Proceedings of the Standing Senate Committee on
Legal and Constitutional Affairs
Issue 3 - Evidence for December 1, 2004
OTTAWA, Wednesday, December 1, 2004
The Standing Senate Committee on Legal and Constitutional Affairs, to which was referred Bill S-11, to amend the Criminal Code (lottery schemes), met this day at 4:08 p.m. to give consideration to the bill.
Senator Lise Bacon (Chairman) in the chair.
[English]
The Chairman: Today we are studying Bill S-11, an Act to amend the Criminal Code (lottery schemes). Our witness is from the Justice Department of Canada, Mr. Hal Pruden. Welcome to our committee, Mr. Pruden. We will hear from you and I am sure the senators will have questions to ask you.
Mr. Hal Pruden, Counsel, Criminal Law Policy Section, Justice Canada: Honourable senators, there is no doubt that gambling addiction is a serious problem for a part of the Canadian population. While the estimated percentage is small, the estimated number of problem gamblers that could be extrapolated from the percentage would, no doubt, sound large to most of us. The impacts of problem gambling for these persons and their families can range from economic difficulty to economic catastrophe and suicide.
The policy question before this committee is: What instruments can or should be used to address problem gambling, specifically in relation to video lottery terminals, VLTs?
While I can speak about legal background matters and the legal impacts that Bill S-11 would have, I must remind committee members that it is for the Minister of Justice and not for officials like me to speak on policy questions related to the criminal law.
With that, I will talk about the background in the first part and in the second part I will talk about the legal impacts that Bill S-11 would have.
By way of background, it is important to note that the existing criminal law policy, which is expressed in the gambling provisions of the Criminal Code, is this: A province and a territory may make local decisions relating to the forms of gambling, from the range set by Parliament that the province or territory itself will offer on or through a slot machine, a video device, a computer or a dice game. The provinces and territories vary in their decisions about whether and how to offer these authorized forms of gambling. These variations among jurisdictions include their differing decisions about placing provincial or territorial VLTs in bars. It should also be mentioned that the provinces and territories have begun to address gambling addiction through educational and health measures that are said to be further advanced and far better funded than those found in the United States.
The intention of Bill S-11 is to address a significant area of problem gambling by changing the current legislation under which local decisions on VLTs are left to provinces and territories. This committee is already aware that Bill S- 11, as it is currently drafted, appears to do much more than eliminate the possibility of a province or a territory operating its VLTs in bars. Bill S-11 would eliminate the Criminal Code authority for a province or a territory to make local decisions about the forms of gambling that the province or territory will offer on or through a slot machine, a video device, a computer or a dice game.
Also by way of background, the definition of a slot machine, which is set out in section 198(3) of the Criminal Code, would include what we know as ``video lottery terminals'' or VLTs. I am given to understand that the key difference with VLTs is that cash is placed into the machine and prizes are paid out in paper that is then redeemed for the cash value. Other slot machines take the cash in and pay out prizes to a player in cash. They are all forms of slot machines, whether it is a VLT or some other slot machine. Under the Criminal Code definition, they are all slot machines.
I will now mention some historical background. Amendments to the Criminal Code in 1969 allowed the following lottery schemes: Those that are conducted by the federal government, those that are conducted by the provincial/ territorial governments, and those that are licensed by provincial/territorial governments. Parliament clearly chose to expand the legalized gambling on the basis that the proceeds from the lottery schemes would benefit public good causes, including governments, rather than benefiting private or commercial interests.
In 1979, a federal/provincial/territorial agreement on gaming was signed whereby Canada agreed not to conduct lottery schemes, and in return it would receive $24 million in 1980 dollars. I am advised that this amount is adjusted for inflation and that in 2003 the amount was over $59 million.
In 1985, a federal/provincial/territorial agreement on gaming was signed under which Canada agreed to place legislation before the Parliament to take away the federal permission to operate lottery schemes and, in return, the provinces agreed to continue the payments from the 1979 agreement and to give a payment of $100 million for the 1988 Calgary Olympics.
Bill S-11 could be expected to have an impact upon the revenues of provincial/territorial governments and upon federal/provincial/territorial relations given the 1979 and the 1985 federal/provincial/territorial agreements on gaming.
I will now turn to the bill itself and its impacts. It is the legal opinion of the Department of Justice that Bill S-11 would mean that provinces would no longer be able to conduct lottery schemes on VLTs, slot machines, computers or dice games at locations other than a race course and premises dedicated to gaming activity. The bill as drafted does not give a definition for the premises dedicated to gaming, and it does not set out limits on the size of the premises or the number of VLTs. Therefore, under Bill S-11, provinces and territories could continue to place VLTs in racetracks or casinos, which is now permitted under the Criminal Code, and they could place VLTs in any other premises dedicated to gambling. Conceivably, a small shop in a shopping mall could be dedicated to VLTs. Multi-use premises of course, such as bars, could not be a location for provincial government VLTs. In relation to VLTs in bars, currently Quebec, the Atlantic provinces and the three Prairie provinces would be affected because they do place VLTs in bars.
Also, as currently drafted, the bill would not permit computerized gambling or dice games, other than in race tracks or the dedicated gambling premises. Through the Atlantic Lottery Corporation, the Atlantic provinces offer computerized purchase, via the Internet, of lottery tickets to their residents. This would be stopped by Bill S-11.
In British Columbia, sport pool bets are offered by the province through computers, in bars, for example, and as drafted Bill S-11 would stop this. While most provinces and territories do not currently conduct the sale of lottery tickets, pool betting or ``cyber'' casino games via the Internet, the bill would eliminate that option for the provinces.
Arguably, Bill S-11 would also make it illegal to conduct the sale of computer-generated, quick-pick lottery tickets at kiosks in shopping malls and it would eliminate the ability to conduct province-wide or territory-wide bingos that depend on computer operations.
I am just saying that this is the bill as drafted. I am not saying that is the intention of the bill.
The Chairman: Mr. Pruden, as you mentioned, two administrative agreements were signed in 1978 and 1985 with the provinces and territories. The Government of Canada is required to respect the signature on those documents. If Parliament decides to proceed with an amendment to the Criminal Code, is there a possibility that litigation would follow?
With regard to legal concerns, do we have to notify the provinces of our intention to change the agreements by legislation?
Mr. Pruden: I am not certain that there is any requirement that the Parliament of Canada give any indication to provincial governments of its intention, though I would hasten to say that the provincial governments will be aware of the bill that is before the Parliament, and may have their own views of the proposed changes.
That is all I can say to that particular question.
The Chairman: There is also the question of the possibility of litigation that might follow the adoption of the bill.
Mr. Pruden: With respect to that question, that would rest with provinces to decide if they wished to litigate. In one of the agreements there is a clause that refers to the intention that they were not wishing to rely on any privilege from going to court.
The Chairman: Has the Department of Justice been in contact with any kind of representative of the provinces or territories on Bill S-11 recently? I am paying attention to the economic impact of the bill. You have mentioned that also in your presentation.
Of course, much money is at stake for provinces. Could you inform the committee about any requests of your department for information regarding Bill S-11?
Mr. Pruden: We have not really had requests for information on the bill. I can say that the minister had correspondence from the Province of Alberta on Bill S-11, but it was not a request for information on the bill.
Senator Joyal: An agreement was signed August 23, 1979, which was succeeded with the agreement dated June 3, 1985. I do not know if you have those texts with you.
Mr. Pruden: I believe I do, senator.
Senator Joyal: I would like to refer you to a clause. It is a very short agreement. It is only three pages, madam chair.
The Chairman: As soon as the translation is made, we will distribute the agreements to the senators here.
Senator Joyal: I apologize. I have only the text in English, honourable senators.
I would like to refer you to the last section of the agreement of 1985, paragraph 8. There are eight paragraphs to the agreement. It repeats the same paragraph that existed in the previous agreement of 1979: ``This agreement may only be amended or terminated by the unanimous consent of the provinces and the Government of Canada.''
This is a very compelling clause. On the other hand, I am caught with the fact that the Government of Canada cannot have traded what I call the supremacy of Parliament. Parliament still has the power to make laws in its jurisdiction. The Criminal Code, of course, is under the heading of 1991. It is the exclusive jurisdiction of the Parliament of Canada. If the Parliament of Canada decides to amend the Criminal Code, the Government of Canada cannot commit the supremacy of Parliament for a future date.
The chair has raised a real question. In other words, we could exercise the supremacy of the Parliament of Canada and amend the Criminal Code to restrict things in the way that Senator Lapointe is proposing, which is not to touch the computer, dice and slot machines. He just wants to address the VLT. He does not want to abolish VLTs but rather locate them in some section. That is his intention. That might not reflect that but we will come back to that later. Even in that limited respect, the point that Senator Lapointe is pursuing shows his intention is that.
Would it not be, in a way, an amendment to the agreement? In other words, the provinces took upon themselves to give money to the federal government, which is spelled out in the bill and you have quoted the last figures. However, if we changed the tax base on which the money will be paid, we are changing something. The province might interpret that as being an additional burden, because they do not have all the same devices that they had before, which is to establish VLTs wherever they want to establish them.
If it is interpreted that way, are we caught in this agreement? What would be the legal procedure you would suggest for the Government of Canada to follow in order to give effect to the intention of Senator Lapointe and Bill S-11?
Mr. Pruden: This is a very difficult question. I will start by saying that you are right that Parliament cannot be bound from doing as it wishes with the criminal law. That, in fact, was the legal advice that this committee obtained from a professor at the University of Ottawa in 1985 when the committee was examining a bill that was before Parliament to implement this agreement by making certain amendments to the Criminal Code.
Clearly, Parliament may do as it wishes.
With regard to how a change like this would then be played out in terms of federal/provincial relations, whether there would be any litigation, whether the courts would see that there is standing to initiate something in the courts and what chances of success that might have, is something to which I cannot speak. Litigating on those agreements is not my area of expertise.
Even if I had the expertise, it would be the Minister of Justice who would be able to speak on that rather than officials.
Senator Joyal: On the other hand, this committee has a responsibility to measure the consequences of the legislation we are proposing to adopt. As much as I personally support the intention of Senator Lapointe, and there is certainly sympathy around this table for the intention of the bill, there are practical implications for the Government of Canada and the provinces. As you realize very well, provinces can calculate very clearly the income that they draw currently from the VLT machines, or the income they would draw in the way that we want to propose to restrict access to specific locations.
We are in a conundrum this way. We cannot, in one way, want to do something and not know, on the other hand, the legal responsibility that we would be creating to the Government of Canada. I do not mean that it is not possible. I want to know what would be the course of action that we should follow to, in fact, implement the intention of Senator Lapointe, given that the Government of Canada signed this document in 1985.
I am not asking your opinion of what the court would say. I know you cannot do that. In your own reading of the agreement, what course of action should we follow?
Mr. Pruden: What Parliament chooses to do may be quite separate from the fallout of that choice. If Parliament chooses to amend the criminal law, Parliament may do that, but Parliament may also know that it will affect federal- provincial/territorial relations. Who knows whether the provinces would choose to litigate in the courts or in the court of public opinion? If they chose to litigate in the courts, who knows what the outcome of that litigation would be.
Even if I could give advice to the committee on the odds of how it would work out in the courts, I would be gambling on whether that would actually happen. I am very cautious about speculating on what might happen. It is very clear that it has impacts for federal-provincial relations.
Senator Joyal: I will put the question in more general terms. What is the process that the Government of Canada normally follows when they have an agreement and they want to reopen the agreement? This agreement does not contain a procedure. This agreement does not say that notice of six months must be given or that the issue must be brought to the next Attorney General's national conference and so forth.
There is no consultation process in the agreement that provides for the mechanisms to say that this is the step-by- step approach that we are going to follow. Since it is not provided in this agreement, what is the course of action normally that the federal government would follow, based on past experience in the circumstances, and analogous to that one?
Mr. Pruden: That I cannot answer because it is beyond my area of knowledge. I am not sure it happens often. Within the agreements, there is a contemplation that if there is a dispute, the provinces would stop paying the payments that they now make to the Government of Canada each year.
One might contemplate the fact that it says the agreement can only be terminated unanimously. On the other hand, if there is a dispute, then the provinces would stop making their payments to the Government of Canada.
Beyond that, what might happen in litigation would only be speculation on my part.
Senator Andreychuk: If I understand, you are saying it is difficult for you to talk about fallout from entering into this field until you know where the political will is, and the policy that the government is attempting to achieve. Is that correct?
Mr. Pruden: It is even more so than that. Despite what policy the federal Parliament may choose, the reaction of provinces is something that I cannot speak to because I cannot speak for those provinces.
Senator Andreychuk: If it was not Parliament approaching you to ask this question, but it was your minister saying, I want to stop VLTs in certain places; what is the outcome? Would you be able to answer him in that case?
Mr. Pruden: It becomes a policy choice that I had identified at the beginning of this opening statement. Currently, the policy is that it is left to a provincial local choice or a territorial local choice. The other option, which Bill S-11 sets out, is taking away that option for provinces and territories, and simply saying that they will not be able to place VLTs in bars. Those are the two policy choices.
One would leave the individuals who are concerned about VLTs and gambling addiction to go to each of the provinces that have VLTs. The other policy approach would be one whereby Parliament itself would look after gambling addictions by making this change to the Criminal Code, saying that provinces will not be given that choice any longer.
Senator Milne: I want to correct what I believe was an incorrect interpretation of the law, at least in part, that you mentioned to us in your beginning statement.
I understand that in line 14 of the bill, under the meaning of subsection 198(3) in the Criminal Code, that Lotto 649 and sports betting cannot fall under that sector of the Criminal Code. They do not fall under that sector. Therefore, this bill would not affect them in any way whatsoever.
Mr. Pruden: No, 198(3) defines slot machines, but this bill speaks not only of slot machines but also of video devices, computers and dice games.
This bill can affect more than just the slot machines as they are defined in 198(3) because of its reference.
Senator Milne: I come back to my main question. It is apparent to me if we want this bill to do what it is intended to do, that we have to change the definition of ``slot machine'' in the Criminal Code. Have you any suggestion on wording, sir, and where this would fit into the Criminal Code?
Mr. Pruden: That is a difficult question because I cannot provide legal advice other than to the Minister of Justice and cabinet colleagues.
Senator Milne: I am sure you can make some suggestions to us. Since we have asked the question, sir, you are required to answer.
Mr. Pruden: No, I am required to give legal advice only to the Minister of Justice and cabinet colleagues.
The Chairman: We have to respect that.
Senator Milne: In the bill, it says, under clause 1, (b.1):
...contrivance or operation described in any of the paragraphs 206(1)(a) to (g) that is operated on or through a computer video device or slot machine within the meaning of subsection 198(3)...
It is within the meaning of this particular subsection, which talks of slot machines meaning:
...any automatic machine or slot machine
(a) that is used or intended to be used for any purpose other than vending merchandise or services, or
(b) that is used or intended to be used for the purpose of vending merchandise or services if
(i) the result of one or any other number of operations of the machine is a matter of chance or uncertainty to the operator;
(ii) as a result of a given number of successive operations by the operator the machine produces different results, or
(iii) on any operation of the machine it discharges or emits a slug or token,
but does not include an automatic machine or slot machine that dispenses as prizes only one or more free games on that machine.
I believe that the definition there excludes Lotto 649 and sports betting.
Mr. Pruden: I understand why you might think that way. However, in the existing section 207(4) of the Criminal Code, and in the proposed section or clause 1 of the bill, the same language is used. The use of the modification, which is within the meaning of subsection 198(3), refers to only slot machine; it does not refer to computer or video devices.
Senator Milne: Precisely.
Mr. Pruden: Subsection 198(3) defines ``slot machine.'' Section 207 speaks about more than slot machines. It speaks about computers, video devices and so forth. When we read slot machine in this clause and they mention 198(3), they are saying 198(3) is mentioned so that people know to look at 198(3) to find out what a slot machine is. There is no need to look at 198(3) for what a computer or video device is.
Senator Milne: I subside gently, more or less.
Senator Ringuette: I am not a lawyer, and I would not pretend to be one, but I have listened to your presentation and to your summary of the progressive changes, since 1969 up to 1979.
What you are saying is that the federal government, with the two agreements, has deferred certain gaming devices — video lottery, dice, slot machines and computers — to be under the provincial/territorial responsibility; and within their responsibility, they have to license location. Is that a logical understanding?
Mr. Pruden: As a lawyer, I will put some refinements on that. The Criminal Code, in section 206, creates a number of criminal offences for lotteries and for games of chance. In section 207 in 1969, it created a number of permitted exceptions for the federal government and for provinces. Then in 1979 under the agreement, they said they would not use the federal permission, and in 1985, they actually put a bill before Parliament, that passed, to take away that federal permission.
Therefore, what Parliament has done is to say, this is illegal in section 206; however, where certain lottery schemes are conducted by a province directly, they will be legal, and where the province licenses certain charities, religious organizations and others to do a narrower range of lottery schemes that do not include dice games, slot machines, computers or video devices, those licensed games will also be legal.
The province may choose, and some of them do, to build a provincial government casino as a location.
Senator Ringuette: They have the authority to license gambling location.
Mr. Pruden: If I can take a step back, the Criminal Code allows that the gambling activity will be legal if it is conducted by the province. Some provinces may say that they will take that legal gambling provincial activity into a provincial building. There would be no need for a licence. Other provinces may say that they will do the gambling activity but will use the premises of somebody else.
Senator Ringuette: Therefore, the licence is in regards to location. They are allowed to do that.
Mr. Pruden: Yes.
Senator Ringuette: As a follow up to this, I have heard that currently a person with a laptop computer at home has the opportunity to gamble at home.
How do the provinces legislate that situation?
Mr. Pruden: Again, as a lawyer, I should begin my answer by saying, ``it depends.'' I was taught that long ago in law school.
Senator Ringuette: All things being equal.
Mr. Pruden: In the case of a provincial government, it may offer its lottery scheme, whatever that is, to residents of the province or with cooperation of another province. They may offer the lottery scheme in that other province. For example, the Atlantic Lottery Corporation offering lottery tickets to its residents is permitted under the Criminal Code.
In addition to that, there will be other people, wherever they are in the world, who might set up some kind of betting, lottery ticket or cyber casino games. They will take players from different countries of the world. It does not mean that it is necessarily legal in the country where the player is sitting, for this company to do that.
Senator Ringuette: There is no control mechanism. We are very sympathetic here; we understand the federal- provincial relations involved. We also understand the financial impacts involved. However, there is a major element that neither the federal government nor the provincial or territorial government can have any control over. That is gambling through the Internet at home.
I am much divided on this because I find that the bill has good intentions, but there is an entire new slate of opportunities to gamble out there that no one can control.
Mr. Pruden: If I can respond to that, you are correct in a sense that in terms of enforcement, it may be impossible to control every Internet gambling offering. However, the Criminal Code very much does control what the provinces, under the Criminal Code, are permitted to offer and how they are to go about it. They cannot poach players from another province. They cannot go out to another country.
That is an important part of control, especially if other countries are ever asked to respect Canada's law. They will want to see that Canada has laws that respect them, in terms of provincial governments poaching people from other countries.
[Translation]
Senator Lapointe: The wording of the amendment presented last year was flawed. We have sought to correct that situation, which was confusing. You referred to crap games and other things, but that is not where the problem lies. The problem has only to do with what you call VLTs, video lottery terminals. In Quebec, they are commonly called video poker, the slot machines in bars that anyone can play; and I would like to point out to you that those slot machines, those VLTs — call them what you will — are always in the most disadvantaged neighborhoods, and you are forgetting — unlike Ms. Ringuette, I am not a lawyer; I rely heavily on the judgment of Senator Joyal, and by the way I gave him a copy of the amendment to be made to the wording of the bill — but I can tell you for sure that the $100 million collected by Ottawa, to use an expression of Senator Bryden's that I like a lot, ``is a piece of cake'' compared to the social cost involved.
I think that for the provincial governments and for the federal government, it would be a major savings. Three studies that we have come across prove that the social cost of video lottery is three to five times higher than what it brings into government coffers, whether provincial or federal.
I want you to know, and you can tell this to your minister for me, that I am going to fight to the end, I will use the media, everywhere, because 70 or 72 per cent — it is much higher than that now — of Canadians are against those machines being accessible at street level. All we are asking for in this amendment is for the machines to be relocated to places where there is already gambling, like casinos, race tracks, and what is commonly called — I am not sure whether it exists in the other provinces but I know it exists in Quebec — ``race clubs.'' All we are asking is that gamblers who want to play video lottery terminals go to casinos, not the street corner.
It is because of the terrible accessibility of this scourge that our young people today are killing themselves by the hundreds, families are bankrupted by the thousands and there are so many consequences in terms of crime — because in solving one problem others are created, such as loan sharks or shylocks. I would like to know what Mr. Pruden's reaction is to that.
[English]
Mr. Pruden: I agree that accessibility can expand exposure and that individuals who are exposed to gambling opportunities can become addicted. According to some studies, 3 per cent of the population is addicted or has a problem with gambling.
Other than that comment, I really cannot say more. It is clear; your bill presents the opportunity to make a policy change to what currently exists. It is a change from allowing the provinces to make their decision about putting them into bars.
It is clearly a policy choice, and I cannot comment on the policy. The minister would have to be the one who might comment on any criminal law policies. Officials cannot make statements about policies.
[Translation]
The Chairman: Do you have any other questions, Senator Lapointe?
Senator Lapointe: I am so bad at asking questions that I had better leave it to someone else.
The Chairman: You do understand that Mr. Pruden cannot comment on the social issues involved in making changes.
Senator Lapointe: He can comment on legal issues, but sometimes the legal issues have serious social repercussions. The fact remains that the 3 per cent of Canadians that you referred to earlier is now 5 per cent of Canadians, because of course there is a large percentage of the population that does not gamble. The majority of the population does not gamble at all. If you take 5 per cent or 3 per cent of the entire population of Canada, and you reduce it to the gambling population, your 3 per cent becomes 25 or 30 per cent. Research has been done on this by experts. If you say that 3 or 4 per cent of the population are alcoholics, and you spread that percentage over the general population that does not have a drinking problem and you come up with a number, that changes the proportion dramatically. Are you aware of that?
[English]
Mr. Pruden: My understanding was that a large percentage of the Canadian population gambles in some way, if one includes lottery tickets. Perhaps your figure does not include lottery tickets, but the figure I had seen was that more than 50 per cent of the Canadian population gambles during the course of the year, if you include lottery tickets.
Senator Lapointe: Lottery tickets are not gambling to me. It is amusement. To certain addicted person, it could be gambling, but for the population who watches TV and checks the results, there is nothing abnormal.
I consider craps, blackjack, and roulette to be gambling. That which happens in the casinos and especially video pokers are gambling. If you go into this area of thing, your figures will change dramatically.
Mr. Pruden: I understand what you are saying. That is borne out in studies that people who do use especially the machine gambling would have a higher incidence of gambling problems and addiction than individuals who might be doing lottery tickets.
[Translation]
Senator Lapointe: Except for minors; I do not know anyone who is 0.01 per cent addicted to VLTs, if you make the comparison. In any event, thank you for answering the questions. I think that before I dig myself in any deeper, I am going to turn the floor over to someone else.
[English]
Senator Joyal: I would like to go back to the agreement of 1985, because there is an element there with which we will have to deal. I would like to point you to section 1 of the agreement, and I will read it. It is easy to understand. ``The Government of Canada undertakes 1.1 to refrain from re-entering the field of gaming and betting except to the extent of its present role under section 198 of the Criminal Code with respect to horse races.''
The Government of Canada undertakes to ensure that the rights of the provinces in that field are not reduced or restricted. I restate: The Government of Canada undertakes to ensure that the rights of the provinces in that field are not reduced or restricted. What happens if there is a problem between the Government of Canada and the provinces, if the province feels that its rights are reduced or restricted? Later on in the agreement, it is what you have said: They will hold back the payment.
I read section 4: ``The payment to be made by the provinces pursuant to paragraphs 2.1 and 2.2 are in consideration of the fulfillment by the Government of Canada of its undertaking under article 1. Should any dispute arise with respect to such fulfillment, the provinces shall be entitled to withhold their payments until such dispute is resolved and to exercise all recourse they may have with respect to such dispute.''
If I understand the agreement, it means that the Government of Canada has undertaken to maintain the provinces in their rights to exploit the lottery system by all kinds of means. Video poker is one of them. They could interpret the right to exploit video poker as being a reduction or restriction of their rights. As such, they can withhold their payments.
Let us go back to what you said at the beginning. Last year the federal government received $59 million. I think you mentioned that for 2003.
Mr. Pruden: It is $59 million plus, almost $60 million in 2003.
Senator Joyal: Let us round it up to $60 million. It is easier to remember. Do you have any idea how much the provinces and territories draw as income with the exploitation of the gaming and betting, or whatever they might exploit with this agreement? Do you have any idea of the figure?
Mr. Pruden: It has been a long time since I saw something in Statistics Canada, but it is measured in the billions of dollars.
Senator Joyal: Let us say it is big, in comparison with $59 million: almost a fraction of that. I am not trying to pin you down. I have here the number of million the Provinces of Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland, Alberta, Manitoba and Saskatchewan receive as net benefit figures that we got from a special report of 2000. In Quebec, for that year, it was $692 million.
Senator Milne: In Ontario, it is around $1.5 to $2 billion.
Senator Joyal: It is multi-billion dollars for all of Canada. Let us make the hypothesis that the province interprets section 1 as the federal government restricting provincial capacity to exploit lotteries. Therefore, they would withhold the payments totalling $59 million. If we have to negotiate with them in proportion, on $60 million in proportion to the overall billions, we have to accept that the provinces will reduce payments proportionately to what the video system limitation will extract from revenue. In fact, the federal government will be bearing the cost, not the provinces. The provinces have the capacity to say to us, you will reduce your income.
In other words, I was under the impression that we would deprive the provinces of revenue, but it is the reverse. It is the federal government who, at the end of it, might be called upon to pay for the amendment to the Criminal Code. The provinces have the capacity to say, on the $60 million we pay you, there is — let us put a figure — $10 million from video poker that we will not be able to get revenue from because it will no longer be allowed in the bar on the corner of your favourite street.
In other words, the whole of that political decision comes back to the federal government, because it will be the one to bear the cost of the proposal of Senator Lapointe. Is my reasoning twisted, or do you think that it is what, in fact, could happen?
Mr. Pruden: Certainly, the payments, in part or in whole, might be withheld. In addition, there might also be consequences for federal/provincial/territorial relations.
The Chairman: If I may interject, Senator Joyal, our witnesses tomorrow will be able to answer questions regarding revenues from the provinces. The answers will be given tomorrow.
Senator Joyal: We could pin it down much closer to what could be the cost. Of course, if the federal government accepts to reopen the agreement in a way that we are contemplating, it is for the public good. It is not because the federal government wants to embarrass the provinces. It is because the federal government is under the conviction that video poker on the corner of the street is a social plague. That is why we have a consensus around this table on the substance of the objective of Senator Lapointe. However, we have to be able to understand the financial consequences for the federal government in the context of this agreement.
I was under the impression at the beginning when we raised the issue of the federal/provincial agreement that the provinces would lose money. Of course, the provinces would lose money, but they could diminish what they pay to the federal government proportionately. At the end of it, it will be the federal government.
In other words, what you are telling us today is that we should run after the federal government more than after the provinces.
Mr. Pruden: In a sense, the provinces might not find enough dedicated gambling premises to place all the VLTs they now have in bars. To that extent, they may well be losing some of the money they now make from VLTs in bars.
If that were the case, the provinces, through the loss of VLT revenues or some of their VLT revenues, would have an economic impact. In addition, because of the agreement, the federal government might expect to see some economic impact on all or part of the annual instalment being paid.
Also, what I am trying to indicate is it might have an impact for the general relations of the federal and provincial/ territorial governments.
Senator Joyal: I agree with that in principle, but if I remember what I have read in the paper — I am quoting the provincial minister of finance of my own province, Mr. Yves Séguin — I understand, for instance, in Quebec this year or next year, that they will reduce the number of VLTs by 700 or so in the bars, and that they will pay in compensation to the land owner, or to the operator of the bar who benefited from the VLT exploitation, a year of income.
The worst scenario that we would find ourselves in, in Quebec, is that we might be called upon in the negotiation with the province to pay for a year of income generated by the VLT on the basis of the number of VLTs that would disappear in the province, if they can be located only in the racetrack, casino and other places allowed under the bill.
The province cannot claim — I will use a common language expression —the moon, because they themselves pay only a year of compensation when they withdraw the VLT from some areas because they feel it is a social plague. In other words, we could arrive at a very precise figure on the amount of compensation we could negotiate with the province.
Mr. Pruden: Those are strategies that are quite correctly contemplated, that the government might consider. It would be speculation to say how it actually would play out.
Senator Joyal: Of course. I do not want you to say to me, it will be this figure. I am just trying to reason on the basis of this agreement, which is an agreement that maintains permanent compensation. The principle of this agreement is that there is a permanent compensation year by year. It is as if the federal government had rented the field of lottery, which according to the Criminal Code, falls under the federal government.
We understand that the federal government cannot yield forever its own field of jurisdiction under the penal code. One day, for the matter of public good, things may change in society. The federal government may come to a conclusion that it needs to amend the Criminal Code, or restrict activities for a social benefit we have outlined here.
In other words, a province cannot claim an absolute compensation forever, because there is the principle of renting the field of exclusive jurisdiction of the federal government because they paid an annual compensation. It is a legal way of saying the thing, but that is the way I would understand the substance of the agreement that we have in front of us.
Mr. Pruden: I cannot speak for how the provinces might react to your view. They may accept your view, or they may take another approach to what they would initiate, should Parliament choose to make amendments to the Criminal Code relating to the video lottery terminals.
Again, Parliament is supreme in the sense that it can change the Criminal Code should Parliament choose to do that. Whatever fallout comes from the agreement is separate from Parliament's ability to change the Criminal Code.
Senator Joyal: I have tried to build reasoning here that would run the test of legal minds, because this is part of what we have to envisage in practical terms. I am relieved by your testimony because then we will know at the end of it who will pay the tab; and at the end of it, it will be the federal government within its envelope of $60 million a year that the other government receives. It will be a percentage of this, on the basis of billions of dollars that the province receives for the whole of it. It will be a fraction of $60 million.
Is the Government of Canada ready to take the cut?
The Chairman: These are questions that we have to ask the ministers and not senior officers.
Senator Joyal: Exactly; I will not ask for an answer on this.
Mr. Pruden: If the litigation were initiated by provinces, we do not know that it would be limited to the payment that Canada receives. The provinces might feel their damages are greater than the payment that Canada now receives.
Senator Joyal: I agree; when you start a negotiation, you put everything on the table. I do not have a problem with that. We have seen that regularly each day in any negotiation. However, if push comes to shove, let us come to the real basic obligations that the federal government has. In the context of renting the field, we are renting to the provinces on the basis of compensation the exclusive competence that exists under the Criminal Code to regulate lottery and all gambling activities. That is the way, essentially, one can argue on this basis.
Mr. Pruden: Parliament, of course, retains its constitutional legislative authority; by the legislation that exists in the Criminal Code, certain exceptions to what would otherwise be a criminal offence are created.
It is correct that each year Canada receives money from the provinces under the agreements.
Senator Joyal: By compensation?
Mr. Pruden: The moneys in 1979 were given because Canada agreed to stop using its own permission to conduct lotteries. In 1985, the monies were given and in return the government said it would put a bill before Parliament. That bill did pass, and the payments are made under this agreement. Canada then took out of the Criminal Code the permission that had existed from 1969 for Canada, under the Criminal Code, to conduct lotteries.
Senator Ringuette: I have a question that perhaps our researcher could look up. I was listening to Senator Joyal about the financial implications. I was wondering if revenue from gambling is one of the 33 elements within the equalization transfer scheme.
The Chairman: No, I do not think so.
Senator Ringuette: It is not?
The Chairman: No.
Senator Joyal: I do not want to answer for the witness, but —
Senator Ringuette: I do not care who answers, as long as I have an answer.
[Translation]
Senator Lapointe: I just have one quick comment to make.
[English]
Mr. Pruden: I do not know anything about the transfer payments. I would appreciate if someone else could answer.
The Chairman: We will ask the witness tomorrow if he can answer that question.
Senator Joyal: I remember having read a list of criteria and I do not remember —
The Chairman: That is the way I feel too.
[Translation]
Senator Lapointe: I should have stayed in school longer and become a lawyer; that way, I could have made simple things more complicated.
[English]
The Chairman: Thank you, Mr. Pruden, for your presence here. Tomorrow morning we will meet at 10:45.
The committee adjourned.