CONTENTS
Monday 17 March 1997
Pre-budget consultations
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président: Mr TedChudleigh (Halton North / -Nord PC)
Vice-Chair / Vice-Président: Mr TimHudak (Niagara South / -Sud PC)
Ms IsabelBassett (St Andrew-St Patrick PC)
Mr JimBrown (Scarborough West / -Ouest PC)
Mr TedChudleigh (Halton North / -Nord PC)
Mr JosephCordiano (Lawrence L)
Mr Douglas B. Ford (Etobicoke-Humber PC)
Mr TimHudak (Niagara South / -Sud PC)
Mr MonteKwinter (Wilson Heights L)
Mr TonyMartin (Sault Ste Marie ND)
Mr GerryMartiniuk (Cambridge PC)
Mr GerryPhillips (Scarborough-Agincourt L)
Mr GillesPouliot (Lake Nipigon / Lac-Nipigon ND)
Mr E.J. DouglasRollins (Quinte PC)
Mr JosephSpina (Brampton North / -Nord PC)
Mr WayneWettlaufer (Kitchener PC)
Clerk / Greffier: Mr Franco Carrozza
Staff / Personnel: Ms Alison Drummond, research officer, Legislative Research Service
The committee met at 1309 in committee room 1, following a closed session.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Ted Chudleigh): If I might suggest that we would ask our research officer to perhaps give us a brief overview of the report and the process she used to put it together, and then we would proceed through the report by section with your approval. Does that process meet the needs of the committee?
Ms Isabel Bassett (St Andrew-St Patrick): Yes.
Ms Alison Drummond: As I had been directed by the committee, I followed essentially the same format as last year with some changes because of changes in emphasis on what we heard. If you turn to your table of contents page, I used more detailed headings than last year, essentially so that can provide a bit of a structure for the committee as to how the report itself was organized.
The one thing I would draw your attention to -- and I apologize for this; it was a computer problem -- is that the third section, which in your copy says, "Projected 1997 GDP Growth," was actually supposed to be the title of the table, and I actually called it something much tamer, which was "Macroeconomic Issues." Otherwise, I think the basic structure I've followed should be clear from the table of contents.
It was a very brief introduction thanking witnesses; a section on what the minister and his staff told us; a macroeconomic issues section with a fairly detailed summary of what each expert witness said; and then more information on what other witnesses recommended on fiscal issues. Then a section on taxes; went into a little bit of detail on sales tax with the harmonization initiatives in the maritime provinces. That seemed to be a bit of a hotter issue than last year, so I gave it its own heading. Transfer partners, with the four major transfer partners; spending programs, sectors similar to last year; and this year I put in a section called "Business Issues." That seemed like the most coherent way to organize some of the recommendations that we heard on access to capital issues, government regulation and privatization. That's pretty much it.
If you can turn to page 1, I had some questions on the body of the report as it stands, asking you to consider whether the organization of topics reflects the committee's priorities; whether there is sufficient background and context on the issues the committee wishes to make recommendations on -- obviously, I don't yet know what that is, so that would be something I would need a bit more response to a little later in this process, once the recommendations are taking shape -- whether the document is a length the committee is happy with and whether it should go into more detail or less detail on specific issues.
Finally, just a very technical point: whether witnesses should be named as they made specific points and as they lined up for or against specific issues. I tended to name witnesses. I tended to attach a witness name to a specific point when people were making fairly detailed recommendations; I tended not to for more general comments that they made. But all that information is available, and I'm at the direction of the committee on that.
I think that's it, the only introductory points I wanted to make. As we go through the sections, as people have specific comments, it would be helpful to hear those.
The Chair: How would the committee wish to proceed? Should we start with the report? Should we start with the four questions, as pointed out? Is there agreement to that?
The first question: "The organization of topics reflects the committee's priorities." Is the committee in favour of the way it's laid out?
Ms Bassett: Yes.
Mr Wayne Wettlaufer (Kitchener): Yes.
Mr Gerry Phillips (Scarborough-Agincourt): Sure.
The Chair: Is there any disagreement as to the way it's laid out?
Mr Phillips: My only two concerns would be -- as you know, my caucus and I are quite worried about the jobs issue. There's mention made of it in various places, but there wasn't, that I recall, a little section on jobs. These things are always difficult because each of us has our own pet interests that are difficult sometimes for the staff to reflect.
The other one that's of interest to us is the -- and it is touched on -- I think they were called "transfer partners." The whole issue of that kind of weaves its way through this, the government's plans to reorient the way services are funded and provided. It's mentioned on page 19 mainly.
Those are the two issues that for us are going to be quite important in the report: the jobs and the Who Does What. I don't know whether there's a way to pull them out and focus them a little bit more, as we've done with things like taxes. But for me jobs would be one where I wouldn't mind a similar section to the taxes section.
The Chair: I take that as a proposal to include in the report a section on jobs and a section on transfer payments. Is there discussion on those two?
Mr Tim Hudak (Niagara South): My feeling, especially on the jobs issue, is that each of these topics does relate to jobs and it does come out in the recommendations. Whether through taxes or transfer agreements or spending programs, they all relate to jobs. My concern would be if we had a special section on the job issue, more or less duplicating the work of the report that's been done so far. I'm cautious about that in that most of these sections do relate to job creation, and to put another section into the report on jobs in particular would be more or less repeating what's already been in the other sections.
Ms Bassett: I would agree.
The Chair: Your comments refer to transfer partners? Mr Spina, did you have a comment?
Mr Joseph Spina (Brampton North): Yes. I was just alluding to the jobs comments. There's a section called "Sectors" on page 26 which relates to construction, energy, tourism and hospitality, financial, business issues, access to capital. Those are all very specific to job creation and growth and the past situation and projections. I can appreciate Mr Phillips's concern about isolating that as a specific sector, but I also believe it's covered in that area and, as Mr Hudak said, the other sections dealing with taxation, spending programs and so forth also have some impetus and impact on job creation, growth and some strategy.
Mr Hudak: Also, in terms of the Who Does What, I think Alison did a good job in the section on page 18, "Transfer Partners" and "Municipalities." She outlines many of the major proposals to date on the Who Does What topics. I think that is covered there in the report.
Mr Phillips: Five to one.
The Chair: You catch the sense of the meeting.
Mr Phillips: We go through the dance. We've got three and a half pages on taxes and zero, in my opinion, on jobs. But I'll give you my opinion. You've got my opinion.
We sent a letter to the minister on February 5 -- and all the members got a copy -- asking for an explanation on the shift of costs between the municipalities, trying to get what will be a huge issue for all of us. I would have thought we'd want to deal with that, which is the biggest shift in funding for the two. As I say, it's five to one, and when Mr Martin is back it'll be five to two, so I know what we have to do, I guess.
The Chair: Does that settle the first question, "The organization of topics reflects the committee's priorities"? Can we move on?
Ms Bassett: Just to come back to the municipality thing, it may be academic, because if we're working, as we are, to change things already, all this stuff on municipal splits and that may be all changed. I just don't know how we get around it. There's a more technical question. If everything is cast in stone, writing, do we want to put a note that things may be changed by the time the report even goes to press? That's a technical thing for the clerk maybe.
Ms Drummond: In the "Municipalities" section on page 18?
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Ms Bassett: Yes, where you list all these things, which is fine as it was, and I think the thing Mr Phillips is referring to. But if we're already working to change them, there will be a new package, obviously, by April 1 or 2. I don't know what you do. Do you just say, "Watch for a change," or "This is tentative"?
Ms Drummond: What we try to do in things that we work on that are going out under the committee's name, as in fact stuff that's going out under our name, is that if we can reference something -- and there has been press coverage that the provincial-municipal committee is meeting or is about to start meeting, so I can certainly refer to that.
Ms Bassett: Because your facts are right as of today but they probably won't be as of two weeks.
The Chair: So the inclusion of a reference.
Ms Bassett: Just that this is changing, it was tabled and it is being look at or something, however you want to say it.
Ms Drummond: Yes, certainly.
The Chair: The second question: "There is sufficient background and context on the issues the committee wishes to make recommendations on." Is that premature at this time? As we go through, could we not have a look at that? We may want to extend some parts of the report. Is it appropriate that we leave that one to the end?
Mr Hudak: I think that's good advice, Chair.
The Chair: Thirdly, "The length of the document is roughly the length the committee would like the report to be -- should it go into more detail, or less detail." The same again?
Mr Hudak: Yes.
The Chair: This point about, "Witnesses should be named as they made specific points, and as they lined up for or against specific issues," what direction would the committee like to give on that one?
Ms Bassett: Can I just ask a question there? If I can ask Alison, did you mean, like, "Seven witnesses from business"? Is that naming them, or do you want to say, "The Bank of Nova Scotia said..."?
Ms Drummond: That's my question to the committee. In the document you have, what I've tended to do is, if a witness came in and made a very specific recommendation, I named them, because there was more clarity that way, but if a series of witnesses said, "Privatizing" -- I don't know, whatever --
Mr Spina: Go to page 41.
Ms Drummond: On any number of issues where people lined up in groups for or against but didn't make particularly specific recommendations, I tended to say, "Five witnesses said this, seven witnesses said that." Would you like me to list them?
Ms Bassett: That's fine, except my suggestion would be that if you say -- and you can take the co-op grants -- "Student bodies" -- and then you name the student bodies -- "said this and they were opposed," then you should say, "University faculties were for." I think if you name on one side, the opposed, then you should identify who was for, so that you know how it's balanced.
Ms Drummond: But on the general points, does the committee want all the witnesses listed or not?
Mr Spina: The individuals are already listed as a matter of public record. The question is, what difference does it make if it's in our report or not? Anybody who wanted to do any further research would obviously be able to get copies of Hansard of the committee hearings. Is that not correct?
Mr Wettlaufer: I happen to like having the names of the witnesses on the report, as is shown here, because from the standpoint of the committee members, we can more easily refer to this and right on the summary we have which witnesses have said what. I think from our own standpoint it makes sense to have it.
Ms Drummond: For example, on page 15, under "Sales Tax" and "Harmonization," I've just said generally that five witnesses recommended that Ontario proceed with harmonization and four witnesses opposed it entirely. You'd like witness names --
Mr Wettlaufer: Which ones, sure.
The Chair: The committee is in general agreement with that?
Ms Bassett: That witnesses will be named. Okay. It makes it easier to reference.
The Chair: How would you like to handle this? Shall we go through the report section by section, starting with the introduction? Would it be the prerogative of the Chair to assume the introduction is okay? Oh, there is a sentence fragment in the introduction which has already been adjusted.
Ms Drummond: There would just be a period after "an additional nine briefs."
The Chair: Yes. Instead of a semicolon, it's a period and the rest of that sentence comes out.
"Minister of Finance and Staff."
Ms Bassett: I have a list of changes, if we can just read them line by line.
The Chair: Would you like to bring them to our attention as we hit those sections?
Ms Bassett: Yes, I'll bring them to your attention. They're all in the minister's statement. If you want to look at page 1, the sixth bullet under "Minister of Finance and Staff," it reads, "Ontario's real trade balance is a record high of..." It should read, "Ontario's real trade balance was a record high of $17 billion over the first three quarters of 1996."
The next one is the seventh bullet: "Real wages grew at annualized rates of 3.1." It should be "wages grew at annualized rates of 3.1%," so take out the "real."
The tenth bullet reads, "Fourth quarter retail sales were up 7% from the fourth quarter of 1995." It should read, "Fourth quarter department store sales were up 7% from the fourth quarter of 1995."
The eleventh bullet reads, "Fourth quarter auto sales were up 25% over the prior year," and it should read "Fourth quarter auto sales were up over 20% over the prior year."
Mr Phillips: Are all these changes because we weren't transcribing Hansard properly?
Ms Bassett: They were changes that -- yes, they weren't what we expected was said.
Mr Phillips: So Hansard was incorrect. Is that right?
Ms Bassett: I don't know.
The Chair: Did these figures appear in the minister's handout he gave us? Are we correcting this from the minister's handout? The research officer will check to see if that's in Hansard or whether it was in the minister's statement.
Ms Bassett: As I understand, some were and some weren't.
Mr Phillips: It seems unusual to have this many mistakes in Hansard.
Ms Bassett: Well, I think Hansard has been very busy; maybe that's why.
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Ms Drummond: Actually, if I can clarify, I'm not sure I had access to the Hansard when I was originally drafting this because of the delay on the Hansard. If I can check these numbers against Hansard, I'll come back to the committee and try and clarify.
The Chair: We can come back to that tomorrow. We'll check that and come back. Do you have further corrections?
Ms Bassett: My assistant has pointed out that this was what was used. If the clerk was using this in writing it out, it's not exactly the same. It's a rougher way of writing it out.
Should I continue reading, Mr Chair?
The Chair: If you would, please.
Ms Bassett: On page 2, if you turn the page, we've got, "In response to questions, the minister stated that he believes that job creation is lagging...." It should be, "In response to questions, the minister stated that job creation will increase as people become more confident and spend more."
Mr Phillips: He didn't say that, then? He didn't state that job creation is lagging other indicators?
Ms Bassett: No, he didn't.
The next one, in the same paragraph, fourth line down, should read "...the small business sector to create jobs, and has announced improvements such as the small business investment tax credit for banks."
Then under "Fiscal Situation" --
The Chair: Before we get to "Fiscal Situation," is there any other comment on the first section, "Minister of Finance and Staff"?
Mr Phillips: I'd just like to see the Hansards on what he did say.
The Chair: We'll have that tomorrow morning.
Mr Phillips: That's great. Thank you.
The Chair: Okay, moving on to "Fiscal Situation."
Ms Bassett: "The deficit is on track to be $7.7 billion" should read: "The deficit outlook is $7.7 billion for 1996-97, $5.08 million lower than the 1996 budget forecast. The deficit target for 1997-98 is $6.6 billion, an improvement of more than 50% since June 1995."
The next one is, "Operating expenditures have also gone up in the third quarter, with the major factor being...." It should read, "Operating expenditures have also gone up in the third quarter as compared to the budget forecast, with the major factor being...."
In the same paragraph, "a $53-million decrease in municipal transit transfer payments" should read "a $53-million accrual adjustment in municipal transit transfer payments."
On page 3 in that same section, the second sentence, "As noted by the minister," should change to "As noted by the minister, there is also a good prospect that the $650-million reserve will not be required."
Two paragraphs down, the part that says, "There have been particular problems with harmonizing taxes on home heating fuel, new homes and books" should read: "In response to a question, ministry staff also discussed issues regarding sales tax harmonization in the maritime provinces which would have to be resolved in any Ontario harmonization agreement. There are particular concerns with the increase in tax on certain goods."
Ms Drummond: I believe the ministry mentioned those three items. I'm sorry. "There are particular concerns with" -- I didn't catch all of that.
Ms Bassett: "...particular problems with harmonizing" -- you mean home heating?
The Chair: "...particular problems with harmonizing taxes on certain goods," and then go on to mention "home heating fuel, new homes and books"?
Ms Bassett: Yes.
The Chair: I was wondering the same thing. So it's an addition.
Okay. Does that complete that section? Are there any other comments concerning that section?
Can we move on to "Financing"?
Ms Bassett: Again I've got three short figures that need to be changed. "...borrowing on behalf of agencies make up total financing requirements of $14.3 billion" should read "$14.2 billion."
Following the five bullets under the title "Financing," a sixth bullet should read "$1.6 billion in domestic Canadian market."
Then, "Of the remaining $1.8 billion as of December 1996" should read "as of December 31, 1996." The clause saying "which may be reduced by the $650-million stabilization fund" should read "the $650-million reserve."
The Chair: Any comments concerning the "Financing" section?
Under "Expert Witnesses," are there further corrections, Ms Bassett?
Ms Bassett: No corrections under "Expert Witnesses."
The Chair: Any comments under "Expert Witnesses, Scotia Capital Markets"? "Canada Trust"? "United Steelworkers"?
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Ms Bassett: I have a change on page 7. The first bullet under the heading "United Steelworkers" should come out "When the income tax...."
The Chair: That's what my copy reads.
Ms Bassett: Yes, I see that too. All right, we're going to have to disregard that then, Chair.
The Chair: "Bank of Montreal"? "Informetrica"? "Scotiabank"? That's page 11. Are there any comments prior to page 15?
Ms Bassett: Yes, on page 13.
The Chair: I tried to take a leap there.
Ms Bassett: On page 13, under "Other Witnesses: Fiscal Issues," it says, "Sixteen witnesses specifically endorsed the direction of the government on deficit and debt reduction." It should be "Twenty-four witnesses."
The Chair: Do you wish to name those 24, as per our previous --
Ms Bassett: Yes, they should be named.
The Chair: Do you have a list of those 24?
Ms Bassett: Yes, we can supply you with the 24.
The Chair: Could you supply those to the research officer. We will review that, if there's a problem, tomorrow morning.
Mr Tony Martin (Sault Ste Marie): Perhaps the research officer could comment on that 16 versus the 24.
Ms Drummond: If I could get the list from Ms Bassett, I'll follow the same procedure and check it against Hansard.
The Chair: We can have that discussion tomorrow morning. Does that meet with your approval?
Mr Martin: Yes.
The Chair: Anything else on page 14 or page 15?
Ms Bassett: Yes, I've got something on page 14 under "Personal Income Tax." "The first phase of the tax cut took effect on July 1" should read, "The first phase of the tax cut took effect on July 1, 1996, dropping provincial income tax from 58% of basic federal tax to 56%."
Ms Drummond: I'm sorry, you're saying it dropped from 58% to 56%?
Ms Bassett: Yes, to 56%; that's right.
Mr Phillips: I think it actually dropped to 54%.
Ms Bassett: Well, 54% represents the rate at which the tax was withheld at the source between July 1, 1996, and December 31, 1966, is the note from finances.
Ms Drummond: Of course, yes, from the budget. I'm sorry.
Ms Bassett: It's not something that would be readily thought of.
Ms Drummond: Yes, I understand. No, wait a minute -- I don't understand. Sorry, can you run this by me again?
Mr Phillips: It averaged 56% for the year but it dropped to 54% on July 1. That's my memory.
Ms Bassett: Can we check into that?
Ms Drummond: These are the figures I got from the budget, and the budget announced that the second cut to 49% of basic federal tax took effect on the 1st.
Ms Bassett: Can we revisit it tomorrow?
Ms Drummond: Okay.
Ms Bassett: All right. We'll come back to that.
Ms Drummond: I could word it, "The first phase of the tax cut took effect on July 1, 1996, dropping provincial income tax from 58% of basic federal tax to 56% averaged out over all of 1996."
Ms Bassett: That's what you want to put?
Ms Drummond: This was wording I took directly from the budget.
The Chair: Okay?
Ms Bassett: That's fine. I'd still like to check that with --
The Chair: That's our third check for tomorrow.
Ms Bassett: Fine.
The Chair: Page 15?
Ms Bassett: On the first line it says "Five witnesses from business..." and it should read "Thirteen witnesses" -- and we'll supply you with a list tomorrow -- "argued that the government should pursue the promised tax cut."
Ms Drummond: Again, if I could get those --
Ms Bassett: We'll get the 13 and supply you with a list.
Ms Drummond: Thank you.
Ms Bassett: The next one is under "Harmonization." It says "Five witnesses"; there it should be "Eight witnesses," and we'll supply you with a list.
Ms Drummond: That was eight witnesses who recommended proceeding to harmonize the GST on one base with full tax credits?
Ms Bassett: That's right, and we have to get the list. You'll have it tomorrow.
The Chair: "Other Sales Tax Issues"? Is there anything else on pages 15, 16 or 17?
Ms Bassett: Yes, on 17 I've got something. It says, "Two business groups endorsed the promised reductions in EHT." It should read, "Four groups endorsed the promised reductions in EHT." That's the third line under "Payroll Taxes" on page 17. We'll supply a list.
The Chair: "Other Tax Issues" or page 18, page 19?
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Mr Phillips: Mr Chair, at the top of page 19, I'd just say once again that to me one of the absolute key things in the budget is the shifting of responsibility for social services and social housing and child care on to the property tax. We've already dealt with it, but this is where I would have preferred a much fuller explanation of all the concerns there. We dealt with it earlier, but I'm just restating my concern about it.
The Chair: That would be around the entire section, or are you referring to the top paragraph of page 19?
Mr Phillips: The second paragraph, "Two witnesses," from CUPE and all those organizations, AMO, the social planning council. For me, jobs and this are as important as harmonizing the sales tax. As I said, we dealt with it earlier, so I don't have the support of the committee to broaden it.
The Chair: Are there any other concerns prior to page 25? Ms Bassett, could you tell us where your next concern might be?
Ms Bassett: Page 28.
The Chair: Any concerns prior to page 28? Seeing none, Ms Bassett?
Ms Bassett: Under "Access to Capital" on page 28, you see, "The CFIB, on the other hand, expressed a good deal of scepticism about the efficacy of venture capital funds, recommending that rules governing them be further tightened." That should read, "The CFIB, on the other hand, expressed a good deal of scepticism about the efficacy of venture capital funds and recommended that the rules governing labour-sponsored investment funds be further tightened."
It's really just spelling out "them."
That's it, Mr Chair.
The Chair: Comments on "Government Regulation," "Privatization" or "Other Issues"?
Am I to understand that our business may very well be concluded for today and that we would reconvene tomorrow to consider the proposed changes as they're referred to in Hansard, and the recommendations, or would you like to review the recommendations today?
Mr Phillips: Should we start talking about recommendations? What was the planned timetable for recommendations?
The Chair: This week.
Clerk of the Committee (Mr Franco Carrozza): If I may, Mr Phillips, last year what we did was that each caucus brought its recommendations and you debated them. Then, where there is some agreement, the committee proceeded to make a majority recommendation. If not, then you will have to make other decisions.
The Chair: Are the caucuses prepared to put their recommendations on the table today so that we can form a consensus of the recommendations, or would you like to do that tomorrow?
Ms Bassett: We're prepared at the same time as you have yours to give us, and then we could discuss them all together.
Mr Phillips: Okay.
The Chair: Okay today, or okay tomorrow?
Mr Phillips: We're still polishing ours up.
The Chair: Very good. Might I recommend that tomorrow morning we will proceed with the discussions as we have discussed? I believe there are six items we will discuss tomorrow morning for clarification; the research officer will bring copies of Hansard to us. We will then submit our recommendations and discuss the recommendations as a group for the rest of the day, until we come to some form of conclusion on that basis. Does that meet with the committee's approval?
Mr Phillips: Beautiful.
The Chair: We have our agenda set for tomorrow.
Mr Phillips: Work, work, work.
The Chair: There being no further business, the committee stands adjourned until 10 o'clock tomorrow morning. I thank you very much for your cooperation.
The committee adjourned at 1357.