Proceedings of the Standing Senate Committee on
National Finance

Issue 11 - Evidence

OTTAWA, Wednesday, June 3, 1998

The Standing Senate Committee on National Finance met this day at 5:30 p.m. to examine the Supplementary Estimates (A) laid before Parliament for the fiscal year ending March 31, 1999.

Senator Terry Stratton (Chairman) in the Chair.


The Chairman: Honourable senators, this is our first public meeting on Supplementary Estimates (A) for 1998-99. We have witnesses from the Treasury Board Secretariat.

Please proceed.

Mr. Richard Neville, Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat: Mr. Chairman. I am pleased to appear before you today to discuss the government's first Supplementary Estimates for the fiscal year 1998-99. I am joined by Mr. Andrew Lieff, Assistant Director of the Estimates Division.


These Supplementary Estimates, laid before Parliament on May 15, 1998, have no effect on planned expenditures for the current fiscal year. Rather, their purpose is to request Parliament's authority to allocate $1.3 billion to expenditures already proposed in the February 24, 1998 budget, but not specifically identified or sufficiently detailed to require Parliament's approval when the Main Estimates for 1998-1999 were tabled.

I will now describe for you those spending items for which Parliament's approval is being sought: $350 million is being sought by Indian Affairs and Northern Development for the Aboriginal Healing Foundation's Healing Strategy, a component of Gathering Strength: Canada's Aboriginal Action Plan which was announced in January 1998; $182 million is being sought by two departments, Agriculture and Agri-Food and National Defence, and by the Economic Development Agency of Canada for the Regions of Quebec, further to the ice storm which hit Ontario, Quebec and New Brunswick in January 1998.


There is $105.4 million for National Defence for payments to the provinces, under the Disaster Financial Assistance Arrangements, for assistance related to other natural disasters, including the 1996 Saguenay and 1997 Manitoba floods.

There is $119.9 million for the Natural Science and Engineering Research Council, the Social Sciences and Humanities Research Council, and the Medical Research Council to provide additional support for advanced research and for graduate students, as announced in the February 1998 budget.

There is $87.5 million for the Department of Justice Canada for setting up and operating the firearms control program.


Health Canada is seeking $83.2 million to implement initiatives announced in "Shaping Canada's Future Together" in conjunction with the February 1998 budget, including funding for the Canadian Strategy on HIV/AIDS, the Canadian Breast Cancer Initiative, and transition costs for the new independent Canadian Blood Agency, pursuant to the announcement made at the federal-provincial-territorial conference of health ministers; we have a request for $50 million, $40 million for Natural Resources Canada and $10 million for Environment Canada, the money to go to the establishment of the Climate Change Action Fund to cover its first year of operation. The fund will receive $150 million over three years, pursuant to what was announced in the February 1998 budget, to administer federal initiatives further to the commitments made by Canada in Kyoto to reduce greenhouse gas emissions; Heritage Canada is seeking $50 million, pursuant to announcements made, for the Canada Television and Cable Production Fund which was created to promote Canadian programming.

An independent, non-profit corporation oversees the fund which receives funding from the cable television industry, from Telefilm Canada and from the Department of Canadian Heritage to promote Canadian television programming.


The above major items represent $1.028 billion of the $1.3 billion for which approval from Parliament is being sought. The $262 million balance is spread among a number of other departments and agencies, the specific details of which are included in the Supplementary Estimates.

Honourable senators, I will be pleased to respond to your questions concerning these Supplementary Estimates. At the last meeting, there were three specific questions to which you were seeking responses. We provided two responses last week. One dealt with the amounts in the 1997-98 Supplementary Estimates (B) to administer the regulations. The second response takes the form of a table which compares the major features of the government's Early Departure Incentive Program. I recommend that you refer to that table from time to time if you have any questions on the various departure programs because it is the most complete table that I have seen in a long time.

The third question dealt with the Airbus file. We have provided a response which will be circulated by the clerk momentarily. It is the definitive response to a question which has been on your minds for some time. We are pleased to provide those responses to you.

The Chairman: Thank you very much. Senator Cools, have you received that information?

Senator Cools: Yes, I have it right in front of me. I am absolutely floored. I find myself speechless. Just give me a minute or two and the words will come. I thank the witnesses for providing this.


Senator Lavoie-Roux: It would appear that the lawyers made a considerable amount of money with the Airbus affair. In any event, that is not what I want to talk about. As far as I am concerned, that matter is over and done with.

I have a question concerning the funds requested by Indian Affairs and Northern Development for its Healing Strategy. I must admit that this is the first time I have heard about this. Obviously, I am not a member of the aboriginal affairs committee, otherwise I might be familiar with this strategy. What exactly is the Healing Strategy? Could you explain it to me briefly?


Mr. Neville: Perhaps I should start by talking about some of the essential elements of the Healing Strategy. In January 1998, the government announced "Gathering Strength: Canada's Aboriginal Action Plan" to respond to the recommendations of the Royal Commission on Aboriginal Peoples. As part of this response, the government committed $350 million to support the implementation of a Healing Strategy to address the legacy of physical and sexual abuse in residential schools.

The Healing Strategy will be delivered by the Aboriginal Healing Foundation, a non-profit corporation at arm's length from government and aboriginal political organizations. It will consist of a series of community-based projects delivered to all aboriginal people -- on and off reserve, status and non-status Indians, Métis, Inuit, et cetera -- and it will be at the grass-roots level. The funds will flow as a grant and, as such, there is a funding agreement that stipulates the need for annual public reporting on disbursements, accounting and other matters.

Specifics with respect to the best mechanisms and processes for distributing the funds have been left to the Aboriginal Healing Foundation to develop. This will allow the aboriginal people to implement their own culturally appropriate healing strategies.

Senator Lavoie-Roux: That is all right, but why do we talk about stratégie de réconciliation? What are we reconciling?

Mr. Neville: We are addressing the legacy of physical and sexual abuse in residential schools.

Senator Lavoie-Roux: I do not know why they call this a reconciliation. This is a reparation. A reconciliation is when we fight with each other and then we have to reconcile.

Mr. Neville: I think this is a reconciliation of sorts. There have been some wrongdoings along the way and this is how we plan on reconciling the wrongdoings.

Senator Lavoie-Roux: How can you ensure that the money will go to the right people?

Mr. Neville: That is a very good question. The Aboriginal Healing Foundation has been set up in this form to ensure that the funds will go to those who need them most. Since it is a non-profit, arm's length corporation, it is independent of the government and the aboriginal political organizations. It is really very much at the grass-roots level that it will evolve.

Regarding the implementation of the Healing Strategy, perhaps I could talk a bit about the set-up and organization. The Aboriginal Healing Foundation was incorporated under the Canada Corporations Act on March 30, 1998. The foundation's board of directors will be comprised of 17 individuals, including representatives from victims' groups. The founding board consists of seven individuals, five nominated by aboriginal organizations and two federally nominated members: Wendy Grant-John, who is with DIAND, and Jerome Berthelette, who is with the Department of Health. I am sure you know most of the other members; they include: Georges Erasmus, Gene Rhéaume, Paul Chartrand, Janet Brewster-Montague, Maggie Hodgson, Debbie Reid and Teressa Nahanee.

A funding agreement accompanies the grant to ensure that federal interests are maintained. It contains accountability provisions and remedy measures, including reporting requirements, provisions for annual public reports and general meetings, financial matters such as disbursement and accounting of funds and the arbitrators' roles and responsibilities. The funding agreement was signed by DIAND and the foundation on March 31, 1998.

I think the independence that has been introduced into the process allows the funds to be received by those who should in fact be receiving them, without the influence of either the government or the aboriginal political groups.


Senator Lavoie-Roux: I quite agree, but given all of these sums that Parliament is approving, and I am thinking hear about the money that goes to CIDA projects, for example, what assurances do we have that the money will be spent for the stated purpose? I agree with you that we have tried to maintain a proper distance between the government and natives, but will there be specific eligibility criteria for individual? How will this money be handed over to them? Will it be given to the appropriate persons? Will an evaluation be done? When money is granted for legitimate purposes, not much of an evaluation is usually done. What matters, as you know, are the final results achieved.


Mr. Neville: I should add that the funds were provided to the Aboriginal Healing Foundation as a grant to enable aboriginal people to implement their own culturally appropriate healing strategy at arm's length from government. I think that in part answers your question. As well, specifics about the strategy will be developed by the Aboriginal Healing Foundation, which is the organization most concerned, rather than the federal government.

At this point, the Aboriginal Healing Foundation is consulting with aboriginal people, organizations, and survivors of abuse in residential schools. After these consultations, the foundation will determine the best mechanisms and processes for distributing the $350 million, including specifics such as the use of funds and eligibility criteria for funding recipients.

I think you were talking about what the eligibility criteria will be. Those will be determined once the consultations have been finalized. However, to answer your question in a general sense, the infrastructure is there and I think the planning has been done to ensure that the government is well-served in the allocation of the $350 million.

Senator Lavoie-Roux: Let us say everything works along the lines you have just described. Then I am happy. However, before the money is distributed, will there be an examination by someone to determine that the correct people will receive it? I know that you have the government and the aboriginals involved, but --

Mr. Neville: The funding agreement does contain accountability provisions, plus requirements for reporting, including an annual public report, and general meetings, so I think there are enough safeguards in the process to ensure that the government's assets and interests are protected.

Senator Lavoie-Roux: Yesterday, I heard from someone who worked on a CIDA project in public health that in that particular country, the employees use the money for themselves and it does not go to the people. I am not saying this is true of all of CIDA's programs but I want to be sure that this money goes to the people who have suffered.

Mr. Neville: That is certainly the intent and the way it has been structured and planned. We have every reason to expect that those at the grass roots will receive the funds, as we believe they should.

Senator Lavoie-Roux: I will question you again in six months. How long will it be before the Healing Strategy is in place?

Mr. Neville: It is evolving. It will take some time until they are set up and have done the consultations and developed the criteria, so I think it will be a little while before the money flows. However, it will be sooner rather than later.

Senator Lavoie-Roux: Because $350 million is a lot of money.

The Chairman: Do you feel comfortable that this process is entirely transparent?

Mr. Neville: At this point, I do. I think the key here is that we have gone with the idea of having a foundation that is at arm's length from both the federal government and the political institutions that could otherwise have influenced it.

The Chairman: Is there a review that occurs later?

Mr. Neville: There are a number of them.

The Chairman: Are there checkpoints? After five years, will there be a review by the Auditor General, or does this thing just go on?

Mr. Neville: This is a grant. As such, it is a payment made to a third party. There is a requirement for accountability, and there are remedial measures if the accountability is not met. As well, there are reporting requirements. Thus, there are some safeguards in the process.

The Chairman: Reporting to whom, the minister?

Mr. Neville: Yes, the minister.

Senator Bolduc: I understand that the Aboriginal Healing Foundation was established after the report of the Royal Commission on Aboriginal Peoples.

Mr. Neville: That is correct.

Senator Bolduc: Do you expect any requests from the Department of Justice Canada, for example, with regard to healing problems in the rest of society? I understand that this year we will be injecting $350 million to benefit a group in society which numbers 500,000 people. What about the other millions of Canadians? They must also have some problems.

Mr. Neville: I am not aware of there being any such requests. In our normal expenditure budget, we have provided for transfer payments to those organizations or provinces which have that responsibility.

Senator Bolduc: In a scenario like that, it would amount to billions and billions of dollars.

Mr. Neville: In the overall scheme of expenditures, we transfer money to the provinces for health care and other health issues. This is for a specific group identified in a report that we are addressing.

Senator Lavoie-Roux: We have been told that we have no money for those who are suffering from hepatitis C. What about them?

Mr. Neville: That is being discussed now, as you are aware. Nothing has yet been finalized.

Senator Lynch-Staunton: Mr. Neville, could you give some explanation about the Millennium Bureau of Canada which is down for $44,600,000. It is found on page 36.

I do not recall seeing that bureau in the Estimates before. It seems to be something new. There is a bit of an explanation which states:

Contributions in support of Millennium activities and projects which celebrate Canada's achievements, diversity and place in the world.

This is just for setting up the bureau, I gather, rather than for any activities of the bureau itself; is that correct?

Mr. Neville: The Canada Millennium Partnership Program is a program of grants and contributions which will be administered by the Millennium Bureau of Canada.

Senator Lynch-Staunton: What is the Millennium Bureau? Of whom is it made up?

Mr. Neville: The Millennium Bureau is an organization that will have specific initiatives for the millennium in place across the country. A number of discussions are taking place now about how we will position ourselves and whether it will be at a local, national or international level.

Senator Lynch-Staunton: Who are the people responsible? The bureau is a separate entity made up of whom? Is there a board, a president or civil service?

Mr. Neville: Yes. The bureau is expected to have a staff of about 35 employees and an operating budget of about $4 million per year. Its headquarters will be in Ottawa but it will have staff in the regions to assist community groups. Both non-profit and for-profit organizations will be able to apply for grants and contributions, although for-profit organizations must demonstrate that the proposed activity is non-commercial in nature.

I sit on the interdepartmental assistant deputy minister millennium committee and have also acted for the Secretary of the Treasury Board who sits on the deputy ministerial millennium committee. We are in the midst of negotiating a strategy on how to allocate the resources and discussing what kinds of programs we will recommend.

Senator Lynch-Staunton: Are there guidelines? How does one apply for a grant or a contribution? Who is eligible?

Mr. Neville: If my memory serves me correctly, there are guidelines. I believe the criteria for the various projects have been circulated and made available to the public. They are quite comprehensive in terms of what can or cannot be submitted for a particular proposal. They are doing it in tranches so that by specific dates they will have approved a certain number. There will be three tranches in all.

Senator Lynch-Staunton: Will the $40 million be spent this year?

Mr. Neville: The intent is to have the first tranche allocated and transferred to those organizations during the 1998-99 fiscal year.

Senator Lynch-Staunton: Do you have any requests now? About what kind of projects are we talking? If there was a press release, I missed it. What is the total budget of this bureau? You say this is the first tranche, and there are two more fiscal years to go.

Mr. Neville: At this point, the proposed funding is $45 million for 1998-99; an additional $45 million for 1999-2000; and $70 million for the year 2000-01.

The Millennium Bureau intends to work with local community groups and non-governmental organizations to develop projects to commemorate the millennium by celebrating Canada's achievements, diversity and place in the world.

I understand that requests are being received as we speak. They will be evaluated. I do not believe that they have come to a conclusion yet on the actual allocation by applicant for the first tranche.

Senator Bolduc: Do I understand that what we have here is an agency created by the administration without any examination by Parliament or any statutory basis, which will spend $150 million, and Parliament will have no discussion about the criteria? This is like CIDA. As you probably remember, CIDA was created by an Order in Council in 1945. It began by spending a few million dollars. It now spends $2 billion or $3 billion per year and there are still no criteria. I do not think this is reasonable.

Mr. Neville: There are criteria, although I do not have them with me today. As a matter of fact, what the criteria consist of is public. If it is of interest to you, I do not mind trying to obtain a copy and making it available to you.

Senator Lavoie-Roux: Yes, it is of interest.

Senator Lynch-Staunton: I am mystified. Unlike the Canada Council, for example, where grants are announced constantly and done at arm's length, more or less, the allocation of this money will be done, effectively, by the Privy Council. Thus, it would come under the direction of the Prime Minister's Office, in effect. Is that correct?

Mr. Neville: That is correct.

Senator Lynch-Staunton: These will all be politically motivated or politically inspired grants, to some extent, is that right?

Mr. Neville: I am not sure that is correct.

Senator Lynch-Staunton: If it comes under the Prime Minister's Office, there has to be political content to it.

Mr. Neville: More precisely, it is the Privy Council Office.

Senator Lynch-Staunton: I do not see much difference between the two.

Mr. Neville: The Privy Council Office is taking the lead on this particular project.

Senator Lynch-Staunton: We know to whom the clerk reports. I do not want to get you involved in a political debate.

I am trying to find out how these grants will be evaluated. Who will evaluate them? Will there be an outside, non-governmental body which will help in the evaluation, or will it be like the infrastructure program? I think this will be a mini copy of that program.

Senator Moore: I attended a public event in March, after the Senate resumed, where the millennium project was announced. Deputy Prime Minister Herb Gray was the chairman. I thought that was all public information and knowledge.

Mr. Neville: That is correct. There was an official announcement at the Canadian Museum of Civilization.

Senator Moore: There were 12 kiosks there from citizen groups and some government departments, indicating their participation.

Mr. Neville: That is why I said this is already public knowledge and it is available. It is just a question of us obtaining a copy and sharing it with you.

Senator Moore: I have an interest here because of something I am involved in as a volunteer at home. I do not think the application forms are there yet, but I know they will be forthcoming.

The Chairman: I am a volunteer on a committee as well, and we are trying to put together criteria for submitting applications. I think it would be appropriate for that information to come forward. It would help this committee.

Mr. Neville: Yes, if is it is not out already. As soon as it is available, we will provide it to you.

Senator Lynch-Staunton: I am satisfied with that.

I have a quick question regarding page 22. I should like an explanation for the "Issuance of a demand note totalling up to U.S. $7,287,199 to the European Bank for Reconstruction and Development." How are we involved with that? Are we a member of the bank?

The Chairman: Yes. Surprisingly, I am on that committee. I went to London one-and-a-half years ago. I understand from the chairman of the European Bank for Reconstruction and Development that there needed to be a topping-up. The bank was not in trouble; rather, it was to ensure that it was self-funding. The loans were being repaid and it was operating quite well, but there was a shortfall in the short term, and the bank needed a topping-up to ensure that it would be there in the long term. That is my understanding. Perhaps Mr. Neville can more fully explain it. If I am wrong, please let me know.

Mr. Neville: Let me give you a more detailed response. This is a little involved, so I will take my time and lead you through it.

The Department of Finance is seeking to issue a demand note totaling U.S. $7.3 million for the purpose of subscriptions to the capital of the European Bank for Reconstruction and Development, which we refer to as EBRD. Funding has already been provided through the 1998-99 Main Estimates. In November 1996, Canada subscribed to 34,000 shares under the first increase of the capital stock of EBRD, valued at U.S. $432 million, of which U.S. $97 million is to be paid over an eight-year period, the rest being what we term "callable capital".

Callable capital is the equivalent of a promise of financial support that the EBRD can call upon in the unlikely event that it will be unable to service its debt from paid-in capital -- that is, demand notes and cash payments from member country reserves and accumulated net income.

The first installment of this U.S. $12 million is due in 1998. In accordance with the bank's resolution regarding the capital increase, Canada is entitled to make 60 per cent of each payment in non-negotiable, non-interest bearing demand notes, with the remaining 40 per cent being payable in cash.

Accordingly, a payment of U.S. $4.9 million was made to the EBRD on April 15, 1998. This submission seeks to provide the authority to issue a demand note in the amount of U.S. $7.3 million, of which 20 per cent, or U.S. $1.5 million, will be cashed in on June 15, 1998.

The EBRD was established in 1991 in response to the challenges and opportunities arising from the collapse of communist control in the countries of Central and Eastern Europe and the former Soviet Union. Since its inception, the bank has aimed to foster in the regions a transition towards open economic systems based on competitive markets. Based in London, the EBRD is an international institution with 60 members. Shareholders include all the member states of the European Union, Japan, the U.S. and 26 countries in which the bank operates. Canada holds a share of 3.4 per cent of the EBRD's total capital of U.S. $20 billion.

That should give you more information.

Senator Lynch-Staunton: Thank you. I like to come to this committee because I learn far more than I contribute to it.

Senator Cools: Once again, let me thank the witnesses for providing this information on the cost of the Airbus case. My quick addition brings the total amount spent by the Department of Justice to about $3.6 million. Your numbers, which are fairly clear, were provided by reputable law firms. What is the item described as "Expert witness fees / special counsel"? Who are they?

Mr. Neville: They are the people the Department of Justice Canada called during the proceeding to get a specific point of view with respect to a legal issue. They may not have given us all the details, but in total it adds up to $179,000 plus a further $81,000 in Swiss francs.

Senator Cools: I cannot ask you the questions that you put to them, but I am sure that they would have understood clearly that we were looking for the amounts of money paid to the various counsels. I am interested in finding out to whom that $179,000 was paid. How many groups or parties or witnesses or lawyers or firms were involved in that? Can you get that for me, or are you having difficulty getting that information?

Mr. Neville: Let us just say that we are very pleased with the information we received.

Senator Cools: You are passing it back to us, then.

I still want to find out to whom that $179,000 was paid. That particular amount was raised at a previous meeting here with the Deputy Minister of Justice. The Deputy Minister of Justice would know exactly what we were looking for there.

Mr. Neville: I will be quite frank. I think that the information that is being provided goes a long way to responding to what you were looking for in that instance.

Senator Cools: Absolutely, but it is still missing particular answers that were placed with the deputy minister himself. You have done quite well for now and I am appreciative.

The Chairman: You no longer think we were being "yes ministered". I will put it to you that way.

Senator Cools: I do not have much information about it here, but, in the fall of 1996, the Senate passed Bill C-42, which basically limited payments to judges for international activities. The Senate took a very strong point of view that the judges of Canada should not be for hire to various international bodies. I do not know if you recall the bill but, as I said before, the bill limited the international activities to one particular judge, Madam Justice Louise Arbour.

I have before me an article from Lawyers Weekly, dated August 29, 1997, in which I encountered some statements by Mr. Chief Justice Lamer about Bill C-42. It troubles me greatly that the chief judge of the country made comments about the Senate and what the Senate should and should not have done.

Then, in addition to that, there was an interview with the chief justice wherein he said:

...I was a little disappointed... when the Senate amended this Arbour amendment...

However, it does not matter; he has found another way of getting money for judges for international activities. He pressed on to say:

I was a little disappointed, but found another way, and I'll be having lunch today with Madame Huguette Labelle, the head of CIDA, then I think we're going to go through CIDA.

Well, where there's a will there's a way...

I'm speaking to Madame Labelle. As I said, I'm having lunch with her today, then I will be speaking to the Commissioner of Judicial Affairs Friday.

I'll have lunch with him Friday and I think we'll get the ball rolling very soon.

Actually I should put that on the record. That was a CPAC interview with Chief Justice Lamer on December 9, 1996.

What moneys would he have been talking about from CIDA? How would that money have been provided from CIDA to Canadian judges for international activities? I have been trying to find this out for a donkey's year and now we have a very cooperative witness.

Mr. Neville: I am trying to be helpful, but I am also here today to defend the Supplementary Estimates (A) for 1998-99 and, to my knowledge, it is not in here.

Senator Cools: Okay. It is not in here. I have been searching and trying to figure out where it could be, but it is not easy. The interview that I am talking about was not that long ago.

Mr. Neville: I have gone through this book on several occasions now and, as my colleague, Mr. Lieff, confirms, it is not in this Supplementary Estimates.

Senator Cools: Very good. I shall find it somewhere one of these days.

Senator Bolduc: I see that Canadian Heritage is looking for an additional $60 million for the Canada Television and Cable Production Fund. I have noticed that over the last five years or six years we have gradually cut the budget of Radio-Canada but at the same time we have increased the budgets of Telefilm Canada and all the others who produce movies or documentaries on everything so that they can feed Radio-Canada.

First of all, am I correct in thinking that there is a pattern? Second, is it advisable to proceed that way? I know that CBC is often criticized because they have everything, including information programs. Everyone has something to say against the CBC or Radio-Canada, and sometimes it seems that their productions are not in accordance with our own values. With respect to policy, it is quite normal that it would be a sensitive organization.

On the other hand, it looks good when we cut them. Since so many people criticize the CBC and Radio-Canada, they are happy if we cut them a little. At the same time, we put the money into another agency and the arts budget increases. I am not against that, but I remind everyone here that we are cutting beds in hospitals, we are cutting nurses, we are cutting doctors and, at the same time, we are increasing grants to the arts community.

Is my perspective correct or am I simply prejudiced?

Senator Lavoie-Roux: Tell him the truth.

Mr. Neville: With respect to what is being proposed, I must stick with what is in The Estimates. What we are looking at here, as part of the Supplementary Estimates (A) for 1998-99, is for the Department of Canadian Heritage to add $59 million to the Canadian Television and Cable Production Fund. That is an increase of 12.7 per cent to $523 million.

The original $465 million, which was allocated in the 1998-99 Estimates, represents the total grants and contributions budget for a large number of programs in the Department of Canadian Heritage. The Canada Television and Cable Production Fund is but one of the Department of Canadian Heritage's many programs. The 1998-99 Main Estimates provided $50 million for the Canada Television and Cable Production Fund.

Having said that, I am not sure that I can accept your thesis. All I can tell you is that there is a specific request for a fund and an explanation is provided. What you have put forth is one way of looking at the matter, but I am not sure that that would necessarily be the correct interpretation.

Senator Bolduc: My next question will be on the Department of Foreign Affairs and International Trade. That department comes back nearly every year with an additional capital expenditure program. I do not understand why they have difficulties in forecasting their capital expenditure. After all, we have embassies around the world and they are housed somehow.

Mr. Neville: I am glad you are very vigilant about that, senator, because we do come back year after year requesting additional funds through the Supplementary Estimates for the Department of Foreign Affairs and International Trade. However, I would like to reassure you that the Department of Foreign Affairs and International Trade is not experiencing difficulty in estimating its capital expenditures. I will explain why that is.

In the case of property revenues, the Department of Foreign Affairs and International Trade has a special operating agency. It was created in 1993 to manage its real property program, which partially funds its capital requirements through the revenues earned through the sale and letting of surplus property. This approach has been successful in allowing the department to meet increasing capital demand through the rationalization of its Crown-owned inventory. The Department of Foreign Affairs and International Trade accesses these revenues through the Supplementary Estimates process each year.

There is no way of knowing in the real estate market business when will be a good time or a bad time. However, one certainly wants to make profits or sales when it is beneficial and the market is right.

We have allowed the Department of Foreign Affairs and International Trade some flexibility to sell when they feel that it is appropriate and to carry those funds into the next year. We recognize that by way of a Supplementary Estimate. This is good management. The down side, if there must be one, is that we must use the Estimates to seek the funding and parliamentary approval. However, it is for a good cause and it allows the department to better manage their resources.

Senator Bolduc: I remember telling Michael Wilson in 1989 to sell the land we had in Tokyo, including the embassy. It was worth about $4 billion at the time, more than all the Canadian embassies around the world. However, he did not do it. We have lost $2 billion since then.


Senator Lavoie-Roux: I refer you to page 25 of the Supplementary Estimates.


My first question has to do with the $8,239,000 budget of the Medical Research Council. This is almost $9 million. I am not talking about the grants, which is a different matter. My concern is with the operating expenditure.


Senator Bolduc: Why is it that operating expenditures total $8 million? This should not be such an expensive proposition. We are talking about scholarship requests and that type of thing.

Senator Lavoie-Roux: In fact, operating expenditures total almost $9 million.

Mr. Neville: I apologize for taking so much time, Senator, but one has to realize that what we have in the 1998-99 estimates are operating expenditures of $9 million, whereas transfer payments total nearly $218 million. This amount represents what it costs to administer transfer payments and if I go by a general rule, $9 million of $218 million is about five per cent. This is a fairly reasonable amount in terms of administration costs for program spending. I think that this is a fairly reasonable request under the circumstances.

Senator Lavoie-Roux: However, if I follow you, next year, if there are still some funds available, grants and scholarships will total $250 million instead of $218 million. Would that justify another increase in operating expenditures?

Mr. Neville: An increase in operating expenditures is not automatic. We must not forget that each request received by Treasury Board, before being submitted to Parliament, must go through a tender process. Tenders are examined by program officers at the Treasury Board Secretariat, who in turn make recommendations to the Secretary of the Treasury Board. I am assuming that the request has been properly drawn up and argued before Treasury Board analysts.

Senator Bolduc: What you are asking is for us to have faith in your advisers.

Mr. Neville: Yes, up to a point. Based on experience and the results achieved to date, their decisions have proven to be sound ones.

Senator Lavoie-Roux: In any event, I would like you to tell me one of these days who the members of this famous Medical Research Council are to need $9 million. I will let the matter rest for the time being and when you have an answer, you can pass it along to me.


The Chairman: Could I just jump in for a moment? It might help you to understand. I am constantly being told by other medical researchers that one in five applicants is approved. It used to be much higher than that. Therefore, five applications must be vetted in order to approve one.

Mr. Neville: That would mean that your demand for funding could be in excess of $1 billion.

The Chairman: Exactly. What is the cost to vet all that?

Senator Lavoie-Roux: You have probably heard that I can hardly go anywhere without people telling me, "We have asked for a grant from the Medical Research Council, and we cannot get it." Do you not think we should be careful? Is spending close to $9 million on staff for the council justified? Are we not depriving good research projects by spending too much money on administration?

Mr. Neville: That is a valid question. As I said earlier, we carefully review the requests from each department, agency or council in terms of additional needs. Only then are we in a position to make recommendations to the President of the Treasury Board.

I repeat the comment that I made earlier. Those analyses are done and reviewed regularly, and the program analyst must have had a significant say in the decision prior to it being recommended to the Treasury Board.

Senator Lavoie-Roux: My concern is not about which request is refused or accepted. I just want to ensure that the most money is spent on research and not on making the council function.

As to the reference to blood on the previous page, I am not sure I understand. It indicates $30 million in grants for transition costs in terms of les subventions aux services canadiens d'approvisionnement en sang.


At the bottom of the page, under "Contributions: Management of Risks to Health," we find "Contribution to the Canadian Blood Agency -- Transition Costs: $7 Million." I assume the Canadian Blood Agency is a reference to the Red Cross.


Would you tell me the difference between the two?

Mr. Neville: This request is for the transition costs of $37 million for the new Canadian Blood Services.

This item reflects the commitment of the federal government to provide one-time, transitional, financial assistance for the establishment of a new, independent, national blood authority consistent with the recommendations of the November 1997 report of the Commission of Inquiry on the Blood System in Canada. Justice Krever, if you recall, recommended that the blood system should be administered publicly by a new corporation to be created by an act of Parliament which would spell out well-defined accountabilities. Federal, provincial and territorial ministers of health have agreed to set up a single national agency called the Canadian Blood Services that will replace the Red Cross and manage all aspects of the Canadian blood system.

To expedite the establishment of the Canadian Blood Services, federal, provincial and territorial ministers have set up a transition bureau to manage all aspects of the transition, including negotiations with the Red Cross and the steps required to set up the Canadian Blood Services. Such steps include selection and recruitment of directors and senior executives, detailed organizational design, planning of financial administrative procedures, et cetera. The federal government has committed $81 million over three years to help with the transition costs: $7 million in 1997-98, $37 million this year in 1998-99, and another $38 million in 1999-2000. Provinces will be responsible for funding the new Canadian Blood Services on an ongoing basis.

The payment of $37 million will be made to two entities. The Canadian Blood Services will be paid $30 million. The Canadian Blood Services was incorporated by the provinces as a not-for-profit corporate body under Part II of the Canada Corporations Act in February 1998. It is expected to be in full operation by September 1998, and federal legislation is currently being drafted to enshrine the mandate and key governance structure of the Canadian Blood Services. As of June, the Canadian Blood Services will be sufficiently established to take over the remaining transition activities leading to full implementation by September 1998.

The balance of $7 million is being paid to the Canadian Blood Agency. The Canadian Blood Agency was established by provinces and territories in 1991 as a federally incorporated, not-for-profit agency operating at arm's length from government. Its mandate is to coordinate and fund on behalf of provinces the national blood supply program and the Red Cross. Federal, provincial and territorial ministers of health have agreed that the Canadian Blood Agency should be used as the interim independent body to provide financial administrative services to the transition bureau until such time as the Canadian Blood Services is operational. The $7 million to the Canadian Blood Agency will cover transition costs to the end of May 1998.

The last point I want to make is that the release of the $30 million to the Canadian Blood Services is subject to another Treasury Board submission providing specific program details expected in late May or early June.

The Chairman: I would like to go back to Canadian Heritage and the Canada Television and Cable Production Fund. This is on page 19 of the English version. In 1998-99, this funding will increase by 12.7 per cent to $522.9 million. Why, only three months into the current fiscal year, does the government feel it must increase its contributions to the fund by such an amount?

Mr. Neville: The 1998-99 Supplementary Estimates (A) provides an additional $49.55 million to the Canada Television and Cable Production Fund as well as an additional $9.5 million for contribution to national sports organizations and outstanding amateur athletes, for a total of $59 million. In effect, we want to show the full amount of the cost at this point.

The Chairman: The $463.9 million has not been exhausted; you simply supplemented it, knowing full well it will not take you to the end of the fiscal year?

Mr. Neville: That is correct.

The Chairman: With respect to the Treasury Board contingencies vote items on page 16, under Health, Canadian Strategy on HIV/AIDS, there is a figure of $5.865 million. Then we go back to Health again on page 25, and there is $20.954 million under Promotion of Population Health, contributions for program initiatives under the Canadian Strategy on HIV/AIDS. In those two items, I see $26 million something for HIV/AIDS, for education and the Canadian Strategy. There are two separate areas dealing with AIDS.

I know you are dealing only with the Supplementary Estimates, but I am curious to know just what AIDS is costing the Canadian taxpayer. As a male, I am curious, because more males die of prostate cancer than people die of AIDS. Hopefully this question does not upset people. I think it is legitimate to know what this country is spending on HIV and AIDS as a total.

Mr. Andrew Lieff, Assistant Director, Estimates Division, Expenditure Management Sector, Treasury Board Secretariat: To clear up one technical point: The table at the front of the document identifies amounts that we have advanced to the department before parliamentary approval through the Supplementary Estimates as a kind of down payment to let them get an important initiative rolling. We have a contingency vote of $450 million. If the department gets approval for the supply of the Supplementary Estimates, they will reimburse that contingency. Therefore, it is not in addition; it is a down payment.

Mr. Neville: Health Canada is bringing to this particular program an amount of funding that adds up to $42.2 million annually. Over the next five years, this will add up to $211 million. That is the short answer to your question.

The Chairman: I know you do not have a response to how much we spend on prostate cancer, so I will not go into that.

Senator Lavoie-Roux: I am sure you did quite a bit of research on that.

The Chairman: Nothing like they are spending here. Far more men die of prostate cancer than of AIDS.

Senator Johnstone: At pages 10 and 11 in the Supplementary Estimates, I have no quarrel with the new appropriation of $183.4 million to the Department of National Defence. Given the state of some of our equipment and the state of our armed forces that is probably not enough money. However, I feel that only one economic engine keeps this country going, and that is business. There is no new appropriation for the Atlantic Canada Opportunities Agency. Then I go down to Justice and see an appropriation of an extra $115 million. This concerns me a little. Coming from the business world, perhaps I am a little sensitive that we are not putting enough emphasis on business. I do not know on what basis these Estimates are made, but I suppose there are terms of reference available for Enterprise Cape Breton Corporation and the Atlantic Canada Opportunities Agency?

Mr. Neville: Yes, there is detailed information in the Estimates and in some of the other documentation that has been provided.

Senator Johnstone: Am I right to be a little concerned that not enough has been spent on business and new business?

Mr. Neville: No, I do not necessarily share that point of view. You have to understand that these are the Supplementary Estimates (A). This is additional funding over and above what has been tabled in Parliament for the 1998-99 Estimates, which is a significant amount on its own. I think you have to look at each component of the Supplementary Estimates (A) and debate the additional requests.

To get back to your initial question, this is but a component of a larger package, which is the Estimates for 1998-99 in its totality. If you were to look at the Estimates in total, you would have a better picture.

The Chairman: With respect to the Medical Research Council on page 26 of the English version, we are looking at a total of $39.5 million for grants and scholarships in aid of research. Was this sum added at budget time? Where does this sum come from? As I understand it, the Minister of Finance increased the grants for medical research. The new appropriation has gone up by $39.5 million. Was this part of the announcement in the budget by the Minister of Finance? How do you rationalize this $39.5 million?

Mr. Lieff: You will notice that all the granting councils have an increase. It is part and parcel of the budget strategy called the Canadian Opportunities Strategy. Funding for increased research and development and for the millennium scholarship program were part of that overall strategy. This is intended to put money right into the hands of researchers in applied research and development.

Across the three councils, there was a total increase of $119.9 million for advanced research and graduate students. The Medical Research Council received approximately $40 million, the National Sciences and Engineering Research Council, $71 million and the Social Sciences and Humanities Research Council, $8.9 million.

Senator Lavoie-Roux: They are still the poor sector.

Mr. Lieff: I will have to look at the base to see what they have in total.

Senator Lavoie-Roux: It has been like this for several years.

Mr. Lieff: The total program in the Estimates for social sciences is $92 million, compared to the natural sciences and engineering, which is $475 million. You are quite right.

The Chairman: My editorial comment would be that this is thin gruel for those researchers, as we know, because I think our grants are now about $8.60 per capita versus $66 per capita in the U.S. That bothers me fundamentally. I would ask that you take this back to the department and the minister to consider in the next budget because being able to award only one grant in five applications is part of our brain drain problem. Young researchers are heading south. Somehow, we must stop or slow down this drain.

I would like to thank our witnesses for being here this evening.

The committee adjourned.