Proceedings of the Standing Senate Committee on
National Finance
Issue 4 - Evidence - Meeting of February 6, 2008
OTTAWA, Wednesday, February 6, 2008
The Standing Senate Committee on National Finance met this day at 6:38 p.m. to study Bill C-41, an Act respecting payments to a trust established to provide provinces and territories with funding for community development.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Welcome 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 chair of the committee.
[English]
Welcome to the twelfth meeting of the Standing Senate Committee on National Finance. Our field of interest is government spending and operations, including reviewing the activities of officers of Parliament and those various individuals and groups that help parliamentarians to hold the government to account. We do this through the estimate of expenditures and funds made available to officers of Parliament to perform their functions, and through budget implementation acts and other acts that are referred to this committee by the Senate.
Today, we are examining Bill C-41. The bill was introduced and quickly passed in the House of Commons yesterday, February 5, 2008, and referred to our committee in the Senate the same day. This bill is the budgetary legislation that funds the new national Community Development Trust, as announced by the Prime Minister on January 10 of this year.
Appearing on very short notice before us this evening is the Minister of Finance, the Honourable James Michael Flaherty, P.C., M.P. We are pleased that he was able to accept our invitation to be here. Along with the minister is Mr. Louis Lévesque, Deputy Minister, Intergovernmental Affairs, Privy Council Office.
Welcome, both of you. I understand, Mr. Minister, you may have some introductory remarks. Then, if Mr. Lévesque has some, we will call on him next.
Hon. James Michael Flaherty, P.C., M.P., Minister of Finance: Thank you, Mr. Chair and honourable senators. I appreciate the opportunity to be here. This bill went through the House yesterday, as the chair just indicated, so it is good that we can have the opportunity so quickly to meet with your committee. I thank you for using my full name. My mother would like that very much. I doubt that she is watching, because she probably has other things to watch on television. If she were watching, she would like that very much.
In any event, let me take a few minutes and touch on some of the primary points. As I said, it is a pleasure to be here. This bill will make Canada stronger and better. There is no doubt in my mind that the fundamentals of Canada's economy are in good shape. As senators will know, we have recently been enjoying one of the strongest periods of economic growth in Canada's history. In fact, we are in our 12th year of economic expansion, which is the second- longest period on record in Canadian history. The only longer period was immediately following the Second World War. The national unemployment rate stands near its lowest level in 30 years.
I am on my way tomorrow to Tokyo for the G7 finance ministers meetings and I will be proud on behalf of Canada to point out once again to my international colleagues that we are the only G7 nation reducing debt levels and running surpluses at the same time. Our economic fundamentals are the strongest in the G7. We are not resting on our laurels.
[Translation]
On the contrary, the government has taken bold and proactive steps to stimulate the economy and help weather difficult economic times. Honourable senators will recall the support package for our forest industry announced in Budget 2006, the acceleration of capital cost allowances for manufacturing in Budget 2007, and the additional broad- based business tax cuts in the fall 2007 economic statement.
[English]
Since forming the government in January 2006, this government has announced measures that will reduce taxes to businesses by a remarkable amount, which is $50.5 billion by the end of 2012. With these measures we are moving toward the lowest business tax regime in the major industrialized countries. Strong fundamentals are evident and we are well positioned for long-term growth and prosperity.
We cannot afford to stick our heads in the sand and pretend we can insulate ourselves from the current volatility in the global economy. In a world facing increasing economic uncertainty, Canada, as an open, trading economy, faces difficult challenges in the year ahead. We have already seen some of these challenges in communities across the country. Canada's forestry industry has been particularly hard hit by exchange rate fluctuations and turmoil in the U.S. housing sector. They are not alone. In communities across Canada, people who work in other sectors, like fisheries and manufacturing, are facing similar challenges.
Honourable senators, our government will not stand idly by while communities that depend on these industries, and the Canadians who work in them, are in trouble. We have said that we will stand up for Canada's traditional industries, and yesterday, with the introduction of this bill, that is exactly what we are doing.
We have taken action that will assist vulnerable communities and workers by investing $1 billion in a Community Development Trust. As part of this new national initiative, our government will support provincial and territorial efforts to build a stronger, better future for communities and workers who have been hurt by international economic volatility.
This government recognizes that the provinces and territories are well placed to identify the unique difficulties facing these communities across Canada.
I want to give a few words about the expected uses of the trust. They include investment in job training and skills development to meet identified local or regional gaps. The trust could assist workers in unique circumstances facing adjustment challenges. This is especially true in communities that rely largely on a single industry that has been affected by an economic downturn.
The trust could also assist in the development of community transition plans or the development of infrastructure initiatives that support the diversification of local economies. This could include public utilities projects, industrial park development, science and technology development, access to broadband technology, downtown revitalization, and communication and transportation services. Other types of investments are also possible depending on the needs of the individual communities.
One of the strengths of the trust is that it allows provinces and territories to respond to their unique challenges and needs. What works in one area of Canada may not work in another.
Honourable senators, I respectfully suggest that there are a couple of things to keep in mind when considering this bill. First, the intent of the funding is to supplement existing and proposed investments by provincial and territorial governments to support community enhancement and development. Second, and this is an important point, all projects funded through the Community Development Trust will need to respect Canada's obligations under the North American Free Trade Agreement, the World Trade Organization and the Softwood Lumber Agreement.
The Community Development Trust will be established using part of the 2007-08 budgetary surplus. Resources for the trust will consist of $1 billion in new funding on a national basis. In terms of allocation, a base amount of $10 million will be provided to each province and $3 million to each territory with the balance of the funding allocated on a per capita basis. This allocation will increase the capacity of provinces and territories to respond to adjustment challenges.
Furthermore, provinces and territories will have the flexibility to draw down funds as required over the three-year life span of the trust.
[Translation]
This bill builds on a number of initiatives undertaken by our government over the last two years designed to secure our economy and protect it against global market volatility. The government has committed $33 billion over the next seven years in infrastructure investments. We have provided $1.5 billion in additional support for skills training and science and research funding.
[English]
As I mentioned earlier, Budget 2006 provided $400 million in additional measures to support our forestry sector, including addressing the mountain pine beetle infestation in Western Canada, enhancing innovation and technology and promoting market diversification. These are all important initiatives to help provide a strong future for Canada.
In regard to accountability and reporting to Canadians, Canadians do expect governments to be accountable for their tax dollars. Provincial and territorial governments are encouraged to report directly to their constituents on the expenditures financed and outcomes achieved with the funding provided through the Community Development Trust.
This proposed legislation is aimed squarely at making a real and lasting difference in addressing economic hardship caused by a shifting global economic landscape. Communities across the country have told us that they are in trouble and that they need to receive this assistance in a timely fashion. That is why this government has made this legislation a priority. I thank you again for dealing with the matter so quickly. I encourage all honourable senators to recognize the importance of this bill, as you do, in ensuring a strong and prosperous future for Canada and to move it through the legislative process as quickly as possible. It is particularly important for quite a few communities in Canada that can be described as single-industry communities that have been hard hit, particularly in the forestry sector.
The Chair: Thank you, Mr. Minister.
Louis Lévesque, Deputy Minister, Intergovernmental Affairs, Privy Council Office: I wish to give information regarding the status of discussions with provinces and territories regarding the implementation of this initiative. The Prime Minister wrote to each jurisdiction, to each premier, on January 10 to outline the general parameters of the Community Development Trust. As you are probably aware, agreements were reached with New Brunswick on January 10 and with Saskatchewan on January 17.
[Translation]
All the other jurisdictions were contacted by their departments of intergovernmental affairs and the offices of the appropriate first ministers.
[English]
Given the urgency attached to this initiative by all jurisdictions, we are confident that agreements will be reached on joint announcements in specific areas of investment consistent with the objectives of the trust and that that should result in an announcement over the next several weeks.
Senator Stratton: Minister, I will try to be brief because there are people on the other side who have questions.
It is our knowledge that you will be attending a G7 Finance Ministers meeting this weekend, discussing a variety of topics, including the recent global economic volatility. Recent volatility, especially weakness in the U.S. economy, has been a contributing factor in the Canadian dollar's rapid rise, which, consequently, has affected the sectors targeted by the Community Development Trust.
What type of issues do you think will be important to discuss at this meeting, and what message do you believe Canada should convey at this meeting?
Mr. Flaherty: I will try to be brief. As I mentioned a moment ago, as Canadians we can be proud of our economic fundamentals. They are the strongest in the G7. We will certainly make that point again in Tokyo.
I expect that there will be substantial discussion about the current turbulence in capital markets and that a good deal of time will be spent on issues relating to areas in which certainly some participants will encourage more regulation of markets. I expect there will be further discussions on the subject of rating agencies and their role. I also anticipate discussions about sovereign wealth funds and foreign direct investment issues generally. We will make the point again that we want to encourage more flexibility in currencies that are not currently reflecting much flexibility, particularly some of the Asian currencies, which affects those of us who have market currencies, like the Canadian dollar.
The Canadian dollar has borne about a third of the brunt of the depreciation of the U.S. dollar, with the European Union getting about another third of the burden of that depreciation. The European Union has close to 10 times the population of this country, so it is a disproportionate burden for Canadians.
Senator Stratton: The question of direct handouts is obviously being discussed in various regions of the country, and we know we cannot do that anymore due to the free trade agreements that we have, including WTO. However, there is still much that we can do as a country and as a government to help particularly the forestry area.
I want to quote the head of the Forest Products Association of Canada, who said, regarding coping with the recent turbulence affecting his sector and specifically what the government can do, that there is a lot that can be done without the government getting into a bailout, subsidies and all those things that we know we all do not want. He said that we need a government to create a tax regime that makes us competitive.
What have we done to help these people from a tax regime point of view?
Mr. Flaherty: I am glad you asked that question. Thank you. Some are talking about economic stimulus, and the Americans are looking at an economic stimulus package.
The cumulative story in Canada is that this year, because of what we have done in the past two years, particularly and including what I announced on October 30 in the fall economic statement, which was historic and dramatic reductions of business taxes in Canada, some of which came into effect on January 1, 2008, we are ahead of the curve.
The percentage of GDP stimuli is about 1.4 per cent this year in Canada, which is a remarkable economic stimulus for Canada, largely through the reductions in business taxes for small- and medium-sized and larger businesses. We saw the economic downturn coming, and we acted in the fall economic statement.
We have reduced personal income taxes, and we have reduced consumption taxes, as you know, by two full percentage points in the GST. We have also reduced the government's take with respect to capital cost allowances by introducing an accelerated capital cost allowance in last March's budget. That is a cost of $1.3 billion. We are looking at that issue now with respect to the submission that we have had from many manufacturers in Canada that we ought to extend that two-year 100 per cent writeoff to a longer period of time because of the time it takes for some businesses to make this kind of planning decision and acquisition.
Senator Ringuette: Thank you, Minister Flaherty, for appearing tonight. I suppose your staff must have briefed you on my comments in the Senate yesterday, so you are probably well aware of where I will be directing my questions.
You stated in your opening remarks that you have consulted with communities that have been affected by the downturn in the forestry sector. It seems to me, looking at the proposed bill and the objective that you have stated, that the two do not concur. Allow me to state my case as a native from New Brunswick.
First, on a per capita basis, we are probably the province that has been the most affected by what has been happening on the forestry side, just as a few years ago the Western provinces were very affected by BSE, and all of Canada and all parliamentarians supported the federal government's helping the beef producers. We were supportive when the federal government announced funds to help the auto industry in Ontario. We were supportive when the federal government announced, a few years ago, special funds to help with the textile industry and the aerospace industry, none of which was in New Brunswick. We have a particular problem in regard to the forestry sector because it is the major portion of our economic pie.
The way that you want to distribute the money and what you say in regard to the objective of this fund do not match.
Second, $1 billion was left with the Americans specifically to look at their market strategy for their forestry products. You have just stated that this $1 billion will need to respect WTO, NAFTA and, particularly, the Softwood Lumber Agreement.
In the press release that was issued on January 10 in New Brunswick, you only mention analyzing the New Brunswick forest industry's competitive position. There was no mention of any money being allocated to seek new markets for forestry products.
You also mention that some of these funds will be available for job training. We already have a federal-provincial agreement in all the provinces in regards to job training. You mentioned science and technology. We already have funding for science and technology. We already have a program for that.
You mentioned that the fund is a supplement for existing provincial programs. I have an article on the forest industry that states that Quebec will spend $450 million over the next three years to ease the industry's pain. I agree that Quebec has been very hard hit in its forest industry, and Northern Ontario has been hit hard as well. The article also said that in September 2007, Ontario promised $330 million over five years.
My basic argument is that it is not a great deal of money and it does not really accomplish what you state it is supposed to accomplish, which is targeting communities that have been specifically affected by the downturn in the forestry sector and some manufacturing sectors.
The distribution of $1 billion will include B.C. at $129 million, Alberta at $104 million, New Brunswick at $30 million, and others. Minister, with all due respect, what you are spinning with $1 billion does not correspond to the means that you will use to distribute the money to the communities that truly need it.
The Chair: We should let the minister reply to some of those questions and comments.
Mr. Flaherty: If you will forgive an anecdote, the first mill I was ever in in my life was the mill in Dalhousie, which is closing. My father worked there for about ten years from 1933 to 1943. It was after he worked there that I went through the mill with him, because I was not born in 1943. The first four of my siblings were born in Dalhousie. My mother was from Campbellton and my father was from Loganville. I have some idea from my father of the importance of forestry, the mills, the pulp and paper industry and the history of New Brunswick, which is very strong in a traditional Canadian industry.
Having said that, the purpose of this fund is not to market forestry outside of Canada. The purpose of the fund is to help communities like Dalhousie that face a very difficult time because the mill is closing and the people and the whole community need to adjust. The funding is community-oriented and people-oriented. It is not an industry-oriented fund.
The industry has been telling me since I became Minister of Finance that in Canada there needs to be a restructuring in the forestry sector; that they are going about the business of restructuring; and that we have many small mills with inadequate investment in new machinery and equipment. The result is that parts of the industry in forestry are not competitive. That is not something government fixes, quite frankly. That is something that industry and the private sector have to fix. Government has a legitimate duty to people and to communities to help them through a time of adjustment.
I should add that New Brunswick was the first province to sign on to this trust, and Premier Graham was quite supportive of it. The employment numbers are very strong overall in New Brunswick, and significant job opportunities are being created. Hopefully this fund will assist people to adjust so that they can enjoy the other opportunities being created in the economy of the province of New Brunswick.
The trust is broader than just forestry, of course. It applies to communities that are affected by other industries that have been affected by international economic conditions. In terms of the funding, there is a $10-million floor for New Brunswick, and after that it is per capita. For skills training, $500 million was announced in April 2008.
Senator Ringuette: Case in point, exactly; when an industry is in trouble, the federal government steps in to help — for example, BSE, the auto industry, textiles and aerospace. Given a few days, I am sure that I could come up with many more arguments, minister. My basic argument is that the philosophy of your government to distribute money on a per capita basis does not meet the objective that you are spinning.
I cannot believe that Alberta is getting $104 million. Where is the dire unemployment stress happening in Alberta? Where is it? Where is the dire unemployment stress in B.C.? Where is it? They cry on a weekly basis for you to open up immigration because they do not have enough workers. I do not see the justification of the per capita funding. If you really want to achieve the goal that you say you want to achieve, you have to look at the changes in the unemployment rate on a regional and a provincial basis to see where you most need to target the money. It is not on a per capita basis. Funding $26.93 per citizen of each province will not achieve what you say that you will achieve. I am being critical because of that.
The Chair: Minister, do you wish to reply?
Mr. Flaherty: Yes. There is a floor, senator, as you know, such that $109 million of the $1 billion is a floor payment, not a per capita payment, to the 13 provinces and territories of Canada. I am sure that reasonable people could differ on how much the floor should be and how much the per capita should be. I do not think anyone would suggest that it should all be divided equally among the 13 provinces and territories, and I do not think anyone would suggest that a per capita allowance should not be part of it, in fairness.
There are towns and communities in British Columbia and in Alberta that have been seriously affected by the issues that we have discussed.
Senator Ringuette: They have alternatives.
The Chair: Senator Ringuette, shall I put you down for the second round? We are running out of time and many senators wish to ask questions.
Senator Ringuette: If need be, I definitely want to be on a second round.
Senator Nancy Ruth: Why use a trust vehicle, and where else does the federal government use trusts? Could you give me some specific examples, particularly if there are any examples where all parties are not governments.
Mr. Flaherty: In this case, it is efficacious because the provinces and territories are close to the communities. It is reasonable to assume that they are well positioned to allocate the funds appropriately and to consult with the local communities.
The trust is merely a financial vehicle, as you know. We need a contract, a trust agreement, in order to flow the funds. We have that already with the Province of New Brunswick and the Province of Saskatchewan, anticipating that these funds will be available. The funds are not deposited in the trust, of course, until Parliament has passed the bill and Royal Assent has been received. It is a flexible arrangement. It is a way of transferring funds, in this case to provinces and territories so that they can move forward in their assessment of their own needs of their own communities.
You asked me a question about other trusts that are not directly with the provinces. I have the list here, but I would have to consult with the Deputy Minister of Intergovernmental Affairs to see which are not directly with provinces and territories.
Mr. Lévesque: The trust arrangements have been used with provinces and territories.
Senator Nancy Ruth: If they do not exist between the government and a citizens' group, then, is it always between levels of government?
Mr. Lévesque: For these kinds of purposes, they have been used with other levels of government in Canada, yes.
Mr. Flaherty: Senator, the trust arrangement does not exclude. You could have a trust agreement with a foundation or some other entity.
Senator Nancy Ruth: Am I to understand that there is only one trust here and that all these are separate contracts with each province; they are not 13 different trusts? Is that correct?
Mr. Lévesque: There is one trust, which will be instructed to have certain amounts for each jurisdiction, according to the table that has been distributed to you.
Senator Nancy Ruth: You spoke about some of the provisions, or at least what the money will be used for in terms of infrastructure and people. Are there any differences among provinces as to the key provisions of the trust indenture, or are they more or less all the same?
Mr. Flaherty: There are only two agreements so far, with Saskatchewan and New Brunswick. I will leave it to the deputy minister to say if there are any significant differences.
Mr. Lévesque: The trust arrangements are the same for all provinces, but embedded in the trust arrangement is flexibility for different uses of funds by different jurisdictions. The government has already made announcements with two jurisdictions, striving to conclude agreements leading to announcements with other jurisdictions on the basis of uses of the funds that are consistent with the overall intent of the trust and, notably, consistent with Canada's trade obligations.
Senator Nancy Ruth: On the accountability side of it, how are the provinces and territories required to report on the use and effects of the fund, and can there be a holdback if the trustees of the trust fund do not like it or do not think they have managed it well? Are you aware of anything like that?
Mr. Lévesque: The nature of these arrangements is that there is no holdback. The money is put in the trust. The accountability requirements are on provinces to report to their citizens, and that is consistent with the overall approach to managing fiscal relations between governments. The Parliament authorizes the use of the funds, and it is then up to provinces to use those funds and to report to their citizens about the use of those funds.
Senator Nancy Ruth: Do you need legislation to set up a trust or to transfer money to a trust? Is that the only way to do it?
Mr. Flaherty: Yes. This is an expenditure of public funds and taxpayers' money. It has to be authorized by Parliament, by all of us as parliamentarians — not all of us but enough of us.
Senator Nancy Ruth: My last question, Mr. Minister, is who are the trustees of the trust?
Mr. Lévesque: There is a bidding process. A financial institution will be chosen on a cost-effective basis.
The Chair: Could we have a copy of the trust indenture that is common to all the provinces and territories so that honourable senators could study the terms and conditions?
Mr. Lévesque: The operating principles for the trust have already been included in the documentation. I will have to check on what time this information can be made available, because we have not concluded those yet.
The Chair: As I understand it, Mr. Lévesque, there is a common trust indenture that is common throughout, and then there are specifics in terms of what each province can invest in.
Mr. Lévesque: The trust arrangement is a single arrangement that applies to all provinces.
The Chair: Yes.
Mr. Lévesque: It is flexible enough that each province can direct the funds to different uses within the ambit of the overall intent.
The Chair: I can understand why you may wish to withhold the specifics for Saskatchewan and New Brunswick until you get all of them done. We would like to see the common terms for all of the provinces and territories so that we can understand what those common terms are. Is that possible, Mr. Minister?
Mr. Flaherty: I think it probably is. I just hesitate because I have not seen the indenture myself. I expect we could confirm that fairly quickly.
The Chair: We have a great reservation in the Senate because this bill is so circumspect. It is so short that this committee has to assure the Senate as a whole that we have a good understanding of what is being set up here. It would help us considerably if you could provide that indenture.
Mr. Flaherty: Yes, senator. I will undertake to get back to you on that promptly. It is nice to do a short bill once in a while in the Department of Finance.
Senator Di Nino: For clarification, I have a quick follow-up on Senator Nancy Ruth's question.
The indenture itself is a singular document. The approach that is being taken, minister, is that because of the different needs of different communities, the use of the funds may be different; however, the distribution of the funds will always respect and honour the principles of the indenture. Is that what you are saying?
Mr. Lévesque: The funds are deposited upon approval of legislation and upon establishment of the trust according to the shares that you have before you for each jurisdiction. The individual jurisdictions have the flexibility to draw up the funds according to the schedule, over a three-year period, and they are responsible to their jurisdictions in terms of accounting about the use of the funds.
Senator Di Nino: I guess the question really is whether, to distribute the funds, in effect to give the funds to the provinces, you are not making different deals with different provinces. Is the arrangement, the indenture, exactly the same?
Mr. Lévesque: That is my understanding, yes.
Senator Di Nino: One province may suggest that they want to use the funds for a town because the mill shut down. Another province may decide they want to use the funds for a small city because the main manufacturer went bankrupt or moved down south. The differences are in that sense; is that correct?
Mr. Lévesque: That is correct. As I mentioned, the intent is to have an agreement and joint announcements about the proposed use of the funds in each jurisdiction in the coming weeks and months.
Senator Di Nino: My other question deals with the information that you provided to us. Based on the breakdown you gave us, the Community Development Trust certainly will be of benefit to communities across the country. Minister, being a senator from Ontario, I see that it will be especially beneficial to Ontario on a per capita basis.
Since I follow what is happening in that province, we know that the federal government has attempted to create a stronger business environment, including the lowering of taxes, but Mr. McGuinty and his colleagues have been reluctant to follow suit.
In your discussion with them on this, has the Ontario government given any indication that they will be participating in some manner to contribute to this benefit to those towns and cities that will require the money, particularly perhaps through reduction of some taxes? Have they given any indication on that?
Mr. Flaherty: No, they have not. I can tell you this is a matter of substantial concern to me as the federal Minister of Finance. I can am quite concerned about what is happening with the economy of Ontario.
I am quite concerned that Ontario has the highest taxes on new business investment in Canada. Those taxes are 50 per cent higher than in Quebec. This is a discouragement to investment in the province of Ontario at a time when investment in plant machinery, equipment and modern technology and becoming more productive in order to become more competitive is essential.
In my discussions with my colleague, the Minister of Finance in Ontario, I am encouraging him in his budget — they will do their budget this spring — to reduce the tax burden on business in Ontario and to emulate what the federal government did on October 30. Some of that has already become law and has started to have a positive stimulus benefit.
The tax burden in Ontario is discouraging business investment at a time when the provincial government in Ontario talks about the need to support business. It is quite worrisome. The economic growth in Ontario is lagging the rate of economic growth in the country, yet this province has the largest manufacturing base in the country.
We need to row together. We are reducing the federal business tax rate to 15 per cent by 2012. As I said in the economic statement in the autumn, we are encouraging the provinces and territories to get their business tax rates down to 10 per cent by 2012 so that we can market our country as having a 25 per cent business tax rate, which would be the lowest in the G7. This is a great opportunity for us, but we cannot impose large tax burdens on business and then ask business to weather the storm and grow.
Senator Di Nino: I have a final question. In your discussions with the provinces, have any other provinces indicated that they will be adding some value to this initiative?
Mr. Flaherty: I have not had direct discussions with the provinces. The deputy minister may want to comment.
Mr. Lévesque: The discussions are underway with a number of provinces to identify the areas where the provinces would want to invest those funds. I cannot comment on individual situations before any public announcement is made by both governments.
Senator Di Nino: That is fair enough. We will stay tuned.
Senator De Bané: Mr. Minister, as the man in charge of the finances of our country, it is a pleasure to have you here. Mr. Lévesque, welcome as well.
[Translation]
I have read your résumé very carefully. I was very impressed to see how, after starting out as a mathematics professor at the Collège François-Xavier Garnault, you became a deputy minister in Ottawa after holding the highest offices in Quebec. I am very pleased that you are here.
[English]
Mr. Minister, if I may, I will be very candid with you. I find that this distribution is most unfair, and I would like to give you some examples.
If you take a look at the sheet that your department sent us, in the third column we see that the first one is the base of $10 million. The second one is the per capita of almost $1 billion, and then the third is how much each province will receive. We see that P.E.I. will get $13.7 million, which is approximately $100 per capita. The first line is Newfoundland. Newfoundland has four times the population of P.E.I. but will get only $23 million, not even double what P.E.I. will receive. New Brunswick will be $50 per capita, and Quebec, $30 per capita. I am still looking at the third column.
Mr. Minister, to speak bluntly, this is a cop-out. This is the laziest way of distributing money. If we want to help the automobile industry of Ontario because it is facing very difficult problems, we do not distribute the money on a per capita basis to all the provinces, because the automobile industry is in Ontario. Distributing the money on a per capita basis after giving a base of $10 million, which gives a distortion for P.E.I., does not take into consideration at all the economic weight of the forestry industry in each province.
I think it would help us a great deal if you would take us into your confidence and tell us the different options, their deficiencies and why at the end they were rejected. I would like to know why you took the easiest route: a per capita basis after giving them all $10 million, irrespective of their size. Why should Newfoundland, which has a lower per capita income than P.E.I., get two or three times less than P.E.I. on a per capita basis? I can show you the distortions for the other provinces as well.
I understand that you use that formula for equalization. However, here you are talking about one industry. It is unevenly distributed geographically in a country which is the second largest in the world — six time zones. Each province has its own bottlenecks and problems, et cetera, and you say let us do it on a per capita after a base of $10 million.
I wonder what the other options are and why they were rejected.
The Chair: Would you like to comment on that, minister?
Mr. Flaherty: Yes. In part you are describing the nature of our great country, senator. We have 10 provinces and 3 territories. They are of varying size. They have different populations.
We are the federal government. We are entering into a trust with the provinces and with the territories. One option, of course, is to do everything per capita. If we did that, I am sure that the people in the smaller provinces and the territories would be upset that they were being unfairly treated. I suppose we could divide $1 billion dollars by 13. Then I am sure that many would say that that would be a disproportionate benefit to the smaller provinces and territories. It would be.
This is the great country we have. We have 13 separate jurisdictions in provinces and territories of different sizes. It is an imperfect world. If you were to say to me that the base should be larger and the per capita should be smaller or vice versa, you could make the case, and perhaps you would be correct. There is no magic to the exact allocation, but I do say that it is fair to have an allocation between straight per capita and a base and having a floor. Otherwise, the smaller provinces and territories are disadvantaged.
We see this as well in the infrastructure programs from the Government of Canada with the provinces and territories. We do take a floor into consideration in most of those programs. Otherwise, as I say, we would be putting the three territories and the smaller problems at a serious disadvantage.
Senator De Bané: Yet, Mr. Minister, do you agree that if we want to help the automobile industry, which if I am not mistaken is also present in your riding, the way to do it is to help where we have the automobile industry, not to say, ``We have $1 billion for the automobile industry, so we will distribute it on a per capita basis.'' That industry is in Ontario.
If you look at the aerospace industry, for example, about 50 per cent of it is in Quebec, some in Nova Scotia, Manitoba, Ontario, et cetera.
The Canadian way seems to say that to avoid any dispute, you do it on an objective basis, per capita. I will give you an example that does not concern my own province. P.E.I. now has a greater per capita income and a lower taxation load than Newfoundland, which has a lower per capita income and a higher tax load. One province is getting three times more than the adjacent province.
There is something wrong here, Mr. Minister. I know it is a difficult issue, but I would have preferred you to say: ``I have $1 billion and I will distribute it this way,'' instead of giving a mathematical formula based on the industrial structure of the province. New Brunswick has a vital industry, one of the few industries they have there, and the same in some other provinces. I put it respectfully.
Mr. Flaherty: The aim of this trust is not to help industries; it is to help people and communities. I might mention parenthetically that Newfoundland is richer than Prince Edward Island these days. Things change.
I might also say that job opportunities are greater in large metropolitan areas than in more remote areas. One of the primary focuses of this bill is single-industry towns. That is not so in the automotive sector, generally speaking. The automotive sector, as you said quite correctly, senator, is mostly in Southwestern Ontario.
The Chair: A single-industry town that happens to be in a province that has a large city in it will get more money than the others because of the per capita distribution.
Senator Murray: Minister, I want to say that the process by which this bill passed the House of Commons is and was a travesty of parliamentary democracy. For the benefit of those tens of millions of Canadians who are glued to their television sets watching this committee, I will place on the record how it happened.
In 11 minutes in your House, a bill to spend $1 billion was introduced and read a first time, deemed to have been read a second time and referred to a Committee of the Whole, deemed considered in Committee of the Whole, deemed reported without amendment, deemed concurred in at the report stage and deemed read a third time and passed.
That is the way it went through. The government proposed it. Then we have Honourable Ralph Goodale, Liberal, ``me too''; Ms. Libby Davies, NDP, ``me too''; Mr. Paul Crête, Bloc Québécois, ``moi aussi.'' It went through in 11 minutes; $1 billion.
It is little wonder that there is an incipient movement that you may not have detected yet to abolish the House of Commons and keep the Senate.
The bill itself is so bereft of detail that it is hard to know what to make of it. The bill was put through so quickly and there is so little detail in it that it cries out for amendment. However, let us try to get a bit more information than we have now to see if amendment can be made unnecessary.
The trust indenture will contain the distribution of funds to the provinces. What else will be in the trust indenture? If you do not want to tell me that, can you tell me what else is in a trust indenture of this kind, since you have said there are others?
Mr. Lévesque: I am no expert on those matters.
Senator Murray: You used to be in the Department of Finance, if I remember well.
Mr. Lévesque: I am not a lawyer; I am an economist. The indenture is basically a contract that will prescribe obligations of the trustee and will allow the provinces to draw a specified amount of those funds over a three-year period that will be put in the trust for their benefit.
Senator Murray: This will be in the trust indenture.
Mr. Lévesque: Also the obligations of the trustee in terms of management of the funds and other elements of that nature will be there.
Senator Murray: And that is it. You have correctly pointed out that there will be — and I have no objection whatever to that, indeed I am in favour — a lot of asymmetry. The money will go to the provinces and they will decide where it is needed in their province.
Mr. Lévesque: That is correct.
Senator Murray: I do not have the agreement with New Brunswick in front of me, but there was a fairly detailed press release put out by the Prime Minister and Premier Graham, which states: ``The New Brunswick government has identified several measures that will help move the province toward this goal.'' I am not sure what ``this goal'' is, because they mention various matters: analyzing the New Brunswick forest industry's competitive position, examining opportunities for supplying natural gas to northern communities in order to lower industry energy costs, accelerating opportunities in the mining sector, and so on and so forth. The statement really does cover a multitude of sins. However, will that press release be put into legal language in the federal-provincial agreement?
Mr. Lévesque: No. That reflects a political commitment by the Government of New Brunswick to use the funds for the purposes set out there.
Senator Murray: What will be in the agreement, Mr. Lévesque?
Mr. Lévesque: You are referring to the word ``agreement.'' This reflects the agreement between governments about the use of the funds. Then, in terms of accountability, it is up to the New Brunswick government to report to the public on the use of the funds.
Senator Murray: I understand that. The Government of New Brunswick will be responsible to the legislature and the electors.
Mr. Lévesque: That is correct.
Senator Murray: Then what do we have besides the press release — to take an example — as between Ottawa and New Brunswick?
Mr. Lévesque: The press release reflects the intent that the two governments have for the use of the funds. The press release does that.
Senator Murray: There will be no further agreement.
Mr. Lévesque: No.
Senator Murray: There is no further conditionality.
Mr. Lévesque: No.
Senator Murray: This is it. I will not read the press release. It is available to everyone.
You mentioned a letter that the Prime Minister sent to all the provinces and territories, I take it. I may have missed it if it is not a public document. I would like to have a copy of that.
This is it. What will happen is a statement of agreed political intent between the federal government and a province. For the federal government, is it always the Prime Minister or is there a minister responsible for this? Is it the Minister of Finance?
Mr. Flaherty: It depends on the trusts. Sometimes I have written letters on the trusts. It depends. You are asking on this particular one?
Senator Murray: This particular one. There is only one trust.
Mr. Flaherty: We have done other trusts in the past.
Senator Murray: This is yours, however.
Mr. Flaherty: Yes, it is mine, but you asked if it is always the Prime Minister's.
Senator Murray: Sorry. With regard to this one, the definition of the joint political intent, is this to be worked out by the Prime Minister and the premier at the first ministers' level?
Mr. Lévesque: For now, we have had an announcement between the Prime Minister and the Premier of New Brunswick and an announcement between the Prime Minister and the Premier of Saskatchewan. Discussions are under way as to getting to announcements with other provinces. I would not want to comment on what form these announcements would eventually take.
Senator Murray: So far as New Brunswick is concerned, and Saskatchewan — I have not seen the Saskatchewan announcement, but I presume there has been one — if this bill passes and receives Royal Assent, the money starts to flow. No further federal-provincial discussion is required.
Mr. Lévesque: That is correct.
Senator Murray: I want to come back to this again. There is nothing else in the so-called trust indenture except the distribution of funds?
Mr. Lévesque: That is correct.
Senator Murray: Thank you, Mr. Chairman. I will leave it at that.
The Chair: That is very helpful. Just to finish that off, you mentioned that you did have a copy of the letter that went out from the Prime Minister to the provinces. If you could give it to the clerk, then we will circulate it to everyone.
Second, could you provide us with a copy of the Saskatchewan announcement? That will help us understand and compare and become more comfortable with the process.
Mr. Minister, you have been very patient. You undertook to be here for an hour on short notice and you have been here just over an hour. I am in your hands. If you must leave us now, we understand that and thank you for being here. If you want to stay another hour, you are welcome.
Mr. Flaherty: I do have another obligation that I delayed so that I could be here, senators, so if I may be excused.
The Chair: You will leave Mr. Lévesque here, who will hold the fort on his own, will he?
Mr. Lévesque: I do not mind answering factual questions, but the scope of my answers will be limited to that.
The Chair: We still have three senators on the first round and then we may a second round. We may have to have another session, but we will determine that afterwards.
Mr. Flaherty: I did not realize there are still three senators who have not participated. I will stay for each senator.
Senator Eggleton: My question is a supplementary to Senator Murray's. When I first heard about this, my impression was that it was to be relevant to laid-off workers, people requiring some help in adjusting. The list that Senator Murray referred to talks about research and development, about analyzing the forest industry's competition in world markets, and about supply of natural gas in Northern communities to lower industry energy costs. Those strike me as a little bit different.
Do I understand that all of these things, or whatever a province identifies that would be helpful in terms of economic development, would qualify? What would not qualify?
Mr. Flaherty: Once the bill is passed, the trust is established and the money flows, the administration will be by the provinces The focus, which we have made clear, is on communities and on people, not on industries. The first comment by the New Brunswick government in their communiqué of January 10, 2008, was supporting economic adjustment in hard-pressed communities such as Dalhousie, Bathurst, Miramichi and others, which is indeed the focus. However, this is administered by the provinces and territories. They are our partners in Confederation and they must report to their citizens and to their legislatures.
Senator Eggleton: The trustee for the trust would be given only that broad parameter, generally to help people, or something like that, sort of one line.
Mr. Flaherty: The trustee just holds the money. The trustee is the financial institution holding the money.
Senator Eggleton: He would have instructions as to how he is to disperse the money.
Mr. Flaherty: That is in the trust indenture. You are correct, though: there is no detailed instruction.
[Translation]
Senator Chaput: Why one billion dollars and not two? How did you arrive at that amount? Since this is a bill that is supposed to support and sustain vulnerable communities, why not add a third category of assistance? The first, base funding, the second, calculated by person or per capita. Why was a third category not added that would target the most vulnerable communities and help them? A province could make additional requests for urgent problems.
[English]
Mr. Flaherty: I will try to answer your questions. Why $1 billion and not $2 billion or $1 million? Well, we do budget, and $1 billion is a lot of money. I was waiting to see whether Senator Di Nino would say that that is a lot of money, and he did. It is a lot of money. Therefore we wanted to make sure it was a program that would have a significant impact and help these communities and these people.
In terms of having categories, we have the base, we have the per capita; could we build in something for the most vulnerable communities? It is a very good question. To what extent do we rely on the provinces and territories to identify the communities rather than do it from Ottawa? Frankly, I think it is fair, in the scheme of Confederation, to say that the provinces and territories know their provinces and territories better than we would were we to try to make those selections from Ottawa.
[Translation]
Senator Chaput: Provinces could make a special request to meet that particular need. Ottawa could then decide to make funding available, but presently, it is limited.
[English]
Mr. Flaherty: I understand the question. Going back to Senator Murray's earlier point, this bill went through the House of Commons quickly yesterday. The suggestion that you are making would require some back and forth between the provinces and between officials and so on. This need is urgent. All four political parties in the House of Commons consented unanimously yesterday to getting this done as quickly as possible. Real people are suffering in Canada, people who have lost their jobs and need some help in order to get back on their feet, to adjust and to help their families. That is a good reason to do things quickly. I think the House of Commons acted properly there.
To move the money simply, efficiently and as quickly as possible to those in need, I would respectfully suggest it is better to have less bureaucracy than more.
Senator Eggleton: This is friendly, because I like this, notwithstanding that I agree with Senator Murray about going through $1 billion in 11 minutes. I thought at first about asking this question that it was unfair, but then you made a comment about Ontario's tax situation, particularly with respect to business and how you thought this was detrimental to the situation. Since you are offering that advice for Ontario, would you have some advice on how they would spend this $357.7 million?
Mr. Flaherty: For the purpose intended. There may not be any mills in Toronto — there is the old mill, I guess, which I think is still in business, but it does not need the money — but obviously the forestry industry is substantial in the province of Ontario, particularly in Northern and Northwestern Ontario. Those communities are in need and the people in those communities are in need. I fully expect the Government of Ontario to direct the funds appropriately.
Senator Eggleton: I have one final question then since I did not do too well on that one, although you did give some answer there. That is fair. My final question is when are you bringing in the budget.
Mr. Flaherty: Before the fiscal year end.
The Chair: Minister, the preamble of the bill states that the funding is ``in support of activities to strengthen the economic opportunities for communities and workers negatively affected by international economic volatility.'' Is that the driving force or principle behind the ongoing negotiations for agreements with each province?
Mr. Flaherty: Yes.
The Chair: Could that include the automobile industry?
Mr. Flaherty: Yes.
Senator Ringuette: That is in addition to the current grant that they already have from the federal government.
The Chair: It is important to confirm that.
Minister, we have concluded our first round of questioning. We have two senators who would like to ask further questions. Mr. Lévesque should be able to handle those. We appreciate your being with us this evening and look forward to your next visit.
Mr. Flaherty: It is a pleasure to be here. Thank you for inviting me to appear before your committee, senators.
Senator Ringuette: Mr. Lévesque, the Department of Finance, just like any Canadian, has access on a monthly basis to the unemployment statistics from Statistics Canada. Is that correct?
Mr. Lévesque: Yes, absolutely.
Senator Ringuette: Have you looked at the statistics for New Brunswick, Northern Quebec and Northern Ontario and how they have devolved in the last two years?
Mr. Lévesque: First, I am from the Privy Council Office; I am definitely not the person following unemployment statistics. The only point I would make is that the work that led to the analysis of the how the government should respond to the adjustment pressures clearly indicated that the pressures that were felt were not sector-wide or province- wide but localized and specific. That is, in part, the reason the government has chosen an approach that allows the provinces to choose where the funding should go.
Senator Ringuette: When you say that you have looked at the adjustment pressures, those include the unemployment statistics.
Mr. Lévesque: To go back to what the minister said, in many provinces, including Quebec and New Brunswick, the overall employment numbers are very good. You have to look at the local level to see where the impacts are, and that was part of the decision that the provinces were probably best placed to decide on the particular circumstances where money should go.
Senator Ringuette: I would not say that my region, standing at 17 per cent unemployment, is very good. My region is roughly 70 per cent based on the forestry sector.
We have to be honest; let us call a spade a spade. Let us not cop out on the situation but be realistic. This bill does not take into consideration that some communities have been affected more than others. Alberta has not been affected. Alberta is looking to import foreign workers, and that province is getting $104 million, while my region is at 17 per cent unemployment. Over three years, New Brunswick is getting only $30 million. I can tell you, you are lucky that Shawn Graham is Premier of New Brunswick, because if I were premier, it would not be the same situation at all.
Mr. Lévesque: The only thing I want to say is that the minister has addressed the question of allocation a number of times.
Senator Ringuette: The bottom line is that the spin that is being given publicly on this $1 billion and the bill that we have in front of us do not match at all. Much more needs to be discussed.
First, in this bill, there is no mention at all of the $10-billion base and the per capita base. That means that there is some room to manoeuvre, some room for the $1 billion to be directed where it is needed, not to be directed to create greater discrepancy between the people who need it most and the people who do not need it at all.
This committee, in comparison to the House of Commons, needs to do its job and ensure that the $1 billion that eventually the Senate will need to approve or disapprove gets greater research. Too often, in the last two years, we have seen a per capita basis in regards to situations that affect the smaller provinces and communities economically the most. When it comes to issues that I have mentioned before, for example, the BSE and the beef industry or the auto industry, then we get a stand-alone program. As a New Brunswicker, I am fed up with having only the crumbs from the table.
The Chair: We have Mr. Lévesque for a short while. Do senators have anything further for Mr. Lévesque not on the policy decision of the government but more specifically with respect to what is being done?
Senator Murray: Back to the trust indenture, is it being drafted as we speak, as far as you know?
Mr. Lévesque: Yes.
Senator Murray: It is not a long document. You have already told us there is only one thing in it, in legal language.
Mr. Lévesque: I have not seen a trust indenture in recent years, but it will have a number of provisions more about the obligations of the trustees with respect to requests for payments by the beneficiaries, the provinces and territories. I cannot comment further.
Senator Murray: It contains the obligations of the trustees but not the obligations of the provinces or the federal government.
Mr. Lévesque: A point of clarification is that this mechanism is related to the availability of funds from the 2007-08 surplus.
Senator Murray: The Martin government did the same thing with child care.
Mr. Lévesque: It was used a number of times, for example, for medical equipment.
Senator Murray: It has been used before. Will we be able to see the trust indenture?
Mr. Lévesque: As the minister committed, we will get back to the department and get back to the committee regarding what we can share with the committee.
Senator Murray: What did he mean by ``what we can share with the committee''?
Mr. Lévesque: I am not sure of the nature of the document. First, I have to get an agreement with a particular trustee before we can share. We are putting this out like a competitive bid process, so that document will be available.
The Chair: On that point, I understood the minister to answer my question that there are common trust aspects to each provincial and territorial agreement. I asked him to share those common trust aspects with us. He said he would try to do that.
Mr. Lévesque: These are the operating principles, and I think they were published at the time of the announcement.
Senator Murray: We are talking about the same thing; are we not?
The Chair: There is a trust agreement between the government and the trustee that holds the money.
Senator Murray: That is the trust indenture.
The Chair: The term ``trust indenture'' as used here, it is with the terms of the trust indenture established by the trust.
Mr. Lévesque: It is the contract between the government and the trustee containing the rules they are bound by and the terms of holding the funds.
The Chair: That is referred to in clause 1(2) of this bill.
Senator Murray: There is no other document. There is no regulation-making authority in the bill, so you will not have regulations. There is no coming-into-force provision, so it will come into force immediately upon Royal Assent, one assumes. Therefore, the only document is the trust indenture.
Mr. Lévesque: Those are the public documents, the announcement with the provinces and the operating principles, such as the backgrounder that was put out at the time the initiative was announced.
The Chair: Do we have that?
Mr. Lévesque: Yes, they are all public documents.
The Chair: What document did you refer to about the principles?
Mr. Lévesque: There was a backgrounder made public at the time of the announcement.
The Chair: Could you make that available so that we all have the same document?
Mr. Lévesque: Yes.
The Chair: Could you also provide us with the Prime Minister's letter to each premier?
Mr. Lévesque: The Prime Minister wrote about the initiative and attached this backgrounder.
The Chair: If you provide us the letter, then that will be attached to it and we will have all the paper that has been put out there.
Senator Murray: Was it in that background document that it was stated that the money would start to flow after the budget had passed?
Mr. Lévesque: Certainly, as you know, that is what the government announced. This backgrounder does not talk about that; it is more about the trust itself, not about how and when it would be delivered.
The Chair: Could you clarify another point that Senator Murray raised? Is there not a written document between the Government of Canada and each province?
Mr. Lévesque: The written documents are the press releases.
The Chair: Is that all?
Mr. Lévesque: These are the joint announcements.
The Chair: The written documents and the press releases, which we have been provided with. Thank you for that. We have for everybody a copy of the Saskatchewan and New Brunswick press releases.
In its press release, the New Brunswick government has identified several measures that will help move the province towards this goal, and they say ``including'' specific items. ``Including'' does not exclude something else. Apart from the specific items listed, there could be other things that we do not know anything about and that the federal government does not know anything about. What keeps the New Brunswick government's measures within some parameters?
Mr. Lévesque: Again, these funds are given to the provinces under the auspices of an intention to achieve a certain purpose. At the end of the day, the provinces, through their auditors general and in reporting to the public, have to account for how they use those funds. That is the government is accountable and how people can track how these funds will be used.
The Chair: Do you have some agreement with each province specifically stating that they must identify the money they have received, how it has been used, what the objectives were and what the results were?
Mr. Lévesque: No. There is not that degree of conditionality.
The Chair: How do we know what they will use it for?
Mr. Lévesque: They will have to report to their public how they used the funds.
The Chair: They will report that they received $30 million from the federal government.
Senator Di Nino: I thought the minister was very clear on that. He said, in effect, we are giving the money to the provinces; it is up to them, and the accountability is to their legislatures, the public and the auditors general.
The Chair: Do you accept, Mr. Lévesque, that there are no parameters other than the normal accountability requirements of the provincial government to their electors?
Mr. Lévesque: That is the framework under which these trust agreements operate. A very important element is the accounting rules under which these agreements or these arrangements operate.
The Chair: Yes.
Mr. Lévesque: It had been suggested notably that a third element could be added that would be ``subject to'' in terms of requests by provinces for particular communities. Such arrangements are possible, but strictly from an accounting standpoint, if the funds are to be taken out of the 2007-08 surplus, no conditions can be attached to the funds.
The Chair: About future years?
Mr. Lévesque: About future years.
The Chair: I understand that, yes.
Mr. Lévesque: That is the nature of the vehicle. It is not a policy consultation. It is just the accounting structure under which the governments operate. For the funds to be allocated against the 2007-08 surplus, they have to be expanded without conditions, which means that is the structure we have. There could be other structures, but they would have to be appropriated out of funds for future years. That is the logic particular to those trust agreements.
The Chair: Other governments put funds into a foundation and created a board to administer the foundation, over which the government had no control. They thereby avoided that same problem through using a foundation.
Mr. Lévesque: With respect to the changes to the accounting rules, you really have to look at the details to see whether that kind of arrangement would still allow funds to be booked against 2007-08.
The Chair: I am glad you reminded us of that. That is why there are no conditions, because you want to account for it all in this fiscal year, to say it was an expenditure charged to this fiscal year.
Will the trust indenture specifically provide that a third, a third and a third will be granted over three years?
Mr. Lévesque: The instructions to the trust basically provide for the total amounts by jurisdiction and the fact that they can be dispersed over a three-year period.
The Chair: You have one third, one third, one third, but that will not necessarily be the way it is done?
Mr. Lévesque: That is what we call a notional allocation; the provinces can get the money over the three-year period because the trust will be there for three years. They can draw out the money right away, or they can wait. They have total flexibility within that three-year period.
The Chair: It can all be drawn out in the first year.
I read out the preamble earlier. The bill that we are asked to vote on talks about communities and workers negatively affected. What is the test? Who applies that test? What are the economic indicators?
Mr. Lévesque: The provinces.
The Chair: These are the words in a federal bill. What does that mean? What do you want me to vote on to appropriate these funds?
Mr. Lévesque: I think the minister answered regarding the intent. Technically, it goes back to how there will be agreements between governments about the use of funds, and press releases will outline the areas where spending will happen.
The Chair: Do any senators have any questions arising out of my comments?
Senator Di Nino: All I wanted to put on the record is that Mr. Lévesque will undertake to make the indenture available to us when it is possible to do so.
Mr. Lévesque: Yes.
Senator Di Nino: Will he send it to the clerk?
The Chair: The minister has already undertaken to do that. We will get a double undertaking.
Senator Eggleton: This says that areas of investment include job training funds and skills development, measures to assist workers, funding to develop community transition plans; and the fifth point is other economic development endeavours and diversification initiatives aimed at helping communities manage transition and adjustment.
The Chair: What document are you looking at?
Senator Eggleton: This is the backgrounder that was just passed around.
That fifth bullet covers anything and everything. If you call it economic development, it is in.
Senator Murray: If you call it cooperative federalism.
Senator Stratton: That is the decision of the provinces, which are held responsible by their legislatures and the electors.
The Chair: This is federal tax money that we are giving —
Senator Stratton: This is not a Big Brother design.
The Chair: This is federal tax money that we are being asked to vote on.
Senator Di Nino: It is an initiative that is being described, in effect, as transferring the money to the provinces on their particular program; and each province will be accountable to its legislature, to its electorate and, as Mr. Lévesque said, to its auditor general. That is the program.
The Chair: We can make the arguments tomorrow about how it is easy to be accountable when you do not have any restrictions on how you use the money.
Senator Chaput: I have a question relating to the document we just received. It states that ``Within mutually agreed- upon parameters, funding will be administered by the provinces and territories.'' What exactly is meant by this? Are the parameters written anywhere?
Mr. Lévesque: I refer back to the way these agreements between governments are materializing as an agreement or announcement that specifies a number of areas for investment.
Senator Chaput: That would be the press release?
Senator Ringuette: I remember a child care program being cancelled because it was supposedly only a press release. Do you remember that?
The Chair: We are getting into political issues here.
Senator Ringuette: There were signed agreements.
The Chair: Order, please. Order. We are going to carry on with our discussion after Mr. Lévesque leaves us, but I think we should all thank Mr. Lévesque very much for being here and helping us. I know it is difficult for you, as well. The bill is not as specific as some of us would like to see, as you have learned.
Thank you very much, Mr. Lévesque. I hope you will say hello to your minister and tell her we are sorry she was not able to be with us this evening.
Honourable senators, those are all of the witnesses that we have arranged to be here tonight. At this stage we will discuss whether you are comfortable proceeding with clause by clause or whether you feel that further consideration through witnesses or otherwise is necessary. I am open to comments.
Senator Murray: I had said that the bill cries out for amendment because it so lacks detail. I have turned it over in my mind. I am open to suggestion, but I cannot think of an amendment that I could propose that would be credible and would add anything to the situation.
The comments that were implicit in my questions to the minister I can make at second reading, third reading or another point if I have the opportunity. If I have the opportunity to do so, I will do so. I am in favour of asymmetry. We saw it in the agreements that Mr. Dryden signed with the provinces on child care, and I supported those. I support this approach.
That being said, without interfering unduly with the prerogatives of the provinces, it might have been a bit more focused. The agreements with New Brunswick and Saskatchewan are really not focused on people and communities. All kinds of things can be done that seem only, shall I say, tangentially related. The money will go right into the A base of the provincial government, and they will do what they will do. Anyway, I will make my points if I have a chance at second or third reading.
The Chair: Thank you, Senator Murray.
Senator Di Nino: Mr. Chair, obviously we are going to disagree on some points, but I think the minister was very clear. He answered all questions in a straightforward manner.
It is not a simple issue, but it is a straightforward issue. It is $1 billion that the federal government has said we will make available to the provinces with the thought to help those economically-challenged communities. The government will create an indenture for a trustee to distribute the funds, which will allow the provinces, in their wisdom, within their authority, to use these funds for the stated intent and purposes.
It is a very straightforward thing. I can see how you can get into all kinds of other arguments if you started to put in terms or conditions, or if you started to have asymmetrical versus symmetrical. I agree that it should not take 11 minutes, and I have sympathy for that, but the parties on the other side are not idiots. They thought about this. They discussed it, and they felt that there is speed and fairness here. One may argue whether it is totally fair or totally unfair. They felt that this was the best way to deliver these funds as quickly as possible to those provinces for them to deal with in their own communities.
I think we should do clause by clause, pass the bill and get on with the other things we have to deal with.
Senator Murray: I did not want to get into an argument with the minister when he told us of the crying need in so many communities, the speed that was required and the great cooperation in the House of Commons. This thing passed as if it were World War II or World War III, with such great urgency. Yet, the government has been playing games with this initiative for a considerable time. First of all, they tried to use those communities or those provinces as pawns in their budget strategy. They said that they cannot flow the money until the budget passes. They came off that wicket because it was very badly received by some of the provinces. Moreover, they realized they were giving the Liberals and other opposition parties a reason for supporting the budget, and they would prefer to have the opposition oppose the budget.
They are playing for an election. There is a need, but I am not intimidated by the statements of the government concerning the need for an urgent rush when I know the background through which the government has been playing games with the initiative for some considerable time.
Senator Ringuette: I agree with Senator Murray that the need has been there; it had been recognized by the previous government. That is why they had put into their last budget $1.5 billion to help the communities.
That was cancelled in February 2006. Then in April, we had this forestry agreement that left $1 billion from the forest industry, not from the per capita Canadian tax base. It was from the forest industry. That particular agreement and that $1 billion was specifically to help the Americans diversify their forest industry and look at new markets and new products.
Now, two years later and $2.5 billion less, we have a government that says, ``Hey, yay, we will provide small communities with $1 billion over three years.'' That will include infrastructure, research, you name it. It is not targeted for the communities that need it the most. That is what I deplore about it. It is a policy of saying one thing when in reality it is something completely different.
I am sorry, but with all due respect for the people of Alberta and B.C., they have excellent growth right now. They are in dire need of employees, and they are getting $200 million plus from this, while communities in Northern Ontario, Northern Quebec and New Brunswick are dying.
This bill, and the way the money will be dispatched, does not reflect the spin that this government is doing. It will not help the communities meet the challenges. Basically, if you look at how the money will be provided to the different provinces on this per capita basis, there is no respect.
The minister was asked about the analysis and different options. The federal government owns Statistics Canada. They only have to look at the unemployment data in the different communities. It is done by postal codes, so it is available. If you want to really target the communities that need the most, the federal government has the means to do it. This bill is a cop-out in regard to federal responsibilities. It only creates greater unfairness to the wide range of Canadian communities out there.
People will say, ``Oh, you know, it is $1 billion dollars.'' Yes, it is $1 billion dollars, but I cannot believe that we cannot have a federal government that can provide communities that have the greatest challenge with better options than what is being offered with this bill.
[Translation]
I have some comments to make. I recognize that the needs are urgent and that communities need these funds. I recognize that the process is, in one sense, very simple. But I feel that the way of distributing the money does not match the purpose of the bill in supporting vulnerable communities.
I tell myself that the provinces are going to decide what the urgent needs of their communities are. But then I ask myself: if vulnerable communities have needs that are not met by their province, what are they to do?
The document states:
[English]
Provincial and Territorial governments are encouraged to report directly to their constituents on the expenditures financed and outcomes achieved . . .
[Translation]
I am thinking of a very vulnerable community in serious difficulty, that really needs help, that is dying; if its provincial government does not help it, how do you think that it can go about demanding action from its government and asking for its fair share?
I would like my concerns recorded in the minutes of this committee.
The Chair: Thank you, everyone, for your comments.
[English]
The issue of the policy decision, which we have discussed, and I let a free-flowing discussion go, undoubtedly will appear if and when this is back in the chamber. However, the real issue, which I think Senator Murray pointed out, is whether there are ways that we in this committee can improve upon this legislation, given that the policy decision has been taken. I guess that is what we have to weigh in our own minds, having in mind our responsibilities to the federal taxpayer and this $1 billion.
I am going to put it to you now, honourable senators. Shall we move to clause-by-clause consideration of Bill C-41?
Hon. Senators: Agreed.
The Chair: I will read out the title of the bill. It is an Act respecting payments to a trust established to provide provinces and territories with funding for community development.
You have agreed that we will proceed with clause by clause. Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Shall clause 1 carry?
Senator Stratton: What about the preamble?
The Chair: Shall the preamble stand postponed?
Hon. Senators: Agreed.
The Chair: Shall clause 1 carry?
Some Hon. Senators: Agreed.
The Chair: Carried on division.
Senator Murray: Who said on division?
Senator Chaput: I did.
The Chair: Shall the title carry?
Hon. Senators: Agreed.
The Chair: Shall the preamble carry?
Senator Murray: On behalf of Senator Grafstein, who takes a principled objection to preambles, I say on division.
The Chair: The preamble carries on division. Shall the bill in its entirety carry?
Some Hon. Senators: Agreed.
The Chair: Carried on division. Shall I report the bill back to the Senate?
Hon. Senators: Agreed.
The Chair: Carried. Shall we include any commentary, or do you wish to make your observations during third reading?
Senator Ringuette: I appreciate the objective of the bill, but the means to attain that objective are not correct, and I would like to see that reflected in our report.
Senator Murray: Mr. Chairman, for a long time I have objected to putting a narrative in. The rule is very clear. The role of a committee is to report a bill, with amendment or without amendment — or I suppose to defeat the bill here if you want. I think that rather than have a committee try to negotiate narrative comments, which are really out of order and are no part of the report, I would rather have those of us who have something to say say it at third reading. That is the time.
When the report comes in without amendment, it will proceed to third reading debate the next day, I presume. We will have our chance to say our piece. Do not try it tomorrow because I will say no. Do not ask for leave. Do not push your luck, senator.
The Chair: Senator Ringuette, are you prepared, on division, to sort of agree with this?
Senator Ringuette: Yes, on division. As Senator Murray said, I will say my piece, for what it is worth, at third reading next week.
The Chair: Okay. Thank you. Has any honourable senator anything further to bring before this meeting?
I will be reporting back the bill on your behalf tomorrow without amendment, and I thank you all for your patience and understanding and hard work this evening.
The committee adjourned.