Proceedings of the Standing Senate Committee on
National Finance
Issue 19 - Evidence - Afternoon meeting of June 20, 2007
OTTAWA, Wednesday, June 20, 2007
The Standing Senate Committee on National Finance met this day at 12 p.m. to examine Bill C-52, an Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007.
Senator Joseph A. Day (Chairman) in the chair.
[Translation]
The Chairman: I would like to welcome you to the Standing Senate Committee on National Finance. My name is Joseph Day. I represent the province of New Brunswick in the Senate, and I am the committee chairman.
[English]
This committee's field of interest is government spending, either directly through the estimates or indirectly through bills that provide borrowing authority to the government or bear upon the spending proposals identified in the estimates.
Today, we continue our in-depth study of Bill C-52 to implement certain provisions of the budget tabled this Parliament on March 19, 2007.
This afternoon it is my pleasure to welcome The Honourable Lorne Albert Calvert, MLA, Premier of the Province of Saskatchewan.
Mr. Calvert was first elected to the Saskatchewan legislature in 1986 as the representative for Moose Jaw South. He was re-elected in 1991 and 1995 and served as a cabinet minister from 1992 until 1998 in the New Democratic Party of Premier Roy Romano.
He was elected leader of the New Democrat Party of Saskatchewan on January 27, 2001, and assumed the duties of premier on February 8, 2001.
He was elected as an MLA for Saskatoon Riversdale in the by-election of March 2001, which may be a story in itself, and was re-elected as MLA and premier in November 2003, in the general election.
Accompanying the premier today is Dan Perrins, Deputy Minister to the Premier, and Dylan Jones, Assistant Deputy Minister, Department of Government Relations.
Gentlemen, we welcome you here and thank you for appearing before the Senate committee.
The Hon. Lorne Albert Calvert, MLA, Premier of Saskatchewan: Thank you very much, Mr. Chair, and honourable senators. Thank you for welcoming us to your committee deliberations. Thank you for the invitation to be here. I have some mixed emotions about being here today. It is a beautiful day in the nation's capital in one of the most beautiful capital cities on the globe that I have experienced, but it is not as nice as Yorkton, Saskatchewan this afternoon. I would sooner be in Yorkton, to tell you the truth.
Building on that theme, I have mixed emotions about being here. I did not anticipate a year and a half ago that we would be engaged in the discussion that we are engaged in, given the promises that were made, but I appreciate the opportunity to speak with you today, fundamentally on the issue of equalization. Our conversations may go beyond that, but fundamentally, on the issues of equalization and the promises that have been made to the people of Saskatchewan regarding their natural resources. In my view and in the view of many in the province of Saskatchewan, those promises have been betrayed and broken.
As senators may well recall, prior to the last federal election, in fact, in the election preceding that election, the Conservative Party promised repeatedly that upon forming government, and making change to equalization in the country, they would exclude 100 per cent of the non-renewable resource revenues from the equalization formula. By the definition of members of Parliament at that time, Conservative members of Parliament then in opposition, by the definition of the Prime Minister himself, Mr. Harper, then Leader of the Opposition, this revenue, in value to the people of Saskatchewan, represented about $800 million on an annual basis.
That point was made by the Conservative members in our province in often repeated speeches that the value of this commitment to the people of Saskatchewan was in the range of $800 million, and that estimate has been confirmed by other experts and those who have looked seriously at the numbers.
That promise was included in a letter to me, sent by then Leader of the Opposition, Stephen Harper in 2004. It was confirmed again in the Conservative Party platform in 2006. I believe senators are aware of a piece of election literature that was sent out in Atlantic Canada that talked about the same commitment, about 100 per cent exclusion of the non- renewables with the definitive statements that there would be no excuses, no fine print and "no caps.'' Of course, we assumed, I think naturally, that no caps would apply to the nation.
There was a promise that there would be no caps. I had no reason to believe otherwise because I did not hear once in the run-up to the last election or the election before that they would cap the 100 per cent exclusion promise. The first we heard of the cap was in deliberations around the O'Brien report when it came time to follow up on the promise.
As the honourable senators know, the bill that you are now reviewing, this year's federal budget, includes that revised equalization formula that contains the ad hoc application of a fiscal capacity cap.
When we look back to the O'Brien panel work, it was not, from our point of view, entirely without merit. The work recognized, one, the associated costs with the extraction of resources, and in our case, some exceptional costs, and two, it also recognized that fundamental provision of our Constitution, and a fundamental way we have chosen to do business in the country, that the provinces should be the first beneficiary of non-renewable natural resources, as the owners of those non-renewable resources.
Where we believe the O'Brien report has gone wrong and the federal government has gone wrong in its budget — and I addressed these same comments to Al O'Brien — is by recommending this ad hoc cap that has the effect of completely negating the other principle. The principle of ownership and benefit is completely negated in Saskatchewan's case by the imposition of the cap.
Essentially, it means the clawback of Saskatchewan's oil and gas revenues on any new development. This word "cap'' is a little word, but it has one huge impact on the province of Saskatchewan. If you review the circumstance in Canada today as a result of this new budget, you will find that the people of Saskatchewan are the only peoples of Canada who will be affected by this cap. It essentially means that by next year again, Saskatchewan will receive, under equalization, under the transfer from the national government, zero.
If you happened to see The Globe and Mail earlier this week, Professor Tom Courchene had an opinion piece in it. I recommend it to you. He describes, from an academic point of view, exactly the circumstance that has faced Saskatchewan in the past and now continues to face the province of Saskatchewan in this unique circumstance. He points out what any common-sense Canadian would see, that if a people are developing their resources, there are associated costs to that population. Now there is a benefit to that population and a benefit, if I may say, to the nation of Canada, but in the associated costs, if the benefits are not returned to the people, common sense would say, if you will lose money on the development, leave it in the ground.
Tom Courchene brought this to the attention of Canadians some time ago when he wrote his extensive paper entitled Confiscatory Equalization: The Story of Saskatchewan. We went through a period of time that for every new dollar the people of Saskatchewan gained from the development of their resources, they lost up to $1.25 in federal transfer. Again, any person with common sense would say, this is costing us money to develop the resource that is a benefit to our people and would also benefit the nation.
Tom Courchene made this important argument in The Globe and Mail this past week.
In Saskatchewan, our desire is to develop an economy that is not ultimately reliant on the volatility of resource prices and the volatility of the energy market. We want to develop an economy that is ultimately not dependent on transfers from the national government and not dependent on equalization.
We bring to the governance of Saskatchewan a simple philosophy, one of developing an economy that is strong enough to provide real benefits for our people. We do not develop economy just for the sake of developing economy. We develop it for the sake of bringing real benefits to people in our province, and to ensure they are not left behind nationally, provincially or locally. I fundamentally believe that a strong Saskatchewan, for that matter strong provinces and strong regions, together build a strong Canada. Weak regions or provinces generally contribute to the weakness of the nation.
As senators will understand, these benefits are one-time benefits because every time we mine a barrel of oil, it can be mined only once. If the benefit is not achieved at that time, it is lost forever.
When we are obliged to take those one-time resources to fund ongoing programs, it is ultimately not sustainable. Some day, by definition, the non-renewable natural resource will deplete. To fund ongoing programs from non- renewable resources is ultimately not sustainable. We want to build an economy that can sustain a quality of life long- term, not on single-time resources.
Someone suggested that it is like asking the bakery owner to sell the oven to pay the electricity bill. Sooner or later, the baker will be out of business in that circumstance.
We believe the cap imposed in the budget fundamentally violates the principle of ownership of these non-renewable natural resources in the hands of the people of Saskatchewan. In the long term, it will significantly impact Saskatchewan's ability to develop those natural resources and to provide the benefits for the people of Saskatchewan that should flow from those natural resources. I point out again that the people of Saskatchewan are the only people in Canada who are affected by the cap.
We do not enjoy even the limited protection provided through the Atlantic accord. We do not enjoy today the protection offered to the people of Alberta back in the 1950s and 1960s as they were developing, or to Manitoba and Quebec as their hydro resources were developed. We are the single people in the nation of Canada that are being dealt with by this cap.
We have spent considerable time over the last number of years negotiating, working with and dialoguing first with the former Liberal government, where we made some progress, and then with the current government. I think you will understand, honourable senators, the delight we felt when the now Prime Minister made a promise to the people of Saskatchewan that he would get this right, that the non-renewable resources would be excluded with no caps, fine print or excuses.
You can imagine the disappointment of the people of Saskatchewan when today we find that promise has been betrayed. We have been through a period of negotiation and discussion with the current administration, none of which has served to meet the needs of the people of Saskatchewan, in our view.
Earlier this day, my minister of government relations and our senior constitutional experts from the Saskatchewan Department of Justice have outlined for the people of Saskatchewan what our course of action will be. This fall, we will ask the Saskatchewan Court of Appeal to make a ruling on a number of these questions pertaining to our nation's Constitution and the federal government's approach to equalization.
We do not believe Saskatchewan is being treated equitably, nor do we believe that ownership of our non-renewable resources is being acknowledged or respected.
In the absence of any meaningful dialogue, and with the encouragement of the Prime Minister of Canada who, I believe, said "if you do not like what we are doing, sue me,'' we are seeking a reference to our Court of Appeal.
I will conclude by saying that in some ways, this is a sad day. We have reached a point in Canada where a province needs to resort to the courts for what we believe is inequity, where we are not engaged in meaningful, even if difficult, dialogue or negotiation. Having reached this point, I and we have made the decision to seek the opinion of the courts.
Thank you, honourable senators, for the opportunity to be here. I look forward to the dialogue.
The Chairman: Thank you very much. I have a list of many senators who are interested in posing questions.
I will indicate beforehand that we will make sure all senators receive a copy of the article from The Globe and Mail by Thomas Courchene that Premier Calvert mentioned.
There was some discussion with respect to the vertical fiscal balance issue there. There was an interesting suggestion that maybe we should not divide these two issues but there should be full equalization in the vertical fiscal balance, and they should be together. That is an interesting and novel thought since Bill C-52 proposes to take out any aspect of equalization or associated equalization. I suspect senators may want to discuss that issue.
I will start with the senator who is the critic on this particular bill as it passes through the Senate, Senator Rompkey from Newfoundland and Labrador.
Senator Rompkey: Thank you. Welcome, Premier Calvert. We are pleased to hear from you.
Mr. Chairman, we have colleagues from Saskatchewan here today, and I think it is important that they have an opportunity to ask questions. I cede much of my time to Senator Dyck, if she would like to ask questions, because this matter is important to her and her province.
Before turning over the floor, I want to highlight the point you made, Premier Calvert, that we have not heard and discussed up to this point. As we have been reviewing the Atlantic accord, which affects both Newfoundland and Labrador and Nova Scotia, we have been talking about caps. We have the accord, but if we did not have the accord, we might as well leave the oil in the ground.
I am glad you made that point, because if it was simply a matter of dealing with equalization, as we make a dollar in oil, they claw it back in equalization. That is how equalization works. The accord was put in place to obviate that.
If we did not have the accord, we might as well leave the oil in the ground because we would be no farther ahead. I am glad you put that on the record because it is important for people to understand that.
The other point you put on the record that I want to highlight is that this resource that we have now is finite, we will not have it for long, and if we do not take advantage of it, we are stuck.
We have common cause. We have different mechanisms that we deal with.
Mr. Chairman, I would like to turn over the rest of my time to Senator Dyck.
Senator Dyck: Thank you. I feel honoured to be first to put questions.
Thank you, Mr. Calvert, for your clear introduction about equalization, and the explanation with regard to the other provinces indicating that it is only Saskatchewan that is so negatively affected by the imposition of a cap. You did not mention the province of British Columbia Can you explain what is happening to British Columbia with respect to equalization?
This is another question that is off to the side. You were talking about how the provinces own natural resources. You are probably anticipating that I might ask you a question with regard to First Nations and natural resources because, as you well know, Saskatchewan has a high percentage of Aboriginal people. With respect to treaties —
Senator Stratton: I would like a point of order, if I may.
The Chairman: A point of order has been called. I apologize for interrupting your point.
Senator Stratton: My apologies; I do not like to do this. Normally when we study a bill, we go first to the sponsor of the bill and then we go to the critic of the bill. Why are we dealing with someone who is not a member of the committee?
The Chairman: First, I have been doing that. I have been giving the sponsor and the critic a significant amount of time. I asked the sponsor and he indicated to me he wished to go fourth on the list, so that is where he appears. I then went to the critic, who indicated that he would like to cede the balance of his time. He spoke briefly, recognizing a senator from the province where the premier appears and wanted to let her ask some questions.
Are the honourable senators —
Senator Stratton: May, I please? Was Senator Angus aware of this when he placed himself fourth? That is, was he aware of the fact that you would have a senator who was not a member of the committee?
Senator Angus: That part I was not aware of.
The Chairman: No he was not. Do honourable senators have any difficulty with the manner in which I have acted?
Some Hon. Senators: No; absolutely not.
Senator Stratton: Yes. It is inappropriate.
Senator Di Nino: We should talk about that some time, Mr. Chairman.
Senator Cowan: The whole thing is inappropriate.
The Chairman: Order, please. We will have an in camera discussion following our time with the premier.
Please proceed, Senator Dyck.
Senator Dyck: Thank you. My question relates to the ownership of natural resources. As you know, with the treaties in Saskatchewan and with other provinces, the position of the First Nations is that the resources are only owned by the province to the depth of a plough. Are you taking that into consideration in future negotiations regarding non- renewable and natural resources?
Mr. Calvert: Let me try to address three points here. Thank you for making me feel at home. It felt like the Saskatchewan legislature for a moment or two.
On the question of British Columbia, I do not want to speak on behalf of British Columbia, by any means. I know some of the issues cross over a little, however. I believe if the premier of British Columbia or if representatives from British Columbia were here — and senators from British Columbia may recognize this — there has been some debate about the inclusion of property taxation as part of the fiscal equation and around equalization. Today, I believe that British Columbia is our second largest producer of natural gas — Saskatchewan now being the third largest producer and Alberta being number one — and has a significant interest in non-renewable resources. British Columbia, as we all know, is well endowed with a large, renewable resource base.
At the same time, I cannot speak specifically to the detail of the actual impact of the cap and this provision. It may or may not have some effect on British Columbia. Much is determined by the commodity price on a day-to-day basis and, because these prices are volatile, this may change for British Columbia. In Saskatchewan's circumstance — and by everyone's calculations — the cap means about $800 million of revenues being clawed out of the province and not available to the people of Saskatchewan. I know that for a fact.
In terms of First Nations and treaty, we, in Saskatchewan, have developed a respectful partnership with our First Nations people in endeavouring to meet fully the right of treaty. We hold treaty sacred because, to speak to Saskatchewan's circumstance, we are all treaty people.
Senator Dyck: Yes.
Mr. Calvert: We have each signed a treaty. Obviously, there are points of disagreement and agreement in the implementation of treaty. With regard to treaty land entitlements, we have moved a significant way ahead. We are struggling with our First Nations and Aboriginal communities around issues such as duty to consult as we develop those resources. We have recently taken unprecedented steps in Saskatchewan to take up the responsibility for issues such as post-secondary education. In the past, we always argued that these issues were the responsibilities of the national government. We cannot wait for the national government. We are concerned about the Kelowna agreement and where that went. We are engaging more, and taking those same natural resources and providing them directly to First Nations for education, child services, and so on. I am pleased to report that we have had a good relationship but there is much yet to do.
The Chairman: Next on my list is a senator from Manitoba, your neighbouring province, Senator Stratton.
Senator Stratton: Thank you, Mr. chairman. You amaze me.
Premier, welcome; it is good to see you.
Being from Manitoba, next door to you, I am somewhat taken aback with you being here today because Manitoba is not sitting on oil. It is not sitting on potash or on uranium. We do not have those resources. When I see our premier, who is an NDP premier, in support of this budget, and in support of what is taking place with equalization, I find it hard to rationalize why our province can be satisfied with the deal that has been struck, and that your province, sitting here on top of oil, uranium and potash, virtually awash in money, is having a problem with it.
I would like to talk to you about where you are coming from. We have heard from some of the Saskatchewan representatives in Ottawa — and I think it was your finance minister who appeared before this committee not long ago — that you are running television commercials here in Eastern Canada that Saskatchewan is doing well economically. In The Globe and Mail today, I came across an article entitled "Saskatchewan beats the oil drum in the U.S.'' The article states that "Saskatchewan's Industry and Resources Minister Maynard Sonntag . . . on a four-day trade mission to Washington, D.C, and New York. . .'' was quoted as saying that he wants Americans to view your province like Alberta. He is quoted in the article as saying, "We see in this venue. . .an opportunity to sell our positive message.''
He is also quoted as saying:
The challenge we face is that the U.S. doesn't know enough about Saskatchewan's potential. . .We think our economy is hotter than the weather here in Washington.
From another story in today's Star Phoenix in Saskatoon, it looks like things have been going well. Minister Sonntag even remarked:
It has been extremely positive. Some have been surprised by how dominant a player Saskatchewan is.
I think that is great news for your province and for all of Canada, because you will be helping Manitoba and I thank you for that. However, it has me perplexed. You came to Ottawa and you appeared before the House of Commons Standing Committee on Finance last month and you projected a different message. Instead of celebrating Saskatchewan and comparing it to Alberta, you made the case that Saskatchewan is more like Manitoba. I look around and I say, "That cannot be possible.'' Oil, potash and uranium — how can you do that?
Here is a comparison. In the Commons Finance Committee, you said:
Reasonable people living in Yorkton, Saskatchewan, look next door to our neighbour and good friends in Manitoba. We see similar economy. We see very similar population. We see a very consistent prairie experience.
The question that begs to be asked is this: Why is this image of Saskatchewan, which your government is projecting, different in Washington and different here today? I have to ask that, Mr. Premier, because I come from Manitoba. I cannot understand it. You are $800 million richer today than you were under the previous government. Why are you sitting here telling me, someone from Manitoba, that you are being hard done by?
Mr. Calvert: Thank you, senator, I am glad you have raised these issues. I have heard this same argument from some of your government colleagues, who are supposed to represent Saskatchewan in the House of Commons on the government side. Thank you for the promotion of Saskatchewan. I am pleased. I was in Washington about two years ago and spoke to the Vice President of the United States, in his office, about the energy potentials and what is happening in Saskatchewan. I have been to the New York Stock Exchange and I am pleased that you have been reporting to this group of senators and those who might be paying any attention here today about what is happening in Saskatchewan. There is no difference between the story I tell here, the story I tell in the Commons Finance Committee or in Washington, Regina or Ottawa. You bet Saskatchewan is on a roll. You bet we have been developing our natural resources, despite, if I may say, horrendous debt that was heaped on the people of Saskatchewan by a former Conservative government. We have paid down immense portions of that debt with no assistance through a fair equalization formula — through none. I mentioned Yorkton, Saskatchewan, earlier, as you did. I invite you to come to Yorkton and come with me to the coffee shop, as I did yesterday, to explain to the people of Yorkton, Henry and Martha at the coffee shop, how it works and because of the established definitions of "fiscal capacity,'' how it is that the people of Manitoba will receive $2 billion next year.
Senator Stratton: It is $2.1 billion, I believe.
Mr. Calvert: You have corrected me, thank you. Manitoba will receive $2.1 billion in federal transfers, whereas the people of Saskatchewan will receive zero. The argument must be that the fiscal capacity of Saskatchewan is that much greater than the fiscal capacity of Manitoba. I do not diminish the fiscal capacity of Manitoba in that regard. Manitoba has a strong economy, and good on Manitoba for building that strong economy. Manitoba, of course, may not have potash but there is some and they are developing it. There may not be oil but there is some, and my good friend and colleague, Gary Doer, is developing it like crazy. The people of Manitoba are developing their renewable energies in a significant way. They have the financial strength of Winnipeg. Good on Manitoba, you have built financial strength. You have the great potential of Churchill. You may not have as much potash or any uranium but the people of Manitoba enjoy a tremendous hydro resource that is simply not available to the people of Saskatchewan, which resource, senator, as you well know —
Senator Stratton: We will export it to you, sir.
Mr. Calvert: There is great potential. Let us look at some east-west and north-south transmission. Please come to Yorkton and explain to Henry and Martha at the coffee shop how it is that the fiscal capacity of Manitoba is so significantly greater that the people of Manitoba should receive $2.1 billion, which is about a third of our provincial budget, by the way, and the people of Saskatchewan should receive zero.
Senator Stratton: I will reply to you in this way. When Gary Doer took over as the Premier of Manitoba, the federal equalization payments were 31 per cent of the budget. They are now 36 per cent to 40 per cent of the budget. That is what is happening in Manitoba. Manitoba is not doing well economically by that basic comparison only. It is not doing well economically because the dependency on Ottawa is ever-increasing, and that is wrong. I put right at the foot of Premier Doer the fact that the requirement for money from Ottawa has gone up six to ten points with Mr. Doer running the province. How can you compare Manitoba to Saskatchewan? You cannot compare on that basis. What percentage is required from Ottawa for your provincial budget? How much do you get?
Mr. Calvert: Senator, I do not think the majority of the people of Manitoba share your view because they recently re-elected Gary Doer in significant majority. The people of Manitoba think Mr. Doer and his government are doing some pretty good work.
The Chairman: I remind honourable senator that we have Bill C-52 to deal with and only 25 minutes left. Many senators are interested in understanding more about the bill.
Senator Murray: Zero inclusion of natural resource revenues in reckoning the fiscal capacity of a province is a principled position — the principle being that these are like the sale of a capital asset and non-recurring. The principal academic proponent of that concept was Professor Boessenkool and the principal political advocates, until recently, were Mr. Harper and probably still, Mr. Layton. I like to think that the 100 per cent inclusion, which this committee recommended twice, and the provincial-territorial panel recommended, is also a principled position — the principle being that it is all revenue and all goes into the Consolidated Revenue Fund and it is used for the same purposes as other revenues. The 50 per cent solution, which the federal government has now proposed, is not principled so much as it is pragmatic. The last thing I would do is put words in your mouth but the impression I have from listening to you is that, however reluctantly, you have reconciled yourself to the 50 per cent solution and that the damaging part is the so- called "Ontario cap.'' My question is: Have you and your officials calculated the numbers? We know what your entitlement will be under equalization with the cap. What will it be under the 50 per cent inclusion without the cap? What is the difference?
Mr. Calvert: I will turn to Mr. Jones for the numbers.
Dylan Jones, Assistant Deputy Minister, Department of Government Relations, Government of Saskatchewan: Obviously, it needs to be said that it depends on prices, which vary. It is in the neighbourhood of being able to retain $500 million to $600 million, as opposed to having the full confiscation of the $800 million.
Senator Murray: Would that be the difference in your entitlement under equalization?
Mr. Jones: Under the proposed bill, we would be entitled to $800 million but there is a separate ad hoc calculation, which means that all of it would be confiscated. If you eliminate the cap, get rid of the zero-per-cent option so that there is one formula for everyone — 50 per cent no cap, our entitlement would be in the $500 million to $600 million range with no confiscation.
Senator Murray: The practical problem with the zero inclusion is that when we crunched the numbers here in committee on two occasions and when we did it in the provincial-territorial panel, there is no doubt that Saskatchewan comes across a big winner and, to a somewhat lesser extent, British Columbia and Newfoundland and Labrador. All the other recipient provinces take a hit. The pie is smaller and their share of the pie is smaller. I do not know whether you want to comment on that but I will move briefly to the subject of vertical fiscal imbalance and the effect of moving in this budget to equal per capita transfers under the Canada Social Transfer and, ultimately, as you know, under the Canada Health Transfer.
When your minister of intergovernmental affairs was before the committee, he made a powerful presentation on that. It is on the record and likely we will use it in preparing our report.
I do not see that biting right away, so perhaps I do not see the urgency in trying to amend the bill right away if I thought that, as things played out over the next couple of years there would be an opportunity for the government to rethink it. Would you comment on that?
Mr. Calvert: Thank you, senator. This debate needs to be couched in the definition of "fiscal capacity.'' We are arguing at all times what should and should not be excluded. We have always said that if you give a full and fair inclusion of every fiscal capacity then, fair enough. However, for many years we have included these non-renewable natural resources as almost the defining category of fiscal capacity in our case.
Senator Murray: You were one of the five provinces.
Mr. Calvert: We were one of the five, with Alberta excluded, and that leaves us in a volatile position. We had $15- per-barrel oil and now we have $60-per-barrel oil. The market is so volatile. When we try to define long-term planning under such volatility, it truly becomes problematic.
We have borne the brunt of the loss because of this volatility. We are in, we are out, and so on, and we want something much more stable.
Along comes a national leader and a group of members of Parliament from our province who say the solution is 100 per cent exclusion and that is their promise to us. Also part of the promise is that no other province should suffer.
Remember, this promise is being made by Mr. Harper, a man whose intellect I respect. If we do not share a political view, I respect his intellect, and he comes from the oil patch. No one should tell me that he did not know what he was promising; that, yes, there will be complications; and yes, when there is a certain volatility in the prices, the fiscal capacity of Saskatchewan may, in fact, using this definition, exceed the fiscal capacity of Ontario. That may happen, using these definitions. However, the promise was made in spite of that; in full knowledge of that.
When someone comes along and says this is what we will do and it meets exactly where we believe it should go, we tend to believe that promise and expect to see it reflected in the budget, without a cap that causes the promise not to be kept. It is in the debate about fiscal capacity where we have this definition issue.
You have asked me to reflect on the vertical and the per capita. We have understood the great concerns of Ontario, for instance, in terms of per capita funding and how Ontario is asked to provide a similar level of post-secondary education, tuition fees and so on, with what arguably was an unfair system, so we see some change per capita. I want you to know, senator, what this means to us.
Senator Murray: I know what it means. I said this yesterday, and I will not take up time, but equal treatment of Canadians was equalizing the tax points. I know it was not as transparent, and that was the complaint, but equal per capita on the social transfers is simply not fair.
Mr. Calvert: I did not have an opportunity to address this other suggestion that comes from my federal Conservative members of Parliament who say this is the best budget ever for Saskatchewan. I will tell you as a result of this budget what it will mean on the per cap funding.
Over the course of 2006-07 to 2008-09, Saskatchewan's all-in Canada Health Transfer, Canada Social Transfer and equalization — we do not have an accord — the total increase for the people of Saskatchewan will be $65 million. That is a 6 per cent increase.
I look west to my good friends in Alberta. Their total increase will be $706 million, which is a 31 per cent increase. I have a little trouble explaining Manitoba to Yorkton and I have a great deal of troubling explaining this to Rosetown. How is it that our increase, with this new structure, will be 6 per cent and Alberta's will be 31 per cent? We are on the absolute low end in terms of percentage increases.
The federal Conservatives tell me they have $878 million in the budget. Senators, you must know that of that $878 million, 85 per cent is one-time money. Most of that one-time money would have accrued to the people of Saskatchewan no matter who was in government or no matter where we lived in Canada. There is $180 million dollars committed to a good project, cellulose ethanol development, but the project is not even approved yet and may or may not go ahead.
In light of that, we have seen the end of the Kelowna accord, which would have meant significant new resources, particularly for Saskatchewan's Aboriginal people. We have seen the end of the child care agreement, which we had signed. That represents millions and millions of dollars. On and on it goes. When I am told this is the best budget ever, I do not know what kind of premier would accept that view sitting down.
We try to see the balance and we understand other Canadians' needs. We understand the need for a per capita move; it is more transparent than the tax points. However, we want fairness on equalization. Our member of the federal cabinet, Carol Skelton, when she was in opposition, said, "We do not want a special deal. We only want what is fair.'' That has not changed. I wish that Ms. Skelton would remember that point of view now that she is in the federal cabinet.
The Chairman: The government sponsor of the bill in the Senate, Senator Angus, is next.
Senator Angus: Welcome, Mr. Premier. I want to congratulate you, sir. As I understand it, you are proud of the fact that, under your leadership, your government has brought Saskatchewan from a "have-not'' to a "have'' province. Am I correct?
Mr. Calvert: If you define "have'' and "have not'' in terms of receipt or non-receipt of equalization, then yes, we are a have province, and we are proud of this.
Senator Angus: I refer to the recent Speech from the Throne in Saskatchewan. I think you indicated, or it was indicated on your behalf, that your government was committed to ensure that Saskatchewan maintains its hard-earned designation as one of only three have provinces in this nation, and that you proudly reflect on this accomplishment.
That is what I was saluting you for. Let us put it into perspective. I want to ensure I have the right numbers. Many numbers are flying around these days and everyone has their own tendency to spin them.
I understand that in 2004, Saskatchewan had, in round numbers, a GDP of $40 billion; in 2005, GDP grew to 43 billion; in 2006, GDP was $45 billion, an increase, by my calculation, of about 12.5 per cent; and that the outlook for 2007 is for an even further increase. Would that be a fair comment?
Mr. Calvert: That would be fair. Obviously, our economy is growing, and the GDP grows with it, much of that, of course, driven by commodity prices.
Senator Angus: In answer to Senator Murray's last question, you referred to allegations by the Stephen Harper government and by Minister Flaherty that this budget is the best budget deal in the history of Saskatchewan. I ask you again because I have the sense you did not fully agree with that.
Mr. Calvert: You are perceptive, senator.
Senator Angus: Can you tell me when there was a better deal?
Mr. Calvert: I do not believe we will build a nation on determining who received the best deal in any given budget. I am here to say to the Senate of Canada, as I have said to the Finance Committee and as I say to my own people: We want a fair deal for every Canadian. I want an equitable deal for the people I represent. Right now, I do not think there is a Canadian that could look at a circumstance where a cap is imposed in a federal budget that singles out one people in the country and call that fair, particularly when this is not only for this budget year but for continuing budget years. The people of Saskatchewan, who I am proud to represent here and everywhere I go, are receiving an unfair treatment.
It is not who received the best deal this year. This is not Monty Hall's Let's Make a Deal and let us see who can make the best deal. I do not want to continue to compare my province to Newfoundland and Labrador, Nova Scotia, Manitoba or Ontario. We are building the economy and we have seen real progress.
We can become a have province by selling off our assets, which is what we are doing. Remember, we are selling our assets. We need to maximize the benefit of those asset sales. We can only sell the asset once, and if some of that benefit is clawed back and we cannot reinvest it in our people, whether it be through education, infrastructure or paying down more debt, whether through investing, for instance, in new forms of energy for the next generation, we are shortchanging that future generation.
Though we have proudly achieved the status of "have'' using the equalization definition, as strange as that is, there are some people in my province who are not yet living in a "have'' world. I can show you communities in Saskatchewan where the housing is deplorable. I can show you neighbourhoods of our cities where young people do not receive the kind of services and encouragement they need. It is not "have'' for everybody. If we are not maximizing the benefits of natural resources for the children and northern communities, to whom the resources belong, and if I am not standing up for them, we are not doing our job in this generation.
I try to set aside best deal/worst deal and look at the long term for our province. We have a tremendous resource base, and I want to ensure that resource base serves our people, not only for today but for the next several generations.
Senator Angus: Premier, all those things you have said are noble things. I happen to be a member of the Conservative Party, and I share the desire for a better deal for all Canadians and to improve our quality of life in any way we can, particularly for the poor and the downtrodden, which situation, by the way, exists in every province.
You can walk down a main street of Toronto, Montreal, Halifax or Winnipeg and see homeless people there, and it sends shivers up your spine. I put it to you that Saskatchewan will receive more per person in this budget than any other province in Canada. I am sure you will not disagree with me on that claim because the numbers are clear. However, if the budget does not pass, instead of receiving $226 million in equalization payments Saskatchewan will receive nothing.
Mr. Calvert: I expect, senator, the budget will pass.
Senator Angus: I see. This is all fluff to support your lawsuit? I am trying to figure out what the issue is.
Mr. Calvert: I take a little offence in a senator of Canada calling what I am saying fluff. As I take a little offence from your Prime Minister standing up in the House of Commons and saying to the people of Canada that what Saskatchewan is doing is "absurd.'' Then, a minister of the Crown comes to my province, Gary Lunn, who says what we are doing is nuts. Then, my own cabinet minister in the press says we are juvenile.
Senator Angus: I am understated then.
Mr. Calvert: You are understated, senator, and I appreciate that.
Senator Angus: If you are offended by it, I have stronger language I can use. If it makes you feel better, I will defluff and carry on.
Mr. Calvert: You should defluff. I am trying to stand up for the people of Saskatchewan because we do not have a Conservative in the House of Commons who will. I expect the budget will pass. It has passed the people's house; it will pass.
Senator Angus: Very good.
Mr. Calvert: I will be here for the next one and the next one and the next one until I see some fairness in the country for the people of Saskatchewan. That is why I am here; not for fluff.
Senator Murray: We are open to amendments, however.
Mr. Calvert: Those are your amendments, and that is your right, senators. I respect your right to amend. I am sure you can find appropriate amendments that will make me happy.
Senator Angus: Premier, I think it is great; you are doing your job. This business of the lawsuit, I will leave all the adjectives aside. The issue, as you say, is fairness. It has nothing to do with other different legal criteria. You have talked about broken promises, et cetera.
It is the nature of politics. When you run the NDP platform you say X, Y and Z. To the best of your ability, when you are power, you bring in your program. That does not give a legal right to the people of Saskatchewan if you do not put everything in that was in your platform. Would agree with that?
Mr. Calvert: Absolutely: We are not going to reference to the Court of Appeal or any other court on the basis of a promise made and a promise broken. The court of public opinion will deal with that one.
We are going on a constitutional reference. You will know that references are not often, but it is not infrequent that references have been made to the courts by governments to ask the courts to test. I do not pretend to be a constitutional expert. This morning constitutional experts in Saskatchewan were answering questions from journalists. In essence, we believe the constitutional provision from the 1930s that indicates natural resources are the property of the people of the province. There is some argument that what is happening in Canada here today is a means by which, through process, we are changing that provision.
Nevertheless, we believe that provision still exists and needs to be defended, that this current budget may fundamentally violate that principle by its outcomes. I would also argue that the Constitution of Canada is based on a principle of fairness and equity. When one province is singled out in this way — as we are and can demonstrate — that any principles of fairness and equity are lost. We will ask the court to make a determination.
We will not say,did the Prime Minister break his promise or not? I know what the judge will say; he will say "yes.'' That is not likely to happen.
Senator Angus: If you appointed that judge.
The Chairman: I have given you more leeway than any other senator here in terms of time. There are senators who are interested in Bill C-52.
Senator Angus: Let me finish on this legal procedure.
On the legal procedure, it is not technically true that the Province of Saskatchewan is going to court to sue the federal government for X dollars. That is not what is happening at all.
Mr. Calvert: Not at all.
Senator Angus: You will ask a panel of Saskatchewan Court of Appeal judges to determine what the criteria is, or should be, to determine what fair and equitable treatment is. Am I right? There is no other lawsuit where you are trying to sue for $800 million?
Mr. Calvert: No, we are not.
The Chairman: Order, please.
We will try to deal with Bill C-52. I understand there are four minutes left. Eight senators would like to ask questions. Unfortunately, they will not all have an opportunity to do so.
The next senator is Senator Eggleton from Toronto.
Senator Eggleton: Premier, you have made compelling arguments. You articulate them well. In spite of the comments from the sponsor of the bill, Senator Angus, I think you have every right to expect the Harper government to live up to its word.
You and a couple of your fellow premiers from Atlantic Canada say the Harper government is not living up to its word. Of course, we had Mr. Flaherty here yesterday saying they are. Unfortunately, it may result in a court determination.
I want to ask you about two things; first, amendments. We had Premier MacDonald here yesterday who suggested some amendments. I do not know if you are aware of those suggestions. John Crosbie was here last night, and he suggested a one-line amendment. Do you have any suggestions you want to leave with us in terms of amendments?
Mr. Calvert: Senators, I did not come with a recommended course of action for you to take. You will know that I share the view of many that the House of Commons has made the decision. The political fight I need to have is in the House of Commons; that court of public opinion. That is where the battle needs to be waged.
The work you do here is significant, particularly the committee work. Ultimately, the House of Commons has made its decision. Whether I like it or not, I respect the institution of the House of Commons. I have a job to do in fighting to change the make-up of the House of Commons that I believe will more accurately reflect the priorities of Saskatchewan people or my own political and other priorities.
You will wrestle with these issues.
Senator Eggleton: Fair enough.
Let me put on my Ontario hat for a moment, because I also listen to my premier. He is concerned that a lot of money has gone into equalization; about a 30 per cent increase over the last four years. Mr. Flaherty said yesterday there will be another $39 billion over the next seven years. The premier is concerned that a lot more money is coming out of Ontario. Ontario will not cry poor; nobody would believe that.
Ontario, like other parts of the country, has a lot of challenges. We have faced the fact that the per capita grants — the CST in particular — are $86 per capita short in Ontario, which means less going to education and social issues. He has expressed a number of concerns. Also, according to one institute for competitiveness and prosperity, Ontario ranks 13 out of 16 in the largest competitive jurisdictions in North America.
That is not healthy for Ontario, and it is not healthy for the entire country. We obviously want to keep the Ontario economy strong so we can continue to contribute to equalization payments and continue to provide the kind of jobs and prosperity that we need throughout the country.
Premier McGuinty was more or less happy. I do not know that anyone is totally happy with the equalization formula; it has been a mess for a number of years. The O'Brien formula has the cap, as you mentioned. Then, on top of that, we had the per capita adjustment that was also made in the budget.
How do we reconcile this concern in Ontario with what you are talking about today?
The Chairman: Mr. Premier, we promised that we would allow you to get away at the end of one hour. It is precisely one hour. If you would like to reply briefly to the question or reply in writing, that would be fine.
On the list and hoping to talk to you and to react to the points you have made are my deputy chair, Senator Nancy Ruth from Ontario, Senator Ringuette from New Brunswick, Senator Di Nino from Toronto, Senator Mitchell from Alberta, Senator Merchant from Saskatchewan, Senator Peterson from Saskatchewan and Senator Moore from Nova Scotia, all of whom wanted to enter into dialogue with you. You are a popular spokesperson. We appreciate your having been here. We wish you well in representing your province.
Mr. Calvert: Thank you, senator. In some ways, time, tide and airplanes wait for no person, and as much as I appreciate your company I would like to be home for events tonight.
In response to Senator Eggleton, there is no doubt in my mind that we are challenged, as we are always in Canada, to keep this broad federation with our broad interests moving ahead together and in an equitable and fair fashion. We have understood some of the significant challenges faced by Ontario, particularly around post-secondary education and other issues. We see what is happening in Ontario in the manufacturing sector, and in Windsor. The pain of Windsor has to be the pain of Weyburn. We recognize that.
We do not find the solution, in our view, by nationalizing the natural resources that belong to the people of Saskatchewan. There is a misunderstanding about equalization. There is the concept that two or three provinces are paying in and everyone else is drawing out. The fact is that we all pay in. We all contribute to the federal resource pool. In division of that federal resource pool, there needs to be systems and processes of fairness and equity that do not diminish the opportunities for one while forwarding the opportunities for another.
The competitive issue is significant for us in Saskatchewan. To the west of us is the hottest economy in North America. We must be competitive. We understand about competition.
I will finish on this item. Surely, we could find a better way. We struggle. We have been through the O'Brien report. Surely, we can find a better way than the people of Saskatchewan going to the courthouse and being challenged to do so by the Prime Minister of Canada. There must be a better way.
The Chairman: Thank you, Premier Calvert, Mr. Perrins and Mr. Jones, for coming here.
The committee continued in camera.
The committee resumed.
The Chairman: We resume our meeting on our continuing examination in depth of Bill C-52, to implement certain provisions of the budget tabled in Parliament on March 19, 2007.
This afternoon, it is my pleasure to welcome and introduce our panel speaking on the area of income trusts as they relate to Bill C-52. From the Canadian institute of Chartered Accountants, we have Kevin Dancey, President. From the Coalition of Canadian Energy Trusts, we have Marcel R. Coutu, President, Canadian Oil Sands Limited. From the Canadian Energy Infrastructure Group, we have Robert Michaleski, President and Chief Executive Officer, Pembina Pipeline Corporation. From Canada's Association for the 50 Plus, we have Bill Gleberzon, Director of Government Relations.
Gentlemen, if you can proceed in the order I have introduced you, that would be convenient for us, unless you have made another agreement amongst you. We will start with Mr. Dancey.
Kevin Dancey, President, Canadian Institute of Chartered Accountants: Good afternoon, and thank you for inviting Canada's chartered accountants to appear before your committee today. I represent more than 72,000 CAs who work in public and private businesses, the public sector, academia and public accounting firms across Canada.
I am proud to be part of a profession that is a leader in its field, both in Canada and internationally. The efforts of our members and our profession as a whole benefit Canadians, Canadian businesses and our capital markets. Collectively, the work we do contributes to Canada's reputation as a good place to work and do business.
I am here today to share our perspective on the federal budget as outlined in Bill C-52 and, if requested, to provide comments on areas of the bill that are within my expertise. Let us start with the profession's overall view of the content of the budget.
At the time the budget was tabled in the House of Commons in March, I told several members of the media that Canada's CAs gave it a solid B grade. This continues to be our view.
Canada's CAs looked to the federal budget process as an opportunity for the Government of Canada to take measures to increase economic growth and to generate jobs while effectively managing our national financial accounts. As such, we looked at three areas when assessing the budget: debt management, taxes and program spending. These three criteria are the primary tools we believe must be balanced effectively to promote long-term growth for the Canadian economy and prosperity for all Canadians.
First, let us look at measures in the budget that deal with the management of Canada's debt. Canada's CAs believe the government needs to continue taking action to reduce Canada's overall debt. We called for acceleration in the reduction of Canada's debt in our pre-budget submission last fall. We believe the $9.2-billion debt reduction, combined with the proposed commitment to retire another $3 billion of debt in each of the next two years, is a significant step. This is particularly true given current expectations for increases in interest rates. Reducing the federal debt, which is the result of accumulated deficits, will give the government the ability to generate significant tax savings in future years. For example, the tax-back guarantees commitment to redirect debt interest savings to personal income tax reductions is a significant step toward making our tax system fairer and more efficient. Yet, there is more to do on the corporate tax front to ensure our businesses remain competitive in a global market.
The overall tax regime is the second criterion upon which we assess the measures in this budget. As I mentioned, Canada's CAs have been clear in our call for changes to Canada's corporate tax regime that would ensure Canada remains competitive with other countries globally. Canadian businesses are the engine of economic growth and employment in Canada. Ensuring we have a tax system that supports their growth is critical to the prosperity of all Canadians.
We believe the incentives for business investment in manufacturing and processing equipment provided for in the budget are important. While disabling tax avoidance plans that utilize inappropriate offshore tax structures is an important goal, it is more important that legitimate business growth not be undermined by overly restrictive tax policy. For this reason, we support the government's efforts to review its position related to tax deductibility related to foreign investments by Canadian companies and to look at the area of international tax policy as a whole.
Overall, however, we were disappointed that there were no broad-based tax cuts in the budget. To foster the growth and competitiveness of our economy, Canada needs a tax system that is broad and has the lowest rates possible. As such, we continue to believe the government must lower overall taxes on all Canadians and, in particular, on Canadian businesses to ensure the future prosperity of our country.
The last criterion we looked at when assessing this particular budget was program spending. The government said in this budget that overall growth in program spending was 8 per cent this year and forecast that the rate of increase in spending would be lowered only to 5.6 per cent in fiscal 2007-08. In addition, department operating costs are estimated to increase almost 10 per cent this year and next. This program spending level is simply too high. The government has said it does not expect growth in program spending to reduce to the rate of inflation, which is the target this government set as its goal, until fiscal 2008-09. This is a concern. Program spending should not exceed the rate of inflation adjusted for population growth if Canada is to achieve its economic and fiscal goals. We continue to urge the government to address this issue immediately.
I hope this provides you with a helpful, high-level summary of our viewpoint. I would be happy to answer any questions you may have.
[Translation]
Marcel R. Coutu, President and Chief Executive Officer, Canadian Oil Sands Limited, Coalition of Canadian Energy Trusts: Mr. Chairman, I am the President and Chief Executive Officer of Canadian Oil Sands Trust, the largest trust in Canada. I would like to thank the members of this committee for inviting me here today.
[English]
On behalf of the Coalition of Canadian Energy Trusts, I commend the Senate for holding these hearings on Bill C- 52 and offering some sober, second thought regarding the so-called tax fairness plan of the Conservative government. When the Conservatives broke their promise not to tax trusts, it created much hardship for millions of hard-working Canadians, but the government continues to ignore their concerns and has inserted their broken promise into the 2007 budget.
Our coalition fails to understand how the government arrived at its tax leakage calculation, its primary justification for taxing trusts, but the Department of Finance refuses to provide its calculation, if it exists at all. In December 2006, we presented a detailed, comprehensive report on the importance of energy trusts in the Canadian oil and gas industry. We have yet to receive a response from the Department of Finance, which indicates to us that the government has chosen to ignore the concrete facts presented by companies that are generating billions of dollars of wealth for tax- paying investors and employing thousands of Canadian income-tax-payers.
We believe our position is beyond dispute and that energy trusts should be allowed to exist as they were prior to the so-called tax fairness plan. We are providing copies of this report to each member of the committee, and the House of Commons Standing Committee on Finance has also received the report previously.
If Canadians thought they should believe this decision was based on sound public policy, they now have evidence not to.
The House of Commons Standing Committee on Finance heard testimony from government selected witnesses, and ironically, many of them believe there is a role for trusts in Canada's capital markets. Let me highlight some of those comments.
Domenic D'Alessandro noted that real estate and royalty producing assets such as energy trusts are the business that the current tax regime was designed for. He said that energy trusts have a strong case for exemption. He went further to say at his annual general meeting on May 3 that we should be concerned about foreign takeover of Canadian companies, especially in our resource sector. The trust model mitigates that risk.
David Dodge said, ". . . on balance, income trusts make markets more complete and somewhat more efficient . . . the income structure may be very appropriate where firms need only manage existing assets efficiently. That is exactly what energy trusts' role is in maximizing production from Canada's mature oil and gas producing assets.''
Kevin Nolan, by inference, declared that there are businesses suited to the trust structure. We believe that this is the case for energy trusts. Kevin Dancey said "trusts have a role to play in rounding out Canada's capital markets.'' We agree.
Now the government has heard these inconvenient truths from the expert witness that they invited to the House of Commons Standing Committee on Finance. These individuals say trusts have a role to play in Canada's capital markets. Contrary to this advice, the government's proposed tax measures will force trusts to disappear from Canadian capital markets.
Meanwhile, the government has not been able to provide convincing data to support the claim that income trusts cause tax leakage. Expert witnesses before the committee came armed with evidence to the contrary, suggesting that any potential tax revenue loss essentially amounts to a rounding error. Our own research shows that government revenues are enhanced by the energy trust structure.
During the past five years, energy trusts have generated greater taxes than they would have as corporations. For 2006, we have estimated that our $8 billion of distributions will generate in the order of $2.4 billion in taxes. Moreover, for 2005, our data shows our sector will have generated an estimated 30 per cent of the taxes collected from publicly traded Canadian entities in the oil and gas sector while representing only 16 per cent of the revenue.
We have stated repeatedly that eliminating energy trusts will reduce production and will reduce government revenues. Canadian management of trusts has been focused on maximizing production from Western Canadian properties, but the increased cost to capital imposed by this tax will alter the economics of these mature properties, leading to reduced ultimate recoveries of Canada's oil and gas resources.
Foreign acquisitions are also a real threat. U.S.-based master limited partnerships, MLPs, have made overtures to acquire some of our member properties, and others have been looking seriously at moving mind and management of their organizations to the U.S. The revenue losses to governments will be significant relative to retaining the status quo of the energy trust sector.
Oddly enough, the Department of Finance refuses to acknowledge that income trusts or flowthrough vehicles even exist for the energy sector in the U.S. However, Cameron Renkas from BMO Capital Markets told the House of Commons Standing Committee on Finance that in 1997 the U.S. amended its tax code. He testified that:
In the U.S. today, there are 214 publicly traded flowthrough entities . . . with a combined market capital of $475 billion and growing.
Later, he said:
From what I have found, the minister is wrong.
Today, four months later, that number of is now 225 publicly traded flowthrough entities.
We hear a great deal about Canada's lagging productivity and the need for corporate Canada to be more innovative. Since 1986, the energy trust structure has evolved into an ideal model for Canada's maturing hydrocarbon basins through our focus on maximizing recovery from mature oil and gas pools. Our report clearly shows that members of our coalition have substantially increased spending on these assets resulting in significant reserve and production additions. We have also repatriated approximately $10 billion of assets from foreign control over the past 10 years.
Despite record levels of drilling, Canadian conventional oil production is falling and natural gas production has hit a plateau, particularly in the Western Canada Sedimentary Basin.
While we are not suggesting that the entire energy sector should be structured as trusts, we believe the traditional corporate growth model is not sustainable for all the assets in a declining producing region.
Moreover, as the company I have the privilege to lead clearly demonstrated, the trust model also has a key role to play in the energy sector beyond maximizing extraction from conventional resources. It also is an ideal vehicle for long- term investment in new energy resources such as the oil sands. Canadian Oil Sands Trust was an early investor providing essential development capital in support of high recovery technologies and processed at a time when it was an open question as to whether oil sands production would ever be viable. Our competitive cost of capital has also allowed us to be a competitive Canadian acquirer.
Another impact of the October 31 announcement is that Canada's credibility in the financial markets has been significantly harmed. We are no longer looked at in the same positive way by foreign investors. At a time of increased globalization, this is a severe black mark on this nation's reputation and an added cost of all our capital due to the higher perceived political risk. We expect far better from our government.
In conclusion, our position regarding government actions can be summarized as follows. Energy trusts do not cause tax leakage. Taxes are not avoided but are transferred to and paid by unitholders at generally higher rates. Energy trusts enhance oil and gas productivity and oil and gas recovery. U.S. energy trusts in the form of MLPs and limited liability companies, LLCs, not only exist but are expanding rapidly and reversing the trend of cross-border acquisitions. Canadian junior oil and gas companies are struggling today due to materially reduced access to capital resulting directly from the trust taxation announcement. The lower cost of capital for the trusts is not due to tax leakage but is a function of market demand for yield and a management governance model that requires disciplined decision making between profitable investment or cash redistribution, which is largely redeployed in the Canadian capital markets. The increased cost of capital imposed on the energy trust sector is crushing the economics of important enhanced recovery projects, including those utilizing carbon dioxide capture and storage.
We believe it is only reasonable that the Minister of Finance exclude Canada's energy trusts as he did for real estate investment trusts, REITs. This issue is no different than his need to revisit the mistake he made on foreign interest deductibility for Canada's large corporations. Individual Canadians deserve the same consideration afforded to large corporations.
We would appreciate the Senate not allowing trust legislation to be buried and thus carried in the 2007 Budget vote by Parliament. Trust legislation is a long-term, fundamental energy industry policy and should be the subject of consultation with producers. It deserves individual attention.
[Translation]
We believe that the Senate can meet this objective by recommending that energy trusts be excluded from Bill C-52. It is never too late to do things right!
The Chairman: Thank you very much, Mr. Coutu. Mr. Michaleski?
[English]
Robert (Bob) Michaleski, President and Chief Executive Officer, Pembina Pipeline Corporation, Canadian Energy Infrastructure Group: Thank you for the opportunity to speak with you this afternoon. I am here on behalf of the Canadian Energy Infrastructure Group, CEIG. The CEIG represents 10 infrastructure companies that manage energy pipelines, storage facilities and processing plants. We process, transport and store a significant portion of Canada's oil, oil sands and natural gas production and petrochemical feed stocks. Our assets represent long-term investments that provide steady fee-for-service income, not unlike real estate investments. We are all income trusts or similar flowthrough entities proudly headquartered and managed in Canada.
The proposed tax on income trusts has the potential to impact profoundly this important sector.
Combined, the CEIG represents a market capitalization exceeding $12.5 billion dollars and represents about 6 per cent of all Canadian income trusts.
Our member firms deliver over 1 million barrels of oil per day to the market. That is half Canada's oil production. We also deliver over 300,000 barrels per day of Canada's natural gas liquids production and transport 2.7 billion cubic feet per day of Canada's natural gas production. We play a central role in the processing and storing of gas and natural gas liquids. As you can see, the companies we represent are key to Canada's energy supply.
The income trust structure is ideal for Canadian energy infrastructure assets and has been the catalyst for the investment and growth in long-life physical assets that are critical to the development of new energy supplies in Canada and to establishing Canada as a world energy super power. This business model is based on long-life physical assets with steady and reliable cash flow streams. Similar to the REITs that have been exempted from this proposed new tax, energy infrastructure trusts represent stable, long-life hard assets. Energy infrastructure assets make substantial investments in asset development. Consider this: Collectively, the CEIG membership has spent $1.1 billion on expansions over the past five years, has planned expenditures of $4 billion over the next three years and has acquired $3.9 billion of assets, of which $1.8 billion of those assets were repatriated from foreign owners. The trust model keeps critical energy infrastructure under Canadian ownership.
Further, the long-term nature of our investments requires a stable, long-term competitive fiscal regime. At the time of the government's surprise October 31 announcement, our members had made long-term decisions and commitments on the basis of the existing taxation regime. Multiyear shipping and processing contracts, some of which extend to 25 years and beyond, are in place, and long-term investments and financing decisions have been made in good faith based on a promise made by this government.
Like members of Parliament and senators, the CEIG member companies are accountable to their own constituents. We made business decisions in good faith, believing that the government would keep its word. We are responsible to our unitholders, who are our primary constituents. These investors made business decisions impacting their retirement savings and financial futures based on the promise that this Conservative government made to them prior to taking office and on the campaign trail, a promise that, with the introduction of the proposed policy change, has been broken.
There is clear precedent for treating energy infrastructure uniquely. When the United States made the decision to tax income trusts, they specifically exempted energy infrastructure, recognizing how critical these assets are to energy supply and energy security, encouraging the development of master limited partnerships as flow-through entities. Today, as we are shutting down this valuable business structure in Canada, in the United States it is flourishing, with the market capitalization of the energy infrastructure sector exceeding U.S. $80 billion and growing.
I ask the Standing Senate Committee on National Finance to consider for a moment the impact these proposed changes have on the Canadian energy infrastructure sector. As our businesses exist in an integrated North American energy market, we now find ourselves as a nation in a weaker competitive position. These infrastructure assets connect Canadian energy producers to markets, so impacts on this sector reverberate through the energy industry, the industry that has often been described as the engine of the Canadian economy. These changes will increase the cost to capital, curtail growth and development of long-life assets, and, perhaps more importantly, create a competitive disadvantage with respect to foreign and tax exempt parties.
Already in the energy infrastructure sector, U.S. flow-through entities trade at a significant premium to Canadian counterparts, and today the U.S. entities trade at a yield of 5.2 per cent compared to Canadian entities at 8 per cent.
The potential for takeovers of critical Canadian energy infrastructure owned by CEIG members, by foreign acquirers such as U.S. MLPs, private equity firms and others, has risen dramatically as a result of this erosion of our competitive position. Such takeovers will result in a reduction of the total tax collected in Canada, precisely the inverse of the government's purported reason for implementing the changes on October 31 of last year.
Retaining the trust structure for energy infrastructure is the right thing to do. Our advantages to Canada are substantial. We provide competition with other tax advantage entities. We limit potential foreign ownership, keeping mind and management of our infrastructure within our borders, and we provide access to capital for cost-efficient energy infrastructure. Contrary to the government's claim, we increase tax revenues and are integral to energy supply and policy.
In conclusion, we ask the committee to consider an exemption for energy infrastructure flow-throw entities from the proposed tax fairness plan. In making this request, we refer the committee to the similar exemption given to MLPs in the United States and the exemption given to REITs in Canada. Such an exemption will support Canadian ownership of energy infrastructure assets critical to Canada's energy supply and security. It will also maintain a competitive cost of capital to continue the development of vital energy infrastructure and prevent tax leakage.
On behalf of the Canadian Energy Infrastructure Group, I thank you for this opportunity to present our position to you today.
The Chairman: I hope that we will understand the relationship between the production type trusts and your infrastructure trusts as we go along in the questioning. I do not have it fully clear in my mind, but they are close cousins, in any event.
Mr. Michaleski: They are.
Bill Gleberzon, Director of Government Relations, Canada's Association for the 50 Plus: Thank you for the opportunity to make this presentation. I am joined today by Marguerite Alexander, who is an active CARP member and herself an income trust investor. She will handle the Q and A part of our presentation.
For those who may not know us, CARP is Canada's Association for the 50 Plus, with 400,000 members across the country. We are a non-profit, non-partisan organization. Our mandate is to promote and protect the rights and quality of life for older Canadians. Our mission is to provide practical recommendations for the issues we raise. We are here today to talk on behalf of the investors, particularly older Canadians.
In our brief to the House of Commons Standing Committee on Finance studying income trusts presented in January of this year, CARP recommend that the current income trusts should be exempted from the new tax regime as is the case with REITs. Alternatively, at the least, current income trusts should be exempted for ten years, as occurred in the United States under similar circumstances, after which a 10 per cent tax regime should be imposed. This would give retail investors a chance to readjust and redirect their investments without panic and perhaps recoup a larger portion of their losses.
The correspondence CARP received after the government announced its new policy on income trust reflected profound anger, outrage and disgust at the government's sudden and unexpected turnabout after having promised that the income trusts would not be touched. This correspondence expressed fear and panic over the loss of income that they were counting on to live out the rest of their lives and, at their stage of life, how they were expected to recoup those losses. If the government goes ahead as planned, there will be more loss of income after four years on a regular basis.
We are still receiving correspondence from outraged members. On page two, there is an example that came up a few days ago from one of our members who is demanding that we institute a class action against the government regarding the taxation of income trusts. The changes in effect are retroactive tax laws, something I am sure is not permitted by law. Every member over 50 would gladly contribute to the legal costs, and I am sure that some lawyer would love to take on the case.
The Chairman: There are lots of lawyers here, but they would be in a conflict of interest situation.
Mr. Gleberzon: Many correspondents told us they used the monthly income from those investments to enhance their daily standard of living: They spent the balance of the income after it was taxed. Some had lost large amounts of money, as much as $20,000 to $100,000 or more, through no fault of their own but rather because of the new government's new policy.
Many correspondents told us about themselves. Like all other demographic cohorts, there was nothing stereotypical about them. They ran the gamut in wealth and occupations. Some were retired chefs, taxi drivers, truck drivers or small businessmen who had worked long and hard to accumulate their own personal retirement savings without the benefit of a corporate or occupational pension. Often, their savings were insufficient to meet their daily costs of living, so they invested in income trusts. They also had to augment their retirement income so they would not outlive it, which is one of the greatest fears of older people.
Others were more affluent or had income from a corporate or occupational pension but wanted to grow the retirement income. The income trust structure could also help many baby boomers, who will be retiring, to stay out of poverty. As you know, there has been a spate of articles suggesting that baby boomers are not saving sufficient money for their retirement.
The human cost of a change in policy must not be ignored or forgotten. The Minister of Finance's figures, which were presented to the House of Commons Standing Committee on Finance during his testimony on income trusts, showed that in the year 2006, income trust unitholders or partners paid over three times the amount of income tax that was paid by shareholders. He presented six panels of information and this copy is from The Globe and Mail, in which one of his panels was reproduced and shows the information that I referred to. The opinion that income trust unitholders were not paying their appropriate share of income tax was totally incorrect.
To reiterate, CARP recommends the following changes to the new income trust policy: Introduction of a 10-year extension for the grace period before the new tax regime is imposed, as was done in the United States when a similar situation occurred; imposition of a 10 per cent tax on income trusts after the 10-year grace period; and application of proper accounting standards to income trusts, because there are accusations that they are not engaging in proper accounting procedures. I point out that an industry, not simply the unitholder, has been destroyed. We trust it is not too late to pick up the pieces.
The Chairman: Mr. Gleberzon, thank you for your comments. I understand that you wish to yield your seat to Ms. Alexander.
In the meantime, permit me to thank all of you for your succinct comments. I remind honourable senators that although our original program was to conclude at 4:30 p.m. because there is a vote in the chamber, we will conclude at 4 p.m.
[Translation]
Senator Biron: Mr. Chairman, yesterday I put a question to Mr. Gerard Lalonde, the Assistant Director of the tax legislation division. I quoted from your letter informing us that the energy sector had experienced an increase in mergers and acquisitions. In answering, he said that mergers were occurring not only in your sector but also, generally speaking, in the business world and that this was due to an international phenomenon. In your opinion, is this occurring in the energy sector in particular?
I added that, in 2011, the energy sector could migrate to the United States to become Mastered Limited Partnership. Should energy sector corporations move to the United States in this manner, have you assessed what this would mean in terms of job and tax loss?
[English]
Mr. Coutu: The spate of mergers and acquisitions that is claimed to be global is probably correct. However, the trend is likely accelerated not necessarily across the energy sector but across those and other businesses that are structured as trusts. All trusts have the advantage of a lower cost of capital and they are a more competitive entity with respect to other foreign entities. By taxing the trusts, that advantage will be taken away and, therefore, the hunter will become the hunted, if you will. The advantage turns to other investors, who could be Canadian or foreign. The biggest impact will come from foreign investors because that is where most of the capital is, in particular where large companies are concerned. I will take our company as an example. We are no longer a small business but a $16-billion enterprise value company. When people talk about who will be most competitive and who will own the resource in the long term, it is always those with the lowest cost of capital. The largest and lowest cost of capital is probably outside Canada. The wonderful exception was the trust sector, where small businesses were able to thrive and fend off the lower-cost-of-capital businesses, be they private equity or master limited partnerships, MLPs. That world will change for everyone. The unfortunate circumstance is that not only do we lose the mine, management, control and ownership of the asset but also, these entities are savvy in the way they finance. They do it aggressively with debt and, as you know, debt interest is a deductible expense in Canada, as it is in most countries. It allows them to do what they call, in the investment banking business, "income stripping.'' They will have the ability to extract a great deal of income from the assets in Canada and repatriate that income to their country of origin because the withholding tax at the border is low and they do not pay taxes as long as those interest expenses are creating deductions for them against their equity ownership in Canada. There has always been a global consolidation of industries as businesses grow, but all that is being accelerated toward the trust sector because the Canadian government has made them ripe for acquisition with this policy.
[Translation]
Senator Biron: In the energy sector in particular, are certain companies readying themselves to become American companies by 2011?
Mr. Coutu: Possibly, that is one of their options.
[English]
Another option is to sell themselves to someone who will pay more than the price they can receive in the capital markets as a public company. Their last alternative is to convert to a corporation.
That last alternative keeps them in Canada for the time being. One problem with this policy is that there are no details as to how that law extends itself into such a conversion to a corporation. This proposed legislation does not have any meat on its bones. It is an immature concept and should not be passed at this time because it needs a lot more work.
The Chairman: How would you answer that criticism if someone were to say that details are normally included in regulations and regulations normally follow legislation?
Mr. Coutu: I would not be as worried about the regulations following the law if the theme of the law made sense for the country. I give you my view as a Canadian, not as a trust CEO: This legislation is bad business for Canada. It will erode the tax revenue base on an instantaneous basis because the profits we generate get taxed at a higher rate; we pay more taxes as a trust to the government than we would as a corporation.
The first concept to understand is that trusts pay more taxes. They do not pay less; there is no tax leakage. The second one is that the basis that generates all that tax will erode and disappear on us; then we do not have the assets to tax, if these acquisitions from foreigners come to pass because of the debt financing they can bring in the structure, as I explained.
I could live with having the rules after the fact if I could agree with the theme, but the theme is awful for this country.
Senator Nancy Ruth: One advantage of being 50-plus is I am old enough to remember conversations around the dining room table in the 1940s about raising risk capital for the oil patch after the Second World War.
One thing that interested me in your presentation was the lack of the word "risk'' in terms of your investors making a decision to invest in your trusts. I have probably invested in some of your trusts, and I have also lost money and made money and I thank you all. That is my background.
We are in the game now of tax fairness, as you all know. I will ask most of my questions to you; what percentage of the whole market of income trusts are energy trusts? Do any of you know?
Mr. Coutu: I will guess that it is over 50 per cent, by a good margin.
Mr. Michaleski: It definitely would be over 50 per cent.
Senator Nancy Ruth: Over what period of time did your members convert to income trusts?
Mr. Michaleski: Probably the first trusts were converted back in the mid-1980s. Then, others came along in the '90s. In our own case, Pembina became a trust in 1997, as did a number of our other members of the energy infrastructure group; so roughly 10 years ago, a lot of these companies became income trusts or partnerships — effectively flowthrough vehicles at that time.
Senator Nancy Ruth: In your speech to us, you say that you provide competition with other tax-advantaged entities.
Mr. Michaleski: Correct.
Senator Nancy Ruth: Can you tell me who else you see as tax-advantaged that you are in competition with?
Mr. Michaleski: The most obvious one would be U.S. MLPs, who have similar flowthrough structures to what we have. We compete in that same space with them. Over the past several years, Canadian trusts have been able to grow and compete with those tax-advantaged entities because of our lower costs to capital — lower costs than today.
Other tax-advantaged entities would include pension funds that can make investments in assets, particularly infrastructure assets that are long-life assets where they will not pay tax. Their owners will pay tax when the funds are distributed by way of pension, but they will not pay tax on it. They can bid on transactions, based on pre-tax cost to capital, which is where we were until the introduction of this new tax fairness plan.
Senator Nancy Ruth: If this budget had excluded you, as you so wish, would you have agreed that what they did in terms of other income trusts was fair, given that corporations were moving in that direction and using it, effectively, as a tax avoidance gizmo?
Mr. Michaleski: We said that this trust model works, certainly for energy and energy infrastructure; and to the extent that there were conversions taking place within that space, they still could make sense.
Senator Nancy Ruth: For the government to have done what it has done, with you being an exemption?
Mr. Michaleski: There is an element of it. The concern was that there was a proliferation of trusts, and perhaps bad business was entering into the trust base. I am a firm believer that we let the market decide that. If the model does not work in a trust sector, eventually the market will figure it out and those entities will not survive in that form.
Senator Nancy Ruth: If you were the government and you believed this theory about the market should decide, what do you do about the individual taxpayer who must also be protected by the government? Is it not on the back of the taxpayers that some of these profits are made? I know it is a matter of timing and those other things too.
Mr. Michaleski: I think individual investors may need to make an informed decision and evaluate the level of risk they are willing to accept within the trust sector. Within a sector itself, there are some higher yielding vehicles because there is more risk associated with them.
Senator Nancy Ruth: I live on a street where people were making 125 per cent a year in the trust sector. I am sympathetic with what the government did, and not entirely sympathetic with you. It seems to me that 125 per cent is right off the wall. It was a great year.
Mr. Michaleski: I do not think it would be sustainable.
Senator Nancy Ruth: That may be true, but risk is the game in capital markets. You have talked about foreign capital. I do not think it matters whether capital is foreign or domestic; it moves every day, every hour and every minute.
Mr. Coutu: I will comment on the high returns people have seen. Much of it has to do with the trust sector all of a sudden coming into an era where it was recognized that cash yields were available; interest rates were coming down so there was a big switch in investment. The trusts that were there, or that came to market, came with fairly high yields; and people started to bid those yields down so the capital value of those trusts went up.
That would have plateaued because that would not continue. The yields are not 125 per cent; they are between 5 per cent, in our case, and maybe up to 15 per cent in the highest risk scenario. The normalized returns are more in that range.
These other cases would be where — like in the corporate world — we have companies that are "10-baggers,'' as people call them. There are some great rates of return but there are also companies who augur in and investors lose all their money.
Senator Nancy Ruth: Was that not about to happen when TELUS and Bell started moving in that direction. Do you not believe the federal government had an obligation to the people of Canada to protect them against this encroachment by corporations in this sector of financial markets?
Mr. Coutu: Bell is a great example and it will play out in many ways. Bell did not want to become a trust but saw it as the only avenue of survival against acquisitive forces.
Senator Nancy Ruth: It was the only avenue of survival if this loophole was left in the law. If the loophole was closed, as the Americans did some years ago, then the competition rules change. I think the government did that and I am proud of the government for having done that, but thank you for your comments.
Senator Di Nino: Welcome all. It is a pleasure to see you here. Hopefully, at the end of the day, we will continue to have general agreement, although not total.
I am not sure to whom I would like to direct this question, but certainly any of the three gentlemen here, and Ms. Alexander can make a comment as well. I believe it was Mr. Coutu that quoted David Dodge. I have a rather extensive article, and I want to quote something by David Dodge about the income trusts, which I would like your reaction to. He says:
By giving incentives that led to inappropriate use of the income trust form of organization, the tax system was actually creating inefficiencies in capital markets — inefficiencies that, over time, would lead to lower levels of investment, output and productivity.
Mr. Coutu: I think some of Mr. Dodge's later comments were in contradiction to what he said earlier on in his career, as his career changed.
I am not sure. These are not tax incentives that we are looking at; it is a different way to tax. The taxes are being paid. If nothing else, what needs to be understood today is that there is no tax loophole here.
The reason that income trusts were popular, the reason they saw some rates of return that were high over a period of time is two-fold. The first is that people were looking for an instrument with yield. We do not have a high-yield junk- bond market where investors can invest in debt instruments of risky levels because there is no appetite for that type of investing in our capital markets. In the U.S. people can invest in that market, but in Canada we do not have that alternative. That is what is driving the popularity of income trusts.
The second is that the trust model creates a huge amount of discipline in the management of these trusts and there is nowhere to hide. The cash is shown to the shareholders because the shareholders are watching and they say, give me that cash, unless managers have a better place to put it, and if they have a better place the investor better hear about it or they will sell the stock.
That puts downward pressure on the stock.
Those are the two reasons why income trusts have been successful in Canada and it has little to do with what has professed to be tax leakage or trusts not paying taxes. That is blatant misleading of the public who are probably less informed than the people around this table.
Mr. Dancey: I think we can slice this issue a couple of ways. Prior to October 31, my perspective is that the tax system was not stable at that time. Businesses were making decisions for tax reasons and not business reasons. That is a fundamental point.
Generally, in that situation, the tendency was for a lot of corporations, whether BCE, TELUS or companies out West, to look at the trust model as the way they would do business going forward. It was not that they necessarily wanted to, but for competitive reasons they were forced to. That is a tax system that is not stable. They are making decisions for tax reasons, not business reasons.
I think that is the main premise as to why the change was brought forward.
A second slice at it is that once we do that, is there a need for any exemptions or specific rules or whatever for any particular sector? That is a second cut. The government decided that yes, they needed that for REIT and they decided they did not need that for the energy sector, but that is why these two gentlemen are here saying that they should have an exemption.
I think the system prior to October 31 was not a stable system and businesses need to make decisions for business reasons and not only for tax reasons.
That issue was the fundamental one that needed to be dealt with. Once they make that decision, it is how they implement that and whether any particular sectors need particular rules because the new world is not the right world for them.
Senator Di Nino: The U.S. did it some twenty years ago, I believe.
Mr. Dancey: I think it was about then, but I am not sure.
Marguerite Alexander, member, Canada's Association for the 50 Plus: From the point of view of an investor in income trusts and part of the advancing wave of baby boomers who will hit 65 in 2011, I have heard a number of issues around the table that I would like to address.
I understand very well, Senator Nancy Ruth, your concern about risk in investing for the individual investor. However, as I am one, I have become aware of and done considerable research on income trusts. I have become aware that income trusts are the same as corporations when it comes to risks; there are good ones and bad ones. I will agree with Mr. Dancey that the good ones will make business decisions based on growing the business and not on the latest tax incentives. I think some trust has to be given to the individual investor that they, themselves, can sort out the wheat from the chaff when it comes to investing in income trusts.
One of the biggest decisions for the run-up on trusts — that is, valuations in the market — has been the link to demographics. We are moving toward thinking about our future, about retirement, about having a nest egg to live on, while our life expectancy is increasing as well. I got to that point. I discovered income trusts and thought: Is this not wonderful? The corporate world will be able to help the government with the wave of baby boomers retiring in 2011.
I got a shock last Halloween because it looked as though the government was not going to allow corporations to help out with income for my retirement when it comes and with the impact of the wave of baby boomers, which will just get larger and larger.
I feel it is very important to take into consideration the maturity of the average investor and also the need of the average investor who is planning for a retirement — or, all the more, if they are actually in retirement — to have a high-yielding investment.
If you look at a retired single person, for example, who may be getting $900 a month from government-financed pension plans, where will they get the top-up they need to meet their monthly bills? Will they go to the bond market, which gives them about 4.5 per cent, 5 per cent, if they are lucky, or are they going to go somewhere else which is safe, as safe as corporations? There are blue chip income trusts, as well, that can yield them 8 per cent or 10 per cent. This little percentage can make a really big difference to their cash flow.
The other thing is that income trusts are structured to help people living with a cash flow issue because many of them pay monthly and understand who their unitholders are. How is the government going to help these retirees, these seniors, who will be in large numbers on their doorstep in 2011, by depriving them that extra little bit of yield?
If we are going to exercise caution with income trusts, I think that the whole regulatory framework for income trusts should be discussed, standardized and made clear to everyone, just as it is with corporations. Yes, that is a proper role for the government. I do not think it is a proper role for the government to destroy a vehicle that can be so instrumental in assuring that a great number of seniors are kept out of poverty, especially going forward from 2011.
Senator Di Nino: Surely the vehicle has not been destroyed. What has been changed is the tax structure of that vehicle.
An article on income trusts in the Financial Post says income trusts have done well since October 31 and the top 10 have averaged not badly for the past six months. It is only six months. The vehicle still exists. Only the tax structure has been amended, not the vehicle itself. I would appreciate a comment.
Before that, Ms. Alexander, it struck me you have a great opportunity to recruit for your membership in the Senate. We are all over 50.
Mr. Coutu: I note that it is dangerous to point to the performance any date following November 1 because so many parameters in the market affect the valuation of companies.
I will throw two out for example. I indicated that our trust price had done better. Frankly, it has not done that much better, but the price of crude oil has gone from $60 to almost $70 which drives energy stock prices. Offsetting that increase, on any given day, we have seen the currency go the other way.
I caution comparisons of where the trusts are today to where they were October 31, 2006. Comparisons should be made in a short period of time if you truly want to understand the impact of such an announcement. The markets are terribly efficient and they react quickly.
Senator Ringuette: My question is to Mr. Dancey. Your presentation was interesting in the way that you analyzed the current budget in three key areas, one of which was program spending. Why did you choose those three areas and not administration?
Mr. Dancey: I will speak to program spending for a moment. Our view is that it is important for government to live within its means and, therefore, important to keep a framework around ensuring that program spending does not increase by more than the rate of inflation. It is then government's role within that framework to make the choices as to where it spends the money. In terms of making sure that we live within our means, it is important to make sure that program spending does not increase at similar rates to those of the past five years.
Senator Ringuette: Have you looked at clause 58 and clause 59 in Bill C-52, which in my view are extremely bizarre. We are looking at two payments to the Minister of Finance, Ontario, so that the federal government can collect provincial corporate tax for Ontario. This is the first time that I have ever seen someone pay another entity to remove their administrative burden of collecting taxes. Is this not bizarre?
Mr. Dancey: I cannot comment on that particular issue. The federal government and the Province of Ontario entered into a tax collection agreement whereby the federal government would collect the corporate taxes on behalf of the Province of Ontario as it does for a number of other provinces as well.
A number of tax collection agreements exist between the federal governments and the various provinces, although I am not familiar with the exact terms of each agreement.
Senator Ringuette: I agree that it is more efficient for one entity to collect corporate or personal taxes. However, it is bizarre that the federal government will pay the Ontario government to do their job. I cannot imagine such a policy in the private sector. As a CA, would you recommend using that business acumen?
Mr. Dancey: I am not familiar with that particular section but that would be a good question for an official at the Department of Finance Canada.
Senator Ringuette: Okay, you are off the hook. I still find it extremely bizarre.
I will address my other questions to the other three presenters.
Yesterday, a group representing a certain income trust appeared before the committee and said that the lost asset value as at November 1, 2006, was approximately $63 billion. What loss did your trust experience?
Mr. Coutu: Our enterprise value was in the order of ten per cent, which would amount to over $1 billion in shareholder value loss to our equity holders.
Mr. Michaleski: In equity value, we were trading at $17.32 on October 31 and within two days, we had dropped to about $13. We have since regained and sit at about $15.50 today but we have also increased our distribution since October 31. If I had applied the same yield in our position on October 31 to our distribution today, we would be trading at over $19, and we are trading at roughly $15.50. The order of magnitude is down about 20 per cent. The people in the infrastructure group of our sector are down about 20 per cent in total, which means $2.5 billion on the $12 billion invested. It is now six months later so it is a permanent reduction.
Mr. Coutu: We should comment on the conventional energy trusts, which I represent, in part. We are an oil sands trust, which is dramatically different because of the long reserve life. The loss experienced by the conventional energy trusts in that short period of time, where we were able to measure it, was in the order of 30 per cent, which is three times the loss we saw at Canadian Oil Sands.
Senator Ringuette: Mr. Coutu, perhaps we do not have the right perception of your investors. Are they middle income Canadians or high income Canadians? What is the aggregate income of your investors?
Mr. Michaleski: When I go to our annual general meeting, the majority of investors who show up are retired seniors who are using their investment in our company to supplement their retirement income. I consider them to be wealthy individuals but they are people determined to supplement their monthly pension. Our demographics are primarily retail owners in their 50s, 60s and 70s. Their income varies. Some are wealthier and better able to afford to take a larger stake in a company like ours. The incomes vary across the spectrum, but largely they are retail.
Senator Ringuette: The spin was that multimillionaires were taking advantage of a tax loophole.
Mr. Michaleski: I would say that description would not represent a typical trust investor.
Mr. Coutu: I would put the investors in three categories: first is the normal Canadian retail investor who is anyone who has savings and a brokerage account and would hold some income trusts of some sort of their choice; second is, to Mr. Michaleski's point, the large disproportionate amount of senior Canadian citizens who would largely skew their investments toward income trust; and the third category is institutional investors, some of whom represent pension funds and insurance companies, who buy these income trusts to support existing pension plans. The various trusts have different shares of those particular markets.
Senator Ringuette: Chair, with your permission I have a comment. You added an appendix to your presentation with regard to class action. This is not surprising when you have a prime minister that issues a public request to be sued. We have the provinces suing, we have a class action suit over the repercussions of mad cow disease and we have class actions over government policy in respect of income trusts. When you issue a public request to be sued, you are sued.
Senator Angus: I welcome all of you, some of whom I know from your several appearances before the Standing Senate Committee on Banking, Trade and Commerce. Mr. Coutu, I have heard you on the same subject several times, and Mr. Dancey, in many lives. It is interesting to hear your views.
I am on the government side with a mandate to assist safe passage, hopefully, of this bill into the books, being only the first bill dealing with implementation of Budget 2007.
Mr. Dancey, I was pleased with your comments and your grading. "B'' is not all bad. I am not sure what the scale is, but I assume it is A to Z and therefore, the mark is high. Is that fair?
Mr. Dancey: You can make it what you want.
Senator Angus: We have all heard the Minister of Finance say a lot lately that in his view and in the view of what they colloquially refer to as Canada's New Government that Canadians pay too much tax, that our tax system is out of whack, and that not only do we need broad and sweeping tax reductions, but we need tax reform. The minister has repeatedly made that statement. He has already announced, in terms of the international elements of our tax system, the establishment of a special expert panel to deal with, and report on, how we can improve our international tax laws that are not resulting in fairness for the government or for the rest of the taxpayers. These laws allow for a lot of leakage, whether it be improper tax avoidance or even, God forbid, tax evasion. The minister has place a high priority on this issue, not only through the budget but also through the money laundering legislation that was recently passed. Issues out there are being addressed to protect the integrity of our system.
Mr. Dancey, you have picked four areas on which to compliment the government for its budget, which is appreciated. However, you did not mention what is becoming in these hearings a bit of a hot potato, which is equalization. It was declared to be a fundamental part of Conservative government policy to address what is referred to as the fiscal imbalance in Canada. I think they were a little lucky with the way the economy was breaking and the extent of the surplus, and they were able, with the assistance of the O'Brien report, to devise a new formula, which is contained in Bill C-52. I wondered about that from the point of view of the Canadian Institute of Chartered Accountants, CICA, since you did not mention it. Perhaps I could put the question this way. Would you consider that this formula is a step forward and a positive aspect of the budget?
Mr. Dancey: That was not an area we looked at. We took a high level view in the sense of ensuring the right framework. The framework centred around keeping program spending under control, making sure that a good chunk of the surplus went to debt reduction and the situation on the tax front. We thought that created a framework within which government can make the choices it has to make in terms of where it spends the money, whether on health, equalization or whatever.
Senator Angus: Debt reduction was front and centre, and there was a provision, to which you have referred, with respect to funds being available, as they happen to be. This was the time they chose to address the fiscal imbalance. It was clear in the budget speech and the attendant documentation that this budget was the first step of an incremental process, that if this government remains in a position to do something about it there will be further tax cuts and a reform of the tax system. I gather that we should consider the "B'' grade at least as a vote of confidence in that regard.
Mr. Dancey: Yes: The main issue of concern we had was program spending.
Senator Angus: We also welcome the appearance today of the Canadian Association for the 50 Plus, CARP. I can remember at least five appearances of your organization before Senate committees. We appreciate the good work you do for the seniors in this country, who are increasingly active, frankly, due to the demographic time bomb that is out there. We seek your input constantly as to how we should manage that time bomb to soften the blow. We must finance heavy obligations as there is a change ratio between the workforce and older individuals. Needless to say it is also part of this government's essential policy to ensure that this matter is properly addressed.
The difficult decision on income trusts needed to be taken. A promise was made, or at least statements were made, by our party in and around November and December 2005 in a different economic circumstance. Obviously, no one likes to go back unless there are material changes. However, in my personal knowledge of this matter, they were concerned about the effect on seniors and the degree to which seniors were invested, in some cases too much so in inappropriate imbalanced portfolios, but how can that issue be addressed?
My question to you concerns income splitting and some of the other special provisions that were announced in the budget. Would you at least agree with me that the provisions represented a positive step forward to softening any blow that the change of tax treatment of income trusts created?
Ms. Alexander: I would not couple them. I think the income splitting measures were a long overdue provision that help married couples, essentially, and more specifically women who tend to have to interrupt their participation in the workforce to raise children or are stay-at-home homemakers. Yes, I think that is a very good measure.
I used to work for the Canadian Advisory Council on the Status of Women. We advocated for this measure 20 years ago, so we are happy to see it. The council does not exist now, but I am very happy to see that provision. However, I do not see it as an either/or issue. I think that the income trust structure is ideal now for the demographic shift that the country is facing.
The government must also look at another challenge, and that is the double taxation of dividends within RRSPs. I am referring to double taxation on the same backs of those who are retiring.
Yes, thank you for the one measure, but please move on the other.
Senator Angus: That is a good point.
How about increasing registered retirement savings plans, RRSPs? I know it was a small measure, but in as much as I turn 69 in the year 2006, I found it helpful in my own case with respect to registered retirement income funds, RRIFs. From the documentation I have seen, it is a significant step forward for seniors. The budget indicated a preoccupation with going further and taking additional measures. If it is at all reassuring to you, these measures for seniors in the budget should be considered as a beginning of a further series of measures.
Ms. Alexander: I hope so.
Senator Angus: Mr. Coutu, it was a difficult decision, but it was taken. I salute you and your people for continually making the point over and over again. A political price has been paid. The thing that has troubled me is the suggestion in your documentation up to now, and even inherent in your remarks today, that the officials in the Department of Finance mislead the minister. I may have it wrong, but I have that sense that you suggested that, especially in tax leakage. What possible motive would there be for doing that. Is it a clerical error?
Mr. Coutu: It would have been unintentional if I said anything about the staff misleading the minister. Our clear message is that we do not think the homework has been done by whoever is supposed to do the homework, and I think everyone should do their homework. That goes to the publicized point that the data has never been made available to us. Where is the calculation? We saw these blanked-out documents. That is the problem we have.
It is a complex issue. The work has not been done to understand it, so the decision that was made was ill-founded and is the wrong decision. Let us not lay any blame but call it what it is and go back to the drawing board and make the right decision for Canadians, for seniors and for the energy industry and the other businesses that can use this investment vehicle. We are here today asking the Senate to make one move here to keep this issue on the docket. Do not let this thing slip away as a buried item in the budget. Raise it. Put it out there as an exception. Allow the budget to proceed with whatever other debate might be around that, but keep this thing alive. We need to bring both parties to the table for consultation. I have seen it time and time again. When consultation occurs, good decisions result. There was no consultation in this process, and that is the problem. Consultation started briefly with the Liberal government, and it was truncated by an election. I think therein may have been the beginning of our collective problem.
Senator Murray: To round out the historical record on this item, are any of you old enough to remember, or have you read enough about the history of it, to tell us something of the broad national policy reasons why a previous government way back when decided to encourage the creation of income trusts?
Mr. Coutu: I am not old enough, so I am not sure my comments would be helpful. I have done some reading about it, but it is not in my background.
Senator Murray: I will leave it at that. I think it had something to do with encouraging Canadian, as distinct from foreign, investment.
Mr. Coutu: For the net benefit of Canadians, yes.
Senator Murray: I think that is what it had to do with. We must look it up some time.
Ms. Alexander, I was intrigued by your comment that the Advisory Council on the Status of Women for a long time advocated income splitting. For clarification, was that for pension income, for total pensioner's income, for all couples' income?
Ms. Alexander: I believe we were talking about pension income.
Senator Murray: Mr. Dancey, I had to read twice the comment you made in your presentation about tax deductibility related to foreign investments. I saw "support.'' I saw "government.'' I saw "tax deductibility.'' I had to go back and read it again. I find you are not supporting the government's position on tax deductibility; you are supporting the government's decision to review its position on tax deductibility.
How do you see that playing out? The measure is not coming in Bill C-52. Senator Angus tells me it is in a future budget implementation bill, coming in the fall. I take it you do not support what the government has announced. I want to know whether that is the case, and, in any case, how you see this playing out over the next few months.
Mr. Dancey: I think it is important. There is a fine line between making sure you do not penalize legitimate business transactions but, at the same time, catch the inappropriate ones. Having spent a lifetime in tax, because I was a tax person for many years, I know that is often a hard line to reach. That is why a round-table group right now is looking at that issue to see if they can get that line right. I think we are waiting to see what that fine line is before we pass judgment.
Senator Murray: One objection that was raised, I forget whether it was by the minister or officials, had to do with the fact that some companies received tax deductibility here and a tax deductibility or other incentive in a foreign jurisdiction, and they think this somehow ought to be eliminated. What is the moral, financial or policy objection to obtaining an incentive in two different jurisdictions on the same investment? What does it matter to us, as Canadians?
Mr. Dancey: I think that the key point to be looked at is in terms of making sure that whatever policy is decided on, it does not make Canadian-based companies uncompetitive in the global marketplace.
Senator Murray: Are you involved in the round-table group?
Mr. Dancey: No, I am not. The association is, yes. Somebody from the CICA is in the group.
Senator McCoy: We have heard from many witnesses and constituents, Albertans in particular. We have been well briefed by companies and investors, and we have heard many solutions. Even Dr. Jack Mintz had another solution to put forward. I think in all cases we have been told there was no consultation, and in all cases we have been told that there would be a better chance to arrive at a workable solution if everyone in Canada worked together, as has been the case before.
CARP has suggested a ten-year implementation plan instead of a four-year implementation plan, and your organizations have not included that suggestion in your brief to us today. What would your opinion be if the implementation period were extended to 2017, which would be a ten-year period?
Mr. Coutu: It was not included in my brief because we have a firm belief that trusts should be perpetuated infinitely. Having said that, a ten-year interim period as opposed to a four-year interim period would be a huge benefit to investors. That would improve the valuations, because, of course, the net present value of those future distributions would be taken into account in the market. Ten years is a long time for anybody, but particularly for seniors. I am over 50 as well. That is an eternity for government.
That would go a long way towards doing two things. It would allow people to recoup a much greater portion of their investment, and it would assure a longer period of time for trusts and governments to come to terms with what should be the ideal, perpetual solution.
Mr. Michaleski: I agree. We were seeking an exemption because we feel that we will be at a competitive disadvantage with the large population south of the border that will come north of the border. Our position was to seek an exemption. I agree with Mr. Coutu. With more time, there is the perspective of the value preservation as well as the ability to reach a better solution to this problem. I say it is certainly an improved outcome compared to where we are today.
Ms. Alexander: I would like to add that the introduction of the 10-year extension is only one leg. The other leg would be the imposition of a 10 per cent tax after 10 years.
Senator McCoy: Many solutions are being suggested, and at least it would give time to explore what combination of those suggestions would be best for Canada — I believe you said the net benefit for Canadians.
Mr. Coutu: You speak with great wisdom.
Senator Spivak: I wanted to ask Mr. Dancey whether he thinks in this budget we have what many people have advocated, which is a sufficient reform of the corporate dividend?
Mr. Dancey: In terms of that issue, I will pick up on a comment made earlier by Ms. Alexander.
One of the things, as we have looked at the income trust issue, is that the endgame is probably a world where there is total indifference as to whether we operate in a corporation or a trust; that would be a great place to get to. One way to get there is to ensure that the dividend tax credit is fully refundable, whether in the case of an individual or a tax exempt, such as an RSP. That is one issue we had suggested the government look at.
That is not a simple fix. There are a lot of issues between the federal government and the provinces to work out with that, but it is an area that should be studied.
Senator Spivak: I believe it has been recommended by Jack Mintz, for one.
Mr. Dancey: He may have, as well.
Senator Spivak: He has suggested the reason the government did not do it is because it is such a difficult thing to do.
Mr. Dancey: It is complex to do. Again, Canada is not a simple country in terms of working these things out. Having said that, I think it is worthy of study.
The tax system is always a journey to go to where we want to go to. We never get there because the world changes by the time we get there, so that journey keeps on going.
Senator Spivak: Perhaps this is too long to answer, but do you think if that were to occur, it would solve the income trust situation?
Mr. Dancey: I think that would go a long way toward it. We would be in a marketplace where people should be relatively indifferent as to whether they operate in a corporation or a trust. It is a difficult area and it is worthy of study.
The Chairman: Senator Murray raised a point about income splitting, and I want to make sure it was clear. Ms. Alexander, you are aware that the provisions that are suggested in Bill C-52, from a seniors' income splitting point of view, relate to pension income — but only certain pension income that is defined under section 157 of the Income Tax Act, eligible pensions. Are you aware that it is restricted; and are you content that is a step in the right direction?
Ms. Alexander: I cannot answer that question because I do not know the specifics of what is in the budget. I was not part of those discussions.
Senator Murray: Senator Day is making the point, I think, that there is less to this than meets the eye.
The Chairman: That was the point I was about to make. I wanted to find out if you were aware that the income splitting is not as extensive as some people think.
Ms. Alexander: I had assumed, perhaps wrongly, that the income splitting was attributable to all pension income. I may have been wrong in that.
The Chairman: You may want to take a look at the fine details. I appreciate all of you being here. It was helpful to us and we will pay careful attention to your submissions in our deliberations.
It is my pleasure to welcome Pierre Sadik, Senior Policy Advisor, Sustainability Program, David Suzuki Foundation. Mr. Sadik is also here today to speak on behalf of the Green Budget Coalition. He has been a senior policy adviser with the David Suzuki Foundation since March of 2005. He has an LL.B and has practised law in Toronto for more than a decade. At the foundation, he works on the introduction of green economic instruments and implementation of sustainable development strategies. He recently proposed a series of eco tax-shifting policies that were modelled by economist Mark Jaccard, including Drive Green: Company Car Tax Shift.
Mr. Sadik, please proceed with your introductory remarks.
Pierre Sadik, Senior Policy Advisor, Sustainability Program, David Suzuki Foundation: Thank you, Mr. Chairman and members of the committee for inviting me here to participate in these meetings.
Am I to understand that the committee would like to hear about the green levy component of the budget?
The Chairman: We would like your remarks to relate to Bill C-52, which is the implementation of the budget.
Mr. Sadik: There is a lot in Bill C-52. My understanding is that you would like to hear my remarks directed to the green levy component of Bill C-52.
The Chairman: That is correct, in addition to anything else you would like to address.
Mr. Sadik: There are many things I could discuss with you. I was led to believe that the green levy is one of the key items.
I will make opening comments for five minutes or so on the green levy, and then I would be more than happy to answer any questions on the green levy or anything else in connection with the environmental component of the budget that I feel I am in a position to answer.
The Chairman: Thank you.
Mr. Sadik: The green levy is the business end of a fee-bate measure that was introduced in the last budget. A fee-bate is a measure whereby a fee is levied on inefficient products and a rebate is offered on the purchase of efficient products. The idea is that the levy and the fee cancel each other out. It ends up being a revenue- neutral measure whereby public policy makers and legislators can influence the way consumers or business behave in terms of their environmental footprint and choices in connection with products.
The green levy pertains to motor vehicles. As you may be aware, cars are a significant component of Canada's greenhouse gas emission problem. Passenger cars alone represent 12 per cent of Canada's greenhouse gas emissions. That puts passenger cars at third in the ranking of the worst greenhouse gas emitters. First is the electricity generating sector; second is the oil and gas production sector; and third is passenger vehicles. I am not including train, buses or airplanes in that ranking.
Greenhouse gas emissions from passenger vehicles have been going up, unfortunately, not down, over the course of the last 17 years. Since 1990, emissions from the passenger vehicle sector have increased at least 15 per cent. Vehicle fuel efficiency, the famous miles-per-gallon metric for measuring how well a car performs in terms of fuel efficiency has stagnated over that same period at about 23 miles per gallon. Despite all the advances in technology in the last 17 years, cars still receive about 23 miles per gallon.
Passenger vehicles are a substantial part of the problem that Canada faces in connection with global warming, a problem that is starting to manifest itself across the country, be it the pine beetle infestation on the West Coast, the droughts on occasion in the Prairies, or the unusual weather occurrences such as Hurricane Juan that we have seen on the East Coast. These occurrences have all been linked by scientists to the global warming phenomenon.
The green levy component of the budget is characterized by the government as a measure that will address these problems. The green levy is, in essence, a carbon tax because the more carbon a vehicle emits, the higher the green levy excise tax will be on that vehicle. The government deserves some credit for introducing the first environmental carbon tax at the federal level with the green levy. Unfortunately, the execution of this green levy was relatively poor and we see that at the end of the day it is a relatively ineffective measure, certainly in terms of the stated objective of the government for this measure.
First, the levy applies only to a small number of gas guzzlers. Vehicles such as the well known Cadillac DeVille, the Lincoln Town Car, the Porsche, most sports utility vehicles, SUVs, and full-sized sedans are excluded from the green levy. The levy is too low and too narrowly cast to make a difference.
I will give you a few examples of the small number of vehicles that are captured by this levy in an attempt perhaps to discourage consumers from purchasing these cars. The Hummer, a $60,000 car, is dinged with a $1,000 levy, about a 1.6 per cent levy on a $60,000 car. That is not apt to change consumer behaviour.
The Mercedes CL600, a $200,000 car that a few lucky people in this country own, is dinged with a $3,000 levy, but at $200,000 that levy represents a 2 per cent consumer disincentive on the price.
The Nissan Pathfinder SUV, a $50,000 vehicle, is dinged with a $1,000 levy. The ubiquitous Jeep Grand Cherokee, a $50,000 vehicle, has one of the higher levies relative to price, $2,000, which represents 4 per cent of the price. Experience and research shows that the levy is nowhere near enough to nudge consumer behaviour in the right direction.
For the disincentive to be effective, we need a much broader levy that applies to a much broader spectrum of cars, and one that starts from at least 10 to 15 per cent of the final price of the vehicle.
Another substantial problem with the government's measure is that the levy does not apply to pickup trucks at all. It probably makes sense to exclude pickup trucks with commercial plates, because these people are driving these vehicles because they need them for business, construction or farming, and they should not be penalized for needing a relatively large vehicle to do business. However, the large number of pickup truck drivers who drive them as part of a lifestyle image choice ought not to be excluded from this levy. That is counterproductive to the stated objective of the levy.
Perhaps the most fundamental flaw is that the levy is hidden from consumers by design. The levy is collected from the manufacturer or the dealer of the vehicle, and there is nothing to stipulate that the final sticker price will show what this green levy is on a certain vehicle. Consumers will not even know if the car they are buying is a particularly problematic gas guzzler and therefore subject to the levy, and they do not know if they are paying the levy.
As well, the government has not undertaken any advertising or outreach to Canadians in connection with the levy, which is the opposite of what the government has done with the rebate. There is a $1,000 or $2,000 rebate on fuel- efficient vehicles and we see a fair bit of promotion of this rebate, quite properly, to encourage people to purchase more fuel-efficient vehicles but there is complete silence from Transport Canada and Finance Canada on this levy.
This lack of outreach removes one of the most useful aspects of any kind of market mechanism like this one which tries to use price to influence consumer behaviour. It uses the social marketing aspect of this mechanism. If Canadians knew that certain vehicles were characterized publicly by government, by Transport Canada as being problematic and that they were asked to internalize part of the social cost that these inefficient vehicles impose on us in terms of our health and environmental destruction, people might be more likely to think twice about purchasing one of these vehicles.
The social marketing aspect of any of these mechanisms cannot be underestimated. It often outweighs the actual monetary impact of the mechanism. Here is a quick example: Most provinces have a bottle return deposit on beer bottles of five or ten cents a bottle in most provinces. Fortunately, we have a situation where, in Canada, over 95 per cent of all beer bottles are returned to the store after consumption of the beer to collect the deposit or, I do not know, perhaps to buy another case. They need to keep the beer company stocked up or the company might run out of bottles.
Do we really believe that, at this point in time, someone earning $100,000 or more a year hauls their empty clanging bottles back to the store to collect their $1.20, or is it because it is the thing to do; it has become part of social norms like putting out the blue box. That happens because of the social marketing aspect of a price signal like that and that is the kind of thing, unfortunately, that is lacking under the green levy as well.
The Chairman: That is interesting and maybe we will discuss how we help evolve that social conscience a wee bit.
Senator Mitchell: I was struck by your point that the government is not advertising its green levy but it is advertising its new interest in National Association for Stock Car Auto Racing, NASCAR, one of the most gas guzzling, fuel inefficient, environmentally destructive things you can use. When I saw that in the newspaper the other day, I was reminded of the movie Talladega Night, and I am driven now to call Stephen Harper, Ricky Bobby Harper.
I want to ask about bottle deposits and so on. Preston Manning has been clear, ironically, as Conservative as he is, about pricing-in environmental costs and environmental inputs. I was reminded of that in an article I read today or yesterday that he is catching the wave. This article gave him credit for pushing on balancing budgets and now he is pushing his own party, we would hope, on balancing the carbon budget if you will.
Having said that this levy probably will not change behaviour, is it not more effective to regulate emissions? What are the possibilities and parameters of that?
Mr. Sadik: Regulations are only as effective as they are stringent, and there is no doubt that well-designed, stringent, motor-vehicle fuel-efficiency regulations are probably the optimal way of bringing our fleet down to reasonable levels of greenhouse gas emissions.
This green levy and the accompanying rebate have been described in the budget document as a measure pending the introduction of new motor-vehicle fuel-efficiency regulations for the 2011 model year. They are a stopgap measure. They could work as a stopgap measure and there is a certain element of fairness in not springing on the vehicle manufacturing sector a brand new, stringent regulation right away the next year. As a stopgap measure, as I have pointed out, they are unfortunately woefully inadequate and ineffective by design. Regulations are the optimal method, and the stopgap that the government has chosen is ineffective, unfortunately.
Senator Mitchell: Can we take the standards that are applicable in California and assume them in Canada? It is not that easy, is it?
Mr. Sadik: It is perhaps a bit easier than some might imagine. There is a commonality between the Canadian and U.S. market in terms of vehicle standards. We do not want to deviate too far from what is going on in California, and the number of states joining California is constantly growing. It is over 15 states now. That is one standard in terms of vehicle efficiency and then there is a substantially lower standard in the balance of the states, the other 35 states or so.
We can opt to go with either standard. Right now, we are with the lower standard that the bulk of the states has embraced. There is absolutely nothing stopping us in terms of economies of scale; in fact it would enhance California's efforts if Canada joined California and the other states in that vehicle regulation standard early in the next decade. Nothing stops us from doing that.
Senator Mitchell: How difficult would it be for Canadian auto sales to adjust to that standard? If they make cars that work in California, how difficult is it to make enough to sell in Canada?
Mr. Sadik: It would be simple. Vehicle numbers are tweaked by manufacturers, if not yearly even twice a year or so as they see what is moving off the lot. Eighty-five per cent of cars manufactured in Canada are exported mainly to the U.S. in any event to states such as California. Over 80 per cent of the vehicles that we purchase here are imported from the U.S. and other countries around the world. There is no problem in terms of moving these vehicles across the border.
Senator Mitchell: Of the total carbon output that is generated by cars, SUVs and other vehicles that are excluded, what percentage of that carbon output will not be covered by this green levy?
Mr. Sadik: What do you mean by "excluded''?
Senator Mitchell: The pickup trucks that will not be covered.
Mr. Sadik: What percentages of vehicles are not captured by this green levy?
Senator Mitchell: What percentage of the carbon output are they responsible for?
Mr. Sadik: Safely, I could say over 95 per cent of the greenhouse gas emissions from passenger vehicles in this country are not captured by this green levy.
Senator Mitchell: It will capture 5 per cent then?
Mr. Sadik: It does not cover most large cars, most SUVs, no minivans, nothing like Porches, a Cadillac DeVille, or a Lincoln Town Car. We know these cars that pick us up at the airport. They are big cars. They are not covered, so if they are not covered, can you imagine your regular mid-sized car or even a Crown Victoria that police drive or something like that?
Senator Mitchell: Yesterday, I made the point to Minister Flaherty that he, Mr. Baird and Mr. Harper continually say that if we invest in Kyoto, we will crush the economy. I made the point that it is okay to invest in tanks, guns, helicopters and bullets for a war halfway around the world, and that investment does not tank the economy, but investing in Kyoto does. Of course, it is absurd. I said, surely the Canada ecoTrust initiative and this other initiative in his budget, the Canada foundation for sustainable development technology, will not kill the economy; Otherwise he clearly would not do it if it would hurt the economy.
His answer was, yes, of course, but we cannot impose too much too quickly on industry because they would not be able to adjust. Of course, he did not say that when they changed the tax on income trust; they did that overnight. They could not adjust either, but that is different.
Having said that, is there anything in here other than the levy that will account for 5 per cent of the carbon emissions? Is there anything in here that actually puts some requirements on industry to do something?
Mr. Sadik: In the environmental component of the budget, without going over it with a fine-toothed comb, I will harken back to what the David Suzuki Foundation comments and the Green Budget Coalition's comments were on the budget. There were a handful of important measures, though the measures did not pertain to climate change; they pertained to species at risk or water quality. There was little in the budget that would move us forward meaningfully in the war on climate change.
Senator Mitchell: Almost none of that, of course, is a requirement of industry to change in some way; yet we need industry to change.
The Chairman: I must tell honourable senators we had two witnesses in this hour-and-a-half time slot, but we decided to have 45 minutes for each because their subject matter was somewhat different. We have about 13 minutes left on this particular subject.
Senator Di Nino: I have a request of Senator Mitchell. I did not want to interrupt him when he was speaking. He made a comment that the government is advertising NASCAR. He should correct that statement because it has nothing to do with the government of Canada. It is the Conservative Party of Canada.
Senator Mitchell: I will correct that statement. It is the Conservative Party of Canada, but let us remember the Conservative Party of Canada raises money with taxpayers' subsidies because donations are deducted. In some sense, it is taxpayers' money.
Senator Di Nino: As does the Liberal Party, the NDP and every other party.
Senator Mitchell: Yes, but they were not advertising NASCAR.
Senator Di Nino: They were advertising something else.
Senator Mitchell: Having raised it, I am answering his question.
Senator Di Nino: As long as he withdraws his statement.
The Chairman: He has withdrawn the statement. The point has been clarified.
Senator Di Nino: I want to ask our guest if he would tell me about the other environmental components which contain some $4.5 billion in environmental initiatives, including $1.5 billion of the Canada ecoTrust; $2 billion over seven years to support the production of renewable fuels; innovative modes for sustainable land and resource management in the Great Bear Rainforest; $225 million to the Nature Conservancy of Canada, which thinks it is great; et cetera, including assistance to farmers for alternative energy.
Do you have any comments on that?
Mr. Sadik: The budget, as is typically the case, was a mixed bag. As I indicated, there was a meaningful allocation for dealing with species at risk. As you have pointed out, there is a useful allocation for private charitable purchases of lands through the Nature Conservancy of Canada. There was some money, I believe, for water in the Great Lakes Basin as well.
In terms of climate change, which Senator Mitchell referred to, and what industry was asked to do, this budget — as in the previous government's budget as well — was content to throw a lot of money at a problem; to give money, in some instances to the provinces, which would move to certain industries in certain respects. That is not really asking industry or anyone in particular to do anything meaningful around climate change.
Canada has a history of throwing money at a problem. We are awash in subsidies to deal with climate change. This green levy is a step in the opposite direction, but we have not moved towards using the disincentive side of the economic tool. Instead of only the carrot, we need some sticks as well. We need to start making polluters pay, to make it more expensive to dump greenhouse gases into our atmosphere or pollutants into our water. That kind of thing, by and large, is missing as well in this budget.
Senator Di Nino: You will agree with me that a variety of different organizations — such the Canadian Union of Public Employees, CUPE, the Canola Council of Canada, the Canadian Renewable Fuels Association, and The Nature Conservancy of Canada — may disagree with you in that assessment of this budget. They have all applauded parts of the environmental component of this budget.
Mr. Sadik: I also applaud parts of the budget, yes.
Senator Stratton: I appreciate your coming because I am curious as to what your reaction would be with respect to the green levy.
As I see it, the government had a reason for excluding the typical half-ton, light-duty trucks. Yes, they are driven through the city, but in a lot of cases — perhaps the majority of cases — they are used for work. The independent contractor doing renovations, or doing this job and that job, relies on that truck for getting around. For farmers, it is their main method of conveyance. They not only use it to haul stuff in the back, but they also use it to haul their families. We can see a good reason for excluding trucks.
When a guy goes into a car dealership to buy a truck, do we ask if he uses it for business or only to drive his family around? How do you determine that, and how do you point and said "thou shalt''? I think that is a difficult thing to do.
I have also observed over the years, particularly in California, that they demanded greater and greater fuel efficiency from their automobiles but they have essentially stayed at a plateau level. As the efficiency in the automobiles grew, so did the volume of automobiles. Hence they are treading water; they are not really getting anywhere. In a city such as Los Angeles, particularly, I do not know how you would overcome that because it is such a vast horizontal plane. If you have been to LA, and I am sure you have, there are few high-rises.
It becomes a problem. The green levy is the beginning of an incentive. It is an interim step to what is coming down the track. There are people like Glen Ringdal, president of the New Car Dealers Association of B.C. This incentive for cost-efficient vehicles such as hybrids is making them competitive now. People will not pay more for a hybrid; they are a fair bit more money. This incentive is a beginning to bring the price of hybrids to a range competitive with normal internal-combustion engines. We are seeing more hybrids and smaller vehicles on the road. It is amazing. It is like we are transitioning from being a North American, big-car country to Milan, Italy, where we see nothing but little cars.
It is happening. It is to be encouraged on the part of Canadians, and they are recognizing the need and moving in that direction. Is a carrot or a stick a better way? If you impose strict regulations in one fell swoop, you will do a lot of damage. I think we need to use carrots.
Would you care to comment on that rambling discourse on my part?
Mr. Sadik: I have taken careful notes of each important point you made.
In terms of pickup trucks being excluded, my sense is that one criterion we could use is the commercial plate criterion, which I suspect is pretty well in place around all the provinces. If they purchase a vehicle and have a commercial license plate, then they probably use it for construction, farming or something like that. Those pickup trucks could be excluded. If they opt not to have a commercial plate, it probably means that they are not doing anything work-related with that truck, in which case they ought to pay the levy.
California has had stricter vehicle regulations over the course of the past two decades, but those regulations have applied only to air pollutant emissions from tail pipes — sulphur dioxide, nitrous oxide and so on. California has been well ahead of the other 49 states because of the unique problem with smog in Los Angeles. The state has not set a standard around greenhouse gases until recently, and that standard does not come into effect until 2009, I believe. California has cleaned up its air somewhat. To their credit, fuel companies and vehicle manufacturers have cleaned up vehicles substantially in terms of the air pollutants that cause smog.
Unfortunately, with respect to greenhouse gases, 1 litre of gasoline, whether it is burned in a massive Chevy Suburban, a tiny Toyota Yaris or a 1925 Model T will produce 5 pounds of carbon dioxide per litre of gas no matter which vehicle it goes through. That will not change until we use smaller and more efficient engines. That is what California is moving toward, and where we can join them.
I agree with you fully that incentives are starting to work around smaller cars. We are seeing the federal incentive of $1,000 or $2,000 for hybrids or small efficient vehicles, coupled with incentives such as the one of another $2,000 that you have cited in British Columbia. Those incentives will lop off $4,000 from the price of a hybrid vehicle, be it a hybrid SUV or a small sub-compact car. That is fantastic, but experience has now shown that only a certain sector of the vehicle-buying public will be swayed by those types of incentives. That is borne out by the fact that we are still seeing an increase in sales of large SUVs, pickup trucks and gas guzzling cars. The market share of SUVs has continued to increase over the course of the last decade, even in the face of those kinds of incentives. Some people will not be moved by an incentive of $2,000 or $4,000. They still want the bigger car.
That is a question of freedom of choice. We have freedom of choice, by and large, in our society, but there are issues around seat belts, helmets on individuals riding motorcycles, immunizing children when they go to school, and a number of other areas where we have decided that, for the sake of public policy and the harm that these activities cause to individuals or the public at large, perhaps we ought to start introducing measures for the sake of society as a whole. Such measures will reduce greenhouse gas emissions, and improve human health and the environment around us.
Senator Stratton: I do not disagree with you. I think that will happen over time.
Senator Murray: Not in our lifetime.
Mr. Sadik: We are running out of time.
Senator Stratton: The problem we have is that until it becomes painful economically — and the price of gas must go higher and higher — people will not take notice.
Mr. Sadik: We are a huge net exporter of gasoline. It is great for Canada.
The Chairman: Did you say 1 litre of gasoline burned produces 5 pounds of carbon dioxide? Did you mean gallons and pounds?
Mr. Sadik: Right: One litre produces 2.4 kilograms of carbon dioxide.
Mr. Sadik: Twenty pounds per gallon.
The Chairman: We appreciate you being here today, Mr. Sadik.
Mr. Sadik: Thank you.
The Chairman: Honourable senators, we are pleased to have with us as our next witness Dr. Marcel Dvorak, who represents the Rick Hansen Foundation. He is Head of the Academic Division of Spine, Department of Orthopaedics, University of B.C.; and Cordula and Gunter Paetzold Chair in Spinal Cord Clinical Research.
Welcome, Dr. Dvorak.
Dr. Marcel Dvorak, Head, Academic Division of Spine, Department of Orthopaedics, University of B.C.; and Cordula and Gunter Paetzold Chair in Spinal Cord Clinical Research: Thank you very much for the opportunity to present to you. I am responding to an invitation on behalf of the Rick Hansen Foundation researchers across Canada and, on behalf of people with spinal cord injury, to speak about why it is vital that clause 143 of Bill C-52 be passed expeditiously. The following statement is intentionally focused on the importance of this provision to our community; hence, the statement does not comment on any other measures or merits of the government's Budget 2007.
This year marks the twentieth anniversary of the Rick Hansen Man in Motion World Tour, and it has been an important reminder of the progress we have made in Canada to remove the physical and attitudinal obstacles that people with disabilities suffer. It has reminded us of how far we have come as a country, but that more opportunities and more progress lies ahead.
A delay of Bill C-52, in particular clause 143, will result in further delay of research advances for people living with spinal cord injury, as well as significant delay in savings to the healthcare system.
The vision of the Spinal Cord Injury Translational Research Network is to implement a national research strategy and have Canada become a world leader in reducing disability impacts while improving the quality of life for people with spinal cord injury.
As one of the physicians and leaders of this initiative, we are mobilizing a community of experts from the field of spinal cord injury research and clinical care to translate research breakthroughs into innovations that will help Canadians with spinal cord injuries adapt to and eventually even recover from their injuries.
This Canada-wide network will identify and share best practices and bring a collaborative focus to create new solutions that will deliver new possibilities for individuals and their families.
By the end of 2007, it is expected that traumatic spinal cord injury will have resulted in $1.9 billion in healthcare costs across Canada. With the work of the new translational research network, healthcare outcomes will improve in areas such as reduced incidents of permanent paralysis, reduction in pressure sores and reduction in the number of hospital days required to treat individuals with acute traumatic spinal cord injury.
The momentum during the twentieth anniversary year has been achieved with support at provincial levels from Alberta, British Columbia, Northwest Territories, Nunavut, Prince Edward Island and Yukon. Other jurisdictions continue to consider the extent of their involvement.
To delay now will not only impact the detailed planning and collaborative efforts of Canada's leading spinal cord injury scientists and practitioners, but it will adversely impact the lives and the economic consequences of individuals with spinal cord injury in Canada. More time will be unnecessarily spent in intensive care units, hospitals and in rehabilitation units. Some individuals will not receive adequate treatment and will suffer through painful physical, emotional and social consequences. Others with spinal cord injury will wait weeks, months or years longer than necessary to move on with their lives. They will be apart from their loved ones and potentially, will suffer from depression and isolation. In some cases, for those not so lucky, they may suffer from unnecessary medical complications that could lead to their premature death.
To delay now means a significant loss in the momentum of that progress and a step backwards for the hearts and minds of members of the spinal cord injured community in Canada. I urge you to assist us in obtaining this funding.
Maybe on a more personal note, as a physician and surgeon who cares for these people, when I return to Vancouver later today and over this weekend, I will be on call for the acute spinal cord injury unit at Vancouver General Hospital. At this time of the year, which is a busy time for spinal cord injury, I will likely admit several patients with acute spinal cord injury. It is hard to stand over the bed of an often young individual who has sustained a new spinal cord injury and not feel extremely compelled to try to do everything that we possibly can to try to improve their outcome and reduce their disability. The patients and the families often ask us in that environment, "What can you do, and what are you doing?'' They question things such as whether or not they reached a centre of excellence in a timely fashion, where their care was expedited, whether there were gaps in their care and why those occurred. My answer to them is that we are doing a lot, and this initiative, the translational research network, is what we are doing to try to improve their care and reduce their disability; and even in some cases to allow individuals with serious injuries to walk away, something that was not happening 20 and 30 years ago.
I ask you, on behalf of the translational research network, which I am one of the co-leads of, and on behalf of patients and their families across Canada, and those living with spinal cord injury, to help us obtain this funding, to help us and partner with us to help improve the care of these individuals, and to speed the passage of this bill.
The Chairman: Thank you, Dr. Dvorak, for your presentation. We understand the importance of this to the Rick Hansen Foundation. For the record, you indicated in your submission, section 143. It has now evolved or morphed into section 141 of the bill that is before us. You are close. I wanted to clarify the record on that.
I have a list of senators that would be pleased to enter discussion with you.
Senator Nancy Ruth: I hope the budget is passed too, because the $30 million that is committed to you is multiplied to a number of other organizations that will also die if we do not pass the budget.
I want to ask you two things. How will you use the $30 million? What kind of research will be done out of it? In the end, I want to know what you think about stem cell research, because this issue is huge in this Parliament.
Dr. Dvorak: We have set up a multi-level collaboration. It runs across Canada. Scientists, surgeons and physicians that care for these patients from the moment of injury through their rehabilitation and through to their ongoing life in the community have agreed to collaborate and work together based on the leadership of Rick Hansen and the Rick Hansen Foundation. That collaboration is only gaining momentum now, and it has been ongoing for many years. This collaboration has five clear priorities within the structure of this translational research network. Those priorities include a reduction in permanent paralysis, improvement in quality of life outcomes for individuals living with spinal cord injury, a data collection process whereby we fund the Rick Hansen Spinal Cord Injury Registry, where every individual with a new spinal cord injury across Canada, regardless of where they are injured, is included, and then components of implementing best practices and management.
We have a structure and we have a plan. We have been working on a business plan. We have clear outcomes. One of the unique aspects of this collaboration is that it brings together individuals at different levels. This is not a pure research initiative as such, but it links the clinical researchers, those that study their patients, with individuals such as healthcare economists that have an interest in management science and want to improve the processes and how we care for these patients. By bringing those groups together, I think we will see not only improvements in care and outcome but also reduction in cost and much more efficient care. This is a way for the federal investment in this area to lead healthcare change and transformational change.
Senator Nancy Ruth: But you do not know, per se, how many million of the $30 million will go to this?
Dr. Dvorak: We have a preliminary budget divided among the five priorities, and every year we will put together a business plan that divides that out. It is representative generally of the spread of incidents of injuries across Canada. We have representation and involvement across Canada in this.
Senator Nancy Ruth: Give me an example. Tell me a story.
Dr. Dvorak: You want to hear a story. Stephen Fletcher and Rick Hansen are great examples. When Rick was first injured, his care was extremely lengthy and extremely disabled.
Senator Nancy Ruth: It is not the individual I want to know about. I want to know how it works with provincial health organizations, how it integrates with one specialist of one kind, or a practitioner that is not medical. How does this network work?
Dr. Dvorak: We have champions in each major centre where there are centres of excellence. They will implement the registry that will collect data on every new injured patient, and that is a cost. The registry is a significant component, maybe even a third, of the annual cost. In addition, studies will be run out of the registry, and management science areas will look at the economics and at the flow of patients from the registry. Clinical trials will be run through the registry and through the network. It is difficult to study individual spinal-cord-injured patients from one centre only because, fortunately, there are so few of them. Creating a network across Canada gives us the ability to implement clinical trials and look at some of the new research developments coming out of the lab that we are able to implement to make improvements in peoples' lives. We will measure that and cost that and show not only the improvements in care but also the savings in dollars.
Stem cell research and therapy represents a controversial area that is outside my specific area of expertise. I know a stem cell network in Canada is being supported. It is an important area to pursue. Whatever the answer and whatever the cure for individuals, it will not be one magic bullet. It will be a combination of many incremental things. Promising early results suggest some stem cell therapies might be part of that.
Senator Nancy Ruth: Many spinal cord injuries come from car accidents. Do you have a relationship with the automobile industry?
Dr. Dvorak: Personally, no, but about half the spinal cord injuries across Canada are the direct result of motor vehicle accidents involving passengers, drivers and pedestrians. We are starting to see a shift in that number with some of the safety initiatives, such as air bags and seat belt laws, both of which have made a dramatic difference. We are seeing fewer individuals ejected from vehicles. There is a shift toward more elderly individuals with spinal cord injuries and maybe lower energy injuries, due to a fall in a bathtub or a slip on an icy curb.
Those injuries are a different pattern and have different complexities because often other health issues are related to those individuals. There can be greater opportunity to intervene because they have a lower energy injury and thus, the damage to the cord may be more easily remedied.
Senator Murray: I am glad you are here today. We have all heard of the Rick Hansen Foundation and I am glad to see someone before us who is directly involved. I will make a brief intervention on which you may comment or take on board as you see fit.
The provisions of the budget that are of particular interest to you are contained in the large, omnibus Bill C-52. That bill also contains provisions that are extremely important, controversial and divisive relating to major national programs such as equalization and the Canada Social Transfer that affect the lives of many Canadians directly. Not all of us support those provisions. I, for one, will support at least one amendment, if it comes forward, to this bill on those provisions. I do not know what you have been told about the legislative process here or who told it to you, but I want to say that if we decide to amend this bill for good reasons, we will do so on Thursday or Friday, and it will go back to the House of Commons. They will need to meet and deal with it. My experience is that they deal swiftly with these matters. They will either accept our amendment or amendments or they will send it back and tell us that they have not accepted them. In any case, the delay might be measured in days rather than in weeks, and I want you to know that.
I also want you to know, although you might know already, that the entire responsibility for putting your worthy program, which I think all of us support in this bill, along with these other controversial and divisive issues is entirely with the government. I do not think I need to say any more.
The Chairman: I assume you do not want to comment on that.
Dr. Dvorak: No, thank you.
The Chairman: I have a point. Can you tell us when the $30 million was promised to the Rick Hansen Foundation because we have been told in government publication that the money is coming out of last year's budget and not out of this year's budget, although the provision is an amendment in a budget implementation for this year's budget, which is somewhat peculiar.
Dr. Dvorak: I believe the announcement was made February 2, 2007. The details of which budget or year are beyond me.
The Chairman: That was in the previous budget year and that explains it. For some reason it was not in other legislation but has ended up in this year's budget implementation legislation. That explains it for me. Thank you.
Senator Rompkey: Of course, they all say that funds may be paid. I assume that you have a guarantee that it will happen. The $30 million is a one-time expenditure but you have an ongoing program. I notice that all of these are one- time expenditures, I think. Is that one-time expenditure useful and, if so, what would you do with it and how would you continue to fund ongoing research? This problem will not be solved overnight.
Dr. Dvorak: This is part of a 20-year journey for the Rick Hansen Foundation in building collaboration and advancing care. We are taking it to the next level. The fact that we have secured funding for five years, which is the term of $30 million, is extremely helpful. Our mission will be to show within that five years how absolutely necessary this work is, and then make a compelling case for further funding.
Senator Rompkey: This funding comes to you over five years.
Dr. Dvorak: Correct: It is a single payment of $30 million with a plan to spend it over five years and to provide annual business plans in advance to be approved. There is an extensive document around the terms of how the money will be spent.
The Chairman: That is helpful. That was not in any of the documentation that we had before us.
Senator Di Nino: Dr. Dvorak, you probably know of the organization that I am with: the Terry Fox Hall of Fame. I am aware of your organization and of the incredible courage of the folks that you deal with; those of us who review the applications of those to be admitted to the Terry Fox Hall of Fame. I congratulate the Terry Fox Hall of Fame because I know they perform a great service in this area. As well, I extend to you and your organization my congratulations because I know the difference that you have made to the lives of numerous individuals whose curricula vitae I have had the privilege of reviewing. The two we mentioned a moment ago, Rick Hansen and Stephen Fletcher, are members of the Terry Fox Hall of Fame. Thank you for making a difference in the lives of many people.
Senator Mitchell: I heard an interesting interview with Rick Hansen recently where he made a number of points, two of which were that there are techniques now that can greatly limit spinal cord damage if they are implemented quickly enough. You probably know what I am referring to; I do not.
Can you describe those techniques briefly and tell us whether there is a national standard of care that is applied for those techniques? I believe he was inferring there was not yet.
Dr. Dvorak: That is correct. A number of interventions have come out of basic science research, but also out of clinical research — some out of other fields where we think that we have interventions that, if applied early enough, can make a dramatic difference.
One example of that would be the timing of surgical decompression. It used to be that surgery was fairly risky early on when the patient was unstable. Through a large collaboration with multiple physicians, we have participated in a study that is starting to suggest that the earlier we decompress, or take the pressure off an injured spinal cord, the better it is.
When we look at spinal cord injury in a country like ours, and the implications to the health care system of a finding like that, we would like to arrive at a situation where they receive the same high level of care regardless of the postal code in which they are injured. That is not only a goal of setting a standard, it is a goal of creating the environment within an already stretched health care system where that kind of care can be prioritized and can occur. Without that, the downstream costs end up being extreme. Part of what we are trying to show here is that if these improvements can be made, there are direct measurable consequences.
The short answer to your two questions is, yes, there are interventions; and no, there are not yet standards. Care varies tremendously, depending on where they are injured and even in what environment — whether it is work related or other types of injuries.
The Chairman: I failed to indicate that Senator Mitchell is a senator from Alberta.
Dr. Dvorak, we appreciate your being here and providing us with this background information. It is helpful to us in our deliberations on this bill in its many different facets.
Honourable senators, we will now adjourn. The bus is waiting outside, and the vote is at 5:30 p.m.
The committee adjourned.