Proceedings of the Standing Senate Committee on
National Finance

Issue 13 - Evidence - Meeting of October 6, 2009


OTTAWA, Tuesday, October 6, 2009

The Standing Senate Committee on National Finance, to which was referred the subject-matter of Bill C-50, An Act to amend the Employment Insurance Act and to increase benefits, met this day at 9:33 a.m. to give consideration to the bill; and to examine the Estimates laid before Parliament for the fiscal year ending March 31, 2010.

Senator Joseph A. Day (Chair) in the chair.

[English]

The Chair: I call this meeting of the Standing Senate Committee on National Finance to order and welcome you all here this morning.

Honourable senators, last week we began our study of Bill C-50. It is presently before the House of Commons. In the first half of this meeting, we will be continuing that study. On this panel, we are pleased to welcome from the Canadian Labour Congress, Ms. Barbara Byers, Executive Vice-President; and Mr. Sylvain Schetagne, Senior Economist. From the Canadian Centre for Policy Alternatives, we welcome Ms. Armine Yalnizyan, Senior Economist.

[Translation]

And finally, the spokesperson for the Conseil national des chômeurs et chômeuses, Mr. Pierre Céré.

Welcome everyone.

[English]

As always, since we have only one hour with this panel, I would ask honourable senators to try to ask your very best question and then have in mind your colleagues who might also like to pose a question.

Ms. Byers, would you like to get things underway for us?

Barbara Byers, Executive Vice-President, Canadian Labour Congress: Thank you very much. On behalf of the 3.2 million members of the Canadian Labour Congress and their families, we want to thank you for giving us this opportunity to present our views on Bill C-50.

The Canadian Labour Congress, CLC, brings together national and international unions, along with provincial and territorial federations of labour and 137 district or municipal labour councils. Our members work in virtually all sectors of the Canadian economy, in all occupations and in all parts of Canada.

Employment Insurance, EI, is a critically important program for Canadian workers, especially in tough times such as those we face today. Laid-off workers obviously need adequate benefits to support themselves and their families while they search for a new job. Unemployment benefits are spent on necessities such as food and shelter; they are not saved or spent on luxury items. They are a highly-effective form of economic stimulus and help maintain the economies of hard-hit communities.

The government's plan to change the Employment Insurance program for long-tenured workers is welcomed by CLC. We believe Parliament should pass this bill so that recently laid-off workers can have access to this temporary measure to support themselves and their families while they search for a new job.

However, Bill C-50 will not help most of Canada's unemployed. Bill C-50 addresses the needs of claimants whose benefits began after January 4, 2009, and have claimed less than 35 weeks over the last five years. They will get from 5 to 20 extra weeks of benefits, depending on how long they have been paying into the EI system.

The cut-off will exclude many workers who have made use of the EI system in the past because they have been unemployed through no fault of their own. Therefore, fair accessibility of the system is not addressed in this bill.

The measures are temporary and will apply to new claims filed since January of this year, if the bill is passed by October 15. It will not apply to new claims filed after September 11, 2010. Additional clauses significantly cut the benefits for new claims filed after June 6, 2010, again graduated according to how long individuals have been paying into the plan.

Although we are saying to pass this bill, we are still concerned about whether it is a reintroduction of intensity rules, which, quite frankly, we fought to get out of the old EI system. We acknowledge, though, that workers who are on EI now desperately need what is there in Bill C-50. If the bill is not passed by mid-October, workers otherwise at the front of the temporary program will not qualify. Therefore, the start date would be pushed forward by any delay.

The Canadian Labour Congress supports provisions to improve the duration of benefits to long-tenured workers. We believe it will help stabilize the economy in many hard-hit communities. However, the huge accumulated EI surplus of $57 billion should be used to improve access and benefits for all unemployed Canadians.

We will be urging Parliament to get back to work for comprehensive reform of the system to introduce a uniform EI entrance requirement of 360 hours in all regions, and to increase benefits for all unemployed workers. Our EI program currently leaves far too many Canadians, especially women, lower-wage earners, insecure workers and younger workers, out in the cold. Only about half of all unemployed workers today qualify for benefits, and the average weekly benefit is about $350 before taxes.

I would like to underline here that female workers in all of the EI areas, whether it is regular or special benefits, receive even less than that. The average is anywhere from $20 to $60 less a week. The average unemployed worker with a claim today qualifies for about 35 weeks in benefits, and tens of thousands of unemployed workers have exhausted their benefits. Many will have to exhaust all of their assets to qualify for provincial social assistance. Therefore, those who have worked hard over the years to just build up a little equity and be able to buy their own homes will find themselves losing them.

High entrance requirements for new entrants and re-entrants have shut out many workers, as have the high qualifying hours needed in regions that had low unemployment rates prior to the crisis. There is absolutely no reason why access to EI should vary with the local unemployment rate. If you are unemployed today, no matter what region you live in, you are unemployed. There should be no difference.

We are also calling for longer benefits of at least 50 weeks in all regions so that fewer workers exhaust their claim. We are also looking for higher weekly benefits based on the best 12 weeks of earnings before layoff, as well as a replacement rate of 60 per cent of insured earnings. By the way, that is less than the 66 per cent that people used to get in the 1970s. The governments should also introduce extended benefits on an emergency basis.

We all have to be reminded that it was workers and their employers who paid $50 billion more in premiums into the EI system during the last decade than was paid out in benefits. The huge surplus was spent by successive governments largely on corporate tax cuts. If the piggy bank had not been robbed, there would be enough money for the unemployed workers of today. Workers paid the premiums in the belief that EI was their protection against a rainy day.

Honourable senators, the rainy day has arrived; it is raining hard. In fact, I would say it is pouring on workers and their communities.

The Chair: Thank you, Ms. Byers.

[Translation]

Do you have a presentation for us, Mr. Céré?

Pierre Céré, Spokesperson, Conseil national des chômeurs et chômeuses: First of all, on behalf of our organization, the Conseil national des chômeurs et chômeuses, I would like to thank all of the members of the Senate Standing Committee on National Finance for this invitation to discuss Bill C-50 which would extend the duration of employment insurance benefits. Respectfully, we strongly disagree with this bill.

First, we disagree with the approach taken. The government has chosen to use legislation to play a political trick on the opposition when it could simply have announced a pilot project, as governments have done since 2004. The government obviously opted for a game of political chess, using the victims of the recession as pawns.

We oppose this bill because it creates two categories of unemployed persons: the good ones who have hardly drawn any benefits in recent years and the bad ones who have drawn on the EI system. We disagree with and are very sceptical of the Department's figures: $1 billion and 190,000 unemployed persons who would be helped by the bill. Finally, the bill further complicates an already complex piece of legislation by creating all kinds of exceptions and applications.

For the past twenty years or so, successive governments in Ottawa have worked to make employment insurance a many-headed beast, bringing in complex legislation with multiple exceptions and special measures. With Bill C-50, the current government is adding further complications. It is replacing subsection 12(2) of the Act, which is six lines long, with three pages of all kinds of exceptions. Under Bill C-50, subsection 12(2) of the Act would become 12(2.1), 12(2.2), 12(2.3) and 12(2.4), creating a distinction as to when EI benefits are claimed, that is four different periods, and setting out up to six possible types of extensions depending on the number of years premiums were paid. The 20-week extension would only be granted to those who applied before June 5, 2010, and who paid at least 30 per cent of the maximum annual employee premium in at least 12 of the 15 years before the beginning of the claimant's benefit period. All other claimants would receive less, often only five weeks.

Most important, workers who have received more than 35 weeks of benefits in the last five years would be excluded. That of course means all seasonal workers — and there are a lot of them since according to the Department of Human Resources' own figures, 30 per cent of EI recipients are seasonal workers — and casual workers — and that designation includes part-time workers and those on call — as well as workers affected by economic slowdowns and those laid off even for a short time in recent years. The measure also excludes all workers with less labour market seniority.

As a result, some unemployed persons will receive a few additional weeks of benefits while others will not be entitled to receive them, even if they are from the same workplace or the same factory and live in the same town, if not the same neighbourhood.

It is all too clear to us as well that the Department's figures do not stand up, if only because the $1 billion announced is necessarily based on a calculation of the average weekly benefits for 190,000 unemployed persons. It does not take a PhD in economics to do this simple calculation. It translates into an average extension of 15 weeks. One billion divided by 190,000 persons, divided by $348 per week extends benefits by an average of 15 weeks.

Is the bill designed to grant that average extension? Surely not. And if there was truly the political will to grant a 15- week extension, why did the government not proceed accordingly, with a simple, clear and direct bill that extends benefits by 15 weeks?

Similarly, will there really be 190,000 long-term unemployed persons who can benefit from this measure? We seriously doubt it, based on two facts: a mere 27.9 per cent of EI recipients exhaust their benefits, again according to the Department of Human Resources' figures. One's benefits are extended only after one has exhausted one's benefits. That happens in less than one third of all cases. Moreover, the bill excludes all those who have drawn benefits for more than 35 weeks in the last five years and all those with little labour market seniority. An MP who supported the bill told me recently that he thought 60,000 rather than 190,000 persons would be helped.

In my estimation, 60,000 is a more reasonable number. The public is entitled to know the true facts. This is why we do not believe the claim that Bill C-50 will provide $1 billion to 190,000 persons. We also believe that older workers deserve more than these few weeks of additional discriminatory benefits. They deserve a real assistance program for older workers, along the lines of POWA. However, the Conservative government refuses to reinstate that program.

In our opinion, the problems with employment insurance have not been addressed at all. As Ms. Barbara Byers noted, EI program eligibility remains a pressing issue. Tens of thousands of people who have lost their jobs are refused EI benefits even though they have paid into the system. This past summer, in July, the premiers of all 10 Canadian provinces attended a meeting of the Council of the Federation in Regina and called on the Prime Minister of Canada to resolve this problem. Moreover, many institutions, municipal elected officials, a majority of House of Commons members, countless social and union groups, the Church as well as many economists and a wide range of political observers have all called on the government to deal with this problem. It seems a consensus has emerged within society on this issue.

I believe, perhaps somewhat naively even though I am 50 years old, that policy must provide solutions to problems and that our highest legislative officials must be able to work together instead of adopting a confrontational stand. Obviously, this is not at all the vision of the current government.

It is not up to us to vote on this bill, to defeat it or to pass it. However, I would like to say this, and I will leave you with this thought: the bill must be amended to simplify its application. For example, with respect to the period of application and the definition of long-term worker, the provision excluding those who have collected over 35 weeks of benefits in the past five years must be eliminated. Could the Senate not take strong action and move not only to utilize its legislative powers but also to explain to the public the ramifications of this bill? Thank you.

The Chair: Thank you very much, Mr. Céré. We will now hear from Ms. Armine Yalnizyan.

Armine Yalizyan, Senior Economist, Canadian Centre for Policy Alternatives: Thank you, Mr. Chair. I am very pleased to be here today to discuss Bill C-50. If you have no objections, I will make my presentation in English.

[English]

I want to say what a pleasure and honour it is to be here to discuss this bill with you and with my colleagues who work day in and day out with the unemployed, who deal with those who you are trying to help with this piece of legislation. I could not agree more with the commentary made by Mr. Céré, but I am here to advance the modifications that were discussed, which are so necessary in a piece of legislation that is so long overdue and desperately needed.

The severity of this recession is something we have not seen since the Great Depression in terms of job loss. No other recession since the Second World War has felled so many people in the opening months of the recession — not the recession of the 1980s or the 1990s.

Since October 2008, we have lost 483,000 full-time jobs. Presently, we have 1.6 million unemployed people; we are about to find out within a couple of days what has happened to those numbers. The job loss has softened in the last couple of months, but in the number of employed, we include the hundreds of thousands of people who now declare themselves employed because they are self-employed and people that have lost full-time jobs who are now grabbing part-time jobs because they cannot afford not to work.

Among the 1.6 million unemployed today, less than half get help. We have not had this type of experience of unemployment, of exposure to the economic risks of job loss since the 1940s, the decade in which the legislation was introduced by your predecessors of six decades ago. In the 1940s, we made it better. Today, we are wondering how little we can do to help those who are unemployed.

The budget crisis, which I understand people fear, has prevented us from moving more quickly. Also the ideology exists that helping people and extending benefits may make people malinger. I want to encourage you to understand that there are no jobs out there, that even though there is a halting recovery, no new jobs are being created. Many people who are grabbing jobs are grabbing jobs that are temporary in nature, not permanent.

The next shoe has yet to fall. Hundreds of thousands of the unemployed will run out of benefits in the coming months. Your legislation, with respect, is not enough, as Mr. Céré has noted. It does not reach the scope that is required.

You heard earlier from Human Resources and Skills Development Canada, HRSDC, officials that one third of people who have lost their jobs since January of this year would qualify. That means two thirds would not, and you are not even touching the people who were the shock troops of the recession last fall.

Going forward, we cannot have a full recovery if only stock market indices and investors recover. If consumers lose ground and workers cannot find jobs and sustaining wages, then our aggregate demand continues to plummet. We will not ride on the coattails of the United States; they are 22 long months into recession, with no end in sight. Exports will not raise our fortunes despite some delimited increases in commodity prices of oil; even if China and India increase production, this is not sufficient to have our economy rise. We need to sustain the purchasing power of Canadians.

We must improve employment insurance, and Bill C-50 can be changed very simply and clearly, as Mr. Céré has requested. I am offering recommendations for three issues that require modification. The three issues that we must address are at what point the clock starts for this legislation, who gets the help and how much extra help they get.

I will make a quick recommendation for something that is outside the purview of Bill C-50 as well, which I will be recommending in the pre-budget consultations to come with the house committee as well as the Senate committee, if I have an opportunity.

First, I would recommend that you start the clock on January 4, 2008, not 2009. You may ask: Why go back a year? I would say Bill C-10 does exactly this. You offer five extra weeks by starting on January 4, 2008; extend it to everyone who started their claim at the beginning of 2008 so that people who found themselves entering the recession, and who had access to five extra weeks back then, would have the benefit of your extra weeks this time.

Second, drop the 35-week criteria. It is nonsense to say that we have deserving and undeserving poor. People who are being affected by the downturn right now have commonly been in industries where there is retooling, adjusting of inventory, slow periods and off seasons. Workers have no control over their hours of work. People who have been laid off on a regular basis may find themselves now not being recalled at all. These are not people who should be excluded from the reach of the extended benefits that you have to offer.

Finally, make the maximum benefits uniform, as you did in Bill C-10. If you recall, Mr. Céré was referring to the premiers. Mr. Campbell actually suggested two years of extended benefits because this recession will not end any time soon. Premier of Saskatchewan Brad Wall also suggested extended benefits. These are not left wing leaders; these are people saying that we will end up watching people fall from having no employment insurance to not being able to access social assistance.

Without such changes to Bill C-50, you would be presiding over the most massive phase of economic asset stripping of the middle class — which was exactly what EI was designed to prevent — and the economic dislocation of households that are scrambling to find a way to pay the rent and feed their kids and are ending up living together. People are moving back in with their parents, and families are sharing apartments to cut down on housing costs.

We have H1N1 flu season coming up. You can expect that one thing leads to another. You may save costs on Bill C- 50 but find costs accelerate elsewhere.

I would hasten to include what the United States has done, a country that does not have the most luxurious unemployment system. I will quote to you from an Associated Press article last week:

Congress has added up to 53 extra weeks of benefits on top of the 26 typically provided by the states. The House this week approved legislation that would add another 13 weeks in high-unemployment states.

These are uniquely federal-supported benefits that will assist the states to deal with this prolonged, protracted, devastating recession.

I said that I would make one other recommendation that is outside the purview of Bill C-50. People cannot live on 55 per cent of 20 hours a week. We are finding many people, particularly single mothers, who are unable to pay the rent and feed the kids and are doing all sorts of crazy things, including paying their rent on credit cards.

In answer to the question of whether the state will help people, or whether it will be through credit, the answer seems to be a do-it-yourself recovery through credit. We know bankruptcy rates are escalating, as are mortgage foreclosures.

I would urge you to consider perhaps introducing a piece of legislation through the Senate that would update a section in the Employment Insurance Act that permits assistance over and above the 55 per cent rate for families that earn less than $25,921, for families eligible for the Canada Child Tax Benefit, CCTB. Low-income families with children that are eligible for the CCTB should get assistance of up to 80 per cent of their previous wages. This would prevent an awful lot of economic dislocation and struggle.

I would close by saying that this is not a game. We are looking at hundreds of thousands of people coping with unbelievable economic stress. You think it is a budget crisis for the federal government; it is a budget crisis for millions of Canadians.

Your predecessors from decades ago were able to improve life for all Canadians. I would call on you to look at what you can do to help people from falling through the floor today.

The Chair: We will now go to a question-and-answer period. I would ask you to try and keep your replies succinct as well.

Before I go to my list, could someone comment on the 30 per cent qualification? I have not heard you talk about that aspect.

There is the five years — 36 weeks within the last 5 years — which I think we have heard about. We know that Bill C-50 would be in effect only until September 12, 2010, after which it would be the status quo. It is an interim measure during the economic downturn.

Under this bill, claimants contribute 30 per cent of the maximum annual employee's premium in 7 of the 10 years. There are different categories. What effect will that requirement have?

Ms. Byers: We have talked in various ways about all the people who are excluded. This is simply another way to exclude other groups of people, such as part-time workers and those who have not contributed at that level. Certainly, Mr. Céré pointed out the complexity of the eligibility requirements to qualify.

In addition to the unemployed who desperately need some measures at this time, I am concerned about people who have to interpret this program at the community level because they will have to face the anger of people who thought they would qualify for EI but do not. They made it through one hoop but did not make it through the other hoop. I do not have the specifics on that, but perhaps someone else will have them.

The Chair: Mr. Schetagne, are you able to help us? How many people who pay into Employment Insurance each year will pay more than the maximum annual employee's premium?

Sylvain Schetagne, Senior Economist, Canadian Centre for Policy Alternatives: I do not have the answer to this question because of the lack of access to the data. It is clear that because they are using 30 per cent of the maximum annual premiums paid on earnings, it will have an impact on part-time workers and those workers who are paid low wages. The criterion to use one third of the maximum is difficult to achieve. For example, for someone works 20 hours per week or less at minimum wage, it is difficult to meet the criterion to qualify for the benefit; and add to that 7 of the 10 years on top of that. That amounts to another criterion that serves to create two categories of unemployed: the good and bad unemployed. As was said earlier, the deserving and undeserving unemployed.

The number of hours worked also restricts accessibility to the program. Currently, if part-time workers do not work the minimum number of hours as stated in the program for their community, they do not have access to EI benefits. The same idea is replicated in this bill: If you have not paid as much in EI premiums, you will not have access to the benefit. Unfortunately, I do not have the percentage of the workforce affected.

Ms. Byers: In an analysis that we did earlier on Bill C-50, we said that the maximum additional weeks for those who have been paying at least 30 per cent of their maximum annual premium in 7 of the last 10 years is 5 weeks. To get more, a worker has to be paying in for a longer period of time. To get the full 20 weeks, a worker has to have paid in for 12 to 15 years.

The Chair: They have to have paid at a rate of at least 30 per cent of the maximum.

Ms. Byers: Yes.

Ms. Yalnizyan: You were given the answer to your question with HRSDC last week when they mentioned that one third of those who have lost their jobs since January 2009 would qualify. That means two thirds of those who lost jobs since the beginning of this year do not qualify. It is a simple matter of mathematics as to what proportion of people lost their jobs since January. That does not include those who lost their jobs in September, October, November or December 2008. Therefore, considerably less than one third of those who lost their jobs in this recession would qualify under the terms of Bill C-50.

The Chair: Would you accept the figure of one third since January?

Ms. Yalnizyan: I am telling the committee what HRSDC said.

The Chair: I am asking whether you accept that figure.

Ms. Yalnizyan: I do not have the information that the department has.

[Translation]

Senator Carignan: I listened carefully to the presentations. The witnesses recommended a number of amendments. Specifically, Mr. Céré and Ms Yalnizyan, you stated that is was nevertheless important for the government to adopt this bill. Can you tell me specifically which provisions of the bill are, in your opinion, positive initiatives?

[English]

Ms. Yalnizyan: I am happy to answer that wonderful question. You have finally done something for some of the unemployed that have been left out in the cold. That is the good thing, just like the five weeks in Bill C-10. However, the problem is that you do nothing as a government unless your back is up against the wall, and that is not sufficient for the unemployed of this country.

Ms. Byers: People have laid out a number of the concerns today. Many of our members feel that they might benefit from this bill but are saying that it is very difficult to say to people that they will delay the process to make it perfect. People then worry that a delay will cause them to be dropped off.

That is why the CLC recommends passing the bill to help those who might benefit from it while recognizing that it is not the end of the discussion. There are some big concerns with this bill. We talk to our members face to face, and they say that it will help, even if only a bit. It might help someone to make a few more mortgage payments or get someone through until they can find another job. That is the bind we are all in. It is not what we wanted, but it will benefit some people. Therefore, how do you say no to those people? We need a longer-term plan for the issue to deal with eliminating all of the various qualifications, whether number of hours worked or how many times someone has accessed EI benefits.

[Translation]

Mr. Céré: Senator, the government is doing the right thing and acting generously by wanting to extend the benefit period. This measure does indeed address certain needs. However, why make a political game out of it? Why not simply launch a pilot project? When the Minister of Human Resources gave a press conference on September 14 —

Senator Carignan: I think my question was very clear.

Mr. Céré: As will be my answer.

Senator Carignan: I want you to tell me what you like about the bill. I am not here to argue —

Mr. Céré: The idea of extending —

Senator Carignan: I have heard many suggestions as to how the bill could be improved, but I want to know what provisions you think we need to keep in the bill.

Mr. Céré: Extending the benefit period is a very good idea. However, this bill — and I will weigh my words carefully — is bad because it complicates an already complex piece of legislation.

Senator Carignan: You are telling me about the down side of the bill. I want to know what you like about it.

Mr. Céré: Well, senator, the idea of wanting to extend the benefit period is a good one. However, when you go about this is a roundabout way, as the bill does by defining four benefit periods and making provisions for seven different possible benefit extension periods, and by excluding persons who have received more than 35 weeks of benefits over the past five years, many people are left out.

Next week, I will be visiting Kruger in Trois-Rivières. Half of the company's 850 workers have been laid off. Before going ahead and laying off so many of its workers, the company went through a period of slowdowns and upheavals, laid off workers, called them back, then sent them back on unemployment to take part in a shared work program. All of these workers will be excluded from the measures set out in the bill by virtue of the fact that in recent years, they have received EI benefits for a few weeks. This is where the bill is unfair. Basically, all that we are asking the government to do is extend the benefit period. This bill, with its exceptions and special measures, only complicates the situation. We urge you to simplify the bill's provisions, specifically those targeting long-tenured workers.

Senator Carignan: Can you tell me about a single case in the history of employment insurance where the retroactive eligibility period was almost nine months?

Mr. Schetagne: There is the case of Bill C-10.

Senator Carignan: Has there ever been a case where the retroactive eligibility period was two years?

[English]

Ms. Yalnizyan: It is very important to say that when we entered this recession, EI was so crippled as to not be able to act as an automatic stabilizer, and there is plenty of blame to go around for that. I understand your statement that this is an unprecedented move, but so too were the cuts to EI 10 years ago. We have to do these things to repair a situation that was badly broken by both the Liberals and the Conservatives. Since 1990, four rounds of reform have taken place, two by the Conservatives and two by the Liberals, that brought us to our knees as we entered a recession. We were not ready for this, and this law will not make us more ready for the next recession.

Mr. Schetagne: If you recall, in 1990, before all these reforms, 80 per cent of unemployed Canadians had access to the Unemployment Insurance program. The latest data released indicates that that is now below 50 per cent. We estimate that around $9 billion is not being transferred to the unemployed while reforms are put in place.

[Translation]

Senator Ringuette: On looking at the figures, I note that the bill only meets the criteria in so far as 3.75 per cent of Canada's unemployed are concerned. As Mr. Céré pointed out, it is difficult to see how the $1 billion figure could be realistic. Last week, in chapter 2 of his third report on the Economic Action Plan, the Prime Minister stated that as of September, the measures announced in the plan had provided more than 300,000 employment insurance recipients with an extra five weeks of benefits at a cost of $446 million. That was a somewhat inaccurate figure because there is no way that 300,000 EI recipients received the maximum weekly benefit of $447 for a period of five weeks. So then, what Canadians heard was untrue, which leads me to doubt, just as Mr. Céré did, the accuracy of $1 billion figure quoted.

Basically, you are somewhat ambivalent. On the one hand, you are asking the Senate to adopt this bill, while on the other hand, you would like us to propose some amendments to ensure greater equity for all Canadians, in view of the economic downturn. In my opinion, Canadian banks are the only institutions in Canada not experiencing an economic recession. They are the only organizations that have increased their profit margins in the past two years.

You have presented us with a dilemma. Since the Senate cannot propose draft legislation that would force the government to commit additional funds — that is the difference between the Senate and the House of Commons — what are we to do? I can understand your dilemma. I agree that there will be families in Canada without jobs and without incomes, families that will face a bleak winter and who will need to turn to provincial governments for assistance in order to keep a roof over their heads. As you pointed out, the only institutions not affected by the recession are Canadian banks that charge 24 per cent interest on credit card purchases made by less fortunate Canadians. How can we help to resolve this dilemma? We are being asked to adopt the bill along with certain amendments, whereas pursuant to the Rules of the Senate, we cannot force the government to incur additional spending.

[English]

Ms. Byers: I am glad that our ambivalence was recognized. It has been difficult for the labour movement to come before this or other committees to say that you should pass this imperfect bill. We are doing it primarily because, regardless of what the number is, a whole lot of desperate people are out there. Ms. Yalnizyan has pointed out the desperate measures they are taking.

We are asking that you pass Bill C-50 as it is because every time it is delayed with an amendment, another group of families is dropping off and will not be compensated. We want to work with the Senate and other groups to try to get Parliament to recognize the crush that people are under and the things that need to be done. The reality is that this bill is designed for older workers who have made very limited use of the EI system.

I do not know how you tell workers that they are not deserving of this. That is why we have decided to ask you to pass Bill C-50 and then to work with us and other organizations to do something more. Fifty-seven billion dollars was taken away from EI, and that should be given back to the unemployed, especially now.

Senator Ringuette: In the current budget, $62 billion was given to the Canadian banks.

[Translation]

Mr. Céré: We came here to testify rather reluctantly because we heard the Minister of Finance say last week that there would be no amendments made to the bill. Yesterday, we received an invitation to testify before the House of Commons human resources committee. We are wondering if we are going to accept the invitation. We are not telling you to block the passage of the bill, or to adopt it either. We are merely saying that the bill needs to be amended. If you do not have the power to amend the bill because that would mean additional spending, at least you can ask that persons who have drawn benefits for more than 35 weeks not be excluded. I am not familiar with parliamentary procedure. Is it possible for you to present to the public, to Parliament and to the media a dissenting report outlining all of the concerns that have been raised in this forum, concerns that you also share? Why complicate this legislation? Why complicate its application? Why divide workers into good ones and bad ones?

Why exclude workers who have drawn 35 weeks of benefits? Why provide for up to seven different types of extensions? You should question the figures. The $1 billion figure cited is misleading. If the figure is really $500 million, then the public deserves to hear the truth. We are asking you to set the record straight.

[English]

Ms. Yalnizyan: I understand that the Senate cannot propose amendments that would add to the public treasury. You are not proposing amendments. You are in a pre-study phase, which is an extraordinarily unusual procedural step where the house has yet to propose its amendments. You are pre-studying the law before it comes to you, with whatever amendments take place in the other place.

I suggest that you listen to what we are saying and to the ways in which this bill can be amended for clarity and for adding assistance for people. As I mentioned, there are three very simple changes: Start the clock on January 4, 2008, as you did in Bill C-10; drop the 35-week criterion and the 30 per cent criterion — drop the qualifications, so that everyone is brought into the sweep of the legislation as was done in Bill C-10; and make maximum benefits uniform so that as many people as possible can be affected by the good news you are offering.

You have nothing to lose as Conservatives; you can only be perceived as helping those in need. I speak to you, as the chamber of sober second thought, and say that you have nothing to lose in terms of electoral problems; you can speak with your colleagues freely in this place. Here, you can work together to do the best that Parliament can offer our citizens, and work with your colleagues in the other place to bring those amendments forward as it proceeds in that chamber.

It is not up to you to pass these amendments. It is up to you to come up with ideas that can be moved by your colleagues in all parties in the other place because you cannot introduce things that affect the public purse here. It is incredibly important for you to also consider what proposals you can make to raise considerations about how you help the most vulnerable. That is why I suggested that you take a look, outside of the purview of Bill C-50, at what can be done to improve the language that was introduced to the Employment Insurance Act in 1996 and has not been touched since. During that period of time, we have seen the people who have been helped under that provision drop like a stone.

Senator Callbeck: You all agree Bill C-50 will not help most of the unemployed. I come from the Atlantic region, where we have a big seasonal workforce, and we need to have that seasonal workforce because of the industries such as tourism, agriculture and fisheries. In order to qualify for this program, it is 35 weeks; you cannot draw benefits for longer than 35 weeks over five years; that is 7 weeks a year. All our seasonal workers require more than that. That means they are excluded.

The government is saying that this bill will help about 190,000 people. We heard the figure 60,000, and I have seen that in news papers, too. Have any of you done any analysis on how many people you think this program will help, and have you done a breakdown on the regions?

Mr. Schetagne: The biggest challenge is to try to get an estimate of how many unemployed Canadians will exhaust benefits. In order to get access to the program, you need to exhaust the current benefits to which you are entitled.

We have requested information. Statistics Canada and HRSDC do not release this information, while in the U.S., it is accessible and available in a timely manner. It is impossible to do these estimates with the current information we have available.

Ms. Yalnizyan: Senator Callbeck, I would echo what Mr. Schetagne said. The information that you need is within the public service, and we cannot do that analysis on the outside. You have two choices: Encourage the public service and the government bodies to make the information open, transparent and accessible so that people inside and outside Parliament can do this; or get your own civil service to give you better information on a timelier basis.

Senator Nancy Ruth: I wanted to go back to Ms. Yalnizyan's suggestion. You said that people cannot live on 55 per cent of 20 hours a week. I assume the largest categories would be students and women with children, maybe with one or two part-time jobs. You suggested the updating of a section in the Employment Insurance Act. Can you tell us a bit more about what this section is and how you would see it being updated, if the last update was 13 years ago?

Ms. Yalnizyan: It is beyond women and students. It also includes many people who are recent immigrants and who cannot get more than 20 hours a week. It is people who have worked in industry over 10 years, waiting for that full- time job they cannot get because employers keep them at 20 hours a week so that they do not have to pay benefits, et cetera.

This carries across a huge diversity of industries and demographics of workers. Many people are working at 20 hours a week or less or, worse, have no control over their hours. Some weeks will be more than 20 hours and some will be less. There is no regularity. These are the people who have no control over their insurable earnings or what their benefit rate would be should they lose their jobs or any access to jobs.

With respect to the section in the Employment Insurance Act, unfortunately I am not a lawyer, and I do not know which it is. However, I can certainly look it up, or you can have the Library of Parliament do so.

It is an additional net supplementary benefit that goes to families with children who are in receipt of CCTB. At the time that it was introduced in 1996, the upper limit for eligibility was an annual income of $25,921. That figure has neither been indexed nor updated since 1996, which means that, over time, fewer and fewer people qualify for the additional benefit. Most of the people who qualify for that benefit are women with children, mostly single working women with children, who have lost their jobs. It would be fantastic if you could raise the visibility of this small but very important addition to the Employment Insurance Act.

Senator Nancy Ruth: I want to clarify again: These are people or families who have earned up to $25,921, and they are allowed a supplementary benefit, is that correct?

Ms. Yalnizyan: Yes, they are allowed up to 80 per cent of their insurable earnings before they were laid off.

The Chair: Witnesses, we have some space tomorrow at 7:30 p.m. Can any or all of you re-attend tomorrow evening? There is a great deal of interest amongst the honourable senators in the points you are making, and if you could come back at that time, we could finish this properly.

Ms. Byers: I do not know about my colleagues here, but I will make myself available.

The Chair: It would be very helpful. It is very important information, and we are trying to do this expeditiously. However, we do not want to cut you off.

[Translation]

Mr. Céré: No, I am sorry, but I am not available then.

The Chair: That is too bad.

[English]

Ms. Yalnizyan: I do not think I can make it, either. I would need to check, but I think I have a previous commitment.

The Chair: We have four minutes left. Let us ask questions of the witnesses other than Ms. Byers, who can be here tomorrow evening.

Senator Mitchell: My question was alluded to by Ms. Byers, but I would not mind an answer from the other witnesses. You alluded to the fact that a lower percentage of women than men actually qualify for EI, although they are paying for it, and, once they qualify for it, they are paid less. First, do you have specific statistics on those differences, and, second, could you outline why that is the case?

The Chair: Ms. Byers, it would be helpful if you could bring that answer tomorrow evening.

Senator Di Nino: It is difficult to deal with such an important issue in a short period of time. Let me make two points.

First, we have to understand that the objective or purpose of this bill is to assist long-tenured workers who have generally not taken advantage of EI. These are people who find themselves now in particular need if a temporary shutdown occurs or a retooling is necessary, et cetera. This is not intended to deal with EI legislation globally. This is a specific piece of legislation to deal with an issue.

I am a little concerned that we are sending out the wrong message that this should be about the whole package. Let us focus on the issue at hand; this is for one purpose.

Second, we also must understand that we have unprecedented times. This country has been going through a "tsunami" unlike anything we have seen since the Second World War. The government has responded with unprecedented measures that have been applauded worldwide. We are probably less affected than most other nations. We will have to see.

This is a difficult set of issues to deal with — the expenditure of funds — particularly in difficult economic times. The previous government saw that and took some unpopular decisions at that time. This government must deal with what we have currently. I feel they have taken some good measures to deal with these issues.

We should try to focus our attention. Ms. Byers is the only one who truly got it when she said to pass this bill, and the other issues we must talk about at a later time. Whether we like it or not, they will be difficult, and it will not be perfect.

I took exception to Ms. Yalnizyan's political statement that our government never does anything until our back is against the wall. Our back is against the wall for all Canadians — all of us.

Ms. Yalnizyan: Thank you for your important question, Senator Di Nino.

We are experiencing unprecedented economic times and an economic tsunami. Therefore, it is incumbent on the government to address everyone who has been swept by this wave of economic dislocation, not only those who you have cherry-picked to be the most deserving of help. Those others who have not been long-tenured and who have not used EI for the periods specified also had no control over whether they would have a job.

It is ridiculous — I repeat, ridiculous — to take this opportunity to say that we cannot deal with the issue. It is a tsunami. You are the only ones who can deal with the issue. The only way we will move forward is by having all parties working together in a minority situation to do the best we can to cover everyone.

Otherwise, sir, your public coffers will be drained for much longer. If you let this economic recovery malinger and not take full flight because not enough people have enough money to spend, public revenues will be drained for a long time. Your government will wear the situation because this was avoidable.

Senator Di Nino: The extension of benefits by five weeks that hundreds of thousands of Canadians benefit from; the extended work-sharing program is probably helping another 165,000 Canadians; the freezing of EI premiums, the $500,000 in retraining are all dealing with the issue.

The Chair: Our time is up, Senator Di Nino.

Senator Di Nino: I am trying to respond.

The Chair: You can respond at third reading.

Senator Di Nino: I certainly will.

The Chair: I am sorry, the time is now up. We have another panel that has been patiently waiting to appear.

Ms. Yalnizyan: Could I say one thing?

The Chair: If you change your mind, or if it turns out that you are able to be here tomorrow at 7:30 p.m., we would love to have you here. We have another panel at 6:30 p.m. on Employment Insurance with respect to Bill C-50 as well.

On behalf of the committee, I would like to thank you for being here. You have obviously stimulated much discussion. We look forward to hearing from you again if you are able to be here. If you are not and wish to send the clerk a note on points that you were not able to fully develop in the time we had, I can assure you that those points will be considered.

Honourable senators, for the second half of this meeting, we are pleased to welcome representatives from the Royal Canadian Mint. They will be speaking to us about the operations of the mint in general and, in particular, the production of the penny, which is of interest to some honourable senators. Before I introduce our witnesses, senators will be aware that the Auditor General recently found discrepancies in the auditing of the mint's precious metal holdings. This issue is undoubtedly of concern and interest to senators.

However, I understand audits are presently underway that are expected to be concluded by the end of the month. That being the case, I would ask for your indulgence in not raising questions concerning the precious metal holdings at this time. We will invite our witnesses back following the conclusion of the audits and the publication of that audit by the government, when they are in a better position to respond to specific questions in that regard.

Representing the Royal Canadian Mint this morning are Ian E. Bennett, President and Chief Executive Officer, Beverley A. Lepine, Chief Operating Officer and Marguerite F. Nadeau, Vice-President, General Counsel and Corporate Secretary, Corporate and Legal Affairs.

Mr. Bennett, you have the floor.

Ian E. Bennett, President and Chief Executive Officer, Royal Canadian Mint: Thank you very much for the invitation to appear before the committee today. As you mentioned, I am joined by Beverley A. Lepine, Chief Operating Officer and Marguerite F. Nadeau, Vice-President, General Counsel and Corporate Secretary, Corporate and Legal Affairs.

[Translation]

I welcome every opportunity to speak on behalf of a business that is world-class and sets the international standard in the field of designing and minting coins.

Senators, you will have noted that I referred to the Royal Canadian Mint as a business. It is more than that. It is a national treasure.

[English]

The mint is not an operation that simply spits out general distribution coins but is a dynamic international corporation that combines artistry, technical innovation, applied sciences and business acumen to be the leading force in the international minting world. Daily it applies the combined skill set to meet its mandate of providing attractive coinage but also to compete, and repeatedly win, in a fiercely competitive international minting market.

This year, 2009, marks the 40th anniversary of the Royal Canadian Mint since it became a Crown corporation. The mint operates without funding from the Government of Canada; it has been profitable for most of this 40-year period, and it pays dividends. You have just received a document called "The Mint at a Glance," which provides you with our revenues, profits and employee counts since 2006.

Two and a half years ago, shortly after my appointment, I appeared before a House of Commons committee. I told its members that though being no stranger to parliamentary committees, I thought I was somewhat familiar with the mint and the role it plays in our country's finances. However, the past two and a half years have been a truly amazing and revealing experience for me.

Throughout this time, I have been constantly struck by the level of professionalism and collective purpose within the mint — at all levels. I have also been fascinated and informed by the unbelievable marriage of art and science that produces the most innovative, attractive, sought-after collectible coins in the world. I said it then, and I say it again today: It is a privilege to be associated with an organization that is so fundamentally linked to some of the most powerful and evocative symbols — some would even say icons — of our nation and its identity.

That said, allow me to outline our four key business lines that have made the Royal Canadian Mint such a success.

First is the Canadian circulation business line. As I mentioned earlier, the production of high-quality, cost-effective coinage that meets the trade and commerce needs of Canadians is our core business and primary mandate. An essential part of this mandate is the management of a comprehensive distribution system that ensures coins are readily available to meet an ongoing national demand.

Some of these coins — the 1-, 5-, 10- and 25-cent denominations — were traditionally made of alloys such as copper and nickel. However, since 2000, these coins have been made of a multi-ply plated steel material, which has significantly reduced the impact of volatile metal prices and, as a consequence, the cost of Canada's coinage.

Consider that at the time metal prices hit their recent peak in the summer of 2008, it cost the Royal Canadian Mint about 2.3 cents to produce each multi-ply 5-cent coin compared to more than 8 cents that it costs the United States Mint to produce their nickel alloy coin.

This is just one of the dividends derived from a strong, vibrant research and development program that embraces the innovation and creativity that produced the multi-ply process and the world's first circulation colour coin, the poppy coin. The Royal Canadian Mint was in the technical vanguard in developing the plating technology that reduced the cost of coin production and losses within the vending industry due to fraud.

In 2005, to further enhance the efficiency of our coin distribution system, we launched a coin recycling program to encourage Canadians to recycle their coins with the aim of reducing new coin production. Canadians have embraced this initiative and it has now grown beyond our start-up program, with entrepreneurs and financial institutions launching recycling projects of their own.

As you may have noticed in the coinage you use as part of trade and commerce, in the last five years, we have embarked upon a multi-year circulation program to promote Canada. Other than our Vancouver 2010 coin series, we have used special commemorative circulation coins to celebrate the 100th anniversary of the Montreal Canadians, the centennial of Saskatchewan and Alberta and the 400th anniversary of the founding of Quebec City. Through these coins, we reach all Canadians. Our coins are a way to connect Canadians with one another and with the world. It allows them to discover new regions, cultures and people.

The second business line I would like to focus on is the one that I believe to be the sleeper of our operations, which is our foreign coinage business. I call it the sleeper because many Canadians do not know of their mint's incredible role and success in the minting of other nations' coinage.

This line of business liaises with foreign governments' monetary authorities and financial ministries in the pursuit of contracts for the production and supply of foreign circulation and numismatic coins and blanks, medals, medallions and tokens for clients worldwide.

This year, the Royal Canadian Mint is producing coins for 13 countries, such as Uganda, Barbados, the Philippines and New Zealand. Since the mid-1970s, we have produced coins for 75 countries. It is a proud record, and we are determined to build on it.

The numismatic business line is renowned for merging the art and science of minting to create coins of unsurpassed quality, artistry and craftsmanship. Time and again, we have successfully incorporated the designs of Canadian artists and merged them with precious metals and world-leading technologies.

We have enhanced these coins by the introduction of holograms, enamelling, lasering and embedded crystals. This is the business line through which we really tap into our creative and marketing talents. It is the activity through which we celebrate Canada, its people and history.

We also use numismatic coins to profile extraordinary international events such as the 2010 Olympic Winter Games and other memorable events and themes that resonate with our fellow Canadians and clients throughout the world. Indeed, we have the honour of designing and producing the medals that will be awarded at the upcoming Vancouver 2010 Olympic and Paralympic Winter Games. In recognition of this significant event, we have also embarked and remained focused on one of the most ambitious circulation of numismatic coin programs ever launched in honour of the games.

The third business line is bullion and refining. We have been providing gold refining services since 1911 — almost 100 years — and refining services for silver since 2006. Our bullion investment products are sold to precious metal traders, banks, coin dealers, mines, industrial firms and foreign governments.

Providing these services demands the ability to meet our customers' requirements for quality, purity, inventory availability, timely delivery, rapid order processing and flexible customer service. Since their introduction in 1979, our maple leaf gold coins are recognized worldwide for their quality and purity.

The demand for gold bullion has increased astronomically. In 2007, the mint used 241,000 ounces of gold in the production of gold coins. In 2008, that more than tripled to 848,000 ounces; and in 2009, we are predicting over 1 million ounces.

[Translation]

I believe it important to note, senators, that our ability to meet such a demand was and is directly due to sound business planning. To compete and win, we need to be nimble and to have built an agility within our planning and operations that can respond to such unprecedented market conditions.

[English]

As a result, Canada's mint was able to secure this valuable business, unlike some of our competitors who had to stop their bullion coin production and sales because they could not obtain material, did not have refineries or lacked the business flexibility to increase their production volumes. Our refinery services are truly integrated in that they also include assaying, secure storage and high-demand finished bullion bar products.

These services are sold to mining operations, scrap dealers and industrial firms. Our clients' requirements, aside from timing and accurate assay results and settlement, are safe storage and security and a reputable, honest and reliable service. The Royal Canadian Mint has been doing that in the gold refining business for almost one century.

Senators, 2008 was an extremely profitable year for the mint. Our revenue target was $664 million, which we exceeded with a very satisfying result of $1.4 billion. That dramatic result can be explained in part by the unparalleled turmoil in the financial markets and the unforeseen demand for precious metals. Only recently did the price of gold reach the $1,000 per ounce mark. Another explanation can be found in our resilience and agility, as a business that has been able to respond convincingly and impressively to pronounced market fluctuations.

Our ability to cope with change has been repeatedly tested, in particular during the second half of 2008. Each member of our team has every reason to be proud of what we have achieved together. I was in Berlin earlier this year to attend the 2009 World Money Fair, where the Royal Canadian Mint was welcomed as Mint of the Year. This is the biggest numismatic trade show of its kind, where the world's mints come to show off their best. I saw what the competition had to offer, and I was pleased and proud to see that we continue to produce coins that lead others in terms of quality, innovation and appeal. The simple fact remains that these sweeping results could not have been achieved without the world-class craftsmanship and commitment to quality found every day in both the Winnipeg and Ottawa facilities.

Senators, I spoke earlier of my first appearance before a parliamentary committee as the president of the mint. I outlined briefly to its members my style of management and the principles at its core, such as accountability, transparency and responsibility. I applied these principles to an issue that has clouded an otherwise remarkable year for the mint and its employees.

As the chair of this committee mentioned earlier, each quarter with respect to its precious metals inventory, the mint reconciles its accounting records to a physical metals count. Over the years, experience has led the Royal Canadian Mint to develop, as every refinery develops, an acceptable variance between the rolling inventory estimate and the physical count. In October 2008, the reconciliation difference was negative and outside the mint's acceptable variance. Extensive reviews are nearing completion — accounting, technical reviews of our processes and security. However, the information we have to date is that errors and estimates in the reconciliation most likely contributed to that discrepancy. Our security reviews have detected no misappropriation of funds. Rest assured that the issue will be resolved and made public by the end of October or early November 2009.

[Translation]

As I did two and a half years ago at the outset of my appointment, I once again take great pride in assuring Canadians that the Royal Canadian Mint continues to build upon a proud past and is today a modern, sophisticated and dynamic business that successfully combines art with technology.

[English]

It should be a source of pride to all Canadians. Thank you, senators for the opportunity to appear before the committee today. I would be happy to answer your questions.

The Chair: I am sure your presentation will provoke a number of questions. The Deputy Chair of the Finance Committee, Senator Gerstein, from Toronto, will start off the questions.

Senator Gerstein: Thank you for the comprehensive presentation. You talked about the fact that 2008 was an extremely profitable year for the Royal Canadian Mint. Alluding back to some comments made by the chair at the outset, I would like to focus for a moment on the subject of the penny. My understanding is that it is not one of the mint's more profitable products. In fact, it is likely quite a high expense. I have seen numbers that range from $24 million at the mint, $130 million when production, storage and transportation costs are included, and $65 million in lost productivity. Perhaps that could be a topic that we should take a look at.

I was interested to see that some proponents suggested we consider scrapping the penny, including Ontario's Premier Dalton McGuinty, who indicated that he would support the elimination of the penny. I understand that in his campaign, President Obama also advocated a review of the penny in the United States. In addition, a substantial number of other countries are taking a look at the equivalent to the penny in their decimal-based systems, including Finland, Sweden, Denmark, the Netherlands, et cetera. I am interested in hearing your views on whether this committee should study the issue of continued production of the penny.

Mr. Bennett: I had thought to say, a penny for your thoughts, but I have your thoughts on that subject. It is a very good question because the government has struggled with the issue in the past. As you probably appreciate, the Department of Finance Canada is our customer for the coinage and would make the decision on scrapping the penny. You are quite right in that a number of countries, including Australia and New Zealand, have eliminated the penny. New Zealand also eliminated the nickel, making the dime their lowest denomination. Certainly, international precedents exist for removing the penny.

Until recently, it cost the mint slightly less than one penny to make one penny. Currently, it costs slightly more. The distribution costs are then added to the overall expense. Our research with colleagues at the Department of Finance suggests that the house is divided on the question. According to the surveys, approximately one half of Canadians want to eliminate the penny. Small retailers are more decided on the subject: They would like to scrap the penny because it is a cost of doing business.

The subject will remain on the agenda so this committee might wish to consider it further. We would be happy to participate in that debate.

Beverley A. Lepine, Chief Operating Officer, Royal Canadian Mint: With respect to the demand for the 1-cent coin, the mint manages the distribution system across the country. We produce coin only on demand, and we have two performance measures: First, there is never any shortage in any denomination in coin demand anywhere across the country; and second, we achieve that by not building excess inventories.

Demand for the penny has remained high. It spiked in 2007 and returned to a more normal level of about 800 million in 2008. In terms of penny production, the mint has pushed recycling, as Mr. Bennett indicated in his opening remarks. We encourage recycling by consumers, which enables coins to come back into the system from circulation. We ensure that recycling to reduce production. About 560 million pennies were brought back through the recycling systems in 2008 to fulfill the demand for the coins in the marketplace.

Certainly, the business case of the penny has been studied. Its elimination would result in a savings of approximately $100 million over 20 years. Of course, that decision is for the Department of Finance. As Mr. Bennett mentioned, this committee might well want to study the issue.

Senator Gerstein: Thank you for your comments.

Mr. Bennett, I appreciate you pointing out the most recent survey. I gather that it is almost a 50-50 split as to whether Canadians feel there is a future for the penny. I also assume that that survey was totally non-partisan in terms of support.

The Chair: Do you wish to comment on that?

Mr. Bennett: Absolutely not.

Senator Mitchell: One of the most interesting facts from your report for me, and probably for many Canadians, is the significant amount of work you do for other countries in the production of their currencies, and some interesting issues arise out of that.

Do you actively and aggressively market to other countries?

Mr. Bennett: Yes, we do. When I joined the mint, one of my first trips was to New Zealand. New Zealand does not have a mint of its own, as many countries do not. New Zealand had their coinage supplied by the Royal Mint in U.K. for years. They decided to put it out to tender and select not only the best price but also the best quality.

New Zealanders are fussy people. They set out an elaborate process to solicit bids, and we participated in that process. They selected our coins, and one of the reasons for that is because of the multi-ply process we use. We can make coins faster and more inexpensively while maintaining the same quality as an alloy coin. Indeed, I argue that they are safer because we can establish a unique electromagnetic signature for each coin so that they can be identified easily and efficiently by vending machines.

New Zealand opted to buy from the Royal Canadian Mint and have placed follow-up orders ever since. That is an example of marketing that we do.

Our biggest customer this year in terms of volume was Uganda. We are making inroads into South America with efforts to sell there. We are aggressively seeking new clients.

Senator Mitchell: Do you have a sales force?

Mr. Bennett: Yes. Each of the four business lines is headed by an executive director. We have an executive director in charge of foreign coins who spends a lot of time on a plane.

Senator Mitchell: I believe the mint has dealt with 75 countries over the years, and now you are producing coins for 13 countries. Why has the business not continued?

Mr. Bennett: Actually it has continued. Our foreign business has grown appreciably over the years. Not every country orders coins every year. Some of the countries that are not on the list of 13 perhaps ordered three years ago and have not yet had a need to order more coins.

Senator Mitchell: Would that explain the drop from $115 million of revenue in 2007 to $98 million in 2008?

Mr. Bennett: Yes. Also included in those numbers is the price of metal. The volume of coin production has been increasing. The revenue line includes the cost of metals. To the extent that metal prices fluctuate, that can affect the revenue numbers.

Senator Mitchell: Do you make any effort to hedge metal prices?

Mr. Bennett: Yes.

Senator Mitchell: How do you do that? Do you have parameters for the risk you take? That can be a double-edged sword.

Mr. Bennett: We take no metal risk at all. As soon as we have an order, we hedge metal.

Senator Mitchell: Do you do cost plus?

Mr. Bennett: It depends upon the country; some sole source; some come to us because they have been dealing with us for a long time. Barbados is an example. They are on our list this year for coins. We have been making coins for them for over 30 years. They are our oldest customer. Others put it out to tender.

In some cases our sales force is actually at the ministry of finance submitting bids in person with other countries in different rooms making bids as well, we do not know whether we will win or not.

Senator Mitchell: On average, is your foreign business more and less profitable — is the spread greater or lesser — than your domestic business?

Mr. Bennett: It depends very much on the individual contract and how aggressive we need to be. I will get kicked under the table soon by our chief operating officer who cautioned me that some of this information is quite commercially sensitive. It is a very aggressive market, and we are the only mint in the world that has in its legislation a mandate to operate in anticipation of profit. Very few mints in the world make a profit. Many are subsidized by their governments.

In Europe there are 24 mints. They harmonized and all have the euro now, and all the euro paper money is the same in all European Union countries. However, the mint bureaucracy at the time very cleverly decided that each euro coin should be unique to each country; coins are minted in Ireland that have a harp on the back, et cetera. In different countries, you will find something different on the back of the coins.

The European mints seek international business because Europe does not need 24 mints. We struggle with some of our competitors in Europe to get foreign business, but I think we win it more often than not because we are seen as a very innovative mint with better technology.

Senator Milne: I am interested in the fact that you are using multi-layered coins while the European mints generally use two metals in their coins, one in the middle and another around the outside. Does that make a difference in the cost or ease of production?

Ms. Lepine: The mono-plated, or single-plated, coins used in Europe would use approximately 6 per cent of nickel on a steel core. Therefore, the cost of mono-ply is more. It is not as competitive as our multi-ply product, which uses thin layers of copper and nickel and achieves a higher durability at a lower cost.

It is interesting that the British mint, which is probably our biggest competitor in the foreign circulation space, produces mono-ply plated material. Mono-ply is also a cyanide-based process, which is environmentally unfriendly. The British do not use plated coin in their own country. They produce coins, but not for their own domestic use. Multi- ply is a significant advantage over single-ply.

Senator Mitchell: You mentioned that Uganda is one of our biggest clients. Of course, Uganda's government has a questionable reputation, particularly with respect to the way it conducts the war there and its treatment of women, et cetera, which is very serious.

Do you debate such issues in establishing a country such as that as a client, or how do you consider that?

Mr. Bennett: We operate within the context of the government's rules. There is no embargo on that country. There is on others, and we respect the judgments that the government makes.

In the case of Uganda, it is an open bid. We were selected as having the lower cost, which is of some advantage to the country.

I agree with you that Uganda has a terrible record.

Senator Neufeld: I am not familiar with the Royal Canadian Mint, and I am new, so I might ask some questions you have been asked before.

I will go to the page that says, "The Mint at a Glance." First, the mint is a Crown corporation, is it not?

Mr. Bennett: That is correct.

Senator Neufeld: For 2007-08, you more than doubled revenue, and I see that you produced many more coins. Do you buy and sell gold on the market, and is that where the revenue would increase? I do not understanding how that revenue would increase that much.

Let me take it to the next line where the profit only went up $12 million. It did not go up very much compared to the revenue. Could you explain that?

Mr. Bennett: The revenues did jump enormously. The main reason, as can be seen in the numbers, is the bullion refinery business line. There is a huge run-up in the price of silver and gold, which we produce at the refinery here in Ottawa, and a great increase in demand for gold maple leaf coins. That explains the bulk of the revenue increase.

That business is a low-margin business. While the volume of that business line increased very substantially, the mark-up on a gold maple leaf coin is only between 2 per cent and 3 per cent. It did translate into increased profits, and, while it only went up $12 million, I prefer to look at it as being almost doubled from $16 million to $30 million in 2007.

Again, it reached a record level, both in 2007 and 2008. Those are record profits for the mint. We have never seen numbers like that before, in terms of profitability.

Senator Neufeld: I am not trying to dispute those numbers. That explains more fully why your revenue increased but profits did not go up.

I notice on your profit line that you have "profit before taxes." What taxes are you referring to?

Mr. Bennett: We are exposed to the same tax environment as any other commercial corporation in the private sector. We pay income taxes to the federal government and to the provincial government; we pay sales tax, all the taxes.

Senator Neufeld: Is that the return to government you are talking about, or is there a return the government asks for because you are a Crown corporation?

Mr. Bennett: There are a couple of ways to look at the return to the government. The government must, as one of its responsibilities, provide coinage to meet the trade and commerce requirements of the country. When it does that, it effectively contracts with the mint to produce coins, and it takes ownership of those coins and sells them to financial institutions at their face value.

To the extent that we can produce those coins more inexpensively, there is a greater difference between our cost of production and the face value of the coin. That is called seigniorage. The Government of Canada earns that seigniorage as a result of the mint's activities in producing coins. As I said in my example, we produce a nickel for 2.3 cents, and it costs some other countries more than a nickel to produce a nickel, so it would be negative seigniorage. That is one source of revenue for the government.

The number is substantial. Since 1969 when we became a Crown corporation, that seigniorage has amounted to $2 billion to the federal government.

Another source of revenue for the government is, of course, taxes, but we also pay them dividends. We have paid $15 million or $16 million since we became a Crown corporation. With our increased profitability, we are being encouraged to pay a larger dividend to my old friends at the Department of Finance Canada. We can accommodate that.

Senator Neufeld: What is the dividend for 2008?

Mr. Bennett: The dividend in 2008 is probably about $5 million.

Senator Neufeld: Is that out of the $42.3 million, or is that already taken out?

Mr. Bennett: I think that is before the dividend, so it would reduce our retained earnings by $5 million.

Senator Neufeld: How many mints are there around the world?

Mr. Bennett: There are 48.

Senator Neufeld: On page 5 of your presentation, after you talk about the demand for gold bullion increasing, you say:

I believe it is important to note, Senators, that our ability to meet such a demand was and is directly due to sound business planning.

On the next page, you say:

As a result, Canada's mint was able to secure this valuable business unlike some of our competitors who had to stop their bullion coin production and sales because they could not obtain material, did not have refineries or lacked the business flexibility to increase their production volumes.

I would assume that, out of those 48 mints, some of them are not producing coins, and you got the business by default, though perhaps that is not the right term. Obviously, you went in and did a great deal of work to ensure you got it from however many mints went into default. How many of the 48 mints actually stopped producing coins?

Mr. Bennett: Let us go back a minute. We are the only mint in the world that has a refinery that we operate ourselves. We have greater control over our "feedstock," if you like; we have the raw material that we need to make a gold maple leaf coin.

Other mints do engage in the bullion market. Of those 48, very few actually produce gold and silver bullion products: the United States Mint produces the gold eagle; the Austrian Mint produces a gold coin called the Austrian philharmonic that sells well in Japan; South Africa produces the krugerrand; and the Royal Australian Mint produces gold coins.

We do have a refinery of our own and a new collective agreement with our unions that provide us with flexibility in terms of adding part-time employees when demand increases, so we can take them on very quickly and ramp up production. We can run the place 24 hours a day, seven days a week; and that is what we did.

The U.S. mint ran out of feedstock. It stopped selling its gold and silver bullion product for nine months. We were there because of our flexibility and our agility, and being nimble, and that is what we have to be to get that business.

Senator Neufeld: To run your mint 24 hours a day, you increased the number of employees from 779 to 865. About 100 more people were needed to run the refinery for 24 hours on a steady basis.

Mr. Bennett: Yes.

Senator Di Nino: Are you subject to the audit of the Auditor General?

Mr. Bennett: The Auditor General is our auditor, yes.

Senator Di Nino: Is it an annual or quarterly audit?

Mr. Bennett: It is annual.

Senator Callbeck: First, congratulations on the awards you have received over the years.

I want to clear up one thing. I have heard the rumour that the Royal Canadian Mint is thinking of outsourcing some of their work. Is there any truth to that?

Mr. Bennett: Nothing extraordinary. We do buy materials and supplies from outsiders. Some of them are silver blanks provided by a refinery in Idaho, for example. We do engage in those acquisitions, but we have said to the labour force in Winnipeg that our first priority is ensuring that that plant is as full as possible before we engage in other activities.

We do have partnerships with other mints. We won a big contract in Thailand. One reason we won that contract is because we added an arrangement with the mint in India, which has much spare capacity. It will do some of the coining in India to supply the Thais for that contract. We are flexible and nimble. We outsource and make partnerships when it makes business sense to do so.

Senator Callbeck: I did not realize that.

In the handout "The Mint at a Glance," your annual report for 2007 says that you used average exchange rates rather than actual exchange rates in 2007. Is that new, or was that done in 2006, and are you continuing that in 2008?

Mr. Bennett: I will ask Ms. Lepine to speak to that. However, I would think that in having to deal with accountants and the Auditor General, I am sure we have done nothing extraordinary when it comes to that calculation.

Senator Callbeck: How would that affect the bottom line?

Ms. Lepine: The foreign exchange accounting follows the rules of the Canadian Institute of Chartered Accountants, CICA. The new hedge accounting rules, which include foreign exchange, were introduced on January 1, 2007. The annual report and the results for that year comply with the hedge accounting rules that CICA has put in place.

Senator Callbeck: Therefore, that is what you will be doing from 2007 and on.

Ms. Lepine: Correct.

Senator Eggleton: You keep talking about coinage; I prefer to talk about paper money that does less damage to the pockets in your clothes than coinage. You should possibly go into the suit repair business. You would make a lot of money.

I have already sided with those who would get rid of the penny. I never liked the idea of the "toonie" either — and I was in the government at the time. That is another story, but I cannot talk about cabinet confidentiality.

The story at the time was that it is cheaper to produce coins, and they last longer than paper. However, the Americans do not seem to think that is the case. They keep producing $1 bills. Why do we have to go to coinage to the degree that we do in view of that? Is there something we know that they do not or the other way around?

Mr. Bennett: In the minting business, we know much more than they do. The United States does produce $1 coins. They have a presidential series that they have been trying to flog and a Susan B. Anthony dollar coin, but it has not caught on. One reason is that they continue to print the $1 bill. As long as the bill is produced, the coin will not catch on. We withdrew and stopped producing the $1 bill and $2 bill when we introduced the "loonie" and the "toonie". Therefore, people had no choice.

You are quite correct. The $1 bills last 18 months or less; coins last 25 years to 30 years or more.

Senator Eggleton: It is a significant cost savings.

Mr. Bennett: It is a huge cost savings. The Japan Mint brought out a new 500-yen coin, which is about $5. The tendency is to increase production of higher denomination coins — I am sorry for your pockets; get reinforced trousers, I guess.

Senator Eggleton: Please do not go to a $5 coin.

Senator Milne: I am not normally a member of this committee, so I am slowly getting up to speed on it.

I am looking at your statistics from 2006 to 2008 on the handout. Is there any reason you did not give statistics from before 2006, say, for the last 10 years? It would be interesting to see if it goes up and down over the space of time.

Mr. Bennett: I would be happy to do that. There is no real reason. I started in 2006, so I thought that was a good reason.

It also showed the record profits that we have earned recently. We could supply the committee with the "The Mint at a Glance" over 10 years. We would be happy to do that.

The Chair: I simply want to confirm that you are not in the bank note business, that you are in the coin business.

Mr. Bennett: Yes, that is correct. The Bank of Canada is responsible for bank notes.

The Chair: Could you define the relationship between the Government of Canada and the Royal Canadian Mint? Is the number of coins minted an order from the Bank of Canada or from the Department of Finance?

Mr. Bennett: It is really neither. We produce coins to demand to the extent that the ultimate customers are the Canadian people who use coins in their trade and commerce activities. We get signals from the consumer through financial institutions that demand coins. They place orders for more pennies, nickels and quarters. We produce to that demand. It is entirely market driven.

The Chair: Would commercial banks call you and ask for coins?

Mr. Bennett: Effectively, yes. A national coin committee meets periodically. It is broken down regionally. We are unique in this way too in the world. That national coin committee is very close to the financial institutions and gives us a sense of the demand for our coins.

The Chair: Who determines the amount of money in circulation? Is that simply at the will of the commercial banks saying that they want more, so you produce more?

Mr. Bennett: They do, but they only ask us to produce more because they are being asked to supply more. The retailer interacts with his or her financial institution, going out every day to get X rolls of pennies or quarters because their trade and commerce activity is generating that level of demand at their cash registers. Those hundreds of thousands of micro decisions translate into demand at each branch of the banks for more coins to satisfy trade and commerce requirements of business.

The Chair: Who determines how much money is in circulation in the country?

Mr. Bennett: That is one way. The other way, of course, is the monetary policy under the purview of the Bank of Canada. They set interest rates and manage monetary policy.

The Chair: One half of the money in circulation is coins. The other is notes, and you are not in the note business. You have described how the volume of coins in circulation is determined.

To bring Ms. Nadeau into the questions, section 6.4(1) of the Royal Canadian Mint Act on circulation coins states:

The Governor in Council may, by order, authorize the issue of circulation coins of a denomination . . . .

It goes on to describe them. That gives the Governor-in-Council authority with respect to what the denominations are and how they look, but not how many. Am I interpreting that correctly?

Marguerite F. Nadeau, Vice-President, General Counsel and Corporate Secretary, Corporate and Legal Affairs, Royal Canadian Mint: That is correct. The act permits the government through the order-in-council process to determine the denominations. For instance, the ones that we use currently have all been authorized by the Government of Canada. If a new $5 coin was to be introduced, it would require more than simply an order-in-council. Parliament would have to amend our legislation to provide for that.

The Chair: I read in the paper that coins were being passed off as gold maple leaf coins. Does the mint pursue that or does someone else pursue that problem?

Mr. Bennett: That was a case in New Jersey, I think. Criminals were going to jewellers saying that they had just inherited 100 gold maple leaf coins, showing an example and wanting to sell them. They would pass off a real coin for the jeweller to examine. Then the next day, they would bring in the 100 fakes. It was a purely criminal activity. We were uninvolved in that except that they used our product to try to dupe the retailer.

The Chair: Thank you for that. I wondered about that. Is the Government of Canada providing guarantees for your activity in any way?

Mr. Bennett: We are a wholly owned Crown corporation, so effectively the government does stand behind any debt we have. It would be equivalent to Government of Canada debt; in that sense, they do stand behind us.

The Chair: Section 7(3) of the Royal Canadian Mint Act says:

Payments for the production, storage, preparation or movement of coins of the currency of Canada shall be made out of the Consolidated Revenue Fund on the authorization of the Minister of Finance.

Does the Minister of Finance have a standing order? Where does he receive the authority to spend that money? Normally, it would be from Parliament, but I do not recall ever having seen any authorization in any of the bills that we have had.

Mr. Bennett: I will let Ms. Nadeau correct me when I go wrong here, but that does provide a statutory authorization to the Minister of Finance to make payments for coinage. The way it works is that we negotiate with officials of the Department of Finance. This year, we hope to make it a three-year memorandum of understanding that establishes the price we will charge for the production of the coinage.

Incentives are built into our arrangements with the Department of Finance so that the more efficiently we produce the coins, the greater is the reward for the mint. We have an incentive to keep costs down. However, we negotiate that arrangement; it has been every year. However, we hope to do it for three years to give us some planning certainty with the Department of Finance. It is on the basis of that memorandum of understanding that we receive payments from the Government of Canada for the production volumes that we have each year.

The Chair: Ms. Nadeau, does this give the Minister of Finance authority to spend money out of the Consolidated Revenue Fund?

Ms. Nadeau: To add to what Mr. Bennett said, the amount that the government is budgeting to spend on coinage is included in the Main Estimates.

The Chair: That is the Department of Finance Main Estimates?

Ms. Nadeau: That is right.

The Chair: In 2007, you did a study on the penny. Have you updated that study at all? We have not circulated that to all of our members, but if we decide to go further, we will do that. It will give us many ideas.

Mr. Bennett: No, I do not think we have updated that particular study, to my knowledge.

Ms. Lepine: No, that is the final study.

The Chair: Have you done any other studies of the penny since?

Mr. Bennett: We have not. My colleagues at the Department of Finance may have been doing some additional work. I am sure that they would be happy to appear before you as well because it is the government's decision ultimately. We are the implementers of those decisions, but they would have something to say about it, I am sure.

The Chair: The decision to cancel the penny would be a government decision, and the decision to have a $5 coin would be the government's, not yours.

Mr. Bennett: Indeed, with the $5 coin, not only would the government have to decide, it would also have to get approval from Parliament.

The Chair: Because it is not one of the coins the minister has a right to authorize the design of, is that correct?

Mr. Bennett: That is right.

The Chair: It would be an amendment to your legislation.

Senator Gerstein: I have no question, but on behalf of the entire committee, I would like to express our appreciation for an outstanding and most informative presentation.

Mr. Bennett: Thank you very much. It has been a pleasure.

Senator Di Nino: Mr. Chair, you raised an issue where I may not have understood the answer correctly. I am not sure that I want to prolong the meeting any longer than necessary because all of us have other commitments. However, on the question of coin, it is a legal tender of the country, is it not?

Mr. Bennett: That is correct.

Senator Di Nino: That includes all the coins that you produce, whether they are gold for the market or for our own purposes, et cetera. Therefore, it is part of the printing of money of the Government of Canada, is that right?

Mr. Bennett: Yes.

Senator Di Nino: I am not sure that we got this answer. It would be interesting for me at least — and I think that the chair would share this — to make us understand how the mint sees itself in the total responsibility of the issuance of legal tender and how it fits into the project. The question I did not get answered is who tells you that you can print 5 million more $2 coins or, for that matter, $1-billion worth of $2 coins? Also, do we know how many coins are out there? Maybe you do not want to answer this now. Do you understand what I am trying to get at?

The Chair: I do.

Senator Di Nino: It has an inflationary pressure. If you start to print 1 billion $100 gold coins and they are out there in circulation, it must have an impact.

The Chair: I was asking the same question. You indicated that it was market forces that determined that.

Mr. Bennett: I will turn to Ms. Lepine to explain better how the national coin pool works and how we get those signals to produce the appropriate number of coins.

The Chair: Do you have anything in writing that would help senators who have to hear this three or four times to understand it?

Ms. Lepine: We could, but in three or four sentences, I could elaborate. The issue of coin demand is driven by an online forecasting system that the mint manages. However, it is the banking community, through its major commercial accounts, that drives the need for coin.

Our responsibility is to make that coin where required, or to move that coin between cities, regions and banks to ensure that the demand is met. It is driven by demand from the banks, but the movement of that coin is such that we are not just getting a call from a commercial bank saying that it needs dimes and making dimes because of that request; we ensure that we do not build excess inventory in the system.

As a practical example, if one of the banks in the Toronto has five-cent pieces but needs dimes and another bank has dimes but does not need nickels, we move those between the banks or regions to ensure that we are not producing new coin. We know the amount of coins that are in the system since inception. However, our whole purpose is to ensure that we are balancing and not inadvertently or deliberately increasing the volume of coin in circulation around the country.

The Chair: It would be helpful to have something in writing; some of our colleagues have not been able to hear your answer.

The question of how section 7(3) plays into this still remains. You are responding to demand of the commercial banks, but the minister must pay out of the Consolidated Revenue Fund for everything you produce. That tie-in and relationship would be very interesting to us.

Senator Milne: It is interesting because I believe I heard you say, Mr. Chair, that half of the money that is in circulation in Canada is in the form of coinage. If you are stamping out more loonies or toonies, then do you inform the Bank of Canada that you are increasing the amount of coinage that is in circulation so that they can, in return, decrease the amount of paper money that is out there? How does this balance work?

Mr. Bennett: We can talk about that, and we will put it in writing.

Senator Di Nino: Also, we want to understand the role that the Department of Finance would play in controlling the coins in circulation. It is not just the quantity of coins. Many people, including myself, probably have hundreds of pennies and nickels and so forth. I think you understand the question.

Mr. Bennett: We will do our best to sort that out.

The Chair: On behalf of the Standing Senate Committee on National Finance, I would like to thank each of you from the Royal Canadian Mint for the good work that you are doing. Keep making those profits and sending dividends to the Government of Canada. We appreciate that. Thank you very much for being with us today.

(The committee adjourned.)