Proceedings of the Standing Senate Committee on
National Finance
Issue 12 - Evidence
OTTAWA, Tuesday, June 9, 1998
The Standing Senate Committee on National Finance met this day at 9:00 a.m. to consider Bill C-36, an act to implement certain provisions of the budget tabled in Parliament on February 23, 1998.
Senator Terry Stratton (Chairman) in the Chair.
[English]
The Chairman: Senators, with us this morning is Mr. Tony Valeri, Parliamentary Secretary to the Minister of Finance.
Welcome, Mr. Valeri.
With Mr. Valeri are support people from the Department of Finance. As you know, there are 13 parts to this bill, with many subparts thereof. It being a fairly complex bill, the Department of Finance has sent people with knowledge of each part.
I requested a summary of the bill, which I hope you all have. This morning we will go through each part sequentially.
We will hear additional witnesses on this bill on Thursday. The Minister of Finance is tentatively scheduled to appear on Tuesday of next week. We will probably do clause-by-clause study next Tuesday evening. We have a very tight schedule to deal with this bill in the time allotted.
Please proceed, Mr. Valeri.
Mr. Tony Valeri, MP, Parliamentary Secretary to the Minister of Finance: Thank you, Mr. Chairman. It is a pleasure to appear before the committee this morning to make some brief remarks on Bill C-36 and to answer questions on it. As you indicated, there are officials here from the Department of Finance.
The budget omnibus bill is comprehensive legislation encompassing several diverse issues. Some originated in the 1998 budget and others were announced separately. The bill implements elements of the new Canadian Opportunities Strategy and also includes measures that relate to the National Child Benefit system, excise taxes, senior citizens, and tax arrangements with aboriginal governments. Other measures deal with Canada's international obligations, the Canada Development Investment Corporation and the Hibernia oil project.
The 1998 budget proposes a series of measures under the Canadian Opportunities Strategy to expand access to the knowledge and skills Canadians will need for better jobs and higher standards of living in the 21st century.
The first component of the bill is the establishment of the Canada Millennium Scholarship Foundation. The foundation, which will operate at arm's length from government, is designed to improve access to post-secondary education for low- and middle-income students by granting scholarships to students who are in financial need and who demonstrate merit.
The government's initial endowment of $2.5 billion will provide more than 100,000 scholarships annually for 10 years to full- and part-time students, beginning in the year 2000.
A second component of the Canadian Opportunities Strategy will reduce the financial burden on students and help up to 100,000 additional borrowers.
Bill C-36 will provide interest relief to more graduates; it will provide an extended repayment period for those who need it; an extended interest relief period for borrowers who remain in financial difficulty; and it will provide a reduction of the loan principal for individuals who are still in financial difficulty after these relief measures.
A third element of the Canadian Opportunities Strategy, the Canada Education Savings Grant, will make Registered Education Savings Plans (RESPs) one of the most attractive vehicles available to parents to save for their children's education. Starting this year, the government will provide a 20-per-cent grant on the first $2,000 in annual contributions made to RESPs for children before the year in which they reach the age of 18.
This bill also contains additional measures that will assist our youth. For example, employers hiring young Canadians between the ages of 18 and 24 in the years 1999 and 2000 will receive an employment insurance premium holiday.
Bill C-36 moves the government forward on implementing the National Child Benefit system, whereby the federal government provides an enriched Canada Child Tax Benefit while the provinces and territories redirect some money into better services and benefits for low-income families, especially the working poor.
The 1997 budget proposed a two-step enrichment of the current Child Tax Benefit that will add $850 million to create a new Canada Child Tax Benefit by July, 1998.
In the first step, last July, the working income supplement was enriched by $195 million, with benefits now provided per child instead of per family. More than 1.4 million Canadian families with 2.5 million children will receive increased federal child-benefit payments by July of this year. The Canada Child Tax Benefit will provide $1,625 in benefits for the first child and $1,425 for each additional child to all families with income up to about $21,000. The 1998 budget commitment to enrich the Canada Child Tax Benefit by an additional $850 million will be introduced following the appropriate consultations with provinces.
Mr. Chairman, Bill C-36 also contains several other measures, some of which I should mention briefly.
Federal excise taxes on tobacco products will be increased, which will add $70 million more in federal revenues each year, along with helping to discourage Canadians from smoking.
The air transportation tax will be reduced, and the rules relating to its elimination later this year will be clarified.
The Bretton Woods and Related Agreements Act is amended in order to ensure adequate resources for the International Monetary Fund (IMF) to fulfill its mandate of preserving monetary stability. These amendments also give the government additional means to participate in cooperative financing arrangements with other countries to supplement IMF-led assistance packages.
Consultation between the Minister of Foreign Affairs and the Minister of Finance will be required prior to Canada providing any financial assistance to institutions covered under the International Development Assistance Act.
Authorization is provided for the Canada Development Investment Corporation (CDIC) to sell the government's 8.5 per cent interest in the Hibernia oil project when market conditions are favourable. Authority is also provided to wind up the CDIC once its remaining principal asset, the Canada Hibernia Holding Corporation, has been sold.
There are also some measures in Bill C-36 that address First Nations taxation. The Kamloops Indian band will be empowered to levy a 7-per-cent value-added tax on all fuel, alcoholic beverages and tobacco products sold on its reserves.
The Westbank First Nations existing taxation authority over tobacco products will be expanded to sales of alcoholic beverages. Provisions included in the Budget Implementation Act of 1997 relating to the tobacco taxation authorities of the Cowichan tribes and Westbank First Nation will now be amended by Bill C-36, as well.
The Minister of Finance or the Minister of National Revenue, with the approval of the Governor in Council, will now be able to enter into tax administration agreements with aboriginal governments.
Before closing, I should like to highlight some changes that would also be of interest to senior citizens. These measures will reduce hardship to some 1.4 million needy seniors. The payment year for both the Guaranteed Income Supplement and the Spouses Allowance will move to July from April, beginning in 1999, thereby giving GIS recipients an three extra months to file their income statements and thereby reducing the possibility of underpayments. GIS recipients will eventually not have to report their income twice to the federal government. The payment period for the War Veterans Allowances will also change from July in one year to June of the next.
Honourable senators, the Minister of Finance recently announced that the GIS measures in this particular bill that adapt formulas to computerized calculations and harmonize income definitions with tax rules are being dropped, as some unintended consequences may have resulted.
Mr. Chairman, this concludes my opening remarks. I would be pleased to answer any questions, and I will call upon the officials from the department to assist in answering those questions.
The Chairman: Mr. Valeri, do you have a copy of your text that can be copied for distribution to this committee?
Mr. Valeri: Yes.
[Translation]
Senator Rivest: The Canadian government has chosen to assist students through its scholarship program. Could you table with this committee the studies that the Department of Finance used in deciding that the most appropriate approach for the federal government in the area of education should be in this specific sector?
Why didn't the Department of Finance decide to increase university research grants? Why didn't it decide to allocate funds to teacher training? Why didn't it decide to help graduate and post-graduate level students? Why didn't it decide to help the provinces reduce the drop-out rate? What studies on how the different eduction systems operate in Canada did the Department of Finance use in choosing this very specific scholarship fund for a given category of students? Do you have the studies on that?
[English]
Mr. Valeri: First, in a number of areas in which you indicated the federal government participates, there is in fact provincial jurisdiction. I want to be clear from the beginning that education is an area of provincial jurisdiction. Access to education is an area of joint jurisdiction, with respect to the federal and the provincial governments.
This particular program is a result of some of the issues that were discussed at the first ministers' meeting this past December and in other fora in which federal and provincial officials have been working cooperatively to address issues of student financing for post-secondary education. The government is aware of the importance of having scholarships that meet the needs of students all across Canada, and we need to complement existing student assistance.
This is an arm's-length institution; it is not a government program. It is an arm's length institution because of its importance. There is a need for a board of experts to decide how best to meet the challenge that students face and the challenge that we face, as a country, in ensuring that our young people have access to the necessary skills to meet the challenges of the next millennium. This will be left to experts.
An official will address your question, as well. In your question, you are asking us to participate in areas of provincial jurisdiction. For instance, teacher training is an area of provincial jurisdiction. The Millennium Scholarship Foundation, as part of the Canadian Opportunities, is meant to assist students in gaining access to post-secondary education. It is in an area where there is joint jurisdiction with respect to the provincial and federal governments.
[Translation]
Senator Rivest: When you say that access to education is an area of shared jurisdiction, you are inventing a new version of the Canadian Constitution. Are you aware that in 1964, Lester B. Pearson and Jean Lesage, precisely on the issue of access to education, established the Canadian constitutional order to the effect that it was not an area of shared jurisdiction as you made it out to be, but an area that is exclusively under provincial jurisdiction?
The federal government, with its spending power, wants to make funds available to the provinces. Under the agreement between Lester B. Pearson and Jean Lesage, the funds were to be handed over to the provinces. As a matter of fact, in Quebec, and perhaps in other provinces, there is already a grants program for students, as part of this agreement between Mr. Pearson and Mr. Lesage. There were no studies, you did not conduct any, and yet someone somewhere at the Department of finance or somewhere else, dreamt up this bill, without any prior consultation whatsoever with the Quebec government and without consulting anyone in education, be it students, universities, or professors. Why?
[English]
Mr. Valeri: Again, I go back to the first ministers' recent meeting and make reference to the discussions there. They agreed upon the importance of lessening students' financial burdens. The first ministers called upon the Ministers of Finance and Human Resources Development to accelerate work, in concert with provincial and territorial education ministers, so that the Minister of Finance can take account of this work in the next federal budget. The Millennium Scholarship Foundation was a result of that discussion.
You also made reference to Prime Minister Pearson. I wish to reiterate that the Millennium Scholarships will not be a federal program. They will be designed and distributed from a private arm's-length organization, which deals directly with students.
Senator Lavoie-Roux: Everyone will be named by the government.
Senator Joyal: No, that is not true.
Mr. Valeri: It is not a federal program. You are calling this a federal program and thereby impugning that a prior agreement should take precedence.
[Translation]
Senator Rivest: Could you show me a statement by the Premier of Quebec, the Quebec Minister of Education or the National Assembly that refers to an agreement in principle with the federal government's involvement in the exclusive area of education? You mentioned a first ministers' meeting. Where did the Canadian government obtain the authorization or agreement from the Quebec government, the current Premier, previous premiers, the Quebec Minister of Education, officials or for that matter anyone else in education in Quebec for this involvement? You realize full well that as we speak this specific project is running into unanimous opposition from everyone involved in education in Quebec.
Secondly, the opposition is unanimous: the Quebec government, the Quebec National Assembly, including the Parti Québécois, the Action démocratique and the Quebec Liberal Party led by Jean Charest.
[English]
Where is the consensus in Quebec? I ask you that question.
Mr. Valeri: Again, senator, I would say that the concept that emerged from the first ministers' meeting was to call on both the Finance Minister and HRD to accelerate this work, with respect to the challenges facing students and access to education.
I also wish to point out to you that the independent foundation that will manage the Millennium Fund needs to consult with provinces to establish the criteria. If you are worried about duplication, that this program already exists, I tell you that this board is being mandated to avoid duplication in any province. It will build on existing provincial needs assessment processes and the need to complement existing provincial programs. The bottom line is to increase access to post-secondary education everywhere in Canada for low- and middle-income Canadians.
That is also part of the reasoning behind the year 2000. This must be an opportunity for continual work with the provinces in this country in order to develop a plan that meets the objectives that I have just outlined. Not only the Province of Quebec, but the other provinces in this country, will work in concert with the board to establish a program that will minimize any duplication and ensure that the program's objectives are being met.
[Translation]
Senator Rivest: Could you tell me who you are going to work with in Quebec to implement this program? Who in Quebec adheres to this program and accepts the principle of a Millennium Scholarship Fund in the area of education? Who are you going to make arrangements with to implement this unilateral Canadian government measure when everyone in Quebec is opposed to it? Is there a group, a government, a political party, teachers, or professors who agree with it? To implement this program, you will need the co-operation of the Quebec government and the Ministry of Education. If the Ministry of Education refuses to co-operate, what would you then -- It will be a fiasco, an administrative nightmare. Don't you think that before getting involved, the Canadian government should have obtained the consent of the provinces and people in the educational field, as it normally would, instead of launching a program, setting up a foundation, making funds available and then going to tell people what it intends to do?
Everyone in Quebec is opposed to your program. The money is available and education needs it. Why not transfer these funds to the provinces and ask them to develop these programs that already exist in Quebec? Why create an artificial federal structure in addition to what already exists in Quebec? That is what everyone in education in Quebec is criticizing the federal government for. It is the worse practice that exists in Canadian federalism. You are creating artificial overlap to celebrate the millennium. Think about how reasonable that idea is. There were problems in education during this millennium. And they will exist in the next one. We don't need to celebrate the millennium to take steps in education. Who approves of your project and who are you going to work with in Quebec?
[English]
Mr. Valeri: Let me take this approach. In essence, I think there is general agreement on the extreme importance of increasing access to knowledge and skills. The Millennium Scholarship Foundation is a dividend for balancing the books and is a recognition that Canadians from coast to coast, province to province, deserve equal opportunity. It is an important and a smart thing to do. It is something that we are proud to do.
We have also said that something this important should be taken out of political hands and put into the hands of experts. That is why we are setting up a private foundation to administer the scholarships.
All governments are obliged to provide access to skills and knowledge. We are not about to stand aside and ignore that obligation. This is not about jurisdiction or turf. It is about the future and it is a role that the federal government, with respect to access to education, needs to play.
Senator Rivest: No one cares about the Constitution.
Senator Moore: Mr. Valeri, at the meeting that you mentioned with the first ministers and others, were there representatives from Quebec?
Mr. Valeri: Yes, there were.
Senator Moore: They were part of this decision?
Mr. Valeri: Yes, they were.
Senator Moore: Are we now hearing through the chairman that the people of Quebec have changed their mind? This is what Senator Rivest seems to be indicating.
Senator Lavoie-Roux: If you read the papers in Quebec, you would know.
Senator Moore: They were part of the decision.
The Chairman: That is one thing I will not allow. I will allow friendly discussion back and forth, but not argument. You will address your questions to the witness through the chair. Please proceed, Senator Moore.
Senator Moore: I find the comments this morning to be very negative on something that is very positive, much needed and much wanted by students, who are the people to whom we are attempting to respond.
I will wait for the second round.
[Translation]
Senator Bolduc: Quebec has had a scholarship program for students for 40 years, since the agreement with Ottawa in 1964. I witnessed that agreement. I remember it full well, because I was working in the field at the time. We reached an agreement that has worked very well for 40 years.
Why, all of a sudden, is half of this year's budget devoted to a new policy in this area? Why is that? For four years, the government has been telling us that there is no money, and all of a sudden, they come up with 2.5 billion dollars for education, and decide that assisting students is a priority. That seems a bit odd to us. No one was consulted. The provinces were consulted, and Quebec stated outright that it wanted nothing to do with it. All of a sudden, the government comes out and says that that is what it will do this year.
It seems to be a departure from our constitutional policy. It is not reasonable action. At this point in time, it is not reasonable to adopt an attitude that, in the end, will provoke a confrontation with the Quebec government -- that is looking for precisely that -- and where the federal government ends up becoming an ally against the former leader of the Conservative Party has now become the leader of the Quebec Liberal Party. Why are you doing that?
[English]
Mr. Valeri: When you say that, all of a sudden, there is now money for education, I will remind you that it has taken 30 some-odd years to balance the books in this country for the very first time. We are embarking on a new era of balanced books and we are committed as a government to continue to balance the books and make strategic investments. Certainly, Canadians have consistently considered education, health care and a number of other areas to be priorities.
The two things that we did, once we saw the financial resources of the government improve, were to put back additional resources, additional moneys, to the Canadian Health and Social Transfer (CHST) and invest in the future of this country's young people by ensuring that they have access to post-secondary education. When we look at youth unemployment, the challenge is greater for those young people who do not possess skills or education to gain employment.
The reasons why are quite clear. In terms of the approach, as I said earlier, this is not a federal program, it is an arm's-length foundation, with a board made up of experts from right across this country. They will decide how best to meet the objectives that I outlined, that essentially will improve access, avoid any duplication, and wherever possible ensure that provincial assessments and criteria are incorporated in the program.
The federal government has put forward additional resources to young people, to help them gain access. Certainly in the discussion that took place in committee, prior to this Standing Committee on Finance meeting, someone noted that there was nothing preventing the Province of Quebec from reallocating some of its existing resources to other parts of the educational system that are solely under provincial jurisdiction. There is opportunity here for cooperation, which would enhance opportunities for young Canadians. That is the program's objective.
[Translation]
Senator Bolduc: I find that odd, because the representatives of the Quebec Student Federation will tell you that this week when they appear. They are against it. The associations representing the recipients will tell you that they don't agree with this formula. It seems to me that it is elementary to take steps to avoid confrontation. Strategically, we are setting ourselves up for a confrontation with the Quebec government that will make nationalist hay with this as long as it can and try to make this into an election issue. That is what we are doing here. It doesn't seem wise to me do that. I do not want to belabour the point, I have said what I wanted to say on that.
Then there is the 600 billion dollar debt. From a public finance point of view we are still a long way from seeing an end to our difficulties. When we have a 600 billion debt that represents 69 per cent of our GDP, there is no reason to celebrate. At a time when the annual part of the budget is balanced, but not all of our public finances, the government right away wants to use its spending power to regulate and decree that education is now a priority. Not only is education being made a priority, but they are saying that financial assistance for students will be the number one priority in education. But that is not the real priority in education. People who are aware of education in Canada know that that is not the number one priority at present.
I find it a bit annoying that the federal government is going back to its old habits of using its spending power to regulate and define priorities for Canada in areas that are outside its jurisdiction. It is not pleasant for people. It is important to us. Quebec does not complain all the time, but there are things that are important to it and that is one of them. It is a priority for us because it defines our Quebec soul. That is what education and culture are all about. We do not intend to let others define it for us. We want to define it ourselves. That is why we are sensitive to that, and as long as we are alive, we will stay that way. I would like that to be clear, that the message be heard and that this craziness be stopped. Forcing us to lecture Canadians is unpleasant, especially during a year where there is a very important election on the horizon. I do not know why action like that is being taken.
That was my preamble, but I do have a question. The federal government says that it will be at arm's length, that this not a program and that it will create an organization. of course, an administrative organization will be created. This organization will nevertheless have powers, as far as we can see. In light of the fact that the foundation will be created, it says that if the foundation is satisfied that it is consistent with its objectives and purposes to do so, the foundation may enter into an agreement with a provincial minister.
It "may," that means that the organization has the possibility of doing so, but that does not mean that if the minister -- one can assume it is the minister of education -- so requests it, that the organization will enter into an agreement. It seems to me that it would have been wise to foresee that. Even if they did not use "shall," at the very least, they could have said that when the foundation is satisfied that it is consistent with its objectives and purposes to do so, the foundation will enter into an agreement with a designated provincial minister. It seems to me that that would have been simple. It is not the end of the world. What do you think about that? Am I right? I think that what I am saying makes sense.
[English]
Mr. Valeri: I will go back to the point you made concerning the debt. You are quite right that we still face a very large debt. The federal government is also committed to paying down the debt, just as we paid down the deficit. I thank the senator for pointing out once again that we still have a challenge before us. Everything that we do in terms of running governments and making strategic investments must be balanced with the challenge of reducing the debt. This budget was focused on youth and the importance of helping them. We do not want to leave a legacy of debt to our children and grandchildren. We have taken a balanced approach.
With regard to the foundation, the legislation gives it ample opportunity to consult with provincial representatives, with the objective of reaching agreements that will benefit young people. The legislation was purposely crafted to give the foundation the flexibility to work with the provinces over the next year. At the latest, the foundation will be in place by the year 2000. After consultation, it will issue the first scholarships to those students who qualify.
As I said earlier, there is ample opportunity to avoid duplication and ensure that the programs are complementary. The federal government has played a role in this area before, and I suggest that it will continue to play a role in it.
[Translation]
Senator Bolduc: Since this organization will be linked to the government, the government is putting itself in a position where it will no longer be able to enter into an agreement in the area of education with the province. The foundation will enter into agreements if there are any. So that leads me to the conclusion that the federal government no longer has jurisdiction, through legislation, and cannot enter into an agreement with the government on an issue of public policy as fundamental as that. Can you confirm that the government has divested itself of this right?
[English]
Mr. Valeri: Through this legislation, the federal government has established an independent foundation, similar to the Foundation for Innovation, which was announced in the 1997 budget. The federal government is funding the Millennium Scholarship Foundation, just as it funded the Foundation for Innovation. However, the federal government also believes that students and Canadians will be best served by putting in place a board of experts to meet the objectives set out in this legislation. The government's objective is to ensure that young Canadians will have continued access to post-secondary education to meet the challenges of the next century.
I infer from your question a suggestion that the government is backing away from its obligation. We feel that we have an obligation to ensure that young Canadians have the opportunity to gain access to education. The Millennium Scholarship Foundation is the vehicle which the government feels is best suited to meet this legislation's objectives.
[Translation]
Ms Jan Elliot, Assistant Director, Social Policy, Department of Finance: The legislation states that the foundation shall grant scholarships in a manner that complements existing provincial student financial assistance programs and that avoids duplication. So the provinces are involved.
Secondly, the foundation may enter into an agreement concerning these scholarships with a provincial minister.
[English]
Also, provinces and the post-secondary education community will have a role in identifying members of the board of directors. The legislation has paid attention to the importance that provinces play in the domain of education.
[Translation]
Senator Lavoie-Roux: The speech that I made last night criticizes the federal government's intrusion in areas that are solely under provincial jurisdiction and particularly in the highly sensitive field of education. It goes without saying that it is very close to the culture of Francophones. That is how Quebec can do the most to promote its identity.
Mr. Valeri, you have repeated over and over again that the board or this new Foundation will be "at arm's length from the government." That seems to run somewhat counter to the Auditor General of Canada's report of April 1998, where he expressed concern with these entities. He referred to the Foundation for Innovation and the Canada Millennium Scholarship Foundation. He set out to determine whether these agencies operate essentially or truly independently from government. Apparently, they have perhaps a bit of experience with the Foundation for Innovation. He did not reach very clear conclusions as to whether it is really "at arm's length from the government." I would like to hear your response to that.
In response to a question from Senator Rivest or Senator Bolduc, you say that the ministers reached an agreement at the ministers' meeting, et cetera. I have in front of me a document released by the ministers of education and the federal ministers to discuss what was announced in the budget. The Quebec Minister of Education, Ms Marois, reiterated the Quebec government's position that compensation equivalent to the amount of money the federal government intends to earmark for Millennium Scholarships be transferred. That does not mean there is agreement on the Millennium Scholarship Fund. The agreement states that if there are surpluses available to the federal government, they could be transferred to the government which would in turn determine whether or not they would be devoted to education. That seems a bit contradictory or perhaps you did not read it, thinking that the ministers had reached an agreement.
I believe it was last December that the Senate tabled a special committee report that examined all aspects of post-secondary education. It became clear that students have very high debt loads, particularly in the west, and perhaps even in Nova Scotia -- I do not want to say something that is not entirely accurate. There were also even more significant problems that were pointed out, including how poor the universities are. The quality of teaching has dropped and there is a shortage of resources for research. If there are surpluses, it would perhaps be a good idea to use them for the students. Part of the funds could go to students, but perhaps the other part could be used for educational purposes.
[English]
Mr. Valeri: I will speak to the first point you made with respect to the Auditor General.
The Auditor General had commented on the Foundation for Innovation and subsequently on the Millennium Scholarship Fund. My response to the Auditor General, and this has certainly been the public response, is that this government believes in transparency and parliamentary accountability. We also believe that we should pay for the programs that we announce, as a government. It is good public and accounting policy, which I feel that Canadians would support. Unfortunately, when there was a change in administration, a number of programs were announced and in place but were not quite funded. That meant that an administration coming into office would require the necessary funds to put those programs in place. We decided as a government to ensure that programs that are announced and are committed to are in fact funded in the year that they are announced. An example of this is the Foundation for Innovation and, secondly, the Millennium Foundation.
A number of accounting firms certainly agree and disagree with the Auditor General. If in fact there is some disagreement, we, as a government, certainly feel that we should continue to pay for what we announce, just as when Canadians decide to buy something, they pay for it. In terms of government, I believe they should expect and support no less.
With respect to the additional points that you made on the other needs within the education system, certainly student debt was consistently flagged by not only students but administrators in the educational system as well. Students need help with debt. Although the focus so far has been on the Millennium Scholarship Foundation, it is but one component of the Canadian Opportunities Strategy. As I outlined in my opening remarks, provisions in this bill would allow for an extension of the interest relief period. They also allow for tax assistance for parents, grandparents or relatives who want to try and help young people fund their education in the future. Therefore, the government is playing a direct role in providing a 20-per-cent grant on the first $2,000 annually.
For those students who are in real need and are unable to benefit entirely from the interest relief, there is also debt forgiveness in this particular bill. The approach is not just a Millennium Scholarship Foundation approach, but it is a multifaceted approach to deal with the issue of student debt.
The scholarship fund is but one area. We have been focusing on that this morning. I appreciate the reasons why, and your questions.
Senator Lavoie-Roux: Fundamentally, if students are in debt -- and I have heard them from Vancouver to Newfoundland -- it is because the fees were increased year after year in most of the provinces except Quebec. There has been a tremendous increase in the fees over the years. The reason for that is basically -- and one should not forget about this -- because the transfer payments have been decreasing all the time. The provinces could not afford it any more. The only solution they have found is to increase their fees.
Has any thought been given to reimbursement in the transfer fund so that more money can go towards education in each of the provinces? That might decrease the need for the continual increases in student fees.
Mr. Valeri: The CHST was put in place in response to federal-provincial discussions. When we first came to office, the provinces said that they wanted some flexibility in terms of the transfer payments. They also wanted predictability in the transfer payments. They did not wish to set their budgets from year to year and then find that the federal government had somehow changed the transfer amount that they were expecting. In the early years of this Liberal government, we put forward a five-year horizon with respect to transfers to provinces through a CHST in terms of block funding, which would then allow the provinces to decide its own priorities and where to invest moneys that reflect provincial priorities.
The first thing that we did when the financial picture of the country improved was to give back some of the transfers, to the tune of $1.5 billion per year, to the provinces. As you indicated, some thought has been given to putting money back. Without a doubt, governments everywhere needed to take steps to clean up their financial houses, not only at the federal level but also at the provincial level. The reduction in transfers to the provinces is an area that the federal government needed to address, along with all the other areas, in order to reach a point where we can now begin to reinvest and put back. Back in 1993-94, things were quite bleak in terms of the financial picture that we were facing. Certainly, there were international pressures with respect to Canada. That has since changed and now we are referred to as a miracle of the G-7 because of the successes that we have had.
We have reimbursed, to use your word, $1.5 billion to the provinces.
Senator Lavoie-Roux: Meanwhile, transfers have been cut $6 billion.
Mr. Valeri: Certainly, this is a beginning. It is the first area that we reinstated because we understand that provinces face pressures, much like the federal government. We wanted to maintain that balanced approach. That is the first thing that we did. The announcement was made as soon as the government realized that the financial picture was somewhat stronger than was first anticipated.
Senator Lavoie-Roux: Did I hear you say that, in the cuts to the transfer payments, there was agreement with the provinces?
Mr. Valeri: No. I said that the provinces had asked the federal government for predictability in the amount of the federal transfer. They did not want the federal government to change the amount of transfers from year to year.
Senator Lavoie-Roux: They were not agreed on the basic principle, just that they wanted some predictability?
Mr. Valeri: Yes, they wanted predictablity and flexibility. That flexibility is provided through the block funding of the CHST.
Senator Bryden: On the question of consultation, you indicated that there had been discussions and that this arose out of meetings with ministers at various levels. Am I correct that an advisory committee established by the Department of Finance and Human Resource Development met and consulted with institutions during December, 1997 and January and February, 1998?
Mr. Valeri: Yes, you are. The officials will speak about that.
Ms Elliott: Yes, you are correct. The Departments of Finance and Human Resources did indeed consult with a group of experts from the post-secondary education community across Canada. We met with them a number of times prior to the budget and sought their advice on the Canada Millennium Scholarship Foundation and on policy matters related to it.
The list of the advisory group members was published at the time of the budget. I would be happy to provide a copy of that list for committee members.
Senator Bryden: Did they meet with representatives from all the provinces?
Ms Elliott: The advisory group consisted of people from across Canada.
Senator Bryden: A question was raised about the fact that the foundation may enter into agreements with the provinces. It has been suggested a number of times that that should be more strict, that the foundation should be "required" to enter into agreements with the provinces.
Am I correct in assuming that if that were to occur, it would put the foundation in a straitjacket where it really could not deal with those situations, particularly with unreasonable demands from the provinces?
Ms Elliott: The legislation's intent is to give the foundation and the board the flexibility to enter into agreements with provinces on the criteria of need and merit, on the provision of a list of names, et cetera. It is intended to complement the section of the legislation that indicates the scholarships must be granted in a way that complements provincial programs and avoids duplication. This gives the foundation authority to enter into agreements with the provinces, those who wish to enter into agreements with them.
Senator Bryden: Let me try again. Why does the legislation not require the foundation to enter into agreements?
Ms Elliott: First, it is an arm's-length foundation run by a board of experts who need to have the flexibility and discretion to manage the organization and the funds as they see fit. Second, some provinces may not want to enter into the agreement. Small provinces may not be interested. Under those circumstances, the foundation would be unable to deliver its mandate.
Senator Bryden: I have a short question on policy. There are competing approaches relating to the foundation. First, it is at arm's length from the government. Therefore, according to some, it can go off on a frolic of its own because it is out of our control. On the other hand, if it were under government control, I understand that it would not be regarded as an independent body and it would likely run into more problems with the division of responsibilities under the Constitution.
How do you deal with that? In a sense, people are both pushing and pulling at the same time. They are saying that it should be independent, but if it is independent, then you do not have the control. Others are saying that there should be more government control, but if that happens, the independence is lost and we run into the constitutional problem.
Mr. Valeri: Rather than control, I think the concern may be accountability because of its arm's-length nature.
I wish to ensure that the committee is aware that this foundation will be audited. The Auditor General can certainly review the audits performed.
The foundation's report is tabled in Parliament so that members have access to information on the board's activities and how it has been meeting its objectives. The board will come under scrutiny. In an open and transparent way, the board will be able to meet its objectives. The issue of accountability will still be there.
As Ms Elliott indicated, after consultation with the advisory group, we felt that the foundation, with its experts from right across this country, will need flexibility and independence to meet the objectives laid out for them in this legislation. Those objectives include ensuring that there is no duplication of provincial programs and that, in fact, the programs complement each other. The objective out there is to ensure access to education for our young Canadians.
Senator Bryden: Every time I read this number, these thoughts go through my head: I see 100,000 scholarships per year at an average of $3,000 per scholarship. I do not expect you to answer this, Mr. Valeri. In the fourth year, how many millions of dollars will be spent? As an example, will there be $300 million if all of them are given out in the first year, on average? The second year, that $300 million will continue, plus another $300 million, which means that we are up to $600 million. I cannot even figure out compound interest, but if you add 100,000 scholarships at $3,000 per year, when you get to the maximum, will there be enough money?
Ms Elliott: We expect that the scholarships will be awarded on an annual basis. That is the foundation's decision. However, they are constrained. They will have $2.5 billion to spend over 10 years. As indicated in the budget documents, a full-time student would get $3,000 on average. That means roughly $300 million annually and roughly 100,000 students each year, depending on how many part-time students qualify. There may be more than 100,000 students in a particular year, but each year the foundation will have approximately $300 million to $325 million to spend.
Senator Bryden: Will that include the renewals of the ones given in the first year?
Ms Elliott: No. Students will have to indicate that they continue to be in financial need and will have to demonstrate merit in order to qualify for a scholarship. Those are the criteria contained in the legislation. It is possible that the merit component may not be sustained and their financial needs may change, as well.
Someone who receives it in the first year may not necessarily receive it in the second year. There is a good probability that they will receive it, but they will not necessarily do so. Does that answer your question?
Senator Bryden: There is a reapplication every year, then.
Ms Elliott: Probably. Again, the foundation will determine this. That is an administrative, procedural thing that they will sort out with the provinces because we do not want to duplicate the existing provincial processes.
I wish to add another comment to Mr. Valeri's point on independence. In addition to an annual report to Parliament, which includes the auditor's report, the foundation must hold an annual public meeting after the report is tabled.
As well, the legislation places certain parameters on the foundation. The foundation must follow certain criteria in order to grant these scholarships. In other words, the legislation walks the balance between policy direction and independence.
Senator Cools: Mr. Chairman, I wish to take this opportunity to welcome Mr. Valeri before us. I believe this is his first appearance before this committee as a witness.
Mr. Valeri: Yes, that is correct.
Senator Cools: I wish to welcome you and invite you to return again.
I also wish to thank Mr. Valeri and Mr. Paul Martin for bringing forth this public policy initiative, which is truly innovative and speaks to the principle of direct movement of moneys raised by governments into the hands of citizens. I congratulate the minister, you, and the minister's department for the initiative and for the innovation. Many of us here are very supportive of this initiative.
The purpose of a foundation is fundamentally to give away money and resources. There are trusts and different kinds of organizations, but a foundation primarily gives away money based on criteria that must be agreed upon. We have heard a couple of concerns expressed here, and I should like you to address them.
First, I have heard committee members speak this morning about what they call provincial encroachment. Could either you or the minister direct your mind to that issue and respond?
From my reading of the situation, no sections of the Constitution are transgressed or encroached upon in any form or fashion. My reading of the bill is that it is not about providing education, which is the exclusive domain of the provincial governments. There is no doubt about that. My reading of the bill is that it essentially allows the government to put money directly into the hands of very needy and meritorious citizens. Could you respond to the point about the encroachment into provincial terrain? I see no encroachment and no transgression on the part of the government.
The second issue I wish to address is the following. The members on the other side have raised an important issue, namely, the phenomenon of certain resolutions of the National Assembly. I should like you to address the fact that the federal government has authority to legislate for all of Canada, including Quebec. As well, the powers and actions of the federal government are not fettered by the powers and actions of any provincial government, nor by any resolutions of any legislative assembly of a province of this country. As a matter of fact, I would be prepared to argue the opposite, namely, that certain actions of many legislatures across the country are tempting to fetter the federal government. Perhaps you would be prepared to respond to that.
Part 1 of the bill essentially takes the federal government a long way into a consultative process or into consulting with the responsible provincial ministers. Clause 29(1) of the bill speaks to the fact that the foundation may enter into agreements with the responsible minister and articulates the area. I see in that clause of the bill a wilful and intentional motivation on the government's part to consult. If I were drafting the bill, I would not have used the words "enter into agreement". I would have said "consult with", but the drafting is fine.
I have said quite a mouthful, but could you respond to those concerns? I would not want anyone to think that the Government of Canada is legislating inappropriately.
Mr. Valeri: Perhaps I can answer the first two questions and then ask the official to speak to your third question.
With respect to the issue of provincial jurisdiction, this legislation, as stated previously, does not in any way encroach upon the provincial responsibility of education. It provides access to post-secondary education directly to the student. There is no doubt that education remains a provincial jurisdiction.
There is also no doubt that the foundation is being established, given the flexibility and the framework within Bill C-36, to ensure that there is minimal duplication in any province to build on any existing provincial needs. If the provinces see that they have an opportunity to reallocate some resources that they are presently directing towards bursaries, they can then decide to reallocate those moneys into areas of solely provincial jurisdiction, which would be other areas of education, whether they be to improve teacher training or other aspects of solely provincial jurisdiction.
There is opportunity here for cooperation and the enhancement of education. Ultimately, the issue of student debt is being addressed, not only through the Millennium Scholarship Foundation but through the Canadian Opportunities Strategy, which encompasses a number of other areas.
With respect to the legislation itself and your comment about other provincial assemblies, I will leave it to you to argue that provincial assemblies are infringing upon federal jurisdiction. I do not want to get into that. However, I wish to say that this legislation respects provincial jurisdiction. It was drafted with that objective in mind and I have not heard arguments which convince me that this infringes on provincial jurisdiction.
Senator Cools: I am willing to support the assertion that there is absolutely no infringement.
Ms Elliott: With regard to your question on clause 29 of the bill, this clause gives the foundation the authority to enter into agreements with the provinces. Clause 28 says that they shall grant scholarships only in a way that complements provincial programs and avoids duplication. Those two clauses combined certainly mean that they will have to consult with the provinces.
Second, the legislation provides that, in the appointment of directors, members must consult with provincial ministers and the post-secondary education community. Therefore, in both instances, consultation is required with provincial ministers.
Senator Cools: I notice that the bill contemplates discussion with responsible provincial ministers. I am also pleased to note that Governor-in-Council appointments to the foundation are at pleasure. For those of us who know about commissions, that is encouraging and very wise.
[Translation]
Senator Joyal: Our witnesses have referred to a number of documents. If possible, I would like them to be tabled with this committee, and I will read out the list. The first document that I would like you to table is a letter from the Council of Ministers of Education from September 1997 that requested that the Canadian government take steps to deal with student debt. The second is a press release from the first ministers' meeting in December 1997 that you referred to where, it would seem, the issue of student debt was addressed.
The third document that I would like our witnesses to table and which they referred to indirectly concerns the Foundation for Innovation. Mr. Valeri mentioned an initiative that the Auditor General commented on. If possible, I would like you to table the letter of understanding signed with the Quebec government on the operation of the Foundation for Innovation. When this initiative was announced in last year's budget, the Quebec Minister of Education registered a vote of protest stating that it was an intrusion into an area of provincial jurisdiction, and if I remember correctly, the Quebec government requested to opt out with financial compensation. As it seems that the operation of the Foundation for Innovation has been resolved to the satisfaction of Quebec, I would like us to have the letter of agreement that confirms this foundation's operation.
The fourth document that I would like to have is the letter of understanding -- it is perhaps not from your department but from Human Resources Development -- on the operation of Centres of Excellence, because that is an area where the Canadian government is very directly involved in funding post-secondary and post-graduate education. I would like us to have that letter so that we can understand the context of how that program works.
The fifth document that I would like to have is one that indicates how much Canadian government transfers to education represent, what percentage Canadian government transfers represent in provincial budgets for education and post-secondary education. At a time when transfer payments were clearly identified, when budget amounts for transfer payments for post-secondary education were clearly identified, statistics were kept at the Department of Finance on what percentage of the provincial budgets Canadian government funds represented. If I've understood correctly, Quebec was the province that spent more than the other provinces. The Canadian government's share represented 50 per cent of the budget earmarked for post-secondary education, whereas in the other provinces, the Canadian government's share represented a higher amount, reaching almost 90 per cent for some provinces.
I would like the figures for the last ten years. I am not asking for these figures on a whim, I want us to have a clear idea as to how the provinces, in light of their deficits over the past ten years, drew up their budgets and how the decisions made by the Canadian government have impacted their budget choices since the government decided to address deficit reduction head-on.
The sixth document that I would like to have covers the amounts that the Canadian government transfers to the Quebec government under its right to opt out with respect to assistance programs for students.
Our colleague, Senator Bolduc, mentioned the fact that the Canadian government had concluded an agreement with the Quebec government 34 years ago under which the Canadian government simply transfers an amount of money. I would like to know how much of the money earmarked for assisting students in Quebec over the past ten years the federal transfer represents.
[English]
I suppose you have those statistics because you have checked them each year. Those figures should be on the record and should be tabled.
I should now like to ask a question of Ms Knopp, legal advisor to the department. My questions relate to the federal spending power, which was raised by Senator Bolduc.
Did you study the federal spending power in the Department of Finance in relation to education generally in Canada?
Ms Kristina Knopp, Legal Counsel, Department of Finance: That is a study which would have been done by the administrative law section of the Department of Justice. Certainly, the federal government has studied its spending power. I am not sure if it was done directly in relation to education. I will have to check on that. I did not work on the file from the beginning.
Senator Joyal: There have been Supreme Court of Canada judgments which are well known by scholars. Senator Beaudoin, in his speech in the Senate last week, raised the point. It is clear that we should have a statement on the limits of the federal government's spending power regarding post-secondary education.
If I remember correctly, the federal government can spend money but cannot use it to regulate a specific field of jurisdiction. In the present context, before taking the initiative of establishing a foundation, someone at the Finance Department or elsewhere in the government administration must have studied the legal or constitutional impact to be sure that this legislation will not be contested in the Supreme Court.
Did you study the aspect of the initiative that is being proposed by the Minister of Finance so as to satisfy yourselves that we will not be implementing something that will end up being challenged in the courts the day after it is passed?
Mr. Valeri: One hopes that we are not putting forward legislation that will find us before the Supreme Court.
We will take back that request and try to locate a document that we can provide to the committee to assist it in its further study of this particular bill.
Senator Cools: Senator Joyal has requested that those six documents be tabled with us today.
Mr. Chairman, I move that those six documents be appended to today's record.
Senator Bolduc: I agree with Senator Joyal that there is probably a Supreme Court decision which says that you do not have the right to regulate in education. You can give money, but you cannot regulate directly. However, I suspect that the Minister of Finance interprets that the foundation will be able to regulate the fund indirectly. Is that your opinion, as well?
Ms Knopp: It is not our position that that is the case. Perhaps I have misunderstood your question.
Senator Bolduc: The Supreme Court's decision is that the federal government can give money, but not regulate in an area of provincial jurisdiction, such as education. This foundation is a government agency.
Ms Knopp: It is not a government agency. It is at arm's length from the government.
Senator Bolduc: That is a play on words.
Ms Knopp: No, it is not a matter of playing with words. We looked carefully at the balancing of powers.
Senator Bolduc: Is it your opinion that there is not even indirect regulation in the field of education, when you establish the criteria?
Ms Knopp: We did not view this as a matter related to education. This is about access to education and funding. That is our position.
The Chairman: I should like to ask some questions about the Millennium Scholarship Foundation and Part 10 of the bill, which deals with student loans.
As other senators have stated, because of transfer payment cut-backs and cut-backs in provincial government budgets, tuition fees have sky-rocketed. So have student debts; some say on average to the tune of $20,000. Students enrolled today, and those who have been enrolled for the last three or four years, are seeing their overall debt sky-rocket. Yet, we see no help being extended to these students, in the sense that they are the ones being hit with the most dramatic increases in tuition fees. If you marry that concept with the first clause under Part 10 of the bill, we see that changes to the Bankruptcy and Insolvency Act provide that student loan debts would not be discharged to bankruptcy if the bankruptcy occurred within 10 years after the completion of studies.
On the one hand, we see this marvellous millennium fund coming down the track. I will not comment on whether or not it is good or bad. I am more concerned with the fact that current students seem to be the ones who are paying a particularly heavy price. Would you like to expand on that or clarify and correct me if I am wrong?
Ms Elliott: First, under the Canadian Opportunities Strategy, there is help for current students. There are grants for students with dependants, namely, $100 million for those with dependants who are in financial need.
There are also several measures contained in the Canadian Opportunities Strategy, which is aimed at helping students once they leave school with their debt. Those are additional interest relief measures, extension of the repayment period and, as a last resort, an actual reduction in their loan principal if they are still in financial hardship. Effective this year, interest on student loans will be tax deductible.
There are several measures which assist current students who will graduate, and are graduating, with student debt.
The Chairman: We are taking it from two years to ten. Let us consider a student graduating from a field such as architecture. When a student graduates from architecture, he or she has a degree which has taken up to six years of university to complete. He or she will have a debt of at least $20,000. In Manitoba, a student graduating from the faculty of architecture with a master's degree in architecture is usually hired at a salary of $25,000 per year. That is not a number I picked out of the air. Owners of firms have confirmed it. Their top salary as an employee after five or six years is about $50,000. It is very difficult for a student like that to repay a debt of $20,000.
Those students who are in school now and who will be graduating before the millennium are paying a dramatically heavy price. Apart from the minor relief that you talk about, they seem to be bearing the greatest burden. Am I correct in that assumption?
Ms Elliott: The measures in the 1998 budget, as they relate to the student-loan program, significantly extend support for graduates who are in financial difficulty and are unable to meet their debt obligations. It increases the availability of interest relief. It raises the income threshold under which interest relief can become available. Thus, you can earn more and still get interest relief. It extends the period of time for which interest relief is available, which means if you are unable to pay the interest on your debt, the student loan program will take care of that. As a last resort, if the individual who has completed school is still in significant financial difficulty, then the Government of Canada or the Canada Student Loan Program will pay down the debt's principal.
All these measures will be available over the life of the loan for that 10-year period. If these measures are available to help a graduate with debt, it was inappropriate, at the same time, to allow them to declare bankruptcy, because there are other alternatives.
These measures are intended to help those individuals who find themselves in circumstances with, as you said, a $25,000 job and who may have some difficulty meeting their debt obligations.
The Chairman: People who must declare bankruptcy appear to have tried everything in their power to avoid it. They have run their credit cards up; they get extended and into debt, and they get into trouble. The next thing you know, they are using credit cards to pay the bank loan for their tuition fees. In other words, there are multiple problems. Their tuition fees are not the reason for their bankruptcy. Their efforts to try to pay back those tuition fees lead to them incurring other debt, and they then try to pay that back. They are faced with the whole frontal assault of debt, not just directly related to tuition fees.
How do you recognize and alleviate those concerns?
Mr. Valeri: You make a valid point. These provisions were put in place in order to address some of the concerns that you have brought forward, namely, student debt, or the situation where someone earning $25,000 has a debt of $20,000 and has difficulty making that payment.
The challenge that we have as a government, and certainly as educational institutions across the country and as Canadians, is to ensure that students are fully aware that these provisions actually exist. Before going to a credit card to make a payment on a student loan, we would encourage students to explore the opportunity to engage in interest relief and, ultimately, if they are in dire straits, this bill would forgive the actual principal.
It is a matter of ensuring that those individuals who find themselves in this situation are fully aware of the options that they need to explore before they find themselves in this spiral of ever-increasing debt.
Ms Elliott: Our colleagues at Human Resources Development Canada (HRDC) are working closely with lenders and with post-secondary educational institutions to ensure that graduates and students are aware of the measures that are available to them for interest relief, principal reduction, and so on.
The Chairman: Is the program in place now, or will it be put in place?
Ms Elliott: I am checking the status at the moment.
Ms Jo Anne Denis, Manager, Learning Programs and Policy Learning and Literacy Directorate, Human Resources Development Canada: You are asking about a working group that HRDC has implemented to get this information out to students. We have created a federal-provincial working group, and there are national stakeholders that we consult on a regular basis, including student groups, educational institutions and lenders. This group is working on a strategy to get all of the right pieces of information to the students at the correct points in time so that no one must ever take that final step of filing bankruptcy.
The Chairman: Do you have measuring points for your success? The focus of my concern, and yours, of course, would be that student who is graduating with this $20,000 debt, or thereabouts. How do you measure success? My understanding is that the student can still declare bankruptcy but cannot write off the student loan. A student could run a credit-card debt up to pay a student loan and then declare bankruptcy, in effect. Is that not true?
Ms Denis: That is my understanding of how it works. Bankrupts can be discharged of all obligations, other than the student loan.
The Chairman: If a student is hard-working enough, he or she could have a $10,000 line of credit, as well as a credit card, and run that up, pay the student loan down and declare bankruptcy, in essence?
Ms Denis: In essence, that could happen. Part of the rationale for not allowing student loans to be discharged in bankruptcy relates to the heavy subsidies that are attached to the student loans. As Ms Elliott pointed out, borrowers can avail themselves of significant measures without resorting to bankruptcy.
You asked how we measure that? In the past, we have seen a number of borrowers declare bankruptcy without having taken advantage of measures like interest relief. As part of our communication with students, we would wish to ensure that they are aware of it. One of our goals is to see an increase in the take-up of interest relief, for example.
Senator Bolduc: I have a supplementary to Senator Bryden's remark about clause 29.
[Translation]
Ms Elliott, you said that the reason why the word "may" was used was that if, for example, the words "enter into" had been used instead of "may enter into", when a province would have wanted to enter into an agreement, for example, it would not have been possible and would not have made sense. It is clear that in this case, to be able to use the expression "enter into an agreement"...
[English]
...enter into an agreement with the provincial minister who asks for it, of course. If he does not ask, there is no problem. That is my remark concerning your point.
I gather that would solve the difficulty that was expressed by you in your answer. That is something I wished to mention.
Senator Bryden: We are both saying that it takes two to make an agreement, and this is just in power.
Senator Bolduc: Yes. You must recognize that an arm's-length agency is given great discretion. I, for one, do not feel it is wise to give such an area of discretion to an organization that is not accountable to Parliament.
What do you think about that?
Mr. Valeri: I take exception to the words "not accountable to Parliament", because, as was stated earlier, the report is tabled with Parliament. In fact, public meetings are held after the report is tabled. The foundation is not only accountable to Parliament, but any Canadian who would wish to attend a public meeting has the opportunity to do that, in order to assess the progress that the foundation has made. It is quite open, transparent and accountable. Certainly, the Auditor General can review the audited statements and comment on them.
Senator Bolduc: Do you do agree that the Access to Information Act does not apply to the foundation?
Ms Knopp: It does not apply. It is an arm's-length entity. It would not be appropriate to have the Access to Information Act apply.
Senator Bolduc: Only part of the information will be available to the public. The witness confirmed, for example, that there is nothing in this bill to compel the foundation to make public its organizational by-laws. If this is the case, does the government consider this to be appropriate?
Ms Knopp: Certainly, there is nothing that would compel them to make public their organizational by-laws. That is a matter of the foundation's internal functioning.
Senator Bolduc: As parliamentarians, can we not see what they do with our money?
Ms Knopp: No.
Mr. Valeri: You will see how that particular foundation meets the objectives, which are outlined in this particular piece of legislation, and the objectives that are being outlined through the discussions that have gone on prior to the formation of this foundation. This is very public and will be scrutinized.
Ms Elliott: In the annual report that the foundation must make, it must give detailed financial statements for the year, a report of an independent auditor respecting those statements, a detailed statement of its investment activities during the year, its investment portfolio at the end of the year and its investment policy standards and procedures. It must also give a statement of the foundation's plans for fulfilling its objectives and purposes for the year and for the next year. It also must evaluate the results achieved by the granting of scholarships during the year. In the fifth year, it must review and report on the organization's activities.
All of these will be tabled in Parliament and will be available for public scrutiny. As Mr. Valeri mentioned, the independent auditor's statement is a part of that.
Senator Bolduc: You said in your initial exposé that this will cost initially $2.5 billion. Will there be more money? If so, will you be more flexible regarding Quebec, allowing it to use its share of any extra dollars as it sees fit?
Mr. Valeri: I am not sure that I said it would be an initial $2.5 billion cost. I said that $2.5 billion over 10 years will go into the Millennium Scholarship Foundation. As far as what happens beyond this program, that will depend on consultations. It will be up to future governments to decide the future of the foundation. We have set out a program with the foundation to provide $2.5 billion and to ensure that the foundation is funded to provide 100,000 scholarships over a 10-year period.
I am not sure whether I said "initial", but I understand that the budget says "initial". There is also an opportunity for the foundation to receive private donations.
Senator Cools: If sufficient time is required, we will discuss the future business of the committee, as we said at this meeting's outset. The committee should have a discussion about future witnesses, when the minister is coming and how the committee wants to proceed with its work this week. I should like us to leave ample time. That should take us half an hour.
The Chairman: If we only go through the schedule of witnesses, it should take about 10 minutes.
Senator Cools: Let us compromise at 15 minutes. The committee must wrap its mind around the business before it.
Senator Bolduc: That foundation will invest $2.5 billion. That is a lot of money. There is no requirement for expertise in investment management contained in the bill. I am a little surprised because we had that for the CPP Investment Board. That puzzles me a little.
Ms Elliott: The foundation and the board will be hiring investment managers. The legislation has some investment direction in it for the foundation.
Senator Bolduc: Is there any requirement that there be an investment committee to oversee the foundation's $2.5-billion portfolio? I do not see that contained in the bill.
Ms Elliott: That is not in the bill.
Senator Bolduc: Would that not be an improvement?
Ms Knopp: They have to establish investment policy standards and procedures that a reasonably prudent person would apply in respect of such a portfolio. Surely, a reasonably prudent person, in respect of $2.5 billion, even though it is not said directly there, would have a committee and would hire professional managers.
Senator Bolduc: We are talking here of a foundation of 15 persons. You cannot make investments with a 15-member group around the table. This is not Parliament, you know. A committee would normally do that.
Ms Knopp: Certainly. That is why we require the board to establish --
Senator Bolduc: Why is it not in the bill?
Ms Knopp: It is unnecessary to say that, once you say that the board must establish procedures and standards that a reasonably prudent person would apply in respect of such a portfolio. A reasonable person would do that.
Senator Bolduc: Is there such a reasonable person? Would you give your money to a reasonable person to invest?
Ms Knopp: Under this kind of standard in the law, yes.
Senator Bryden: I have a supplementary question. There is no term which has been so canvassed in judicial decisions as "the reasonable person" and how the reasonable person would act, or how the reasonably prudent person would act. That is the obligation here. The courts, if it ever came to it, would have a huge body of law to apply to decide whether the foundation is acting reasonably prudently, for example, in hiring the managers.
Senator Bolduc: I know exactly what you mean. I know something about corporate law, too. I just want to ask you, why is it that in the CPP Investment Board legislation, we talk about expertise in investment management and we do not talk about it here when we have $2.5 billion? This is inconsistent because the other bill was produced by the same government. I am expecting an answer.
Ms Elliott: I will repeat what Ms Knopp has said. The legislation provides for the foundation to establish investment policies, standards and procedures that a reasonably prudent person would apply in respect of a portfolio of investments, to avoid undue risk of loss and to obtain a reasonable return, having regard to the foundation's obligations and anticipated obligations.
The legislation requires that they establish policies and procedures that a reasonably prudent person would choose. You just had a little debate about what that meant. You know better than I, I suspect. I am not a corporate lawyer. There is a provision to protect the assets.
[Translation]
Senator Rivest: Ms Elliot, earlier on you mentioned pre-budget consultations conducted by the education community. Can you tell me if the Quebec government or organizations in the education community asked the federal government to set up a scholarship program?
[English]
Ms Elliott: The advisory group was from across Canada. They were from the post-secondary education community. They were not members of provincial governments. They were experts in the field of post-secondary education.
[Translation]
Senator Rivest: What organizations in Quebec asked the federal government to put forth this scholarship program? What Quebec organizations in the education community specifically requested, during these consultations, that the Canadian government implement a scholarship program for students?
[English]
Ms Elliott: The advisory group was convened to consult on the most appropriate way to deliver on the access problem for low- and middle-income students.
[Translation]
Senator Rivest: Did someone specifically ask for this program in Quebec? Did any Quebec organization, professors, students, or universities ask the federal government to step in as it has presently? Can you name an organization? It is good to have consulted them, but did they ask for this? Yes or no?
[English]
Ms Elliott: As I stated earlier, I can provide with you a list of the advisory group members.
Senator Rivest: I do not care about the list. I want to know who from Quebec requested a federal intervention in the field of education with regard to bursaries. That is all.
Ms Elliott: An advisory group member from Quebec participated and believed that this was a good idea. I will provide you with his name.
Senator Rivest: Was it a person, an individual or a group?
Mr. Valeri: It was an individual.
Senator Rivest: What a consultation.
Mr. Valeri: I am sorry, senator, but that consultation was provided for by a number of individuals across the country. A news release listed each of those members. Obviously, you are at liberty to contact that individual if you would like.
Senator Lavoie-Roux: Can we get his or her name?
Mr. Valeri: We can provide the press release with the names of each individual who participated in this advisory group.
Senator Rivest: It was not a group or an association, but it was an individual; is that right?
Ms Elliott: I will read the list to you, and then I would be happy to provide you with it.
Senator Rivest: You can table it, but please read it.
Ms Elliott: Thomas Brzustowski, President, Natural Sciences and Engineering Research Council of Canada; Robert J. Giroux, President, Association of Universities and Colleges of Canada; Charles Jago, President, University of Northern British Columbia; Arnold Naimark, Director, Centre for the Advancement of Medicine, University of Manitoba; Alain Noël, Directeur, Programme MBA, L'École des hautes études commerciales; Martha Piper, President, University of British Columbia; Jacquelyn Thayer Scott, President and Vice-Chancellor, University College of Cape Breton; Richard van Loon, President, Carleton University; Sue Wiesner, Past President, Canadian Association of Student Financial Aid Administrators, University of New Brunswick; Thomas Wood, President and CEO, Mount Royal College; John English, University of Waterloo; David Dodge, Faculty of Commerce, University of British Columbia and Simon Fraser University.
[Translation]
Senator Rivest: No associations, no groups, except an individual or two in Quebec, that's quite the validation!
You know that in Quebec, politically, for 20 or 25 years, we have been defending the federal system. For the most part, Quebecers want to continue to share the Canadian experience on one condition, that the powers of the National Assembly are respected. We did not invent that, it has existed since the country was created.
If I understand correctly, under Canadian federalism, the federal government has powers, and the provinces have powers, and now there is a third level of government: foundations. This new division of powers authorizes the federal government to spend in the area of education. No one can question this before the courts because it is a foundation. Could the provinces create foundations to get directly involved in areas under federal jurisdiction?
I do not know how you can defend that position in Quebec. Administratively speaking and legally speaking, everything can be defended in the courts. Someone can make an appeal, others could make a different appeal. Do you realize what considerable political difficulty you are putting Quebecers in who are trying to defend the Canadian option? No one asked for it specifically, no one wants it, but you're continuing anyway. You're saying: vive le Canada!
During the next referendum, on the political level, do you realize how this approach will contribute to undermining and making it difficult to defend the federal option in Quebec? It's a disaster! That is what we're trying to tell you. The legal quibbling that we will hear in one appeal is different from what we'll hear from another lawyer. They're trying to lead us to believe that they are not getting involved in education, but promoting access to education through a scholarship. The federal government could build a school and say that it did not build the school, that it was to promote access to education because to have education there needs to be a building.
It is not artificial. Why not let the provincial governments deal with education? Who at the federal level is familiar with the problems specific to education? There's no expertise because it exists within the provinces. That is where the people are who reflect on the education system. It's all fine and well if the government has money to invest and it steps in. Senator Joyal pointed out that in the past, the federal government had done so very well in several areas, but it should do so while respecting constitutional authority. The country is set up that way.
If we only want one government in Canada, let's set one up and have local administrations where everyone makes decisions. But try to sell that in Quebec! This initiative will be disastrous for the Canadian option and politically.
Secondly, a proposal for negotiations was made between the Canadian government and the provinces on the basis of the National Assembly's resolution. Negotiations broke off, if I'm not mistaken. Why?
[English]
Mr. Valeri: My understanding is that the discussion was continued in a number of meetings and that the province has decided not to proceed with them. The federal government is prepared to continue meeting.
[Translation]
Senator Rivest: If there are no negotiations, there is no agreement, the foundation is set up and scholarships are awarded.
[English]
Senator Lavoie-Roux: Who decided not to proceed?
Mr. Valeri: The foundation still has a requirement to meet and consult with a designated individual from Quebec.
[Translation]
Senator Rivest: Yes, there is money that will be available. If the Canadian government cannot enter into an agreement with the Quebec government, how will the Foundation enter into an agreement with the same government based on the same principles? Explain that to us? Your position does not make any sense.
[English]
Mr. Valeri: Perhaps I can point to the fact that the first cheques that the foundation will be prepared to send out will be in the year 2000, which leaves an opportunity for the Quebec representative to continue to engage in the consultations to meet the foundation's objectives for the benefit of Canadian students.
Senator Joyal: I would like to follow up on the line of questioning with regard to Canadian students' debt. Since some of our witnesses mentioned that they have studied that issue, would it be possible to get from them a statistical chart relating to the increase of student debt in Canada over the last 10 years, so that we have a better idea of how great the problem is? As I understand, tuition fees have been increased in many provinces, if not in all of them. However, as I remember in the last federal election, the then-leader of the Parti Québécois pledged not to increase tuition fees in Quebec. I understand that they have been indirectly increased.
Is the problem on a rising trend or on a plateau where, over the last 10 years, it has been more or less the same? In order to illustrate that, I should like to have the real figures involved here.
The Chairman: Should that be done by province?
Senator Joyal: Yes. As we mentioned earlier, each province decides its own budgetary allocation as to how much money it wants to devote to post-secondary education. The honourable senators who sat on the Special Senate Committee on Post-Secondary Education certainly studied that, but it should also be part of our discussion here because it is an essential element of the decisions that we will be called upon to make.
Mr. Valeri: That information can be made available, but I will ask the officials to address whether or not it is possible to do the breakdown by province.
Ms Elliott: We can certainly provide information on student-debt load and the trend over the last 10 years. My colleagues at Human Resources Development Canada tell me that we have limited provincial data, but we could certainly provide data on student-loan debt. We would be happy to provide that information to you.
The Chairman: My question relates to the passage of the bill through the House of Commons. A reasonable number of amendments were proposed and turned down. For the information of this committee <#0107> and, to try to shorten the work of this committee because of the deadline with which we are faced -- could you please provide this committee with responses to the amendments that were proposed and then turned down? For example, in clause 8, board members require that, in addition to being knowledgeable about education and the needs of the economy, that directors be knowledgeable about investment management. That motion in amendment was put forward in the House of Commons and we would like to have responses to that. There are not that many of them. You have answered some of them, but it would help me, if not others, considerably.
Many of the questions that I have are related to these amendments. Do you think that it would be possible to obtain that information?
Mr. Valeri: Are you asking us to submit to the committee the written responses to those amendments that were put forward?
The Chairman: Yes. For example, there was one to cause the foundation to cease. I am not interested in the response to that because it is obvious. However, where it is appropriate -- and there are a fair number of them -- where it adds information and knowledge and helps us in our deliberation, it would be appropriate to have the answers in those cases.
Do you want me to give you the list? I have it here.
Mr. Valeri: Yes. I would be pleased to have it.
The Chairman: I will provide the clerk with the list, because that will shorten our work considerably. It adds a burden to you, but it is not that significant. The Canada Millennium Scholarship Foundation has the greatest number of proposed amendments because it is the most controversial. However, there are others. We will not have time to deal with them all, but I think it would be appropriate for those amendments to be answered in one way or another.
Are there any other questions from around the table?
Senator Bryden: When that information is provided, will it be circulated to all members?
The Chairman: Yes.
On behalf of the committee, I wish to thank our witnesses for coming here this morning. This has been an interesting morning. The committee has a tentative schedule involving our consideration of this bill within the time frame that we have available to us. Would you be able to return here to respond to any questions, should we need you to do so?
Mr. Valeri: It would be my pleasure.
The Chairman: Thank you very much. I am sorry that we could not hear from all of your officials, but I wish to thank you all for being here this morning.
Senator Bolduc: Will we return to the other aspects of the bill later?
The Chairman:Yes, we will return to them once we talk about the proposed schedule. That will deal with other issues and other parts of the bill, as well. We are trying to do that because we do not want to hear about only the first part of the bill.
We will now adjourn the meeting and proceed in camera to discuss the committee's schedule.
The committee continued in camera.