minimum accommodation because it will be cheaper for him or her in the long run to look to someone else without a disability. And you may be as qualified or more qualified.
For instance, at my workplace it's taken me 10 years but I finally got them to understand that the setup they have for everyone else is not going to work for me. As a result, it's cost them $550 to accommodate me, and in the long run it's cheaper for them because I'm not off sick, because I haven't pulled a muscle trying to reach my mouse -- simple things. As a result of repealing the act it makes it very difficult and the grounds for hiring and firing have almost been eliminated.
The Vice-Chair: Thank you very much, Mr McInnes, Ms Cole, Mr Beatty. Thank you for your time today before the standing committee. Have a good day.
Mrs Marland: On a point of order, Mr Chairman: I really don't think Mr Phillips intended to leave with the committee an inference that -- he just said that the Ontario Home Builders' Association was in here yesterday rubbing their hands with glee about the amendments to the Ontario Building Code. Indeed, Gerry, that may have been what you interpreted, but I can assure you the Ontario home builders would not rub their hands with glee about amendments that changed accommodation for people with disabilities.
Mr Phillips: You've got to listen to what I said.
Mrs Marland: They are happy that there are amendments to the building code that deal with some of the outdated requirements of the code. The building code deals with safety primarily and accommodation of people with disabilities, and the changes and revisions to the building code that are coming do not affect those two areas.
Mr Phillips: Listen, if you want her to go on like this you've got to give me equal time.
Mr Silipo: Are you going to have a debate on that?
Mr Phillips: I want equal time.
Mrs Marland: You made the statement.
Mr Phillips: Yes. I made the statement that yesterday the Ontario builders were in here. They were extremely pleased with the changes that are coming forward on the building code. They made that statement. You check Hansard on it. I said that what we heard today was something I had not heard before, and that is that the people here from ARCH alerted us that there's a concern around it. I'm just saying that yesterday the home builders said they were very pleased with it and now --
Interjection.
Mr Phillips: No, no. I won't be quiet because I don't appreciate Ms Marland -- when she wants to make a point she seems to be able to talk on at length. I will say once again, if the government would come forward with some information that we keep requesting, this committee could function a lot better, instead of trying to misinterpret what I said today. I stand by what I said.
The Vice-Chair: Thank you, members of the committee. The Chair did not hear anything out of order. Is the Daily Bread Food Bank in the gallery? I understand our next delegation has not yet appeared. I'm going to recess the committee until 1555. If our next delegation does arrive shortly, the clerk will contact members in their offices.
The committee recessed from 1534 to 1539.
DAILY BREAD FOOD BANK
The Vice-Chair: I'd like to welcome Mr Gerard Kennedy from the Daily Bread Food Bank.
Mr Gerard Kennedy: Thank you very much. My apologies to members of the committee for having interrupted your schedule by being late. We much appreciate the chance to depute here. The food bank actually has a bit of a tradition of appearing in front of the finance committee. The first time we were invited we thought maybe they'd gone to the wrong kind of bank by mistake, but we think there is validity in having an agency with our point of view.
1540
In brief, Daily Bread Food Bank is the largest food bank in Ontario and indeed in Canada. We operate completely without government funds. We raise approximately $1.8 million from the private community and distribute about $35 million worth of food on an annual basis. It gives us a vantage point through the churches and community centres that we supply, about 170 across the GTA, particularly in terms of some of the early decisions of the new government.
When we look at the basic disposition of things, we certainly have to bring to you first and foremost the outcome of the welfare cuts that were enacted October 1. In Toronto and the GTA we have had successive increases through the months of October and November. It was stable in December, and a further 8% increase in January brought us to a point where we're now serving about 157,000 people, an increase of some 51% from this time last year. We can attribute the majority of that increase to the changes in the way the social assistance benefits are paid out to individuals and families that are attending the food banks.
We have had record numbers of new people. We also have record numbers of people who have no income. I think the incidence of people with no income is particularly important given the reported drop in the welfare rolls that has taken place. We cannot tell you yet, because our survey instrument that we do on an occasional basis is only in the field this month, exactly the situation and disposition of those people, but anecdotally at least we're hearing from people who are having a much more difficult time with the welfare system in recent months. I think that some of those figures have been reported before and perhaps you are aware.
I want to bring it to a different dimension, though, as you contemplate your advice to the Finance minister for the next budget, that you understand that those figures only represent the most obvious outcome in terms of what has happened. What I can't convey to you very well is the anxiety that people are feeling and how much more difficult that makes the role for the community. We have never seen the level of anxiety that we see among the people that we're attending to today. People feel, rightly or wrongly, that they've been punished for their inability to work, for the fact that they're unable, at this time at least, to be taxpayers.
I think what is worth reminding in terms of the decisions that are ahead for this committee is that 28% of the people that we're helping have some college or university education, that the average longest job of employable people is six and one-quarter years, so we're not talking about people who have been indolent or who have been dependent on the system for a long period of time. In fact, we're talking about people who have done, in many, many respects, exactly what we've asked them to do.
Unemployed employable people have been out of work for an average of now over 19 months and in that time they've made more than 220 job applications. That's a lot of times to be told no. The main point I'd like to make, in addition to the impact that we can bring you, as I say, only in a very large form in the sense that our detailed surveys won't be done until the end of March, is that there is already beginning to be signs that some of the cuts that were taking place -- not only are they harmful to individuals in the sense that they have destabilized them, but they may well be costly to the government system.
While there have been people removed from the welfare rolls in the instance of working people -- about 12,000, we understand, in the Metro area have been taken off the welfare rolls because they are working and therefore they're making too much against the lowered rates -- there are also people who have simply had their lives destabilized in a way that will keep them on welfare for longer. We are certainly seeing this and I think we'll see it more manifest in the springtime in the number of evictions, the first time in the 10 years I've been working at the food bank that people are not paying their rent.
You have to understand the situation and circumstance of households that are trying to get by. It is very important to them to be able to keep a sense of identity, a distinction from the people who are much talked about who live outside. These, mainly families -- I'll just iterate that 43% of the people we're helping are children and 70% of the food goes to families -- are for the first time having to put their ability to keep shelter at risk, because in a 0.7% vacancy market like the GTA, they're running the risk now of being in arrears, of being evicted, of not having references for future accommodation.
What we're hearing about this winter in terms of dislocation of families in hotels, single people more numerous outside, and we can certainly attest to that, is really only the tip of the iceberg. What we're seeing now already are some of the implications of what I have to say have been felt as arbitrary measures on the part of the new government. There is no understanding, for the people we're helping, of the relationship between the 22% cut and the cost of rent, which is 50% higher here than in other major metropolitan areas. If you take the average for apartments across Canada, the cost of rent in Toronto is 50% higher when you exclude Vancouver, and Vancouver is the only municipality that's even close.
I can give you a glimpse that the majority of the centres across Ontario are also reporting increases. There are only very small communities, whose reach is below 300 people, that have had less than 10% increases in terms of the demand at food banks, and very many of them, like our agencies, have had to do a proxy of what the government has done. In other words, they have to turn around and restrict food to the people they're helping. So the numbers you hear in future may not indeed reflect the demand that isn't being met.
I think you can appreciate just how likely that is when you look at the incidence of dollars that have been taken away from people on assistance -- approximately $1 billion. The value of all the efforts made by food banks and related programs in the province in total, in a year, is $120 million. So in effect, when you talk about the role of the community, you're asking groups like ours to become seven or eight times larger to make up for what has been taken away, or, which is much more likely and it's important that you realize, that difference, those dollars are translated into some level of deprivation.
So families and individuals are going without, and I want to tell you that while we don't have the detailed surveys in, some 60% of the adults we deal with go hungry despite our help, and so do 32% of the children. I will tell you without any sense of shock or prevarication that those numbers will increase. So whatever else you take away from the presentation today, I have to make clear that there is going to be, there already has been, deprivation as a result of the welfare cuts.
I'm not really wanting to linger on that except in the sense to recognize, from our standpoint, the frustration that exists out there in the community on the part of the churches, the community centres, the social service agencies that are trying to help people stabilize, and then to have this sweeping measure take place and really undo a lot of the work that has happened. We're seeing people we haven't seen for three and four years, people who've been piecing their lives back together and are now having to attend food banks again.
The other thing we'd like to make sure reaches your attention, given the other measures the government has taken, is the impact of user fees. I think you need to understand that over 22% of the people we're helping are already having to pay for drugs, which used to be covered by government programs, out of their food money. It is one of the leading incidental causes for people to have to turn to food banks.
I know this is another jurisdiction, but it just gives you an idea of how close to the margin people are: 35% of the people we were helping before the welfare cuts do not have telephones. I want again to make clear that 34% of the people we're helping have a disability or illness in terms of access to a doctor, 25% are single parents and 55%, including some in both of those groups, are people looking for work. We're finding that more and more of them are giving up phones, giving up even a remedial connection to society, stopping to use transportation. These are the kinds of things that underscore their instability and make the measures that have taken place not only doubtful in terms of what they're doing to people but what they're really going to accomplish for the province's finances.
While there may be some people who've been scared into doing different things, the things we see and the things we hear about are women working in things that they don't want to do. We hear about more women working in the sex trade. We hear about men doing jobs that are less than minimum wage. If we want to force people into options, then certainly that can happen, and there will be a reaction.
People are resilient, but I certainly want to express to you on behalf of a significant part of the charitable community that there is large and wide questioning of the kind of strategy that's been put into work right now. Even groups that don't consider themselves in any way political or interested in government policy see these measures as too extreme. I really want you to contemplate, arising from my presentation, what is likely to be the outcome if people are destabilized to the extent that they need to stay on welfare for months and months longer. I would say to you that our experience is that the first six months are critical, that having people stabilize during that time, having them be able to pull things together, be able to reorient themselves in terms of the job market, is really where a lot of the difference gets made. If we're not in a position to do that -- and we are finding ourselves scrambling, such that we're not able to help people do that kind of thing because we're scrambling for food.
1550
There's been much talk about the role of the community. We've had a very generous response from the community. Our supplies are up about 30% but our demand, I remind you, is up 50%, so that gap has already opened up and we face the months of February and March with a very good prospect -- we understand with dozens of other food banks across the province -- of running very, very low on supplies, if not running out at some point. I think there's very little to be sanguine about on that point, but we are hopeful.
What you'll be hearing from the Ontario Association of Food Banks is some reconsideration of your decision to cut the welfare rates. The options, I think, are in terms of looking at a market basket, looking at pricing welfare rates by the cost in the communities where people are living, because there are huge differences between the cost of rent here and in other parts of Ontario. Quite a great deal of the savings the government is seeking could be had in that manner. But the arbitrary and sweeping way in which this is enacted is really putting a lot of people into the kind of harm that we just haven't seen before, and frankly, I will say, as one of the more sophisticated charitable agencies, that we really don't know how to deal with.
What I would like to do is perhaps leave my remarks at those and invite any questions you have about the food bank perspective on some of the fiscal measures you have in front of you and the ones that have already been taken.
Mr Phillips: I'll kick it off. I appreciate your being here, Mr Kennedy. I think all of us admire the Daily Bread Food Bank and the work it's done over the years.
One of the challenges we face is that we've got really good measurement tools for a bunch of the old stuff, like hospital beds, the number of people in school, GDP and all those sorts of things; we have very poor measurements, I think, for the community of today, because there's so much community-based care and all those sorts of things. I'm not sure that we have a mechanism for measuring this as it goes along other than very crude measurements right now, such as your own, just saying, "Here's the demand on our operation." Have you any advice for us of how we can set up some tools to measure what's going on out there on a fairly accurate and regular basis?
Mr Kennedy: We are planning, from the standpoint of food banks, to institute surveys on an every-three-months basis to find that out in a detailed basis, because a lot of the data that I cited to you are from last year's survey. They represent a different group of people. We think it's very important that there be some way. We would ask the government, as we have asked previous governments, to consider some kind of joint effort in terms of understanding what is happening, because I think there's a responsibility there that we hope the government shares in terms of understanding what has occurred.
We are, for example, in a position to be in touch with a lot of the people who are experiencing the consequences of some of the decisions and we have a research capability that we're prepared to offer in terms of monitoring some of the outcomes. But I think we have to look first of all at -- and this is the role of the government and of the other parties to really come to the question -- what is the outcome we want to have? I think the outcome has got to be people on assistance for the shortest period of time, able to be self-reliant in the best manner possible. I think that's the outcome that is really, really in question because of the measures that were taken on October 1.
However, we find ourselves possessing more information about the status of people than sometimes the ministry does. I would say so far we've not had very much takeup in terms of the data that we have. We have not been able to get in to see anybody in the ministry to convey either our concerns or the data that we do have access to. After the end of March, we will have a very detailed assessment of what is happening and we would invite both the government and the opposition parties to collaborate in any way they would see fit to have access to that information.
Ms Castrilli: I want to thank you for coming here. I'm going to ask a question that may seem a little odd, because this is, I suppose, a question that one would normally ask an economic expert. I feel that as someone who is actively working in the field, who has to deal with people on a daily basis in the kinds of situations that you do, you might still be able to provide some advice from that level.
The government has a platform which essentially says, "We are going to reduce taxes, and that will trickle further down into the economy and create jobs." You've seen some cycles, I'm sure in your line, of people who come to you as times are bad and then not again as times are good. What do you make of that premise? Could you foresee that kind of benefit for the people you deal with every day?
Mr Kennedy: Given what we've read about what it would take to be able to enact a tax cut, we're very hopeful that some reconsideration is under way on the government side. If you look at the multiplier effect of the dollar spent by poor people versus -- I know the official tables haven't been produced, but I've seen calculations that suggest people over $90,000 receive 32% of the benefit of any tax cut.
The multiplier for people with luxury purchases and with savings and with offshore investment is nowhere near what you'll get from the kinds of purchases that have been made by low-income people. I'm hoping that somewhere in that reconsideration this government, now that it has had time to become the government, will take the time to reassess the impact it's having on people and the impact this is going to have, even in the medium term, on its fiscal plan. I'm hoping that the tax cut, because it has varying appeal economically -- I think it really does represent an opportunity for the government, as well as something of a moral signature, if you'll pardon my saying so. I think it is going to be very difficult for the average family out there to enjoy the extra benefit, to feel fine about the community that you want them to spend that money in, when things are so apparently tough for people on the bottom.
I would suggest that the question of security has moved beyond the people at food banks and on welfare into other people who don't know what's going to happen. They're looking at what's happening to people on welfare and it's affecting them. It would really be incumbent on the government to revisit that whole question with this particular impact in mind, because to think people would enjoy an economic benefit from the suffering that we see taking place is certainly something I hope the government is thinking about right now.
Mr Silipo: Mr Kennedy, I was interested in reading this morning in the media clippings that the Minister of Finance is blaming fearmongering by the opposition for the fact that the Tory government has dropped in opinion polls. One of the interesting comments he makes is that he thinks over the next three or four years a lot of the predictions that opposition members made in the House will not come to pass.
As I look at the effects you've listed for us, I see in fact a number of those things that we have been saying, whether it's been from the NDP or the Liberal opposition or the others outside of the politicians, that the cuts would hit the poorest citizens in our province hardest, that there would be people who would not be able to pay their rent, because if they had to choose between putting food on the table and paying their rent, they would inevitably start to make those hard choices to first put as much food on the table as they could; the high level of anxiety at the fact that the charitable communities can't pick up the difference in the cuts. You're giving us pretty sound, and clearly, from the experience you have at the Daily Bread Food Bank, real advice on what is actually happening.
It's a bit of a rhetorical question, I know, but I would just ask you why the government and the ministry are not even bothering to talk to you about what actually is going on and what you see on a day-to-day basis, and presumably what other food banks across the province are also seeing, as you're indicating?
Mr Kennedy: I can't say the reason for that. The letter we received from the minister only suggests that it's not possible to -- we have not had any explanation on those grounds. We're hoping that it has something to do with the government's determination to see its agenda happen. However, perhaps the public is thinking that it is time for the government to take stock of some of its early measures. I really hope that's how the government is receiving that information.
I'd just like to share with you some information we're going to be releasing publicly next week about the opinions of people in the GTA. It's a sample of people that is only slightly skewed. Where it's skewed is to the surrounding area, not so much centred on Metropolitan Toronto. So, 61% of the people don't blame people for being unemployed; 57% say it would be better if people received welfare payments which were based on the actual cost of living in their community; only 26% of the people believe that people wouldn't need food banks if they handled their money properly; only 25% similarly believe that people on welfare get enough money and don't need food banks.
1600
So I think it's very, very important for the government to distinguish between some of the anti-government sentiment that was out there and the way the public still expects this still-wealthy province to provide for marginalized people. I mean, there are 303,000 people in Metro alone affected by the cuts: 32,000 disabled people, 49,000 single parents, 130,000 children, before we get to the 90,000 employables who were presumably the target.
I think it's really, really important that the government, which is uniquely in the position to see who these people are -- I mean, really, the average person walking around does not know -- to be able to exercise that oversight and to review what is happening. I'm hopeful that is not a condition that will continue, for example, even throughout the winter, because what we're also finding, as a companion to the cuts, is an inflexibility on the part of government. Here in Metro, for example, they're sending letters to people. Even though at some point the Premier was quoted as saying you should depend on family and friends, across the province welfare departments are sending letters to people who are depending on family and friends and penalizing them for that.
In North Toronto, for example, that welfare office is saying to people, "If you're paying a high amount of money for your rent" -- in other words, you've found some way to do that -- "we're going to make you move within three months or we're going to take your welfare away." Now, that's not even allowed by the regulations, but it's the kind of thing that if it's not what the government intends, then it really better come clear, because people are feeling a mean-mindedness. It's happening in the system. It's making it much, much harder for us to deal with the offices and the social workers and so on. It's a corollary of this sense that the government doesn't want to know what's happening. We really would like to believe differently.
Our offer doesn't stop with the letter that we sent; we made it here again today. We would welcome any members of the committee who would like to visit our food bank or any of the facilities. There are food banks in 174 communities across the province, and the increases are being experienced in places as varied as Havelock and Niagara Falls and Sudbury and so on. This is not a big-city item. Anywhere where jobs and cheap, affordable rent are hard to come by, people are finding themselves in that squeeze. I think it's important that there be some connection.
Mr Wettlaufer: Okay, we'll make this quick. I have a great deal of sympathy with you because my firm, in which I was a partner, contributed time and money to the food kitchen and the food banks in our area. I understand what you're going through. I understand what the people are going through who have to use your facilities. I want to compliment you. I notice that you have 20 paid employees and 1,700 volunteers. I think that's fabulous.
You mentioned user fees and how they're going to add to the deprivation. I want to make it clear to you that 140,000 additional people are going to be eligible to receive benefits under the Ontario drug benefit plan.
I think you're aware that the debt and the deficits which have grown in the last 10 years are greatly affecting our ability to provide for the underprivileged. In spite of the deficits of these preceding years, there was a lack of permanent jobs, jobs which we are trying to provide through our program. We're trying to get private industry to produce more permanent jobs.
I think what this committee is looking for, certainly what the minister is looking for, are some recommendations from the presenters, what their ideas would be to provide these permanent jobs, what alternatives you may have, what alternatives you have for cutting spending, because we must cut the spending. The spending has grown by 100% in 10 years. What suggestions would you have? We need them.
Mr Kennedy: In terms of cutting spending, the perspective, of course, that comes first to mind is the fact that social assistance is only 15% of the provincial budget. It was visited very harshly in relative terms and very early on in the mandate, so that over the life of the mandate social assistance will pay a disproportionate amount in a number of ways. However, of course, there is a fiscal consideration.
I think what we see missing is this, and certainly the people who are experiencing it see missing in this, is a sense of fairness. I think that had there been more time to input where the cuts were taking place, perhaps there would have been a better sense of sacrifice. What I see on the part of people like our donors -- we get a lot of mail from people because we're so dependent on the public -- is that they get a sense that there's an arbitrariness out there now and they can't concede anything, they can't sacrifice for the greater good of something because they don't know when they're going to get hit. So there's a real missing dialogue step there that I think is going to make it much harder for the government in terms of saying, "Here are some other areas. We don't want kids to go hungry," which I assume is the objective of the government. I do assume that, but I have to say the kids are going hungry.
Somewhere there has to be a way of reconciling that, and I think the biggest problem here in terms of pointing out alternatives is that everyone now is feeling very, very defensive about hospitals, about education, about health care, because they feel as if it's happened to them. A downtown mission woman who has no political bones in her body calls it extremism, and that's how she's experiencing that. That makes it difficult for that dialogue.
In terms of suggestions, I think it would be important for the government, if it's having problems with workfare, to look at some other ways of doing that, maybe some private sector partnerships that bring in some private sector income, work in the third sector. Have some of the private sector actors that are active in things like food banks and so on create jobs for people, but jobs that pay minimum wage. People on welfare now receive $3 an hour if they are a single person. They are 52% better off at minimum wage after taxes. They receive $5.32 a month, per average, in these gold-plated benefits that people talk about, or an extra three cents an hour.
So there is no disincentive there. The question is how to give people a chance with some dignity to be able to get back in the job market. I think the difficulty is that as long there's not a dialogue taking place with the government, it's very hard to come forward with new, good ideas, because frankly I will say on the part of the community that I come from, people are quite shocked by the manner in which this is happening. I won't say that the well is poisoned, because there's a need to see people working with the government and trying to find ways to make things happen, but there is a real difficulty because of that. There's a sense that things aren't discussable and that it's a one-way kind of communication.
I know that's not a complete answer, but there are some ideas that may work, and the important thing, though, is that the government does express a real interest in those, because so far we would find the bulk of our advice that we put forward -- and we did release a paper in September -- there's not even a reaction to. I think we still have to try and do that in good faith, but it is difficult.
The Chair: Thank you very much, Mr Kennedy, for joining us today. We appreciate your presentation.
ONTARIO COALITION FOR BETTER CHILD CARE
The Chair: The next group is the Ontario Coalition for Better Child Care -- Kerry McCuaig. Welcome to the committee. We have 30 minutes.
Ms Kerry McCuaig: With me today is Martha Friendly, who is a researcher with the child care resource unit at the University of Toronto and a member of our council.
In the government's July 21 economic statement, it signalled its intention to review the province's early childhood education and care programs. Since that time, it has cancelled $84 million in child care funding and, conservatively, threatens another $200 million of the province's $560-million child care budget. In addition, parents and educators fear the demise of Ontario's 25-year-old junior kindergarten program. Government spokespersons have been touted unregulated care as the arrangement of choice for the care of children.
Ms Ecker is heading up the review of child care with an aim of making it more affordable to parents and taxpayers, levelling the playing field between the profit and non-profit sectors, and offering more parental choice. These goals have caused considerable alarm among those with a concern for the education and care of young children. They are incompatible with the delivery of quality, accessible and publicly accountable programs.
We should note that no previous government has ever reduced funding for child care. Responding to changing workforce participation rates by parents with young children, growing child poverty rates and the overwhelming research which indicates the benefits of quality programs for children, each consecutive Ontario government has increased its funding commitment to child care. In the past 15 years, the provincial budget has increased from $144 million to $560 million in 1995, and each new investment has been aimed at enhancing the quality and accessibility of child care.
1610
Since July, your government has undertaken a number of steps to reduce government involvement in the provision of early childhood education services. They have included the cancellation of the early childhood education pilot projects; reduced funding to junior kindergarten; allowing boards to opt out of providing junior kindergarten; cancellation of the Jobs Ontario Training program; the reduction of the Jobs Ontario child care subsidies from 100% to 80%; cancellation of financial support to child care centres already built in new schools; cancellation of planned child care centres in new schools; a 5% cut to resource centres; elimination of the program development fund; cuts to programs which assist child care programs to integrate children with special needs; a review of wage grants and the elimination of pay equity, which have reduced child care salaries; and the cancellation of the conversion program for commercial child care.
The overall direction of these steps and the statements made by government ministers indicates a preference for privatizing care and education programs for young children, reducing regulations and monitoring, and undermining the quality of care children receive.
These government actions are having an impact. A survey of municipal children's services departments just completed by the coalition indicates that 4,743 of the original 14,000 Jobs Ontario child care subsidies have been lost to date, 19 child care programs have closed, 12 regions have frozen their subsidy intake and 12 community-based planning groups have lost their funding. Meanwhile, 30,000 eligible parents continue to wait for access to regulated, quality child care.
Ms Martha Friendly: I'm Martha Friendly. I work at the University of Toronto centre for urban and community studies and I'm on the council of the coalition.
I want to talk about how money is spent for child care. How money is spent for child care is crucial. For child care advocates, it has never been a question of simply more money but ensuring that money is spent in a manner that delivers high-quality programs and supports. This is important, because the research indicates that high-quality programs are a benefit to children, their families and to society. Poor-quality child care arrangements are damaging, even dangerous, for children. If public dollars are used efficiently, they should produce a comprehensive social program which supports parental employment, positive child development, income support for low-income families and a prevention program for children at risk. It should reduce the costs of other social programs and expand the economy by creating new jobs.
Now, you can think about this as better bang for your buck. Since you're a finance committee, let's talk in economic terms. If you want to produce the best bang for your buck, public funding must produce good-quality care and education programs. This isn't a mysterious formula. Extensive research shows that quality programs have high adult-child ratios, consistent caregivers, small group sizes, appropriately trained staff and adequate physical environment. Research shows that these results are most likely to be delivered where there's adequate public funding, good regulation and enforcement, parental involvement and non-profit delivery.
What this means is that a voucher given to a parent in a job training program or child care from a woman who has been coerced into providing care for children in order to sustain her welfare cheque while other parents are told to make do would bring false paper savings today but the ongoing costs will deliver overwhelming deficits.
I'm going to talk a little bit about some of the specific research. I'm actually doing some ongoing work on this, so this is a bit preliminary, but I want to talk about some of the variety of ways that child care can be a benefit economically in the short term and the long term. If you design child care properly, you can provide good value for money, because child care services that are well designed can meet a variety of needs simultaneously. This is the better bang for your buck I was talking about.
First, high-quality child care is demonstrated to have a positive impact on children's development, learning, health and wellbeing. One part of that is increased school achievement, both for children who are at risk and for ordinary children, children from working-class and middle-income and affluent families who are not at risk.
I've just noted a couple of pieces of research that support that point really specifically with numbers. There was quite a good article in the American Economic Review last summer, Does Head Start Make a Difference? One of the points that study made was that children -- and these were not Afro-American children, they were white children -- who participated in Head Start were 47% less likely to repeat a grade than those who hadn't attended Head Start. The question is always asked, "Do these effects only hold for poor children, children you can assume might be in a deficit situation?"
There's a really interesting study the French National Ministry of Education did back in 1983, using census data, that found that for each year of participation in France's universally accessible preschool programs, which started about age two and a half, children regardless of their social class were less likely to fail grade 1. This held true for the three social classes they divided the children into. So you can see some real savings there.
There are a lot of studies that look at things you might call soft, cognitive, intellectual and social benefits of good-quality child care. I'm just publishing through my centre a review of this literature done by Gillian Doherty. It reviews a substantial body of child development literature that shows the benefits that participation in high-quality child care programs have in all of these areas, and that could be available -- I have it with me, actually, but it's still in draft -- to all the members of the committee if you're interested.
It's really important to note that these benefits only accrue from participation in high-quality child care. Poor quality child care may have a negative impact, regardless of the child's social class; that is, a good home may not compensate for poor quality child care.
The next area of economic benefit, moving away from children, is for parents. If reliable, affordable child care is provided, parents are enabled to pursue work and careers, earn income and become financially self-sufficient. You can perhaps have an impact on your welfare costs and the kinds of things Gerard Kennedy is talking about, that people need to participate at food banks because they don't earn enough income in one way or another.
In this area, there's some interesting research from the UK that calculates the impact on life-time earnings for women if they're kept out of the workforce because they have child-rearing responsibilities for which there is no child care. I've given the names of some of the authors.
There's a lot of American research, particularly because of their large welfare population of single mothers with children. They've actually calculated that a drop in the price of child care can cause up to a 10% increase in the labour force participation of single mums on social assistance.
There have been a number of Canadian studies, small studies, including things like surveys of people at food banks, studies in particular industries like home sewing, low-wage industries and work in rural communities, which have shown that one of the main things that keeps low-income mothers out of the labour force is the absence of reliable, affordable child care. There are a number of studies that show this kind of thing that are quite local Ontario studies, all around Ontario. Metro Toronto has some interesting figures which show that with programs that provide child care assistance like the STEP program, they've calculated they can decrease social assistance costs up to 35% per family per month, so there's an actual dollar saving from that kind of thing.
I don't want to go through all these things. The point I want to hit on is that the other part of child care where you can see direct economic benefits is that you have to remember that child care services are economic activities that have both direct and spinoff benefits.
I want to use some Metro Toronto figures. They've calculated that the child care subsidy system alone accounts for about $200 million annually of economic activity, while another $50 million, by their calculation, is spent by full-fee parents, and another about $350 million to $400 million in the unregulated child care sector. The interesting thing about the unregulated child care situation is that most of the money that flows from parents to caregivers in that system is actually untaxed income. There are Revenue Canada figures to support that. So you're losing tax revenue right there.
Metro Toronto calculates that for every dollar it invests in child care, it derives about another $9 in provincial, federal and private spending.
At the same time, child care services have many spinoff expenditures. Nobody's really calculated the cost of these, but these are things like suppliers, companies that make disposable diapers, food suppliers, food preparation, other service providers, maintenance, bookkeeping. If you're interested in trickle-down effects, I'm quite interested in this whole idea of having an industry where you have many spinoffs, and if you start closing down that industry, you'll have concomitant spinoffs in jobs being lost and economic activity being lost. There are some very interesting anecdotes about this.
It's undeniable that child care creates jobs. In 1993, the federal Liberal Party calculated that the increased child care spending it was proposing would create 600,000 new jobs in child care services, and those are direct jobs.
I want to summarize that by saying that I think you have to remember that child care is an economic activity that creates wealth and it seems to me that if you put all these things together, you have to really recognize that child care has economic as well as social benefits and is an investment for a government to make.
1620
Ms McCuaig: The good news with child care is that it is the one social service for which there is new funding available. The federal government has moved forward on its child care commitment. On December 13, then human resources minister Lloyd Axworthy made a partnership offer to the provinces and territories on child care: "$630 million over three to five years to be followed with ongoing funding for the maintenance of spaces that are developed." The provinces have received a letter "offering up to $630 million over the next three to five years to expand and improve child care services." These dollars would be cost-shared with the provinces. They were asked to respond by the end of January.
To date, all the provinces, including Quebec, with the exception of Manitoba and Ontario, have indicated interest in reaching an agreement with the federal government. Ontario's share of the child care fund is approximately $240 million. This is a significant amount in today's environment and 50-50 cost-sharing has not been offered to Ontario since 1990.
We appreciate that Ottawa continues to decrease its funding commitments to the province and that Ontario has been particularly hard hit because in this respect both the federal and Ontario governments have made deficit reduction through cuts to public programs and services a priority. However, the federal government has recognized the need to reinvest in crucial areas of public policy which address employment and family supports. It is in this context that child care is an essential social program.
It is also in this context that we urge the provincial government to endorse the $33-million agreement Metro has reached with the feds. The pilot project to test the new delivery model for child care would demonstrate that a new funding and accessibility mechanism would deliver a less administratively heavy, more efficient service, meeting the needs of additional families in a more flexible, comprehensive manner.
This is not an immediate provincial funding matter, since it does not require a financial commitment from the province. However, this does have implications for the province as a whole, since it is a model that could be applied across the province if it demonstrated its capacity to deliver a more efficient range of services to more families.
We think the federal government has taken the first steps to addressing the human deficit and the economic deficit around making a commitment to child care. We would like to see the provincial government join with the other provinces in a march towards a national child care program offering high-quality, accessible, comprehensive child care services for all families who wish to use them.
Mr Silipo: Certainly we've had the chance to talk about child care a number of times already during these hearings, although obviously not in the level of detail your presentation puts in front of us. We've talked about this on a number of other fronts over the past number of months and years.
I appreciate particularly your focus today on some of the economic benefits of child care, because aside from the kind of philosophical bent that seems to be driving this government towards privatizing child care, there is also in my view some perhaps genuine lack of understanding about exactly those benefits. I hope your presentation sparks some additional interest.
I'm glad Ms Ecker is here for the presentation and I hope your conversations with her will continue and will result in some better understanding by the government about how foolhardy the actions they've taken so far are, because when they cut child care, they are cutting not just jobs for the people who work in the system, but they are cutting the ability of people who use the child care system to be able to work, as well as to have their children well taken care of.
The picture you paint is obviously not a positive one, although you obviously tell us that in terms of what the federal government is suggesting there may be some light. Just in terms of what is happening in the Metro area, could you talk a little bit more about the agreement that's been reached? As I understand, it still requires provincial government approval, doesn't it, or is that something that has been worked out at this point?
Ms McCuaig: According to our information, it does require provincial government approval, since jurisdictionally child care belongs to the provinces. Mr Axworthy, just before he resigned, sent a letter to Mr Tsubouchi indicating that there was no cost-sharing, that if the only impediment to moving ahead with the deal was cost-sharing, they wanted to assure the province that there was no cost-sharing and that he would be prepared to proceed immediately. Our discussions with Mr Young indicate there's been no change in that position.
Mr Silipo: So there's at least one instance where all the province has to do is just simply say, "We agree," and there's no additional funding required.
Ms McCuaig: That's right.
Mr Silipo: I'd be interested to hear if Ms Ecker wants to comment on that when it's the government's turn on this, because having worked with you and others around the changes that need to be made, it would seem to me here's a great opportunity for the government to say that it does have some interest in this area, and to actually allow, at least to a limited extent, for us to safeguard some of the places that otherwise are lost and to look at significantly improving the way in which the system is run, as a pilot here in Metro and hopefully spreading to other jurisdictions.
The only other point I want to highlight: In every one of the bullets on page 2 there's a lot of discussion we could have, but I think overall you make the very clear observation that no previous government has ever reduced funding for child care. What we are seeing here for the first time in the history of Ontario is in fact a government that is moving to get rid of one of the basic programs and services we've developed in this province.
We can all claim credit for what's been done in terms of the various political parties, but the point is that it actually has been done, as you point out, by various governments of different political stripes and that while we may have argued over the years about whether we were spending enough, this is the first time we're actually talking about the fact that this government is actually spending less and cutting this program. I just want to underline that point you've made. I'd certainly invite you, if you have any additional comments to offer. I don't need to be convinced by your point of view; I agree with it wholeheartedly.
Ms McCuaig: We haven't made the point here together with it, but it's not just the reduction in funding; it's the first time we're having discussions about reducing regulations for child care; it's the first time we're having discussions about allocating public funding for child care into the unregulated sector.
In here we also have to note that the federal government holds some responsibility. By moving forward with the Canada health and social transfer, it has taken off the safeguards which existed requiring provinces to spend child care money on regulated child care. In this case, both levels of government are at fault. Nevertheless, we're moving in a direction which we have not seen in 15 years of vast community participation in partnerships with governments in the development of child care.
1630
Ms Friendly: If I could just add a comment to that. I've been involved in child care policy in Ontario since the time of the Davis government, since the 1970s, I've been working in the same kind of capacity. The thing I find astonishing is that a lot of the things that are being contemplated, besides the fact that there are cuts, is that we have so much more information and knowledge that we've derived from research over the years about the best ways to do child care.
The last time the Day Nurseries Act was reviewed, back in 1983, there was quite a lot of community consultation and I was involved in it, everybody was involved in it. I remember that some of the first quite good child care research was coming in from the United States about things like staff-child ratios and group sizes and staff training. I'm sure you're familiar with that, Mrs Ecker. Those things were incorporated into the consultation. These were all part of the discussion.
I guess what I really want to say is that we really do know a lot more about child care as a service, for parents, as a family support, as a child development program, and some of these economic studies that we're talking about hadn't even been done back 20 years ago.
So I think government policy should at least reflect what is known and I hope that the directions will do that.
Mrs Janet Ecker (Durham West): Thank you very much, Kerry and Martha, for coming and sharing your views with us and I look forward to more detailed discussions. I think in a week or two weeks we've got our meeting scheduled.
Two things that I would like to do, just to correct the record, which I think is important to do -- I guess I'm a little concerned that the communication among all the child care players, which sometimes seems to work very well, would seem to not be working very well when it comes to what Ottawa and Metro are, or should I say are not, doing. There is no agreement between Metro and Ottawa on any child care funding. If Mr Young is speaking to you or meeting with your organization that would be helpful but he has not yet made that clear to us. His officials, despite what Mr Axworthy kept claiming -- that there were no strings attached, that money was just going to flow to Metro -- that's certainly not what Mr Axworthy's officials told Ontario or Metro when we had the first meeting. They said it had to be 50-50 cost-shared dollars.
What is important, of course, is that Mr Axworthy is no longer there. We were quite concerned that despite the fact that he -- and people seemed to feel that he was so concerned about child care -- refused to meet with Ontario twice to carry through with what his offer may or may not have been. The question of course now is he is now gone so what he wanted is irrelevant. What is important is what Mr Young is prepared to commit, and we have indeed communicated with Mr Young to say, "Please can we stop saying who said what to whom and get on with is there indeed going to be Ottawa money and if there is going to be Ottawa money, what will it be available for?"
The other point that I think is worth mentioning: You say here that Ontario is the only province which hasn't indicated its interest in working with the federal government on the red book commitment-whatever that may actually turn out to be -- which is not accurate. We have indicated formally, informally, publicly, in correspondence our interest to discuss that and, as I said, the two meetings we tried to have with Mr Axworthy did not occur. So we look forward to seeing what may or may not be available from Ottawa to assist Ontario in its child care operations. I'll let the intergovernmental affairs people worry about whose jurisdiction it is. If there are resources which can be used and shared I'm certainly interested, and Ontario is certainly interested, in pursuing discussions to access that money.
One of the things I wasn't sure that I had heard you correctly -- at one time I thought in your presentation you were talking about the need for affordable child care, that it was something that was important, and economic support for many parents. Yet at the same time in the presentation you are objecting to a child care review that has as one of its goals an affordable system.
You also, I gather, have some concerns about the other goal of parental choice which is something I have heard from people so far -- I've not completed the consultation -- but so far parental choice has seemed to be a very important factor from many people in the child care field, regardless of their experience in their area.
I was just sort of curious as to why you were objecting to two goals and objectives that I would think, from your presentation, you might have been supporting.
Ms Friendly: We have always advocated for affordable child care. You can make child care affordable in different ways. If we're talking about affordable to parents, because that's one piece of affordability, you could make it affordable by having somebody else pay for some of the costs, like government or somebody else. Another way you could make child care affordable is to make it a less costly service. The best ways to do that are to have less people working in it or to pay them less money. Those are the main ways that you can make child care more affordable.
So since our position -- and I guess this would be true of most people in child care, in anything connected with child care -- is that child care needs to be not only more affordable but high quality, and since what we know about quality is very much related to the people who work in it and how many of them there are and what kind of training they have, we have been advocating for high-quality, affordable child care.
Now, the solution to that, to us, has always seemed to be to have more government funding. From a policy analysis point of view, if you look at countries that have child care, that's how they have it. I don't object at all to a child care review that looks at affordability, not at all. I guess we haven't spoken about child care and I haven't been asked to speak to anybody, and I would be happy to. I have been making suggestions for years about how to make child care more affordable, but we're not just interested in more affordable child care, to put kids someplace so the mom can work. We're interested in child care as a quality early childhood service. That's when it's good for children and that's when your long-term benefits can accrue. If you do it the other way, it's not a very good thing to do, even if the mother can get off social assistance and work.
Mr Kwinter: Thank you very much for your presentation. I was interested in your discussion just now about affordability. The government is suggesting the ultimate affordability and that is to take your children and leave them with your relatives and leave them with neighbours. Sounds reasonable. It's a proposition that could attract some support. What do you have to say about that?
Ms Friendly: I don't have any objection to children being taken care of by their grandmother or their auntie or whoever it is, or their mother's or father's friend or neighbour. In reality, many people's mothers or aunties don't live anywhere near them, or they're already in the labour force, or they're living in Florida, or one thing or another, they live in Thunder Bay or St John's, Newfoundland. Families are not the way they used to be and most people's next-door neighbours are not there either. So then you have a situation where parents are seeking what sounds like that kind of informal child care but isn't within the context of the extended family and the neighbourhood network any more, but is much more a situation where people, because they can't afford or access something that they can have some assurance about, are looking in the newspaper to find somebody they don't know whom they can pay less than they can for regulated child care.
I want to be really clear. I can tell you one thing: My mother wouldn't have volunteered to take care of my children every day, day in and day out. She was a very happy grandmother who did not live in Toronto, so it wasn't a possibility anyway. This is a whole different thing than talking about a system in the modern era of high-quality child care services that people can choose from among because they're there and they're affordable.
I just want to add that some of this has been couched under the framework of parental choice. Kerry and I are both parents; we've been on parent boards; we know a lot of parents; we talk to parents all the time. It is certainly true that parents want choice. Some parents want to work, some parents want to stay at home for a period of time. We support improved maternity and parental leave. Some parents would like to work part-time and have more flexible work hours. We would also support that. We would support a lot of much more work-and-family-friendly practices as public policy. I think that in order for people to have a real choice about child care there have to be things from which they can choose, and that's what we're supporting. So this notion of parental choice is one that we would support as well, with that being part of it, but I think we might interpret it somewhat differently. I don't think choice is giving somebody a chit so you can go out and purchase child care like a pair of shoes. It's not a marketplace thing.
Ms Castrilli: I want to thank you, Ms McCuaig and Ms Friendly, for putting in very stark terms what the consequences have been of the cuts and also the economic analysis of child care. I have one question based on something that you said, Ms McCuaig, that scares me. You talked about the reduction in regulation in child care and I wonder if you might elaborate on that quickly for us.
1640
Ms McCuaig: Again, the indications are from government statements, from a questionnaire that the government answered for us during the election campaign, that the direction they're moving in is towards the deregulation of child care, or weakening the regulation around child care, or diverting public funding which now is targeted towards the regulated sector where there's some accountability for what the public dollar is buying into the unregulated sector, where there is no way of measuring or getting accountability for what public funding is purchasing.
We have been monitoring statements that ministers and the Premier have been making in this regard and the indications are that there will be a weakening of regulations or a deregulation of child care.
The Chair: I'd like to thank the Ontario Coalition for Better Child Care for their presentation today and Ms McCuaig, Ms Friendly. We're a little over time --
Ms Friendly: May I make one last comment? This idea of more bang for your buck, I think is exactly what I want to come back to at the end. If what we're talking about is finding a way to care for children so their mothers can work or be in training, which is a perfectly legitimate purpose for having child care, it's only one thing that you're doing. If at the same time you're providing a child development service, and I don't think you can argue that you're doing that if you are using an unregulated system of neighbourhood child care providers, it may be perfectly good care, but it's not a child development program. It's also not a program that supports families at risk.
What I want to say is, economically you're not doing very well for your public money if you only do one thing at a time with child care. Thank you.
The Chair: Thank you very much for joining us today.
UNITED SENIOR CITIZENS OF ONTARIO INC.
The Chair: Our next group is the United Senior Citizens of Ontario Inc, Mr Smith, Mr Leitch and Mr Connon -- I'm sorry, Mrs Leitch.
Mr Al Smith: Thank you very much, Mr Chairman. My name is Al Smith and I'm the president of the United Senior Citizens of Ontario. With me is Jane Leitch, a former past president of our organization and also the chair of the Senior Citizens' Consumer Alliance for Long-Term Care Reform, and Wally Connon, executive board member of our group.
We'd like to thank you for this opportunity to present this brief paper for your consideration. The United Senior Citizens of Ontario represents thousands of seniors in the province through memberships in over 1,200 clubs.
Seniors in our province have been devastated by the continual attacks by the federal government through increased taxes, clawbacks, the GST and other forms of taxation which drastically reduce their ability to maintain a decent standard of living. It is estimated that approximately 47% of the seniors in the province are living below the poverty level. It is obvious, therefore, that we cannot tolerate further inroads in our diminished income.
The USCO believes that the government's approach to finding savings and restructuring in the Ontario drug benefit plan, as outlined in schedule G, is the wrong approach. In fact, introducing user fees into the Ontario drug benefit plan contradicts the evidence on the impact of such fees and copayments on health outcomes. It also overlooks the cost of establishing the necessary administrative structures for collecting such fees and is in direct violation of the campaign promise outlined in the Common Sense Revolution. In fact, the Common Sense Revolution clearly states:
"In the last decade, user fees and copayments have kept rising and many health care services have been `delisted' and are no longer covered by OHIP.
"We looked at those kinds of options, but decided the most effective and fair method was to give the public and health professionals alike a true and full accounting of the costs of health care.... Under this plan, there will no new user fees."
The Treasurer has indicated that he anticipates generating some $225 million in revenue through the introduction of copayments on the Ontario drug benefit plan.
We support the Senior Citizens' Consumer Alliance for Long-Term Care Reform in recommending the elimination of overprescribing medications, which is one of the primary sources of illness and institutionalization of senior citizens. This would be not only a cost saving but also a lifesaving measure. In an investigation into drug reform issues, we offer the following facts: In 1989, Statistics Canada estimated that 4,000 Canadian seniors died as a result of inappropriate medication use. In a recent study, 41% of elderly patients admitted to hospital had an identified drug-related problem, including inappropriate dosage, adverse drug reaction and/or drug interaction. Inappropriate medication use is one of the five most important quality-of-care problems in the elderly in terms of avoidable morbidity.
New expensive drugs are often prescribed when equally effective, older and cheaper medications are available. In 1993, a study conducted by the Patented Medicine Prices Review Board found that 105 of 177 drug products sold in Canada were priced above the median international price and that Canada's drug prices were the highest in the world 24% of the time.
A review of the literature on user fees and copayments prepared in 1994 for the Premier's Council on Health, Well-Being and Social Justice by Stoddart, Barer and Evans concluded that the charges are neither a necessary nor sufficient condition for overall cost control in the health care systems.
User fees act as a disincentive to both appropriate and inappropriate use by the poor but have little or no impact on reducing inappropriate use for those who can afford to pay. User fees which are low enough not to act as a serious disincentive often cost more to administer than they actually generate, and I'm sure we all remember the GST.
User fees increase overall spending on health costs, which ultimately has a negative impact on the competitiveness of our corporations. Adding user fees to the Ontario drug benefit plan increases the overall percentage of the gross domestic product which Ontario spends on health services, bringing us closer to the American system and thereby destroying our competitive advantage.
A 1992 study prepared by the Premier's Council on Economic Renewal in Ontario found that businesses in Illinois, Michigan, New York, California and Ohio were spending two and a half times more than those in Ontario for medical benefits, workers' compensation, unemployment insurance and social security. This is a major factor in attracting and retaining businesses in Ontario.
It is our view that the measures outlined in schedule G do nothing to address these quality-of-care issues; in fact, if one were to believe the research evidence, there is every indication that the introduction of a copayment will increase the amount of inappropriate medication among Ontarians.
Furthermore, since schedule G also calls for the deregulation of drug prices, it is likely that Ontarians will end up paying more for their prescription medications, when we already know that Canadians are already paying world-record prices for our drug products.
We recommend the following amendments to schedule G of Bill 26:
(1) Eliminate any plans to introduce a copayment into the Ontario drug benefit plan.
(2) Restore the government's power and authority to regulate Ontario drug prices.
(3) Introduce measures which will allow the government to develop and enforce the most appropriate prescribing guidelines aimed at ensuring the safe and affordable use of prescription medications.
(4) Introduce measures to ensure the establishment of ongoing physician and consumer education programs geared to improving appropriate drug utilization.
Regarding hospital cutbacks: We would disagree with any form of hospital user fees. We would suggest a health hotline and propose an aggressive education program to inform the general public as to when it is appropriate to rush to the emergency room services in the hospital. Sometimes it would be more suitable to visit the local health clinic or your doctor. Health clinics should be monitored for abuse of the system. The high cost of emergency service should be stressed. With the modern technology of today, a printout should be given to each patient before they leave the hospital, be it for emergency services or any medical attention given.
1650
Covering houses in our concerns: The Ontario building code should require smoke alarms and sprinklers for all collective living accommodations. We strongly feel that every retirement home should be required by law to be policed to meet all of the safety requirements for public seniors' residences. Although there would be an initial cost involved, the savings to the taxpayer in case of fire and loss of life would more than offset the cost involved.
Transportation: A provincial transit integration task force is badly needed to plan integration of transport services for seniors and the handicapped. Further, people in the north are forced to wait hours in the middle of the night if their trip crosses the boundary of two separate bus lines.
In a presentation the USCO made in February 1995 -- that was a year ago -- to the standing committee on finance on the subject of Bill 164, automobile insurance, all three parties stated their willingness to review Bill 164 and to do away with the onerous sales tax the previous government had put on auto insurance premiums. We would be happy to serve on any committee set up for such a review, and we might add, ladies and gentlemen, we haven't seen any action on it yet.
The USCO has been requesting for years that the names of young offenders should be published. We are pleased to know that this recently seems to have been accomplished, and we'd like to encourage the government to make sure that the public have a right to protection more than the individual has a right to privacy.
Once more, we would like to express our appreciation for this opportunity to present our views to the committee. We would like to thank you, and if there are any questions, we'll be pleased to try to answer them.
Mr Ford: Thank you for coming today. We appreciate your coming and putting your input on these various programs. On this area that you say, "Restore government's power and authority to regulate Ontario drug prices," it's good to do that, but I don't think it creates a harmonious relationship between the government and the drug manufacturers, the reason being -- I have met with several of the manufacturers -- they have investments in Canada, they are producing drugs and they are exporting an awful lot of these drugs outside the country. Furthermore, on the regulation of the drug prices -- you'd have to have a competitive situation. Consequently, if we did that, then they would reduce their investment and only concentrate on small operations in Canada just to service the Canadian market.
Mr Smith: I'm going to ask Jane, if she would, but just before I do, I'd like to point one thing out. The Canadian Drug Manufacturers Association is one of the top 15 companies in Canada on research and development. I don't think too many of the pharmaceuticals do. You already in the province ask for the use of generic drugs where possible, and we're saying let's get more of it, because if you really want to save this health care of ours -- and let's stop worrying about the pharmaceuticals making big bucks. A good percentage of their products is produced offshore --
Mr Ford: I agree.
Mr Smith: -- and we have a problem, and one of our concerns is that -- like last year, let's take a look. The generic drugs went up 7.1%. The pharmaceuticals went up over 15.2%. So who's gouging? When I see the court cases going on, I get a little concerned with the fact that the so-called pharmaceuticals are taking the CDMA to court and want to change the shapes and colours of pills for seniors, who will be most adversely affected, yet they tell us out of the other side of their mouth, "Yeah, we're interested in seniors." I find it hard to believe.
Jane, maybe you'd like to comment on some of this, because you've worked extensively on it.
Mrs Jane Leitch: You've done a good job of explaining it, but I would just like to add that I think we all know that user fees are killers for seniors. They do not help anybody. The poor they discriminate against, and the people who can afford it can certainly have it. But the high cost of drugs and the deregulating of the cost of drugs seems to us to be a useless exercise. It will give the opportunity for the prices to go higher, it will not make it any easier for people to get the medications, and this is a very, very serious problem and one that we feel, with the amount of people who can afford to pay for their drugs and for the user fee to be collected will not be money saving; there is no way. The cost of administering such a program would be so high.
Mr Ford: I know the points that you're making here, and I go along with a lot of them, but let me explain something. Approximately one month ago, I had a box delivered to my office -- this isn't exaggeration -- about two feet long, probably a foot high and probably a foot and a half wide. I opened up the box, and here it was packed with prescription drugs. The letter inside says, "Please check on these people, who have got second, third, fourth, fifth and up to sixth opinions and thrown the drugs in the garbage."
These are the realities we're facing. We're trying to cope with the deficit right now, and we're seeing these things. These are the things that we're working on. These are the causes for some of these things. It's not only one person doing that. I get letters from people telling me these things. So this is why they probably brought in user fees, so that it would cut down on people doing that.
Mrs Leitch: That's a very minimal amount of people who do that, sir.
Mr Ford: I'm not here to debate that.
Mrs Leitch: I would like to say that it would probably cost more to have that inspected and everybody checked. Who prescribes the drugs? We don't prescribe the drugs; the doctors do.
Mr Ford: That's right, but you're questioning the fact of a user fee and different aspects of the drug industry.
Mrs Leitch: Some people abuse any law, don't they?
Mr Ford: I'm visiting a drug company tomorrow on an inspection tour to see what investments they have made due to these regulations.
Mrs Marland: Thank you and welcome. As always, the briefs that are presented by the United Senior Citizens of Ontario are excellent. It never seems, over the years I've heard you, on any subject matter, that you have not done your homework. That's sincerely appreciated by us.
I just wanted to make a suggestion to you on the issue of following up on the review of Bill 164, the auto insurance, that you're referring to actually on your last page, on page 6. You may not be aware of the fact that Mr Ernie Eves, the Minister of Finance, appointed a very important responsibility to his parliamentary assistant, Rob Sampson, who is the MPP for Mississauga West, to review the whole issue surrounding automobile insurance in the province. That review started as far back as July. Mr Sampson has been meeting with over 100 different groups and delegations in the six months since that time. We are still interested and need to hear from anyone else who wishes to make a contribution.
This committee, in fact, starting on the 19th, a week on Monday, is commencing the public hearings on what the recommendations of Mr Sampson are in terms of his review at this point. So he has held these meetings, he's now coming forth with some recommendations, and there is a very clear time frame that they would like to have this completed by.
Because I don't sit on the subcommittee, I don't know whether this committee still has time available in the two weeks starting on the 19th that they're holding the public hearings on the automobile insurance issue. But in any case, I encourage you to contact Mr Robert Sampson's office. If you can't get before this committee, because you've already spent time on that subject I know you're more than equipped to talk to Mr Sampson about it.
Mrs Leitch: Interesting that we never had the opportunity or were invited to speak on behalf of seniors.
Mrs Marland: Pardon?
Mrs Leitch: It's interesting that the United Senior Citizens of Ontario did not have an opportunity to meet with him and present our views to him.
Mrs Marland: Well, what I'm saying to you is, you have that opportunity. They're just beginning another segment of the public input process. That's why I'm suggesting to you that you can do that.
Mr Smith: If I could ask a question, I'm just kind of curious. Last year we submitted a follow-up by John Atto, our insurance adviser, at the request of this committee, to clarify some points. I'm a little disappointed that maybe it wasn't filed someplace where it could be used.
Mrs Marland: I'm sure it will have been used in that where they started their review was to look at existing information, existing committee reports and the issue as it's evolved over the last two governments, because each government has brought in its own insurance bill. So no, it would have been part of that, but what I'm suggesting is that this is 1996; there may be some aspects of it that you want to update too.
Mr Kwinter: Thank you very much. I really am very, very interested in what you have to say for two reasons: You are becoming a larger and larger factor in the population of Ontario, and I'm getting closer and closer to being a member of your group.
Mr Smith: We'd be delighted to have you, and anybody else who would like to come.
Mr Kwinter: I really want to just pursue this drug problem because I think it's critical. It's a serious problem. We had another group in here today, the Alliance of Seniors to Protect Canada's Social Programs, and I had a chance to talk to the pharmacist who was with them whom I knew in a previous life.
I want to recount a story that happened before this government came to power, which I think shows the problems that we have with this user fee. My brother-in-law is a pharmacist. He owns a Shoppers Drug Mart franchise and he often tells me stories about how seniors who are on the ODB, where they get their drugs free, come in and they present their card. Once it's on record they just come and they get their medication. As a result, unless, as some of the stores have now put in, there's a computerized system where they can monitor the amount of drugs that were taken, there is this problem that when they die you open up their medicine chest and they've got a 20-year supply of drugs in there.
The more significant situation that I find is he's told me stories about how certain drugs were not covered and a customer would come in and say, "I'm here to pick up my prescription," and they've said, "That's going to be $7," or "It's going to be $5," or whatever it is. They say: "Oh no, no. I don't pay for my drugs. I'm a senior and I have a card." They say, "Yes, but this isn't covered by the Ontario drug benefit plan." So they say: "Well, that's fine, then take it out. I'm not going to pay for it." The problem with that is that may be the most important drug for them, and that is the one they've taken out.
When you have the user fee, that in itself is going to be a deterrent. It may sound like it's not very much, but to some people, the idea that they have to go out and pay this user fee is going to be a deterrent. I'm just wondering whether you have had an experience like that or if you feel that's a valid kind of concern.
Mrs Leitch: We certainly have. But with the new monitoring system in the drugstores, I hope that will identify a lot of this overmedication and the difficulty some people have in restraining themselves from getting everything they can out of the ODB program. However, I think you're perfectly right when you say that there are people who will be disadvantaged. There are people who, with a user fee, will be more disadvantaged. There will be no incentive for them to pick up their medication. This is very true with people who are confused and maybe a bit upset, that they are going to neglect taking their medication, and the $2 that they have to put out to get it is just going to be another reason for them not to bother to take their medication. So we really are very concerned about the fact that it's a disincentive for people to take their medication if they have to pay for it.
It's also often going to cost more on the health care system if they don't take it. We really are strongly in support of the fact that the user fee does nothing to add to the value of life for not just seniors, but there's a lot of handicapped people who have the same problems. We're very concerned about this.
Mr Smith: Having said that, we'd like to suggest, and one of the things we do in the brief and in our annual brief to the government is that we have suggested that you need to watch some of these storefront clinics. I am in close touch with a number of the family physicians because I sit on the district health council for Simcoe county, and have for the last six or seven years. One of the concerns we had was we'd get doctors talking to us and saying: "We have people show up Monday morning. They've hit the emergency once, they've gone in and out of the clinic and they've got four or five prescriptions in their hand." Our question is, is this a licence to print money for the clinics or should they be more closely monitored? If all they're doing is pushing pills, I don't think you need walk-in clinics. I'm sure some are doing a good job, but some I think are doing an awful job. That's one of the problems, we feel, because if they're just passing out the pills -- in one case that I can tell you about, that I know, the chap walked in and he said: "I've got five prescriptions. Which one of these damn things do I take?" The doctor said, "I don't think you'd better touch any of them." This was Monday, but had he gone and cashed those in and got them, what would have happened? There doesn't seem to be any monitoring of this kind of system.
Mrs Leitch: Some education should be put into training doctors, pharmacists and seniors how to use their medication properly. If some money were put in there instead of granting special privileges for the drug manufacturers, it would do a lot more good to the system.
Mr Silipo: Thank you for your presentation and for, among other things, reminding us again about the promise that the government made to institute no user fees and the breach of that promise, as you and many others have pointed out to us in these hearings and in the Bill 26 hearings. As I'm sure you know, the government, at least for now, has chosen not to listen to you or to any other groups.
Mrs Leitch: We sure do.
Mr Silipo: This is now the law. So we will all have to deal with that and live with it for as long as that is going to be the case.
I think we would all, quite frankly, benefit from your continued work in this area to see exactly what is going to happen now that this is here. I appreciate the fact that you put the issue again in front of the committee, but I don't have a lot of faith that the government members are going to recommend a change in policy from what they've done under Bill 26. But so be it.
I was interested in pursuing a little bit more this question of the overprescribing and what could be done around that, because you probably are familiar with the position that we had put before us by the pharmacists' association, which had a number of useful suggestions that they made to us around that, including referring to a pilot that's been going on now for some time, I gather, in BC, if I remember correctly. By working together, they have managed to reduce the overuse of medication by seniors and others, but particularly seniors, and obviously one of the things that does is it saves money. I just wanted to get your thoughts on that in terms of whether you're familiar with that particular initiative or some of the other suggestions that the pharmacists' association made to us, because they seemed to be very much in the vein of what you're recommending to us.
Mr Smith: One thing I would say to you is that I think the pharmacists are a good group of people. I know there is a battle going on between the medical people and the pharmacists on who should be the point of entry. One of the things I have found in talking to seniors' clubs all over this province and talking to them personally is the fact that it's usually the pharmacist who picks up any mistake in the prescription that's been supplied by the physicians. I'm not knocking physicians, because they do an excellent job, but you can't be all things to all people. You probably have noticed as well as I do that if you're in a doctor's office sometimes and you ask -- a lot of people don't, but if you ask him questions about a prescription, he usually goes to the big book and opens it up and says, "Oh, yeah, it says that in here." You go to the pharmacist and he'll whack it right off very quickly.
Now that you've put in this computer system -- and I think it's an excellent thing you've put in, so that I can't go to this pharmacist and I can't go to that one; the pharmacist is going to pick it up -- I think we should capitalize on that because it's an excellent point to slow seniors down, or anybody at any age who gets a prescription from this doctor and then goes to another one or drops in at the clinic. It's one way to stop them because many of these prescriptions are acting counteractive to each one and they're dangerous. As I say, that's why the 4,000 people they say died of drug overdose in 1989, I'll bet you that figure's gone up. But I think the pharmacists would be the ones to take the initiative in that because they seem to know more about it. Certainly, any time I've phoned they will tell me very quickly whether you can have a drink or whether you shouldn't take this thing or that, or whether it'll react against it or kill what you're taking. It's very good; you won't get that out of most MDs' offices.
Mr Wally Connon: If I may just add briefly to the general remarks, I think the problem that seniors are having, and others who are in the lower margins of our economic society, is they get hit every conceivable way. We think that they're an un -- what would you call it? I'm stuck for a word. I'll put it this way: You keep coming back, and if you're a landlord, you're going to get more rent out of this individual. If he drives a car, he's going to be paying probably more for the car or for the insurance or for his drugs. It all keeps coming down. As the federal government saves money, the provincial government has to save, cut corners in order to make up for that. It goes down to the municipality and the municipality then dumps it on the guy on the bottom. It's not a limitless resource; we're going to run out pretty quickly.
The Chair: I'd like to thank the United Senior Citizens of Ontario for their presentation. That brings to a conclusion the time for this evening.
Mr Smith: May I just make one more comment? I know that everybody who was here ahead of us whom we heard today seems to be knocking the government. I'd like to say one thing: We think some of the things you've done have been darned good and we're pleased to see them. What we feel and our concern, and we've written the Minister of Health, is that maybe you're moving a little fast. You've got organizations such as ours, and in every letter we write you we usually try to offer some suggestions and we're always willing to serve on a committee or come before you to answer your questions, because we do talk to thousands and thousands of seniors across the province.
Mrs Leitch: And we all vote.
Mr Smith: Yes, and we all vote.
Mrs Marland: And we thank you on behalf of the government, because that positive, constructive approach we truly appreciate.
The Chair: Thank you very much. The committee stands adjourned until 9:30 Monday morning, and we will be in the Amethyst Room.
The committee adjourned at 1712.