Proceedings of the Standing Senate Committee on
National Finance

Issue 20 - Evidence - May 31, 2012

OTTAWA, Thursday, May 31, 2012

The Standing Senate Committee on National Finance met this day at 2 p.m. to examine the subject matter of all of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures introduced in the House of Commons on April 26, 2012.

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


The Chair: I call this meeting of the Standing Senate Committee on National Finance to order.


Today, we are going to continue our study on the subject-matter of all of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures.


Honourable senators, as you are aware, we have been given an order of reference by the Senate to study the subject matter of Bill C-38. Bill C-38 is a budget implementation bill. This is our tenth meeting, and we will begin our meeting this afternoon by reverting briefly, I hope, to Division 33 of Part 4 on page 329 of the bill, which we touched on yesterday. We asked several questions, but we felt that it would be better to have someone else from the Department of Foreign Affairs and International Trade return and help us with the clause-by-clause analysis of that particular division. The bill is divided into four parts, and we are into the fourth part. We are at Division 33, and then we will be proceeding to Division 43 next.

Before I call on our witness for this particular session, I would like you to know that Library of Parliament and Translation Service have been working very hard, and they have concluded the first draft of our Main Estimates report, which is a critical document to have in to the Senate before we receive the main supply bill. That will be delivered to your offices this afternoon for study over the weekend, and we hope to deal with that on Tuesday morning at our meeting. We will deal with the draft report at that time. In the meantime, it remains confidential. You will find it quite an extensive report on the work we have done on Main Estimates.

We are now back to budget implementation, and I am very pleased to welcome, from the Department of Foreign Affairs and International Trade, Mr. David Angell, who will help us with respect to Division 33, International Centre for Human Rights and Democratic Development Act.

Mr. Angell, you have the floor, sir. We had some work done on this yesterday. Some questions were outstanding. If you can answer any of those, that would be great. Otherwise, we will wait to hear from the department in relation to the questions. We would like you to take us through Division 33 from a clause point of view to tell us what each clause is trying to achieve.


David Angell, Director General, International Organizations, Human Rights and Democracy Bureau, Foreign Affairs and International Trade Canada: Mr. Chair, thank you for giving me the opportunity to meet with you today.


If I may, I will pick up where my colleague left off yesterday and begin with the clause-by-clause review of the draft.

Clause 490 maintains the existing requirement to report to Parliament for 2011-12 but limits this to financial statements and to the Auditor General's report.

Clauses 491 and 492 link the terminology used in the budget implementation bill with the definitions used in the Rights & Democracy act and provide that the budget implementation bill overrides the Rights & Democracy act.

Clause 493 addresses the board of directors. There are currently nine directors on the board. This section permits fewer than 13 directors to serve on the board. It lowers the quorum from seven to five. It prevents the board from appointing three additional international directors, as has been the practice previously. It clarifies that the eight federal civil servants who are sitting on the interim board will not claim compensation with regard to their work as members of the board.

Clause 494 relates to ministerial direction and provides the Minister of Foreign Affairs with explicit authority to give direction to Rights & Democracy. This does not affect the existing authority of the board to give direction to the president.

Clause 495 relates to the transfer of Rights & Democracy's records to the Department of Foreign Affairs and to the transfer of relevant research carried out by Rights & Democracy to Foreign Affairs.

Clauses 496 and 497 relate to the transfer of legal obligations to the Crown. Those obligations are transferred, including with regard to surplus debts and liabilities.

Clause 498 relates to the transfer of legal proceedings to the Crown. Both existing proceedings and future proceedings against Rights & Democracy would be so transferred.

Clauses 499 and 500 relate to final financial statements, for example, audits and reports thereon. Clause 499 provides for the continued audit of Rights & Democracy's annual statements by the Auditor General, and clause 500 provides for the audit of Rights & Democracy's final financial statement and for the tabling of that statement in Parliament.

Clauses 501 through 503 relate to consequential amendments. These amend the relevant legislation, for example, the Access to Information Act, the Privacy Act and the Public Service Superannuation Act.

Clause 504 is the principal operative section. It would repeal the International Centre for Human Rights and Democratic Development Act.

The final clause, 505, sets into force transitional measures at a date to be fixed by government in council once all necessary steps have been taken to close Rights & Democracy's operations.

The Chair: Thank you very much. I wonder if you could go back. This is one of the questions that we had yesterday. Could you go back to page 330 and clause 493(4), which provides that members of the board other than the president would have no right to compensation or damages or indemnity other than the relief offered by Her Majesty, but the president is excluded. That means the president could have more compensation than the other members of the board, the way I read that. Can you tell us why the president is singled out as being given a favoured position?

Mr. Angell: I think the issue that is being addressed in this clause is the fact that, with the exception of the president, the other members of the board are all full-time public servants. I think the purpose here is to prevent members of the board from drawing any financial remuneration other than the salaries they normally receive in the course of their duties.

The Chair: That is the case? All the other members of the board will be public servants?

Mr. Angell: Yes, Mr. Chair. The composition of the board was announced by the Minister of Foreign Affairs. I think a press release was issued on April 5. All of the members of the board are public servants.

The Chair: At this time.

Mr. Angell: With the exception of the president, yes, Mr. Chair.

The Chair: Thank you. Were there any other questions you were made aware of from yesterday that you wish to answer at this time, or should we wait for your written reply?

Mr. Angell: I am in your hands. There were quite a number of questions. I am entirely open to trying to answer them. There will be some we will need to follow up with in writing. I do not sit on the board, for example. I am not party to their deliberations, except as they may be released in the minutes of the meetings, but I am at your disposal to answer any questions that the members may have.

The Chair: We have no further questions at this time. We appreciate your coming and helping us through this clause by clause. I will call on Senator Callbeck from Prince Edward Island for an additional question.

Senator Callbeck: Thank you for coming to give your explanations.

Yesterday we dealt with this; there were a lot of questions. I am not sure whether this was covered or not. Clauses 496 and 497 are where you talk about transfer of legal obligations to the Crown, including surplus, debts and liabilities. Do you have any estimate on what dollar figure we are talking about and a breakdown of it?

Mr. Angell: Thank you for the question. I do not have a dollar figure. My understanding is that this is a provision in case there should be any transfers required. I regret that I do not have a dollar figure.

Senator Callbeck: You will be sending in answers to the committee, so I wonder if you could add that to your questions. I would like to know what the estimates are, whether there is a surplus and whether there are liabilities. What is the situation? Thank you.

Mr. Angell: Thank you.

Senator Peterson: Is the work of the centre going to be carried out by some other entity of government or is this gone?

Mr. Angell: The Minister of Foreign Affairs, in announcing the closure of the centre, indicated that the functions of Rights & Democracy would be transferred to the Department of Foreign Affairs.

We are in the process of providing options with regard to the minister as to how this might best be done. The ongoing work of both the Department of Foreign Affairs and CIDA touches directly on the work that Rights & Democracy was doing. We are trying to find the best way of integrating the work of Rights & Democracy within Foreign Affairs so as to maintain, as best we can, the value it was providing.

Senator Peterson: You are still committed to your mission statement of promoting freedom, democracy, human rights, rule of law around the world each and every day. Is that still your mission statement?

Mr. Angell: Absolutely, senator. We are actively involved in that, both at headquarters and at CIDA's headquarters. Of course our missions around the world are very actively engaged as well.

We have very good working relations with a large number of civil society partners around these issues and that will continue as well.


Senator Hervieux-Payette: I do not have a question but, to move things along, I just want to make sure that my questions from yesterday will be answered in writing.

The Chair: Yes, Mr. Angell has already said that the department will send us the answers to the questions from yesterday.

Mr. Angell: Absolutely, Mr. Chair, Madam Senator, we have taken note of all the questions. We need to consult with the board members for some of the questions. With the help of the president of Rights & Democracy, we are going to try to send you the answers as soon as possible.


Senator Ringuette: On May 9 I asked a series of questions of your department in regard to employees and staffers. Today is May 31. I still have not received, through the clerk, the answers to those questions.

When can I expect to have answers to these questions? Will it take two or three months? Does it take the rubber stamp of the minister before you forward it to the clerk of the committee, which could perhaps bring us to September?

Mr. Angell: We will endeavour to provide the answers as quickly as possible. I think some of the issues that were raised in the questions relate to the areas of responsibility of the board of Rights & Democracy. There has been one board meeting since the meeting took place. I know they are actively engaged on issues of how best to fulfill the obligations with regard to the staff of Rights & Democracy, for example. We will provide that information as quickly as we can.

Senator Ringuette: Mr. Angell, to clarify the issue, I will ask, for probably the third time, the same questions again, hoping that the department will forward the answer as soon as possible.

The Chair: Are these questions that you asked yesterday or questions that you asked another time in another forum?

Senator Ringuette: I asked these questions of the department via this committee on May 9.

They are the following: How many employees in your department got a notice letter of layoff by province and by classification? How many of these letters were to EXs and DMs? How many staffers in your department are not under the Public Service Employment Act and under what classification? What is the cost in your department for program management? What is the total for salaries, expenses, bonuses, et cetera, for the management level of your department and program? Could you also put them as a percentage of the total?

As far as I know, this is definitely the second time that I have asked these questions. The first time was May 9.

The Chair: Mr. Angell, in the next two or three weeks we will be asked to deal with the bill and go through it clause by clause. It is helpful to us if we have answers to our questions before we are asked to vote on this, so anything you can do to expedite the replies would be very much appreciated.

Mr. Angell: Of course, Mr. Chair, I will certainly do that.

I am sorry Senator Ringuette; I misunderstood the question you were referring to. The answers to these questions do not lie in my area of authority. I know that the chief financial officer and the deputies are seized of these questions, and I am certain they will provide answers at the earliest opportunity. We are mindful of your deadlines and will do everything we can to this respond to the 10 questions that were outstanding yesterday.

The Chair: Thank you very much. I have no other senators who wish to intervene. We thank you for coming to help clarify this particular division for us, and we look forward hearing from you.

We will now move to page 369, Division 43, which deals with the Employment Insurance Act. From Human Resources and Skills Development Canada we have Ms. Mireille Laroche, and from the Department of Finance Canada, we have Mr. Mark Hodgson.

We are getting well into this act. This is good. I am getting excited.

Mr. Hodgson, we have seen you before. It is nice to have you back. Who will be the spokesperson?

Mireille Laroche, Director General, Employment Insurance Policy Directorate, Human Resources and Skills Development Canada: I propose to do an overview and then go into clause by clause because they are not all grouped together per measure.

The Chair: When you do the clause by clause, refer to your overview and say,  "This is achieves what I told you we were trying to do. " It goes smoothly that way. You have the floor.

Ms. Laroche: Good afternoon. Division 43 of Part 4 of the budget implementation bill contains six changes to EI. I will describe them in order, and subsequently we will go through the clause by clause.

The first change is to introduce a new approach to tackling the EI benefit rate that will come into force on April 7, 2013. Under the new approach, the required number of best weeks that will range between 14 and 22 of employment earnings that would be considered during the qualifying period — which is typically 52 weeks — will be determined according to the unemployment rate in the regions where the client resides.

The second change pertains to the refund of premiums to self-employed persons. The proposed amendment would ensure that both insured earnings as well as self employed earnings are taken into account when determining the eligibility for a premium refund.

The third proposed measure pertains to the administration of overpayment of benefits. The proposed amendment would provide discretion in pursuing potential overpayments arising from employer bankruptcy or wrongful dismissal if two conditions are met — first, if more than 36 months have elapsed since the layoff or separation from employment; and second, if the administrative costs of determining the overpayment would likely exceed the amount of the repayment.

The fourth change pertains to the assignment of benefits program within the EI program. The proposed amendment removes the requirement that a claimant must consent in writing to having the deduction made from EI benefits to reimburse the provincial government for social assistance or welfare payments.

The fifth change pertains to premium rate-settings. This is in response to the public consultation on EI premium rate-setting that was held in the fall and to ensure the predictability and stability of the premium rate.

These changes have three components. The first proposed change is to bring forward the notification or the advertisement of the premium rate two months earlier, moving from November to September.

The second change proposes to set the premium rate using a seven-year breaking VIN rate, to ensure that the EI operating account is in cumulative balance at the end of that period. This revised rate-setting mechanism would come into force once the EI operating account has returned to cumulative balance.

The third change pertaining to premium rate-setting is in regard to the legislative limit on year-to-year change. The proposed change is to adjust the maximum amount of variation and bring it down from 15 cents per year to 5 cents per $100.

Last, the proposed changes are being introduced within this bill to provide the Canada Employment Insurance Commission with regulation-making authority to develop regulations to define what constitutes suitable employment for various claimant types and to prescribe objective and measured verbal criteria for assessing reasonable job search efforts.

Moving to the clause-by-clause review, clause 603 amends the date that defines the data set used in the calculation of the maximum yearly insurable earnings from June 30 to April 30.

Clause 604 pertains to the new calculation of the benefit rate, and does a number of things. It amends subsection 14(2) to determine the new calculation of the weekly insured earnings, which will use a total insurable earnings in the calculation period divided by a specific number of weeks ranging from 14 to 22 weeks, based on the regional unemployment rate presented in the table that you see in the bill.

It also amends subsection 14(3) to reflect the new approach and to determine insurable earnings for the benefit calculation, and it does that in two steps — first, by changing or amending the clause in regard to the insurable earnings, and subsequently with respect to the insurable earnings that stem from layoff or separation from employment.

Subsequently, this section also amends subsection 14(4) to define the calculation period as being the number of weeks, consecutive or not, with the highest insurable earnings over the qualifying period, which is typically 52 weeks. The number of weeks in this calculation period will vary according to the regional unemployment rate as determined by the table you have in the bill.

Finally, it repeals sections that are no longer required within the Employment Insurance Act, including the length of the current calculation period, which is 26 weeks.

Clause 606 pertains to the initiative known as connecting Canadians with available jobs. This replaces an existing section by defining that what constitutes not suitable employment is any employment that arises as a result of a labour dispute, a strike or a lockout.

Clause 606 pertains to the assignment of benefits initiative and essentially removes the words  "in writing " to allow for electronic concept to make deductions from EI benefits to reimburse social assistance or welfare payments.

Clause 607 pertains to the overpayment initiative and in this section provides the Canada Employment Insurance Commission with more discretion in pursuing EI claims and overpayments that were established as a result of employment bankruptcy or wrongful dismissal and outlines the two conditions in terms of this discretion if three years or more have elapsed and if the establishment of the overpayment would likely exceed the amount to be collected.

Clause 608(1) amends section 54 of the Employment Insurance Act to provide new authorities to the Canada Employment Insurance Commission to establish by regulations criteria for defining what constitutes suitable employment by categories of claimant and for defining what constitutes reasonable job search.

Clause 608(2) also amends the act, and this is in regard to the new calculation of benefits, to basically reflect the new name of the calculation period, replacing  "rate calculation period " with  "calculation period. "

The subsequent clause, 608(3) essentially does the same thing.

Turning back now to the premium rate-setting, in clause 609(1) there is no longer a requirement under this section of the Canada Employment Insurance Financing Board to set the premium rate with a view of maintaining a reserve.

Clause 609(2) also pertains to the premium rate-setting. This essentially provides the new rate-setting mechanism formula, and this amendment will come into force once the EI operating account returns to cumulative balance.

Clause 609(3) repeals some clauses from the Employment Insurance Act, and under the amendment there is no longer a requirement for the board to take into account the requirement to maintain a reserve for the purpose of rate- setting. Instead, the board is required to take into account the amount by which its financial assets exceed its financial liabilities, which include any surplus funds transferred to the board and any investment income earned on those funds.

Clause 609(4) amends the date by which the announcements by the Minister of Human Resources and Skills Development are to be taken into account by the board for the purpose of rate-setting and moves this date from September 30 to July 31.

Clause 609(5) pertains to the fact that the board is no longer required to maintain a reserve. This clause also amends section 66(7) of the EI Act, where the limit on the year-to-year changes to the premium rate is reduced from 15 cents to 5 cents per $100.

Clause 609(6) introduces a new section to the EI Act to allow the premium rate to decrease by more than 5 cents per $100. In the first year, the premium rate is set according to the revised seven-year rate mechanism.

Subclause 609(7) amends the date by which the board is required to set the premium rate from November 14 to September 14.

Subclause 610(1) amends the date by which the Minister of Human Resources and Skills Development is required to provide information related to EI expenditures to the board for the purposes of setting the rate from September 30 to July 31.

Subclause 610(2), in accordance with the new rate setting mechanism, amends current practice within the Employment Insurance Act to require the Minister of HRSDC to provide seven years of information related to EI expenditures to the board for the purposes of setting the rate.

Clause 611 amends the date by which the Minister of Finance is required provide information related to economic forecast and EI revenues to the board for the purpose of setting the rate from September 30 to July 31.

Subclause 611(2), in accordance with the new rate setting mechanism, amends existing provisions to require the Minister of Finance to provide the most current, available information related to economic forecasts and EI revenues to the board for the purpose of setting the rate on the new regime.

Subclause 612(1) amends the date by which the Governor-in-Council may set a premium rate or substitute the premium rate set by the board from November 30 to September 30.

Subclause 612(2) changes the date at which the board must set the premium rate from November 14 to September 14.

Clause 613 repeals the section in the Employment Insurance Act that pertains to the payment of $2 billion from the Consolidated Revenue Fund for the establishment of the board's reserve.

Subclause 614(1) amends the date by which the Minister of Finance is required to forecast and estimate the amount of EI revenues to be credited into the amount of EI expenditures to be charged to the EI operating account from September 30 to July 31.

Subclause 614(2) amends the date by which the payments to the board from the CRF is to be paid from October 31 to August 31, and subclause 614(3) amends the day by which payments from the board to the CRF is to be made from October 31 to August 31.

Subclause 614(4) replaces the terms  "Board's reserve " with a reference to the board's financial assets, less its financial liabilities, which includes any surplus funds transferred to the board and any investment income earned on those funds.

Moving on to the Premium Refund for Self-employed, clause 616 creates new sections within the Employment Insurance Act and amends another one to provide the circumstances under which a self-employed person who has opted into the Employment Insurance program to receive special benefits and who also has insurable earnings qualifies for the reform of the employee premium deduction from insurance earnings.

Clause 616 pertains to the new EI benefit rate calculation. This provision clarifies that these specific amendments will only apply to claimants who establish a claim on or after the coming into force.

There are also a number of consequential amendments to the Canada Employment Insurance Financing Board Act to align this act with the changes made to the Employment Insurance Act. Clause 617 changes a paragraph within it that talks about the requirement of the board to maintain a reserve according to the EI Act.

Subclause 618(1) amends the date by which the board's chief actuary is required to prepare the actuarial forecast for the purposes of rate setting from October 31 to August 31.

Subclause 618(2) replaces the seminar  "Board's reserve " with a reference to the board's financial asset less its financial liabilities.

Subclause 619(1) pertains to the coming into force of the new calculation for the EI benefit rates and stipulates that these amendments will come into force on April 7, 2013.

Subclause 619(2) pertains to the coming into force of the initiative that pertains to overpayment. This subsection specifies that the changes will come into force on a date specified by Governor-in-Council.

Subclause 619(3) pertains to the coming into force of the premium rate setting once the EI operating account is forecast to break even on a cumulative basis by the end of that year.

That concludes the clause by clause.

The Chair: That was very helpful. I have senators who have indicated an interest.


Senator Hervieux-Payette: Thank you, Mr. Chair. I am not going to get into the actual numbers. People are on employment insurance because they are laid off by employers. What measures are being proposed to guarantee full employment in regions where people do seasonal work?

Have you looked at Germany, where they have job-sharing programs when demand goes down? Finally, are the premiums paid by employees and employers still part of Canada's consolidated revenue fund? What is the financial situation of this fund? To my knowledge, the fund has a surplus.

I would like to know what those parameters are. Before we start to fiddle with the rates, the amounts and the eligibility, I feel that jobs are far less protected and that everything falls on the shoulders of workers. The last time I checked, workers were employed by employers. Could you tell me what types of measures will ensure that employers will provide permanent employment to those workers, who certainly want to work?

Ms. Laroche: The measures announced or included in the budget implementation bill have an impact on all workers, not on a particular group of workers.

I assume you are referring to the measures announced last week. Those measures will not affect a particular group of workers. The purpose of all those measures is to ensure that employees, regardless of the sector, have the necessary incentives to go to work and have access to employment insurance.

As for Germany and the job-sharing option under the employment insurance system, there is a job-sharing program available to employers who could enter into a contract with the Employment Insurance Commission, and, as a result, workers could benefit from sharing a job and receiving employment insurance for the days when they are not working.

In terms of premium revenues and the financial situation, could Mr. Hodgson provide an answer?


Mark Hodgson, Senior Policy Analyst, Labour Markets, Employment and Learning, Department of Finance Canada: The EI premiums are always deposited and form part of the government's Consolidated Revenue Fund. EI benefits are likewise paid from that fund. There is a separate tracking account, the EI operating account, which came into existence on January 1, 2009, corresponding with the date at which the CEIFB became responsible for setting premium rates and at which time the new rate-setting mechanism aiming for cumulative break-even took effect.

Projections on page 241 of the budget plan show that, at the end of fiscal year 2011-12, the cumulative balance in the EI operating account is a deficit of $8.5 billion.

The projection is that by the end of 2016-17, the cumulative balance will have returned to zero, at which point the rate-setting mechanism would switch to the new seven-year break-even rate.

Senator Hervieux-Payette: How long did it take to get to the $8 billion?

Mr. Hodgson: January 1, 2009.

Senator Hervieux-Payette: It is for the last two years that we have accumulated that deficit.

Mr. Hodgson: That is correct.

Senator Hervieux-Payette: Before that, was the fund financed properly?

Mr. Hodgson: Before that, there was a preceding account, the EI account, that, as it was closed, had a cumulative surplus of slightly over $57 billion.

Senator Hervieux-Payette: Where did it go?

Mr. Hodgson: It had already been accounted for in the government's overall fiscal position. It was a separate line item in the government's accumulated debt as a credit against that. In each year that the revenues exceeded program expenditures, the annual surplus in that year went directly to the government's bottom line and fiscal position of that year. It had already been accounted for year by year.

When the account was closed, the $57 billion surplus was permanently transferred to the government's net debt.

Senator Hervieux-Payette: It is interesting to know that this is a recent situation, and that even during 2008, when we started to have the economic downturn, the EI was not going down the drain at the speed that it was going in other countries.

I was not referring to some announcement last week. I was just asking you what is being done, and just on the seasonal jobs, of course, it is probably more in the eastern part of Canada, but there are probably others. In January, I do not see much work done on farms. Often people work seven days a week during the summer.

What measures are being done? Do the employees have to be penalized? There are economic sectors that are valuable, and you cannot move these persons across the country to find jobs when, in their region, the work is there and they are there. The problem is that the jobs are not permanently there. I am quite sure, whether we are talking about fishermen or farmers, they would be delighted to work 12 months a year, or at least 11.

What is being done so that we cannot move families from a region? I know that you have implemented this provision of travelling time, but even with that, you have to earn quite a substantial amount of money per hour to cover the cost of gasoline at $1.40 a gallon. If it costs you the amount of money that you make to pay for the gasoline to go to work, we have to take that into account. I am wondering what kind of measures we can have for these people to be in a working environment the majority of the time of the year in seasonal activities.


Ms. Laroche: Obviously, the main goal is to guarantee full-time employment so that everyone can sustain themselves. Both within and outside employment insurance, there are a number of initiatives for workers to help them hone their skills, and to provide them with more information about the labour market and jobs available in their profession per se, but also in related professions. Those initiatives provide them with the tools they need to do a reasonable job search and to find another job when they are not doing their seasonal work.

The provision in the budget implementation bill simply seeks to clarify the criteria that have to be considered when individuals are actively looking for employment and when they are on EI, and to define what suitable employment is.

Senator Hervieux-Payette: Could you tell me what you will be doing about the people in the Magdalen Islands? As far as I know, there are number of jobs available and a certain number of people who can fill those jobs. Just think of those who, at the beginning of the year, hunt seals, then catch lobster, and probably catch fish afterwards. They can only work on the island for a limited period of time. Are you going to bring everyone to the cities and close down those regions? How do you see the situation? Those people will keep coming back. Are you going to make them leave the island for four months a year? Are you going to find housing and a job for them for the four or five months when it is impossible for them to have work in those regions?


Senator Ringuette: First, usually in an act of Parliament, the words used in the act are also defined within. Can you tell me why  "suitable employment " is not defined in this act?

Ms. Laroche: That would be a question to be answered by the minister or the government.

Senator Ringuette: What?

The Chair: She said that is a policy matter to be answered by the minister.

Senator Ringuette: Chair, will we have the minister before us?

The Chair: We had the minister before us. We will not have the minister again.

Senator Ringuette: No, we had the Minister of Finance, but we did not have Minister Finley.

The Chair: This is the budget implementation bill, so we only had the Minister of Finance.

Senator Callbeck: I have a supplementary on that. I thought this act was saying that, as far as suitable employment went, the commission will now be determining that, not the minister.

Ms. Laroche: For the Employment Insurance program, it is actually the Canada Employment Insurance Commission that recommends the regulations to the minister, and the minister then brings them forward for approval by government.

Senator Ringuette: These are all important issues with regard to the definition of  "suitable employment "; the definitions of  "long tenured worker,  "frequent claimants " and  "occasional claimants "; and the new definition probably of  "region. " Right now, we have 52 regions. I have heard there is talk behind certain centres that these 52 regions will collapse into maybe half. That will change the entire dynamic of the requested numbers of hours, depending on the region and the number of weekly benefits.

All of that will not be part of the legislation. It will be decided by the minister by order of council and will not go before Parliament.

Ms. Laroche: The definition, as I have described in this clause by clause, the budget implementation bill is to provide authority to make regulations on these matters in terms of the definition of claimants as well as the definition of suitable employment and reasonable job search.

As for your comment regarding the regions, there is nothing in the budget implementation bill that pertains to changing the number of EI regions.

Senator Ringuette: Actually, there is not a lot of transparency so that parliamentarians can request some accountability in all of these important changes. The data I have is that for the fiscal year 2010-11, there were 443,000 seasonal workers in Canada. That is almost half a million Canadians who rely on seasonal jobs. These seasonal jobs are provided by an industry that operates only on a seasonal basis because of Canada's geography. You cannot harvest trees in January and February.

Senator Buth: Mr. Chair, is that a question?

Senator Ringuette: Nor can you fish, nor can you farm potatoes, nor can you cultivate blueberries. You cannot go blueberry picking.

Senator Stewart Olsen: I was just trying to let you know they do cut trees —

Senator Ringuette: I am sorry; I have the floor, madam.

The Chair: I will call on you, if you would like to get on with this.

Senator Ringuette: I guess you do not show up in New Brunswick that often if you do not know about that.

The Chair: Senator Ringuette, please.

Senator Stewart Olsen: I know, Senator Ringuette.

The Chair: Please.

Senator Ringuette: Essentially, in Canada, 22.8 per cent of the workforce is in seasonal industry and generates 20 per cent of our gross domestic product. I know that you cannot answer for policy; you cannot answer for regulations that are not here in front of us. However, down the road someone will have to answer all these questions.

Senator Runciman: You mentioned the regions are not part of the legislation. Are they established through regulations? How does this occur?

Ms. Laroche: There is a requirement within the EI Act to conduct a review of what we call the regional boundaries. That is to be conducted every five years, and that is actually in the regulations, so it is part of the regulation portion of the EI Act.

Senator Runciman: Who conducts that review?

Ms. Laroche: HRSDC.

Senator Runciman: I heard the comment about 58 regions. Is that what is being proposed?

Ms. Laroche: Correct. There are currently 58 regions.

Senator Runciman: There are currently 58 before the changes take place?

Ms. Laroche: No. These will not change with the budget implementation bill. The number of regions has been 58 since 2000.

Senator Runciman: At this stage there is no intention to change?

Ms. Laroche: No.

Senator Runciman: The measures to connect Canadians to available jobs I think have been probably the most controversial aspect of this element of the bill. I personally would have thought that people would already be required to accept reasonable job offers within a reasonable commuting distance.

Could you outline what the rules are now on this? Do they vary based on region or frequency of EI claims by an individual? What is the process?

Ms. Laroche: Under the current legislation, if you are on EI, you are required to look for work and to accept suitable employment. However, the current definition for both terms I would characterize as relatively vague. For instance, in the EI Act, the section that pertains to that actually defines what is not suitable as opposed to what is suitable, and there is no clear definition or guide in terms of what would constitute a reasonable job search.

The proposed amendments to the EI Act, which will be followed by regulations, have the goal of actually clarifying for claimants what would constitute suitable employment and what would be required for it to be considered a reasonable job search.

Senator Runciman: Currently there are no distinctions on regions based on how the rules are applied?

Ms. Laroche: No, there is no distinction, and with the new changes, there will be no differences in application across the region. It will be a national application.

Senator Runciman: There is reference in here with respect to changes in premiums with the requirement for a seven- year break-even cycle. I am not quite grasping this. What if the program cannot break even because of the limitations that are here as well on premium changes?

Mr. Hodgson: You would see exactly what has happened over the last couple of years where premium revenues have been far below the costs of the program. The government acted first to freeze the premium rate and then limited premium rate increases to 5 cents per year. The CRF is responsible under the legislation for providing the benefits. The program costs whatever it costs and benefits will be provided. The expectation is with a seven-year break-even premium rate you will be able to, over that length of time, cumulatively balance the account without having large shifts in the premium rate.

The projections show and in Budget 2012 in the budget plan it indicates that in effect what has happened through this recession and with 5-cent increases in premium rates going forward we will have returned to balance by 2016-17, roughly seven years after the onset of the recession. Recent history and current projections serve to underscore that about a seven-year period is sufficient with 5-cent premium rate changes to break even in a cumulative sense. In the meantime, the program runs a significant deficit during a recession.

Senator Runciman: If there was an unforeseen problem with respect to the economy, is there an ability to address that?

Mr. Hodgson: The government covers the cost of the EI program from the Consolidated Revenue Fund. The EI operating account goes further into cumulative deficit, and it will take longer to return to cumulative balance. However, the expectation is that would take place over time.

Senator Runciman: There is nothing legislatively in terms of a quick fix, if you will? The assumptions stay in place?

Mr. Hodgson: That is correct.

Senator Buth: Thank you very much for being here today.

I want to go back to a comment that you made at one point about the purpose of these changes in that employees will have incentives to go back to work but also have insurance. That is the purpose of the program and the purpose of the changes that the government is proposing in this budget implementation bill.

I want to clarify one point that you made that suitable employment and one of the definitions essentially will be set under regulation; is that correct?

Ms. Laroche: Yes.

Senator Buth: To clarify, especially for our listeners, we do have public comment periods in terms of regulations, so there is an opportunity for the public essentially to comment as a regulation goes through the Canada Gazette process? Is that true?

Ms. Laroche: There is typically a process, yes, in terms of the regulation, and it will be up to the government to proceed in that regard, should they wish to do so.

Senator Buth: Okay. In terms of a question, the rate-setting mechanism that has been proposed in here that is based on regional unemployment rates, is this a new process? If it is a new process, can you describe the previous process and the process now?

Ms. Laroche: Are you talking about the premium rates or the benefit rate? How much people get?

Senator Buth: Both.

Mr. Hodgson: The premium rate is set nationally, and the current legislation requires the Canada Employment Insurance Financing Board to set a rate for the coming year that will bring the EI operating account to cumulative balance by the end of the year. There is a legislative limit of 15 cents per year on changes in the premium rate. The government also has the authority, through regulation, to alter that maximum limit on rate changes and has done so to limit them to 5 cents. Thus we have reached an $8.5 billion cumulative deficit by 2011-12.

Going forward, once the EI operating account has returned to cumulative balance, they will be responsible for setting a rate that is projected to cumulatively break even over the following seven years. Rather than trying to bring the EI operating account into balance in one year, they will be looking at a seven-year horizon.

Senator Buth: That relates to the comments you made in terms of the reserve fund, et cetera, and it is a switch from that?

Mr. Hodgson: There is the change that the CEIFB will no longer have a reserve to manage. It would not really serve any purpose under this type of rate-setting mechanism. During the public consultations, there was a fairly strong consensus both on a five-cent limit for premium rate changes and looking for a horizon to break even of five to ten years. What you have before you is a seven-year horizon with a five-cent limit.

Senator Buth: Can you talk about the changes, if there are any changes in terms of benefits?

Ms. Laroche: The budget implementation bill is introducing a new way of calculating the benefit rates, which means the amount that people get every two weeks. Right now, there are two ways the benefit rate is calculated. The legislative way looks at a period of 26 weeks once you establish your claim, and looks at a certain number of weeks that you have worked in that period.

There is also a pilot project. The EI program has, through regulations, the authority to conduct pilot projects to test alternative approaches to see if they better meet the needs of the labour market. This pilot project is currently available in 25 regions. It looks at a one-year look-back period, identifies the 14 weeks with the highest earnings, and calculates the benefit rate based on those 14 weeks.

The proposed legislation change would provide a national approach that would be applied across the country, whereby the way the benefit rate would be calculated would reflect the local labour markets where you live.

This has two components. The first one is from a legislative point of view. It brings the look-back period to a year, for everyone. This aligns the period in which you accumulate your hours in your work to qualify and the earnings that will be considered to set up your benefit rate. They are becoming aligned as being one year.

The second change is that it moves the whole country into a best-week approach, so looking at your highest earnings. The number of weeks required will vary according to the regional rate of unemployment. In regions of high unemployment, 16 per cent and up, the number of best weeks will be 14. As the unemployment rate is lower, the number of weeks will increase, up to 22 weeks. That is essentially the change.

The Chair: Mr. Hodgson, as a point of clarification, you say that over a period of years it is anticipated that expenditures and revenues will balance out, and then going forward from there on a seven-year cumulative basis. When you talk about balancing out, is that taking into consideration the accumulated deficit or debt that has resulted, and will that be cleared off before we talk about balance?

Mr. Hodgson: That is exactly what is intended by the legislation. The current mechanism will remain in place until the EI operating account has returned to cumulative balance and has recovered the deficit incurred during the recession. Once it is projected by the EI chief actuary that in the coming year the account will return to cumulative balance, the new rate-setting mechanism would take effect.

The Chair: A lot of those extraordinary expenditures in this account during the difficult time of the recession will be paid off, in this instance, through those employers and employees who are paying into an EI account?

Mr. Hodgson: It is important to distinguish between the economic action plan initiatives that were added to the EI program during the recession and were funded from the CRF through a transfer of funds, and the normal increase in Employment Insurance benefits that were paid as a result of a higher number of unemployed people. I believe the final cost of the EAP measures that were part of the economic action plan delivered through the EI program was $2.6 billion. That was funded by a transfer from the CRF and so will not be recovered from future premiums.

The Chair: Thank you. It is important for us to distinguish between the different numbers.

Senator Callbeck: Thank you for coming this afternoon and for your explanations.

I come from a province where the three main industries are agriculture, fisheries and tourism — seasonal workers. These are the industries that provide the dollars, put the bucks into the economy. If you do not have the workers, you cannot have the industries; it is as simple as that.

I want to try to clarify in my own mind what Bill C-38 is doing to those seasonal workers. First, let us take someone who works in tourism and is lucky enough to get 14 weeks. The processing period is now running at about 28 days?

Ms. Laroche: That is the standard we try to achieve.

Senator Callbeck: Is that what it is running, or is it running more than that?

Ms. Laroche: The standard is to have the applications processed within 28 days, 80 per cent of the time. I think we are very close to that target, but I cannot provide an exact number.

Senator Callbeck: You take the best 14 weeks, and then they are eligible for employment insurance for how many weeks?

Ms. Laroche: That will vary according to the unemployment rate in their region, but also the number of hours they will have worked. The more they work, the more benefits they have. The range in terms of benefits throughout the EI program is from 14 to 45 weeks.

Senator Callbeck: This does not change. Right now we have pilot projects for 14 weeks. Now it will be the same across the country, right?

Ms. Laroche: Yes.

Senator Callbeck: The number of hours will really not change?

Ms. Laroche: No.

Senator Callbeck: Let us say that the unemployment rate is 13 per cent. That will give you how many weeks?

Ms. Laroche: I will make a few points while my colleague is looking. The pilot project  "best 14 weeks, " as announced in Budget 2012, will be extended until April 6, 2013, so that will remain in effect until the new provision comes into effect.

Mr. Hodgson: It is also important to clarify that the proposed changes to define  "suitable employment " and  "reasonable job search effort " have no impact on people's eligibility for employment insurance, the duration of those benefits, or the amount that they would receive. As Minister Finley has indicated, it is not intended to make people move; and to the extent that there are no jobs available in that person's region during the off-season, it will have no impact upon them. It is intended to provide clear guidance on what sort of employment is suitable, should it be available in their region.

For seasonal workers, it would be mean that in the off-season, if there is suitable employment available within a reasonable commuting distance, they would be expected to take that work during the off-season. It is not intended to penalize seasonal workers, and it will apply uniformly across the country. The same standards will apply to all EI claimants everywhere.

Senator Callbeck: I hope it is not supposed to penalize seasonal workers, but this is what I am trying to figure out. Suitable employment, you say, was in the act, but it was very vague. Now it is coming out of the act. The Canada Employment Commission, as I understand it, will define that and make the suggestion to the minister, who will take it to cabinet. Then will it be in the Canada Gazette for comments? How does this comment period work?

Ms. Laroche: As I mentioned through the clause by clause, there is one provision in terms of what constitutes suitable employment that stays in the act, which is the one that pertains to labour strike disputes or lockouts. The other provisions in the budget implementation bill, as you have mentioned, will define these concepts in the regulations. These regulations are made by the Canada Employment Insurance Commission and recommended to the minister, who then brings them forward. There is typically, though not in all cases, a consultation period that can be made available. It will up to the government to determine whether they wish to do so.

Once the regulations are passed, they will be gazetted in the Canada Gazette and posted on the website and in the regulations.

Senator Callbeck: That is it; then the regulations will be in effect on a certain date?

Ms. Laroche: Yes. As the minister of HRSDC has mentioned, we are anticipating that these new provisions in the regulations will come into effect early in the new year.

Senator Callbeck: The details on what  "suitable employment " and  "reasonable job search " are still have not been determined then?

Ms. Laroche: Last week, Minister Finley made an announcement and outlined what constituted both concepts. In terms of  "reasonable job search, " it will be defined based on four key components. These will not vary according to the claimants group and will apply for the duration of an individual's claim. One of the four criteria to define a reasonable job search is job search activity. The government intends to identify or to list what constitutes reasonable job search activity. We are talking about preparing resumés, searching for and applying for jobs, going to interviews, going to job fairs, upgrading our skills and standard things that we do when we look for jobs.

The second criterion mentioned by Minister Finley is the intensity of the job search. It is expected that job search activity should be done on a daily basis. Naturally, if you live in a community where there are only two stores or two industries, you will not be expected to go every single day to the two stores or the two industries to ask if there is a job. That will be commensurate with the availability of work.

The third criterion is the type of work being sought. That will be consistent with the definition of  "suitable employment, " which I will go through in a few moments.

The fourth criterion is for the claimant to keep a job search record and submit it upon request. It is expected that claimants, as they look for work and apply for jobs, keep a log and that, if there is a requirement from Service Canada, they be in a position to demonstrate that they have been actively looking for work.

In regard to suitable employment, the minister, last week, also outlined what would constitute suitable employment. There are six criteria. Two of the criteria, type of work and wages, will vary according to the EI history and the time spent on claim, while the others will remain constant over time or over the person's claim.

One of the four criteria that will remain constant is personal circumstances. As part of the definition in trying to determine if the job is suitable or not, things like a person's family situation will be taken into account. Health will be taken into account, as will the suitability of a job. Certainly, a pregnant woman would not be asked to become a mover, for example. Being a single mother, not having daycare, not being able to work at night and things like that will be taken into account. The availability of public transportation will be taken into account.

Working conditions is actually in the act in terms of no job being considered suitable if it stems from a labour dispute.

The third criterion would be hours of work, that all available hours, including part-time work, should be considered as suitable employment. It is important to note that, within the EI program, there is a working wall and claim provision, which allows you to keep a certain amount of money that you earn and to receive EI at the same time. This is to encourage people to stay active in the labour market and to keep some labour force attachment because it is always easier to find a job when you have a job, when you are in the market.

The fourth criterion is commuting time. The requirement would be to look for jobs within a one-hour commute. That could be longer in communities where longer commuting times are the norm.

The two remaining criteria, type of work and wages, will vary according to the types of claimants that you hire. Those are the three types of claimants that the minister has identified: long-tenured workers, frequent claimants and occasional claimants.

Depending on where they are in their claim and what type of claimant they are, this is where a claimant will be asked to look for the same type of work at 90 per cent. As the time that they spend on claim increases, they would be asked to broaden their horizons and to cast their net a little wider to explore other possibilities.

It is important to note that, through the information that the minister revealed last week, no one will be asked to move to look for work. Just to come back to your example, senator, in terms of P.E.I., a fish plant worker works in their community. The plant has shut down, and there is nothing else to do. The person will not be requested to move. A person will be asked to look for work, but if there is no work, they will be entitled to continue to get their EI.

However, if there are other opportunities, they will have to be considered. The objective is that it always pays more to work than to be on EI. As you probably know, the amount that a person can receive on EI is 55 per cent, up to maximum insurable earnings, which is $45,200. The maximum that a person could get in a year is approximately $20,000 to $25,000. These provisions are to make sure that it always pays to accept work rather than to solely be on EI.

The Chair: I have allowed questioning to go on for quite some time on this because I felt it important to clarify some issues, but none of this is in the legislation that we are dealing with. This is a promise, by the minister, that may be in something in the future. I think it is important for us to focus on what is here.

Senator Callbeck: That is the point, Mr. Chair. You have mentioned a lot of measures here in trying to get at what suitable employment and a reasonable job search are, but the bottom line is that we are really not going to know until the regulations come. The minister says that they will be in place by the beginning of the year, I believe.

Ms. Laroche: Early in the year.

Senator Callbeck: Who will be consulted in this six-month period? I was amazed that several of the premiers were in the newspaper saying that they had not been consulted at all. In a province like mine where the three major industries, agriculture, tourism and fisheries, have a major impact on the province, this EI program can certainly have serious repercussions.

Are the premiers going to be consulted? What will take place in the next six months?

Mr. Hodgson: That would be a question for the minister to answer.

Senator Callbeck: Will we have the minister?

The Chair: We had not planned to. What you have asked is not in this bill. What you have asked is the process that will happen after, if this bill gets passed, but we are dealing with this bill.

Senator Peterson: For clarification, clause 613 repeals the section of the Employment Insurance Act where the Consolidated Revenue Fund was going to pay $2 billion into the fund. Clause 614 amends the date by which the payment by the Consolidated Revenue Fund can be made to the board. Are the CFR and the EI basically one in the same, and are you just commingling the funds back and forth?

Mr. Hodgson: This refers to two different things. In the current legislation there is a provision giving the Minister of Finance the authority to transfer $2 billion to the CEIFB as part of their reserve. There are also provisions in the legislation that each year an assessment is made as to whether the program will be running a cumulative surplus or a deficit in that year. Should there be a projection of a surplus occurring in that year, the surplus funds are transferred from the Consolidated Revenue Fund to the Canada Employment Insurance Financing Board for them to invest and hold until they can be returned to premium payers through lower premium rates in subsequent years.

Similarly, should they have accumulated surplus funds that have been transferred to them, and there is a deficit projected to occur in the year, the transfer would work the other way and the CEIFB would be responsible for transferring funds to the CRF to the extent they have them to cover the projected deficit for the year. This is the key mechanism for ensuring that any future surpluses will not be spent on anything other than the employment insurance program.

Senator Peterson: Any shortfalls will be covered by the Consolidated Revenue Fund, too. They are one in the same.

Mr. Hodgson: Absolutely. Benefits are always paid from the CRF regardless.

Senator Peterson: It is quite possible with this new definition of suitable employment that there will be many people going off EI onto welfare, which is a provincial responsibility. Have you discussed with the provincial governments that this is a possibility? Are they aware of this?

Ms. Laroche: We do not foresee a lot of people going on welfare. When we talk about connecting Canadians with available jobs, the measures are intended to provide the tools that are needed to be able to do a better job search and to clarify what is required while on claim. I think Canadians are already looking for work and they actually want to work. This is to better support them to be able to find work. There is no anticipation.

As Mr. Hodgson has mentioned, these measures do not affect eligibility or duration of the actual claim when they qualify.

Mr. Hodgson: The only way that the new definitions could result in someone being disqualified from EI and perhaps ending up on social assistance already exists in the legislation. If it is found that someone is not undertaking a reasonable job search or that they have refused suitable employment, there are the possibilities of penalties, either suspension or termination of benefits. Those are already provisions in the legislation.

Ms. Laroche: To conclude, when such a situation occurs, if a claimant shows changes in behaviour and actually follows what is required by the act they would be reinstated.

The Chair: Senator Stewart Olsen, do you have an intervention you would wish to make at this time?

Senator Stewart Olsen: The only thing I would like to ask about is something that pertains to Senator Callbeck's comments. It is not in the budget implementation bill, so perhaps I would leave it for another time.

There was a reference in the minister's speech to the increased assistance with job searches. If you can, could you briefly say something about that?

The Chair: I appreciate your sensitivity, but I allowed so much leeway on this so far I will allow a bit more.

Ms. Laroche: Part of the initiative of connecting Canadians with jobs consists of providing enhanced labour market information to them. Currently there is a system we call Job Alert. Every time a claimant reports, so every two weeks, these clients can register and receive up to three jobs. The proposed measure is to actually enhance that system so claimants will be able to receive a listing of jobs that pertain to their profession twice a day. If I am a plumber, I will receive plumbing jobs in my area. I will also be able to customize, if I live in Ottawa and I am interested in Montreal, and receive information about those jobs as well as related jobs. That will allow a claimant to make informed decisions and apply for jobs.

These job listings will come from a broader pool of jobs that we currently have. The information that is currently being sent to claimants stems from the job bank, which is a government service. Our goal is to also link to a private sector job board in order to provide claimants with additional information to support their job search and their transition back into the workforce.

Senator Stewart Olsen: That is very helpful.

The Chair: I have Senator Ringuette for a follow-up question.

Senator Ringuette: In regard to what you have just indicated in relation to forwarding job opportunities in the area, geographically and technically, will the system give your department the knowledge of which job opportunity was sent to which EI claimant at what date?

Ms. Laroche: That job search will be administered by the department, so this will be seen as a tool for Service Canada to be able to assess what jobs are available in the given region for a given claimant.

Senator Ringuette: Maybe I was not very specific. For instance, I am receiving EI benefits in northwestern New Brunswick. On June 14 your system sends me two job opportunities within my geographic region and within my skills. Is your system going to feed you back, through my social insurance number, that you have sent to me by email, for those who have email, those job opportunities on such and such a date?

Ms. Laroche: I do not believe so, no.

The Chair: Is there anything in this bill dealing with that issue?

Ms. Laroche: No.

The Chair: Thank you.

Senator Ringuette: I think I have heard a word quite a few times, and that is the word  "behaviour " in relation to an employee, a job or workforce behaviour. I want to remind my honourable colleagues that in the last 40 years, fortunately, I have never met a Canadian who had the  "behaviour " of not really wanting to work in a decent job. I think that vocabulary relating to  "behaviour " must be stricken from the department. From my perspective, it is somewhat offensive.

Senator Buth: I am not sure that is in the budget implementation bill.

The Chair: I do not see our witnesses wishing to respond. We are not encouraging you to. You have the opportunity to respond, but what I would like to do, on behalf of our Finance Committee, is thank you very much for being here and taking us through this bill. There has been much public discussion and you have helped to clarify some of the outstanding issues and, perhaps, misunderstandings. Thank you very much, each of you.

We will move on to Division 44, Customs Tariff Act, at page 379. Finance and the Canada Border Services Agency should be here to help us. We have Mr. Dean Beyea, Mr. Patrick Halley and Mr. Alec Attfield. Who will be the spokesperson to tell us what is here?

Dean Beyea, Director, International Trade Policy, International Trade and Finance, Department of Finance Canada: I will. As our colleagues did before, perhaps I could give an overview of the two measures that amend the Customs Tariff Act and then go to the clause by clause.

The Chair: That would be helpful.

Mr. Beyea: As you have said, Division 44 amends the Customs Tariff Act. There are two primary changes. The first is a tariff measure that supports the energy industry. A recent tariff classification decision by the Canada Border Services Agency resulted in the imposition of a 5 per cent duty on imports of certain fuels used in energy and electricity production that were not previously subject to duties. Clauses 620 and 621 restore the duty-free rates for these fuels used as intermediate inputs in the energy and electricity production. This measure enhances the competitiveness of the energy sector and reduces the cost of electricity generation. The measure also maintains the government's commitment to make Canada a tariff-free zone for industrial manufacturers.

The second measure is an increase to Canada's traveller's exemptions. Clauses 622 through 624 increase the value of goods that may be imported duty-free and tax-free by Canadian residents returning from abroad after a 24- and 48- hour absence to $200 and $800 respectively. Harmonizing these exemptions with U.S. levels, this measure will facilitate cross-border travel by streamlining and processing of returning Canadian travellers who have made purchases while outside Canada. The change will be effective June 1, 2012.

I will move to clause by clause. Clause 620 amends the schedule to the Customs Tariff Act to eliminate the 5 per cent most favoured nation rate of customs duty on certain imported fuels used as production inputs in energy and electricity production. This clause deletes the references to these oils and preparations from tariff item 2710.19.91 so that they may now be classified in the duty-free item 2710.19.91.

Clause 621 does exactly the same thing for goods classified in tariff item 2710.20.10 so that they may be classified in the duty-free item 2710.20.10.

Clause 622 amends the schedule to the Customs Tariff Act to increase the travellers' exemption threshold to $800 from $400 for returning Canadian residents who are out of the country 48 hours or more.

Clause 623 amends the schedule to the Customs Tariff Act to increase the travellers' exemption threshold to $800 from $750 for returning residents who are out of the country seven days or more. With this clause and clause 622, all trips of 48 hours or more will be subject to the same exemption threshold of $800.

Clause 624 amends the schedule to the Customs Tariff Act to increase the traveller's exemption to $200 from $50 for returning Canadian residents who are out of the country for 24 hours or more.

Clause 625 provides a coming-into-force date for clauses 620 to 624, and the subclauses set the dates.

The Chair: Thank you; that is very helpful. Honourable senators will be interesting in knowing whether there is any calculation on the revenue that will not be collected as a result of these measures.

Mr. Beyea: Yes. For fiscal year 2012-13, as outlined at page 132 of the budget bill, for the travelers' exemption, in year 2012-13 the foregone revenue will be $13 million; and in 2013-14, it will be $17 million. For the trade measures to support energy, the foregone revenue will be $30 million per annum.

The Chair: The first one was travelers' exemptions.

Mr. Beyea: Yes; and the second was energy. However, there is a bit of an anomaly in the energy one because this rate came into force temporarily as a result of a classification decision and is returning to 30. While we are recognizing a $30- million cost, the rate is returning to zero. While revenue was not collected in the past, there was for a short period of time; and that will be forgiven.

The Chair: Thank you.

Senator Hervieux-Payette: Are the new exemptions for 24 hours, 48 hours and 7 days exactly the same as they are in the U.S.?


Patrick Halley, Senior Chief, Trade and Tariff Policy, International Trade Policy, International Policy Division, Department of Finance Canada: In the United States, the limits are also $200 for 24 hours, and $800 for more than 48 hours.

Senator Hervieux-Payette: And for seven days?

Mr. Halley: There is no category for seven days in the United States. They only have the one for more than 48 hours.

Senator Hervieux-Payette: You talked about foregone revenue, but what will happen with the amounts currently collected for 24 hours, 48 hours and more than seven days? How do you calculate the revenue collected every year? What is the number of travellers? This way, we could find out the percentage of foregone revenue. Is it five, ten or 25 per cent?


Mr. Beyea: Generally, duties and taxes are payable when you come into the country. These are exemptions to those duties and taxes owing depending on the length of stay out of the country. The numbers we have given, $13 million and $7 million, are the revenues that will be foregone for increasing those exemption levels.


Senator Hervieux-Payette: I understand you will lose $13 million, but how many millions were you previously making when the limit was $50 instead of $200, and $400 instead of $800?

In terms of the $13 million foregone because of the increase from $200 to $800, is the amount based on an annual revenue of $200 million or $500 million? What revenue are you currently collecting on those amounts?


Mr. Beyea: The difference really is the revenue that is foregone. If you want to know the amount of revenue collected from customs duties generally, GST and HST, which are the revenues that are foregone, we can get that for you. The customs tariff, for example, is $4 billion annually. We do not have a category where we calculate what is collected from travelers coming in separately.

Senator Hervieux-Payette: When we arrive at the airport, we go to the counter. If we declare that we have more than the limit, we give our VISA card and pay. I am saying that you are collecting at each port of entry an amount of money from travelers.

Of course, it is everything over these amounts of money. It is over $50 if it is one day and over $400 if it is 48 hours. What I am saying is that is where we will lose $13 million, but I just wanted to know if the $13 million was significant over the amount of money that we have been collecting from travellers. My understanding of what you said is that you do not know because it is all put together with anything that comes into Canada.

The Chair: Maybe Canada Border Services Agency can help us. Mr. Attfield?

Alec Attfield, Director, Traveller Border Programs, Border Programs Directorate, Canada Border Services Agency: Yes. I work for the Canada Border Services Agency. We do track the revenues that we do collect. I do not have the full answer to the question that you are asking. However, I can give you an indication.

Just looking at the 2010-11 fiscal year, and only looking at the highway mode, which is part of the picture but not the entirety of it, the overall amount of duties and taxes that we have collected, just looking at the land border, highway mode, was in the order of $22 billion, $21.6 billion in 2010-11. It is a lot of money. The vast majority of that is on the commercial side, trucks and commercial movements. It is approximately $160 million from travellers alone. When we talk about the kinds of measures on the travellers' exemptions, for that fiscal year on the land border, it was approximately $160 million.

Senator Hervieux-Payette: That was my question, so $13 million out of 160 is about 10 per cent.

Mr. Attfield: There is a difference between the amount collected on duties. Of that $160 million, $59 million was duty, whereas the GST and HST was about $101 million.

Senator Hervieux-Payette: Will you reduce the staff with regard to the collection if there are fewer people who show up to declare? Will it diminish the workload to the point that you will reduce the number of agents at the boarder?

Mr. Attfield: There was no cut to the complement of staff, our border services officers acting at the frontier, at the border. We have lots of work to do. We are not changing the complement as a result of any reduction under this initiative.

Senator Ringuette: Mr. Attfield, as a follow-up to Senator Hervieux-Payette's question, you indicated approximately $101 million in HST collected from travellers, land, last fiscal year. It is HST. It is not the federal tax, nor the provincial tax.

Senator Hervieux-Payette: It is harmonized.

Senator Ringuette: It is both of them together, the HST.

Mr. Attfield: The overall amount we received is approximately $22 billion, $21 billion in revenue in both streams of commercial and travellers. On the travellers' side of it, that share or part of $21.6 billion was $160 million. That is what I can speak to. In terms of the breakdown beyond that —

Senator Ringuette: You cannot certify if it was GST or HST?

Mr. Attfield: No, I am sorry, I cannot.

The Chair: Or PST? The provincial tax?

Senator Ringuette: Yes. Well, $101 million.

Mr. Attfield, again, correct me if I am wrong, but I think the federal government has an agreement with all the different provinces that the border services will collect not only the federal sales tax but also the provincial sales tax at borders.

Mr. Attfield: I am sorry, but, in terms of the agreements, I am getting beyond my mandate. Sorry.

Mr. Beyea: There are agreements in place with certain provinces allowing the CBSA to collect provincial revenues at the border on behalf of provincial governments. Provincial taxes are also waived in circumstances where travellers' exemptions are applied.

Senator Ringuette: Which provinces have you consulted with in regard to this particular measure? When the department certifies to us that in budget year 2013-14 there will be $17 million less based on 5 per cent GST, that means that you estimate a minimum extra duty free shopping of $340 million. That $340 million should also be subject to the provincial sales tax. That provincial sales tax amounts to $23 million a year. The overall lack of revenue for both the federal and provincial governments over this particular measure is $40 million a year.

Can you tell me about the consultative process with the provincial premiers, who are crying for additional funds because they are in huge deficits and the federal government is downloading a lot of responsibility to their coffers? Which provinces were consulted? We had agreements with them to collect these taxes.

Mr. Beyea: Perhaps if I could, before I get to your specific question, I think there was a factual error in your statement, and that was that the $17 million is the GST or the HST. That is not the case. It is the HST plus the tariff, which is 13 per cent. The amount is $17 million in duties and taxes, of which also there would be a cost to the provinces.

With respect to consultations with the provinces, when the minister was here, he answered that question, and I do not have anything to add to that.

Senator Ringuette: Well, actually, no provincial ministers were consulted about this issue. The fact is that the $17 million is with regard to the federal sales tax. There might be a bit of duty in there, but the biggest portion of the duty is the 5 per cent duty imports with regard to the energy industry, and that is $30 million a year.

I live in a border community. I see this day in and day out. I see retail people in our small community struggling to keep their businesses alive. When I look at the potential loss in revenue for the provinces, added to the fact that you have already estimated the amount of shopping that will be done across the border without any tax, that is roughly 11,000 full-time jobs in the retail community

In downtown Ottawa, perhaps it will not have that much effect, gentlemen, but I can tell you that, across the country, in all of our border communities, never mind the loss in revenue in a deficit situation of this federal government, and in the deficit situation of most of our provincial governments, you are also affecting drastically border communities and retailers in Canada. We are losing jobs here.

By the way, I also saw last night on the CBC where the Minister of Finance said that he had had no consultation with either his U.S. counterpart or his Canadian counterparts. However, such is life.

Last but not least, Mr. Beyea, on May 9 I asked some of your colleagues a series of questions with regard to employment and staffing in the Department of Finance. I asked the CBSA a few days ago, so you are okay. However, on May 9, I questioned the Department of Finance, and we are now at May 31. I have not received any word from the clerk of this committee that your department has forwarded the answers to these questions. Do I need to repeat the questions?

The Chair: No, I would think not.

Senator Ringuette: When can we expect the answers to these questions? It has been almost a month now.

Mr. Beyea: That is clearly outside the area of my responsibility, and I will pass on your message.

The Chair: If you could pass on to your colleagues that we are anxiously awaiting the response.

Mr. Beyea: I will do so.

Senator Hervieux-Payette: I have a supplementary on the number of Canadians going to the U.S. versus the Americans coming to Canada. This would give us the scope of what it is all about. Are we on the gaining or the losing side in terms of people spending on both sides of the border?


The Chair: Do you have a quick answer to this additional question, Mr. Halley?

Mr. Halley: We can provide you with data from Statistics Canada. They are available to the public.

Senator Hervieux-Payette: Data on the number of travellers who cross the border. That would give us an idea of the impact of those measures.


Senator Gerstein: Thank you, panel, for being here.

If one starts on the premise that since the beginning of time retail has been a very tough business — it is almost as tough as politics some might say — there have always been challenges. Shopping centres came in and were destroying downtowns — chain stores versus independents. Some survive; some do not. Would you agree that with the reduction of tariffs and with the increase in travellers' exemptions that are being put forth in this bill, the Canadian consumer will be the beneficiary?

The Chair: Is that a policy question?

Senator Ringuette: Is that an issue of policy?

Senator Gerstein: It will not bring prices up; it will only bring them down.

The Chair: Should you talk to the minister about that?

Mr. Beyea: I think the measure recognizes that Canadians make frequent overnight trips outside Canada and return with goods.

Senator Callbeck: I have a couple of brief questions. Have there been any studies done to show how raising the exemption levels will affect the retailers on the U.S.-Canada border?

Mr. Beyea: We assessed the costs. It is not a simple calculation because there are some important elements. Most of the shopping and retail shopping is in day trips, and there remains no exemption for less than 24 hours, so that is a major impact.

The other is spending on overnight trips changes significantly versus day shopping, where people tend to spend the majority of their money on accommodation and meals and return with goods. What we focused on was the revenue impacts from the spending variations between trips.

Senator Callbeck: However, there has really been no in-depth study done to show how this will affect retailers who are on the border, right?

Mr. Beyea: No in-depth study, but these were amended in 2007. There was an amendment to the 48-hour rule, and there was no impact on the number of overnight trips since then; it has been very steady, and we expect this would have little impact.

The Chair: Thank you, senator.

Colleagues, we have now concluded this particular division. We will thank Mr. Beyea and Mr. Halley from the Department of Finance and Mr. Attfield from the Canada Border Services Agency. Gentlemen, we appreciate your help in helping us through that particular division of this bill.

My records indicate that Division 45 has already been done, so we will move on to Division 46, which is entitled the First Nations Land Management Act. It is at page 380 of the bill. We have Mr. Andrew Beynon before us now. You have the floor, sir, to help us through the First Nations Land Management Act amendments.

Andrew Beynon, Director General, Community Opportunities, Aboriginal Affairs and Northern Development Canada: Thank you, senators. I should apologize in advance; I have a severe cold. If I am brought to tears, hopefully it is my sinuses and not your questions.

Senator Runciman: You have not been here since the start of the meeting.

Mr. Beynon: This legislation is designed to make some amendments to the First Nations Land Management Act, which was enacted in 1999 and allows First Nations to opt out of 34 land-related sections of the Indian Act and instead manage those lands issues and resource issues and environmental issues themselves.

There are now more than 30 First Nations operating under their own land codes under the legislation, and approximately 60 First Nations have formally expressed an interest in opting into the First Nations land management regime. These proposed amendments to the legislation would remove some identified legislative barriers, which we have learned about over time with the operation of this legislation, that prevent or delay First Nations from taking full advantage of the benefits of land responsibility under the act in a timely manner. These provisions will assist us from a cost perspective mostly by reducing the number of activities that are required to complete entry into the legislation and by speeding entry into the legislation.

A number of provisions are changed. First, the environmental protection provisions of the legislation will be maintained, although we are removing a requirement to establish an environmental management agreement with the Minister of the Environment. Experience has shown that this is an unnecessary step in order to proceed with effective environmental controls. As I said earlier, the nature of the environmental protections and the requirement to meet or exceed federal standards is maintained in the legislation.

Major federal environmental laws, such as the Fisheries Act and the Canadian Environmental Protection Act, will continue to apply regardless of these amendments.

Other steps that the amendments create are to prevent undue delays in the ratification of the land codes that First Nations develop by allowing us to work with First Nations regarding reserve land boundary issues and title issues by excluding certain portions of lands until a future date when the boundary issues can be resolved.

The provisions also create clarity as to the time when a land code under the legislation can come into effect. Right now it is only after the minister and the First Nations sign an individual agreement, and there is a lack of clarity in the current legislation on that point. We also clarify the schedule to the legislation to identify specifically the First Nations that are truly operational under the legislation. As the schedule is drafted right now, some First Nations are identified in the schedule but ultimately their communities do not approve entry into the legislation and yet their names remain. It creates some confusion for outside readers as to who is subject to the legislation.

It is important to stress to senators that this legislation echoes provisions of the Framework Agreement on First Nations Land Management, and in the crafting of the provisions there were extensive consultation with the First Nations that operate under the First Nations Land Management Act. All of us are drawing on experience and learning what changes are appropriate, but we have had an opportunity to consult with them on these specific legislative changes and have their support for that.

With that, I could turn to a specific clause-by-clause analysis of the provisions, if you would like.

The Chair: If you would please go over them and tell us how they achieve the points that you have just made.

Mr. Beynon: I would say clauses 627, 628 and 629 are designed to remove the current requirement that a specific legal description of land be specified in order to enter into the First Nations land management legislation. We are creating a bit more flexibility by allowing for the Surveyor General from Natural Resources Canada to use a description of the land that is considered satisfactory for clear delineation of the area that is subject to the authority of the First Nation, and ultimately for the Surveyor General to agree with the First Nation at a later date to complete further surveys.

This is just an issue where the initial precision in that language, focusing on legal description, is one that does not work well with the description of reserve lands.

Looking beyond that, clause 630 also creates a bit more flexibility. Right now with some reserve lands you have, in some cases, very precise boundaries. However, at some edges, particularly along a natural boundary where there has been erosion or accretion over the years, there can be some disagreement and questions regarding the survey issues. These provisions allow for flexibility on entry so that we can exclude an area of land from the description that may be the subject of further work, proceed to enter into the FNLM regime, allow the First Nation to build that capacity and start to make its own decisions, and then at a subsequent date rectify the description of the reserve with the information that is obtained.

Turning beyond that, clause 631 is a related provision again regarding the boundaries of the reserve and the precision of its description. Clause 632 amends the legislation to specify that once a community approves a land code and its individual agreement for entry into the FNLM legislation, the council of the First Nation must send a copy of the land code that they have approved to a verifier, an independent party that ensures that the process of entry is appropriate.

The amendment also requires that this individual agreement be signed by the minister and the First Nation and that the agreement be sent to the verifier.

This essentially improves our process and the precision of the order of events for entry into the FNLM regime: What are the duties of the First Nations, what are the duties of the independent verifier, what are the duties of the minister and what sequence do those steps take?

Clause 633 amends section 14 of the English version of the act to just clarify the language slightly in respect of the individual agreement requirements. In fact, this amendment just to the English version of the text would bring greater clarity in aligning it with the French version of the current legislation.

Clause 634 specifies the date on which a land code, the First Nations governing code for land authority, takes effect. We have only added an amendment to make it clear that it is subject to a later section, subsection 15(1.1). This new subsection 15(1.1) is described in clause 634, and it provides that a land code cannot come into force until it is approved by the First Nation members and not before the date the individual agreement is signed by the minister and the First Nation. As I said in my opening remarks, with experience we have gained we are trying to make the sequence of events for the start-up of the FNLM regime more precise.

Beginning with clause 635 we have the changes to the environmental protection regime. It is clause 635 in particular that deletes the requirement for a procedural step under which First Nations would enter into an agreement, an environmental management agreement, with the Minister of the Environment. Instead the subsequent sections make it clear that the First Nations must still have the right environmental standards for their law-making authority.

I would just offer to senators that this change, by deleting the requirement for an environmental management agreement, would actually bring this legislation more in line with other legislation that involves First Nations and law- making authorities, where they have authority to make environmental laws, where it is clear that federal environmental laws prevail. However, in the other legislation there is no procedural step of having to do an environmental management agreement. This makes the legislation more consistent with other federal legislation relevant to First Nations.

New subsection 21(2) in clause 635 clarifies that the environmental protection standards, and the punishments required for failure to meet the standards, must be at least equivalent to the standards and punishments imposed by the province in which the First Nation land is situated.

We have a different group of amendments beginning with clause 636. This replaces section 45 with a series of subsections, 45(1), 45(2) and 45(3). The current section 45 specifies the role of the Governor-in-Council in adding the name of a band to the schedule to the legislation. This change is critical, going back to the point that I raised earlier, that it makes it clear that the timing for the minister to add a First Nation into the schedule is after there has been approval by the First Nation as a whole.

Clause 636 also creates the authority to delete the name of a First Nation from the schedule. Again, as I said earlier, the current legislation has a mechanism for putting names on to the schedule so that First Nations can consult with their community and decide whether to ratify. However, if the First Nation community members do not ratify and do not approve entering the legislation, right now we do not have a mechanism for taking the name back off the schedule. This makes that more clear.

Clause 637 makes it clear that essentially it is the provision which allows for adjustment of the columns in the schedule so that we can be more clear as to which First Nations are in and the dates of ratification of land codes.

Clauses 638 to 645 and also 647 to 651 amend a series of provisions in the legislations. These ones work to amend the schedule to the act, so we have to follow with the amendments to the provisions. It is just a cross-reference within the legislation.

Clause 646 repeals section 34 of the act, which was an express reference to one particular First Nation, the Chippewas of the Thames. In the original passage of the legislation there was a reference to this First Nation in error in the schedule. The Chippewas of the Thames currently are not operating under the First Nations Land Management Act, so this creates clarity and gives an update.

Clause 652 amends the English version of the act. The French version of the legislation also refers to changes in the English version, replacing references to  "First Nation " or  "First Nations " with capitalized terms. This just brings the First Nations land management legislation into conformity with current Department of Justice policy on the capitalization of the terms  "First  "Nation " or  "First Nations " in English in legislation.

That is a summary of these questions, and I would be happy to respond to questions.

The Chair: Thank you very much. This is an area that this National Finance Committee is not normally requested to look into, you will appreciate, but it is in the budget implementation bill. There you have it and there we have it, and here we are.

Senator Peterson: Who is the approving authority for the First Nations Land Management Act?

Mr. Beynon: It is a combination, interestingly enough. I would say that the core of the legislation requires community approval — that is, a specific vote by the community members — on whether they want to enter into the FNLM regime.

As I said earlier, there have been a few First Nations where the council of the band has forwarded a band council resolution and sought to enter into the legislation. The minister has agreed to say yes, you would be a good candidate for entry, but, ultimately, when it came to a community vote, the community membership did not vote in favour. That is the guarding factor for entry.

Senator Peterson: It is the Minister of Aboriginal Affairs and Northern Development who has the approving authority from the federal government side?

Mr. Beynon: From the federal government side, yes.

Senator Peterson: How many bands have project approvals?

Mr. Beynon: The number is changing over time. We are proceeding with expansion of the legislation, but there are over 30 First Nations that are currently operational under the legislation now. Earlier this year the minister announced the intention to proceed with 18 new First Nations under the legislation. Those pieces of legislation are moving into a developmental process where they will work towards the process of community ratification.

The minister also spoke publicly with the media and in response to questions about whether there would be further expansions of FNLM in the future and suggested that, hopefully later this fiscal year, there would be another announcement of new entry into FNLM. It is expanding legislation over time.

Senator Peterson: In the past, how long has it taken to get approval?

Mr. Beynon: That is a very good question. I would say roughly an average of about two years, as a process. We are learning all the time. Some First Nations have to go through an internal process and go at their own speed of building the community consensus, so they take longer. I would say to senators that we are working very closely with the FNLM First Nations and particularly the resource centre that works with FNLM First Nations to speed that process for entry. Our target is definitely to go much shorter than a two-year process.

I should share with senators that I had the pleasure of attending the ceremony when the 18 new First Nations were announced and had their opportunity to sign their intention with the minister. Some of them were saying that they are in a competition with each other to be the fastest to go in and to seek their community approval quickly. They would like to go as quickly as three to four months.

Senator Peterson: Once they have this approval they can enter into commercial deals with private investors and it is a bankable deal; is that correct?

Mr. Beynon: That is one of the great advantages of the First Nations land management legislation, namely that the First Nations then have the authority to make laws in respect of their lands but also to make their own land management decisions without going through the current Indian Act system, which requires decisions by the department and the minister.

Independent studies have shown that the experience with the First Nations who have entered into the FNLM regime is that they are more able to move at the speed of business in making those decisions themselves and dealing directly with private sector businesses.

Senator Eaton: Thank you, Mr. Beynon. Could you go to clause 635 to clarify something for me? Once environmental standards have been set, the First Nations can up them, but they cannot go below those standards. Do I understand that correctly?

Mr. Beynon: Yes; that is right. The First Nation can certainly set stronger standards, if they would like, on their lands; they can also revise those standards up where they can also be selective within reserve lands to identify certain conservation areas and put in place very high standards. This rule dictated by Parliament's approval of the legislation requires a minimum standard. If that standard is not met, then the First Nation is not complying with the legislation.

Senator Eaton: Then there are penalties or there is some kind of enforcement?

Mr. Beynon: The decision and the law by the First Nation, if it is off-line with this First Nation, would be open to challenge, primarily by the First Nation's own members.

The Chair: For clarification, the framework agreement is the same for all First Nations that wish to enter this type of scheme?

Mr. Beynon: Yes. There is one single First Nations land management agreement. It was originally entered into with 14 First Nations to set the terms of what the government and First Nations wanted to do as a mechanism to opt out of the Indian Act. The First Nations Land Management Act, passed by Parliament in the two official languages, very much reflects and gives life to the framework agreement; it is consistent with it.

The Chair: That framework agreement is available for all of us?

Mr. Beynon: Yes. It is on the public record. It is in the two official languages and amendments to the framework agreement also have to be in both official languages. This legislation tends to track changes to the framework agreement.

These amendments are, in fact, tracking an agreed-upon amendment No. 5 to the framework agreement.

The Chair: I am asking primarily because the standard is set in the framework agreement for an environmental regime and what they have to do. That follows Senator Eaton's point. We now know how to trace that back.

Senator Callbeck: Thank you, Mr. Beynon, for being here. I have been listening to your explanations on all the various sections, and it strikes me as a piece of legislation that should be coming forward by the Minister of Aboriginal Affairs and Northern Development Canada. Here we have it in the budget bill. I am trying to figure out a reason why it would be in here. Are there any savings?

Mr. Beynon: I can offer this: As I said at the outset, this legislation is designed to pick up on the lessons that we have learned through experience with operating the legislation.

Going back to one of the earlier questions, we are looking to try to save both money and time through the implementation of this legislation and to reduce the costs that we incur and what Canada funds First Nations for in terms of transitioning into the legislation. We are also looking to reduce the cost that would be associated with environmental management agreements.

On the issue of the placement of the legislation here as opposed to elsewhere, I would note that the government's intention to reallocate dollars into the FNLM legislation was specifically referred to in Budget 2011, and in Budget 2012 there was a reference to the expansion of the FNLM regime because of the financial investment that the government is making.

Beyond that, I am sorry; as an official, I cannot really comment on the choice of venue.

Senator Callbeck: It just strikes me as something that should not be in the budget bill.

Senator Nancy Ruth: I wanted to ask about natural resources. I read about no uranium, radioactive minerals, et cetera. They can do iron, bauxite, gold and diamonds. What if some of these mining procedures throw up radioactive materials? What happens then?

Mr. Beynon: I would likely have to get back to the senator with a precise answer after consultation with those who are experts on radioactive materials.

Senator Nancy Ruth: They can mine anything on their lands without referral to anyone, with the exception of what is listed here?

Mr. Beynon: Yes, I have several comments on that. Again, I could get the precision on what might throw up radioactive material. Certainly our intention is to ensure that is properly regulated, in accordance with federal requirements.

With respect to activities such as mining, it is not very common on reserve lands, large-scale mining. However, where that opportunity arises, even First Nations operating under this legislation have the opportunity to work with Canada to regulate those very complex commercial and industrial activities under what is called the First Nations Commercial and Industrial Development Act. That legislation allows the creation of federal regulations to govern the complex commercial and industrial activity.

First Nations, even those operating under this legislation, many of them have an interest in working with Canada to establish those regulations. Mining companies, to make the investment for a long-term mining project and extraction, like to have a stable set of federal regulations that are very similar to the provincial ones.

We could provide some additional information if you would like, but I would not say that the experience with First Nation land management-led First Nations is that there are these major mining projects going on under this legislation.

Senator Nancy Ruth: Thank you, that is sufficient.

The Chair: I have no other senators in attendance who have other questions. Mr. Beynon, thank you for being here and helping us through this. It looks like a good initiative, and I am glad to see that it is progressing.

Mr. Beynon: Thank you. We are very proud of it.

The Chair: We will now move to Division 47. This is entitled Canada Travelling Exhibitions Indemnification Act. It can be found at page 387 of this bill of 424 pages, Part 4, Division 47. You thought we would never get to you, and here we are. We should have, from Canadian Heritage, Lyn Elliot Sherwood and Janick Aquilina; and from Finance, Social Policy, Angela Gillis.

Lyn Elliot Sherwood, Executive Director, Heritage Group, Canadian Heritage: Mr. Chair, with your permission I will do a very brief overview and then deal with the clauses.

This is clause 653, which amends the Canada Travelling Exhibitions Indemnification Act, as the chair has noted. That act authorizes the Minister of Canadian Heritage to provide Crown indemnity to cover possible loss or damage to high-value travelling museum exhibitions that are being presented at venues in Canada. If I look at current schedules for example, the Norman Rockwell exhibition that just closed at the Winnipeg Art Gallery, the Picasso exhibition that is on at the Art Gallery of Ontario and the van Gogh exhibition that is on at the National Gallery of Canada.

Indemnity constitutes a contingent liability for the Crown, payable only when there is a valid claim. Since the act was passed in 1999, thanks to a vigorous program of risk management, there has not been a single claim. I would note that track record parallels the experience of similar indemnity regimes in a large number of other countries.

When the act passed in 1999, the average value of indemnified exhibitions was just below $100 million. Today it is somewhere between $300 million and $400 million. Because the act caps the overall amount of indemnity that can be provided, the impact of that increasing value has been a declining ability to indemnify every year.

To give you a sense of the impact of a lack of access to indemnity, for a museum to indemnify a $400-million exhibition would cost approximately $1 million. That is the difference between breaking even and not breaking even on these blockbusters.

Clause 653, the amendments to the act that are proposed there, responds therefore to these changes in market conditions and is intended to maintain the effectiveness of the indemnity regime we have.

Clause 653(a) increases the limit for indemnity for a single exhibition from $450 million to $600 million. Clause 653(b) has two changes. The overall limit, the overall amount of indemnity that can be provided, will increase from $1.4 billion to $3 billion. The wording of the act will be slightly changed to make it clear that liability is to be calculated on the basis of the actual exposure to risk at a given time. The current wording is ambiguous and the parliamentary committee that discussed this act when it was first passed interpreted the legislation in a way that right now requires us to calculate cumulatively over the year, so we cannot reinvest indemnity.

When a spring exhibition closes and is off our books and there is no risk, we cannot take that indemnity and reinvest it in an exhibition subsequently in the year. This change will make it clear that we can reinvest the indemnity throughout the year, as long as we stay within the defined $3-billion ceiling at any one time.

That concludes my presentation, Mr. Chair. I would be happy to answer questions.

The Chair: Thank you. These figures are statutory, but I note that the wording says,  "or any other amount that is provided by an appropriation . . . "

This committee deals with the supply bills and appropriation as well. Is it typical that you would have an amount greater than this in an appropriation bill, or have you any experience in that regard?

Ms. Sherwood: This is the first change since the act was passed in 1999. We felt the budget implementation bill, in consultation with the department and Minister of Finance, offered the appropriate vehicle to present this to Parliament.

Senator Peterson: Does the government self-insure in all these matters?

Ms. Sherwood: National museum collections are self-insured. When a national museum, for example, borrows objects from other museums, it normally takes out private insurance. A national museum would also take out insurance for third-party liability, slip-and-fall insurance.

The national museum collections that they hold would be self-insured, but when they are dealing with collections that belong to others, they would take out private insurance if they were not indemnified.

Senator Peterson: What would the cost of that be? How much would that cost per annum? You save Canadian institutions $2 million to $4 million a year. Do you back charge them? Who carries that cost?

Ms. Sherwood: It is a contingent liability. It is in the framework to be paid out, should there be a claim. It is not money that changes hands. It is simply there if needed, if there is loss or damage and there is a valid claim against the program. This is for travelling exhibitions only, not for permanent collections.

Senator Peterson: You have to pay for the private insurance though?

Ms. Sherwood: A museum is not indemnified, in the case of a national museum, from its appropriations for the cost of its private insurance. This is designed, in essence, to replace the need for private insurance for the high-value travelling exhibitions where the cost of insurance is prohibitive.

Senator Callbeck: It says here the program has an estimated positive net impact of up to $15 million annually in federal tax revenues, with similar positive impact on provincial revenues. Could you explain that?

Ms. Sherwood: One of the major impacts of these blockbusters is enhanced tourism in the regions where they are being hosted. There have been several studies done over the years that indicate an impact of between $30 million and $60 million in the surrounding region for the biggest blockbusters. From those service industry revenues, there are tax benefits that flow to all levels of government.

The Chair: Thank you. We wish you well on your travelling exhibitions.

Ms. Sherwood: Thank you, and thank you for the opportunity to talk about the program.

The Chair: Thank you.

Colleagues, we are moving along nicely. Division 47 is concluded. We are now into Division 48, Canadian Air Transport Security Authority Act. CATSA is the Canadian Air Transport Security Authority that keeps all public air travel safe.

Ms. Radi, you have the floor to explain this provision to us.

Madona Radi, Acting Director, Strategic Planning and Business Direction, Transport Canada: Thank you, Mr. Chair. Division 48 is to amend the Canadian Air Transport Security Authority Act to have the CEO of CATSA appointed by the Governor-in-Council instead of the board. That is what it is; that is it.

The Chair: Is there any policy reason for that? Has there been a problem in the past?

Ms. Radi: There are three things: First, it better reflects the current level of interaction between CATSA and the government and it recognizes the critical role that the CEO has in implementing Transport Canada's regulatory program. Second, since CATSA is fully appropriated by the government, this would complement the governance model where the GIC already establishes the CEO remuneration and performance pay. The last item is that it makes it consistent with the norm; most Crown corporations have their CEO appointed by the Governor-in-Council.

The Chair: Do you want to tell us about clause 655, as well, which amends section 19?

Ms. Radi: It flows from amending section 17. By having the CEO appointed through the GIC, in case of an absence or incapacity, the board can appoint an employee for 90 days. After 90 days, it would be appointed by the GIC.


Senator Hervieux-Payette: Are you going to request that the designated person be bilingual?

Ms. Radi: Yes, absolutely.

Senator Hervieux-Payette: In the legislation?

Ms. Radi: Yes, and in compliance with the Official Languages Act.

Senator Hervieux-Payette: If the nature of the appointment changes, will the remuneration change as well?

Ms. Radi: Not at all.

Senator Hervieux-Payette: In terms of the remuneration, do the CEOs of similar corporations have equal status, more or less?

Ms. Radi: Yes, more or less.

Senator Hervieux-Payette: That will do, Mr. Chair.


The Chair: Thank you very much, Ms. Radi. Good luck with CATSA. This committee has seen CATSA through its creation and various amendments. We wish you well.

Ms. Radi: Thank you.

The Chair: We are back to First Nations. I have Division 49 at page 388: First Nations Fiscal and Statistical Management Act. I hope that Brenda Kustra can help us out with us and tell us why we need this amendment.

Brenda Kustra, Director General, Governance Branch, Aboriginal Affairs and Northern Development Canada: Thank you. I am here today to give you a brief overview of clauses 656 to 681 of Division 49 of the budget implementation bill. These clauses are concerned about with the dissolution of the First Nations Statistical Institute, as indicated in Budget 2012.

There are a series of clauses that provide for changes to the existing legislation, which is the First Nations Fiscal and Statistical Management Act, under which FINSI operates. There are clauses with respect to transitional provisions that will allow for the orderly wind-down of this Crown corporation in fiscal year 2012-13, achieving a savings of $2.5 million in 2012-13 and $5 million in 2013-14 and thereafter.

Clauses 674 to 680 deal with consequential amendments to other legislation that currently makes reference to the First Nations Statistical Institute.

The final clause in this section, clause 681, provides for the coming into force of this division of Bill C-38 on a day to be fixed by order-in-council. We are currently working with the chief operating officer of the First Nations Statistical Institute on a reasonable wind-down plan, and we will be coming forward with a reasonable date on which to fix this order. Thank you.

The Chair: Thank you. Do you want to take us through the clauses? You can start with clause 656, which I find quite interesting. It is the long title of First Nations Fiscal and Statistical Management Act is replaced by the following, which is even longer.

Ms. Kustra: Actually, it is a bit shorter because it removes the words  "First Nations Statistical Institute. " The purpose of this clause is to actually remove those words from the long title.

The clause 657 removes the reference to  "statistical systems " and shrinks it down to  "comprehensive fiscal management systems. " Did you want me to continue on?

The Chair: If you could. It will not take you long. We want to ensure we know what is in here. That would be appreciated.

Ms. Kustra: Okay. Clause 658 is basically the short title which, again, removes the words  "First Nations Statistical Institute " from the existing title.

The definition under clause 659 changes the definition of  "first nation " in the act by replacing it with a band named in the schedule. The existing legislation identifies bands to be scheduled if they wish to participate in borrowing and in taxation under this particular piece of legislation, but the Statistical Institute was applicable to all First Nations. Therefore, we need to change the definition of  "First Nation. "

Again, part of clause 661, with reference to section 132 again removes the words  "First Nations Statistical Institute " and talks about commission, board or authority. It removes the word  "Institute " from the existing legislation. Similarly subclause 661(2) removes the word  "Institute " and indicates that the section is applicable to the commission, which is the First Nations Tax Commission; the board, which is a reference to the Financial Management Board; and the authority, which is a reference to the First Nations Financial Authority.

Subclause 661(3) removes the reference to persons appointed to the board of directors of the Crown corporation, the First Nations Statistical Institute.

The majority of the clauses that we are going through right now really have the bottom line effect of removing the words  "First Nations Statistical Institute " or reference to the institute, but we have to go through every paragraph of the existing legislation to remove those.

The Chair: This is an optional thing, is it not? A band says they would like to be part of this or that they would not like to be part of this?

Ms. Kustra: That is absolutely correct. A First Nation that wants to raise property taxes under this legislation sends a band council resolution to the Minister of Aboriginal Affairs and requests that their name be added to the schedule of First Nations who will take advantage of the opportunities under this particular legislation.

The Chair: When you look back to that long title in clause 656, if I went to the statute that is being amended here, would I find how the oversight of the commission, management board and authority — and all of these different schemes that are contemplated under this legislation — would I find out how those people who provide that oversight are appointed?

Ms. Kustra: Yes, absolutely. The existing legislation, the First Nations Fiscal and Statistical Management Act, details how members of each of the institutions are appointed. The First Nations Tax Commission is a shared governance corporation, and so the board of directors is appointed by order-in-council. The Financial Management Board, similarly, is a shared governance corporation. The majority of its directors are appointed by order-in-council. The Aboriginal Financial Officers Association has three seats on the tax commission: one seat representing taxpayers that pay utilities, one person representing residential taxpayers, and one representing non-resident taxpayers.

The Chair: Are there government members on these boards?

Ms. Kustra: There are not. They are all done by Governor-in-Council.

Senator Callbeck: Thank you very much for the explanation.

You are talking about the First Nations Statistical Institute. What is its mandate? What does it do and what has it been working on?

Ms. Kustra: The mandate of the institution is articulated in section 104 of the Fiscal and Statistical Management Act. Its purposes are to provide statistical information on, and analysis of, fiscal, economic and social conditions of Indians and other members of First Nations, members of other Aboriginal groups, other persons who reside on reserve lands or lands of other Aboriginal groups.

It has another purpose, which is to promote the quality, coherence and compatibility of First Nations statistics and their production in accordance with generally accepted standards and practices through collaboration with First Nations, federal departments and agencies, provincial departments and agencies and other organizations.

They also work with, and provide advice to, federal departments and agencies and provincial departments and agencies on First Nations statistics. They are to work in cooperation with Statistics Canada to ensure that the national statistical system meets the needs of First Nations and Canada, and build statistical capacity within First Nation governments.

These are the purposes that were intended when the legislation came into force in 2006.

Senator Callbeck: What has it been doing? Has it been carrying out those functions?

Ms. Kustra: It has not been carrying out these functions. The corporation has been operational since 2008, and it has not delivered on the purposes that were intended in the legislation.

Senator Callbeck: How many people are employed by this institute?

Ms. Kustra: There are 23 employees of this institute.

Senator Callbeck: What has it been doing if it has not been doing things under the mandate?

Ms. Kustra: They have actually been doing a fair bit of outreach, trying to get the message out that they are a statistical institute and trying to market themselves to First Nations communities. They have also been doing some specific community projects with respect to labour force and population projections. They have only very recently started to work with a couple of the communities that plan to take advantage of the first bond issue, which will be issued by the First Nations Finance Authority hopefully this fall.

Senator Callbeck: With this institute gone, who will take over what they are supposed to be doing in that mandate?

Ms. Kustra: That is a good question. The First Nations Information Governance Centre, which has been in existence for a couple of years, is currently doing a fair bit of statistical work. They delivered the Regional Health Survey recently and are working with the department on delivering the Aboriginal Peoples Survey. In addition, First Nations will continue to find sources for their statistical information in the same way they did before the existence of this institute.

Senator Callbeck: How much will the government save?

Ms. Kustra: We will save $2.5 million this fiscal year, $5 million next year, and $5 million every year thereafter.

Senator Nancy Ruth: This is really a follow-on question. Thank you for being here.

You say that 23 employees have been staffing, marketing, making notes, doing something. Are they transferring into either Statistics Canada or the First Nations Information Governance Centre or are they all getting axed? What is happening? How are you giving this $2.5 million this year and $5 million next year?

Ms. Kustra: They will be dealt with according to the rules and regulations that govern employees in federal Crown corporations. Whatever the rules are that govern all federal Crown corporation employees will govern those in the statistical institute. They do have a number of employees who are term and contract, as well as  "permanent " employees.

Senator Nancy Ruth: Their annual budget is how much now?

Ms. Kustra: Their annual budget is $5 million. It has been cut by 50 per cent for this fiscal year, which reflects a wind-down work plan completion of their existing projects, termination of their lease, et cetera.

Senator Nancy Ruth: Given the cuts in Statistics Canada, are you confident that Statistics Canada, along with the FNIGC, will be able to do the work this institute was supposed to do?

Ms. Kustra: I think that is a question that the individual First Nations looking for the service would have to answer, because we are not totally familiar with the kinds of expectations individual First Nations will have with respect to their statistical needs.

Senator Nancy Ruth: Would the First Nations Information Governance Centre contract with Statistics Canada to measure whatever they want? Is that the way it works?

Ms. Kustra: They could.

Senator Nancy Ruth: And they pay for it, right?

Ms. Kustra: Yes. They were working on the Aboriginal Peoples Survey and a Regional Health Survey on behalf of Health Canada. They are an agency that can be a delivery arm in First Nations and Aboriginal communities across the country.

The Chair: I have no other names on my list. This is good. Thank you. We appreciate your help.

Ms. Kustra: Thank you very much.

The Chair: Division 50, Mr. John Oliver, the Canadian Forces Members and Veterans Re-establishment and Compensation Act under Veterans Affairs Canada.

John Oliver, Director General, Departmental Secretariat and Policy Coordination, Veterans Affairs Canada: I thank you for the opportunity to speak on Division 50 of this bill, which, as the chair indicated, has two amendments to the Canadian Forces Members and Veterans Re-establishment and Compensation Act, more commonly known as the New Veterans Charter, which was enacted in 2006.

The amendment has two clauses. Clause 682 makes two changes to the career transition services that are provided by Veterans Affairs Canada. The first change is a change in its service delivery model for the program. Currently the program is delivered through a national contract provider across the country. This change will allow individual veterans the option to obtain career transition services where they best see fit, in their local communities, for example, on an individual basis.

The second change will relate to the eligibility of services, to avoid duplication with certain services that are already afforded by current Canadian Forces members at National Defence. Current serving CF members will no longer be eligible to access the program. They will still have access to programs that are available to CF members who are still enrolled in the Canadian Forces.

Clause 683 makes changes to allow us the regulation-making authority to provide for these changes and reimbursements that the department would be able to do on behalf of the minister, to individuals who seek career transition services through this new service delivery model in their regions, the closest available services that are of their choice.

It eliminates two things. It eliminates a bit of confusion and duplication as to whether a veteran goes to DND or Veterans Affairs and it also provides our eligible veterans an option for securing the services of Career Transition Services where they best see fit.

Hopefully, I have explained that.

The Chair: I think you have done both things. You have given us an overview and you have also talked about the two clauses that appear here. I guess there are three clauses.

Mr. Oliver: Sorry, the last one is the coming-into-force day.

The Chair: It is important for all of our colleagues to know that veterans are no longer the image of a veteran of the Second World War or the Korean War. Many veterans who have been involved in more recent conflicts and missions can be quite young and they can have young families. What this provides is that if they are still in the Armed Forces then this transition will be done by the Department of National Defence.

You have also eliminated the opportunity for families. Other than if the veteran happens to have died, if he comes back and is maimed and unable to work himself but his or her spouse will be the breadwinner for the family, you are not providing that service any longer.

Mr. Oliver: Yes, we still will. Over the life of the program the Career Transition Services is offering job-finding and career finding. It is a rather smaller program. If a veteran was not able to go forward with certain training but the spouse was able to, they would be eligible for our broader range of programs under the vocational rehab program, for example, actual education as well as training. There would be a wider variety of programs available to a spouse if the eligible veteran was not able to attend or take the training for probably medical release programs. We will be continuing with that, yes.

The Chair: That is what this does and it provides for training for re-establishment for the veteran. If the veteran is physically okay, the family is excluded. They used to be involved but are no longer.

Mr. Oliver: We have not provided career transition services for spouses of still-serving members or those who are post-release. This provides for non-medically released CF members who, in a period of two years after their release, indicate their intention to possibly consider the program. They do not have to; it is part of the discussion when they transition out of the military. They indicate once they go, yes, it is our intention to maybe participate, maybe no. They have a two-year window in which they can participate.

To give you an example of the statistics we are looking at, since the New Veterans Charter was put in place in 2006 we have had about 1,600 released veterans participate in the program. Currently we have about 183 who may be eligible to participate in the program, who will still be able to. However, in this case they will have the option, for example, if they live in Gaspé, rather than going to a national service provider they will be able to go to a local service provider who probably knows the local job market, what the qualifications are, and can provide some type of career counseling and job training. It is really that basic type of service. Someone who would have been medically released would have access to a larger scale of programs — for example, education and vocational rehab.

The Chair: Just so we are clear, then, this is a non-medical release person, now a veteran, under the New Veterans Charter, so he is one of the more recent ex-service personnel. Prior to this amendment, spouses were not included.

Mr. Oliver: No, they were not included. There was a legislative provision that was put there, I believe, to provide some policy cover if we were not covered for what I call a widow or a spouse to be covered by the provisions, but it was never utilized because a spouse could apply and get a more fulsome program access through the vocational rehab program if they were not eligible to go on behalf of their spouse.

The Chair: Our briefing note says eligibility to career transition services for veterans' spouses or common-law partners is being removed from the legislation. You believe that is incorrect?

Mr. Oliver: No, that is correct. It was never enacted and there were never any regulations to enact those provisions.

The Chair: It was in the legislation; it is now being removed?

Mr. Oliver: Yes.

The Chair: It will never be enacted now if it is being removed, correct?

Mr. Oliver: Correct.

Senator Nancy Ruth: To clarify, if you have voluntarily left the army, let us say, you have taken their job transition package, you go out and try to find a job but within two years you decide you need more help, can you use this veterans thing if you have been there, say, 10 years and therefore are a veteran?

Mr. Oliver: You have to indicate in the first two years that you are interested in entering the program.

Senator Nancy Ruth: Can you do both?

Mr. Oliver: Yeas. You could have access to, for example, a transition assistance program that DND provides on transitioning out of the military and again after that have access to a career transition, if you are an able-bodied release. If you are medically released for a service-related injury, you may have access to more fulsome training, education and vocational rehab programs.


Senator Hervieux-Payette: In one of the questions, it says that, with the new service delivery model, the recipients will now be able to select the career transition services and provider that best meet their needs; and they get a maximum of $1,000.

When we talk about an amount of up to $1,000, does that only include meetings with professionals who guide them and help them with the transition or does it also include other services?

They have to meet with someone to see what they would need to be able do something else, or to see what they would be able to do in their new employment, and the $1,000 is for an assessment.

Mr. Oliver: It is for an assessment and possibly to help them prepare their résumé or prepare for an interview with an employer, as well as to provide them with some guidance about the labour market.

It is not training per se, but it will give them a little boost; it is particularly helpful for our military colleagues who might not be used to having too many interviews with employers. It is about giving them tips and tricks to help them land a job. They can also get help with writing a résumé in order to increase the odds of getting a job. Many veterans have skills that are highly sought after by the private sector, but they may not necessarily know how to show they have those skills.

Senator Hervieux-Payette: Who are the people who left the Canadian Forces? Are we talking about people who are eligible to retire? Are those people entitled to services? If they have served in the army for 20 years, for example, they have certainly not reached the age of 67 that the government has now set as the retirement age; so they still have ten or 15 years. Are we talking about those people as well, or are we talking about people who left after ten or five years?

Who qualifies?

Mr. Oliver: People in all categories qualify, from those who left voluntarily after five or ten years to those who chose to retire and who would also be eligible.

We have a whole range of potential clients for the program, depending on when they chose to voluntarily leave the military, and provided that the proper procedure was followed.

Senator Hervieux-Payette: And there is still a two-year period?

Mr. Oliver: Yes, we are talking about a two-year eligibility period.

Senator Hervieux-Payette: And afterwards, do they no longer have access to services?

Mr. Oliver: No, not this service.

But as you know, there is also a wide range of services available in municipalities, in the provinces and at Service Canada outlets that could also have more programs and services to meet their needs.

Senator Hervieux-Payette: But you are talking about services that are available to the public at large, correct?

Mr. Oliver: Yes.

Senator Hervieux-Payette: They are not specifically for veterans?

Mr. Oliver: No.


The Chair: Mr. Oliver, thank you very much. The work of Veterans Affairs is very important to the Senate as a whole. We appreciate the work you are doing.

Mr. Oliver: Thank you very much. We had the pleasure of having Senator Meredith at the commemoration of the one hundred and tenth anniversary of the signing of the end of the South African War today at the war memorial. It was a nice ceremony with many of our veterans.

The Chair: We are glad that the Senate was represented. Thank you.

We will now go on to Division 51, which is at page 396, and it is the repeal of the Department of Social Development Act. We have Mr. Stephen Johnson, of Human Resources and Skills Development Canada. You have the floor to tell us what purpose Division 51 has.

Stephen Johnson, Director General, Evaluation Directorate, Human Resources and Skills Development Canada: Division 51 repeals the Department of Social Development Act. This former department was combined with the current department of human resources and skills development in February 2006 by the Governor-in-Council under the authority of the Public Service Rearrangement and Transfer of Duties Act, so that was often called a  "machinery of government change " that happened in 2006. The repeal here brings the legislative authorities to the minister in line with that decision.

Division 51 also abolishes the National Council of Welfare. That was announced in Budget 2012, along with a savings of approximately $1.1 million per year, starting in 2013-14. Since its initial creation in 1969, there have been many other organizations that serve a similar mandate and role to that of the National Council of Welfare, and there was a decision to abolish that. This is the mechanism that would give force to that decision.

Finally, this division consolidates the legislative mandates, so by abolishing the Department of Social Development Act, it takes those powers, duties and functions and moves them verbatim into the Department of Human Resources and Skills Development Act. I will go briefly through the clauses, if I may.

Clause 685 is the repeal of the Department of Social Development Act.

Clause 686, for greater clarity, specifies that previous members of the National Council of Welfare are not eligible or entitled to relief, and confirms that the National Council of Welfare will cease to exist upon the coming into force of these provisions.

Provision 687 contains the clauses, as I mentioned, that take the powers, duties and functions of the minister and the Department of Social Development and simply combines them and moves them over to the Department of Human Resources and Skills Development departmental legislation. You will see reference in there to mandates around social development in Canada, under clause 5(1), or relating to social development with a view to promoting social well-being and income security. Again, there are no changes there. This simply takes the existing wording in the Department of Social Development Act and transfers it to the Department of Human Resources and Skills Development Act.

Clauses 688 through to clause 695 are consequential amendments that make revisions to the references to the department or to the minister of social development in other statutes and remove those to reflect the fact that if this comes into force, the departmental statute will no longer exist.

Finally, clause 696 states this would come into force on a fixed date by order-in-council.

The Chair: That seems straightforward. Most of the services that have been provided previously will be picked up by another department in a department name change.

Mr. Johnson: In fact, the machinery of government change occurred in 2006, so it is now one department in terms of its operations. In terms of the department's legal authorities, there are two separate statutes. This simplifies by combining into one and reflecting, if you will, the reality of the current departmental structure.

The Chair: HRSDC, Human Resources and Skills Development Canada and the minister responsible is where we should look for a lot of this activity that happened in the past that will now happen in the future.

Mr. Johnson: Absolutely. There has been no change through this, that is, no proposed change in terms of mandates, powers, duties, actions. It is simply taking two pieces of legislation through which Parliament established the mandate for the minister and the department, and combining them.

The Chair: That happened, as you say, three years ago, but legislation is just catching up with it now.

Mr. Johnson: Yes.

The Chair: Thank you very much. We understand that, and we appreciate your being here and explaining that to us. No questions.

Mr. Johnson: No questions. Thank you very much.

The Chair: You followed our format very well, and everybody is very well informed.

Now, colleagues, the good news is that Divisions 52, 53 and 54 have already been done, so we are now going to Division 55, one of the two divisions left that we are required and mandated to look at.

Division 55 is the next one on my list, Shared Services Canada, which we have heard about on a number of occasions.

We have Graham Barr from Shared Services Canada, on Division 55. Mr. Barr, could you explain that to us?

Graham Barr, Director General, Strategic Planning and Transition Coordination, Shared Services Canada: Certainly. As you say, Division 55 is to enact the Shared Services Canada Act. Shared Services Canada was created on August 4, 2011, by order-in-council and has been given the mandate to deliver and renew certain information technology services for the government of Canada.

This division has two clauses. Clause 711 sets out the context and rationale for the creation of Shared Services Canada. The clause states that SSC's purpose is to assist its minister in providing services that will be specified by the Governor-in-Council and that the Governor-in-Council will also specify which departments must obtain these services from Shared Services Canada. Clause 711 also provides clarity on the application of the Access to Information Act and the Privacy Act. Although records belonging to other organizations that are contained in or carried on SSC's information technology systems are in the physical possession of SSC, this information is still owned by the originating organization, and the records are not considered under the control of Shared Services Canada.

Clause 712 is a consequential amendment to the Department of Public Works and Government Services Act and gives Shared Services Canada the authority to procure goods instead of requiring it to use Public Works and Government Services Canada as an intermediary. This will help Shared Services Canada forge and manage strategic relationships with its key IT suppliers. However, Shared Services Canada's procurements will remain subject to the government contracts regulations, the Treasury Board policy framework, and the relevant trade agreements. Shared Services Canada's contracts will respect the values of fairness, transparency and value for money.

That is the extent of Division 55, Mr. Chair.

The Chair: Thank you very much. We have seen throughout the past year appropriated funds for various departments transferred to Shared Services, and then Shared Services has received its own appropriation for the coming fiscal year, and we have seen all of that. Do you anticipate charging back for your services, and is that how you will be obtaining at least part of your revenues over the next coming years?

Mr. Barr: There are 43 departments that are part of the Shared Services Canada family, so to speak, at this point; however, our services are available to other departments. For those departments, we will be providing service on a cost- recovery basis, but we will not be charging the 43 departments that transferred funds to us. That was the reason those funds were transferred to us, so we would provide those services to those organizations.

The Chair: Is that over the long term, or is that just for the short term? I assume some of those funds that were transferred to you will not keep the services that you have to offer and the employees. Will you need some funds to continue to operate?

Mr. Barr: No, those transfers were for the services that we were mandated to start providing in the area of email, data centres and networks, and that is for the long term.

Certainly, if we do expand to providing different types of services or services to other organizations beyond the 43 departments, then we would need another source of funds. However, that $1.4 billion that was transferred to us and that, as you say, was represented in the Main Estimates for 2012-13 is the money we need to maintain operations.

The Chair: How many employees do you have now?

Mr. Barr: We have 6,300.

The Chair: Quite a few of those are in different departments but working on behalf of Shared Services Canada?

Mr. Barr: That is exactly right. Actually we have employees in 360 different locations across the country, every province and two of the territories, which is a challenge for us but also exciting to have employees all over the place. They are embedded in their host organization, so to speak. It is important that they be there because they are providing a key service to that department.

The Chair: That sounds like quite a challenge for human resources.

Mr. Barr: It is.

Senator Runciman: This is a supplementary. The act gives you the authority to provide services to organizations outside the federal government. I am wondering what is contemplated there. Are you talking about other levels of government or private firms? What is the thinking?

Mr. Barr: Certainly the main thinking there would be the provinces, so other levels of government.

Senator Runciman: Nothing beyond that?

Mr. Barr: Nothing beyond that. The legislation sets out that it is for the Governor-in-Council to determine. Currently we are providing certain services to some of the provinces and territories in terms of telecommunications. We will continue analyzing if there is a strong business case to continue doing that.

Senator Runciman: Would the intent be to simply recover costs or would there be a profit basis for it?

Mr. Barr: No, our motivation would not be profit; it would be to cover costs or, by expanding the number of organizations that we are providing services to, we could lower costs for all of us. No, we are not seeking to make a profit.

Senator Runciman: What has been involved in terms of the capital side in establishing this in terms of purchase of equipment and that sort of thing? Is there a handle on that?

Mr. Barr: With respect to information technology equipment?

Senator Runciman: Yes.

Mr. Barr: The 43 organizations that were brought together to form Shared Services Canada had investment plans in the area of capital. On August 4, when we were created, we did not cut all that off, so that continued. Going forward, we are looking at those investment plans and whether or not it makes sense and fits with our business model. It is a seamless transition from the capital plans of the 43 organizations to what we plan on doing.

One of the things we are doing now is developing our department's long-term investment plan, which would set out where we plan to make investments and what the source of funds would be.

Senator Callbeck: Has the government looked at other jurisdictions for best practices in implementing this ambitious plan? My understanding is that they tried this in Australia. It was supposed to save millions of dollars, and it ended up costing taxpayers a lot of money.

Mr. Barr: Certainly the government looked at many different jurisdictions that have implemented shared services initiatives. The U.S. government, certain states in the United States, Ontario, British Columbia and New Brunswick have all implemented shared services initiatives. I think you are referring to the state of Western Australia, which just last summer more or less pulled the plug on their shared services initiative.

One of the biggest lessons that we learned through looking at that was about scope and not starting too broadly. That is why we have a focused mandate. It is not all IT; it is not even all information technology. We are looking at email, data centres and networks. Western Australia, in addition to information technology, involved human resources and financial management as well. Another lesson we learned through looking at other jurisdictions was to limit, to the extent possible, any customization among the different organizations that you are providing service to, which really dilutes the efforts and benefits that can be gained from consolidation.

The Chair: Mr. Barr, I think those are all the questions we have. We wish you well on this challenging venue and we will be watching you closely.

Mr. Barr: Thank you.

The Chair: Colleagues, there are 425 pages in this bill, and we are at page 413. We have a 30-minute bell, so if we could continue for a further 15 minutes, let us see how far we can go with this last division; it would be wonderful.

We have our division representative here. This is the Assisted Human Reproduction Act, a Health Canada initiative. We have Ms. Hélène Quesnel.


Hélène Quesnel, Director General, Legislative and Regulatory Policy Directorate, Health Canada: Mr. Chair, section 56 simply amends the 2004 Assisted Human Reproduction Act, in response to the Supreme Court decision of December 2010.

This section does not deal with any of the provisions in the legislation that were accepted and declared valid by the Supreme Court. This section simply repeals the provisions that were considered unconstitutional by the Supreme Court.


For example, the amending bill would repeal those authorities for licensing of practitioners and for licensing of clinics, and it would repeal authorities that allowed the federal government to regulate controlled clinical and laboratory activities. Finally, it would repeal all authorities for the federal government to gather and retain health reporting information of individuals who participate in the assisted human reproduction services. Those were all authorities considered unconstitutional by the court. The court considered they were more appropriately under the review of the provinces, under the Constitution, and in this division they are being repealed.

Finally, the amending bill amends certain provisions. For example, it narrows significantly the authority under section 10. As I mentioned previously, section 10 would have allowed us to regulate all activities in a clinic, medical and laboratory. The courts decided that was much too broad for the federal government's authority, so we have narrowed significantly to cover only third-party donated material. That is, only where those materials are donated for the use of someone else, to ensure that they are safe and that they do not cause a risk to the health and safety of individuals who use them and to the children born as a result.

Lastly, this amending bill will dissolve Human Reproduction Canada as a result of its significantly reduced role. That is the gist of these sections.

I could go through the amending section one by one, if you wish.

The Chair: Could you do that and quickly say this achieves what I just described?

Ms. Quesnel: Certainly. Clause 713 repeals definitions that are no longer required such as the definition of the agency. Clause 714 essentially modifies the Human Pathogens and Toxins Act, and the following section amends the Food and Drugs Act to indicate that those acts no longer apply to third-party reproductive material because they will be covered by this.

With regard to clause 716, this deals with the narrowing of the authorities to focus exclusively on third-party donated material. Clause 717 repeals the previous broader section. Clause 718 repeals section 11, which the court ruled was unconstitutional.

Various other clauses following are essentially either to modify or completely repeal provisions related to the health reporting information, how the agency was to keep that information, who had access to it, and how that information needed to be protected not only for individuals who are directly affected but for future generations.

In terms of clauses 724 onwards, the rest of those clauses are related to the administration and enforcement of the resulting act. By and large, they are repealing authorities that had been previously assigned to the agency, Assisted Human Reproduction Canada, and assigning them to the Minister of Health.

That is from clause 724.

The Chair: The definition of agency is repealed.

Ms. Quesnel: Absolutely.

The Chair: Is the agency repealed as well?

Ms. Quesnel: Yes, it is dissolved. The agency is dissolved and all of its authorities are being repealed. Those that are still valid under the remaining act are assigned to the minister. All the authorities that are remaining will be carried out by Health Canada, given the significantly reduced breadth —

The Chair: This is not a cost-saving measure but rather a reaction to a court decision, is it not?

Ms. Quesnel: All the amendments are directly a result of the Supreme Court decision, but there is also a cost savings to this amendment. The agency's closure will result in about $8 million savings this first year, and subsequently $10.5 million of its allocation will be contributing to the deficit reduction.

Similarly, Health Canada's $1.8-million budget is reduced to $1 million for the residual role.

The remainder of the clauses from clause 740 onwards are coming into force and some of the consequential amendments. By dissolving the agency, it no longer needs to be listed for example under schedules to, for example, the Financial Administration Act and the Public Service Employment Act.

They also provide for the coming into force of this bill in a staged approach. First, upon Royal Assent, the authorities that the Supreme Court considered unconstitutional would be repealed immediately. The section that provides the Minister of Health with the authority to take immediate action if there is an egregious issue that is developing would be enacted immediately.

Other sections that are being repealed would be repealed only on dissolution of the agency itself, which we expect to be within this fiscal year.

Finally, those sections that require regulations, which are essentially reimbursement and third-party donated material, would come into force only when the regulations come into force.

The Chair: I think the public watching and listening might be interested in knowing whether you are aware of whether any of the provinces have picked up the gap that has been left by the federal withdrawal.

Ms. Quesnel: The Supreme Court ruled that it was not the federal role, and implicitly the decision means that it is the provinces' role. The provinces and territories will pick up that role as they see fit, and as they see the need. I am aware that Quebec has introduced its legislation, primarily in the sense of health services for Quebecers, but also setting limits on the number of embryos that can be transferred and so on.

Other provinces currently have rules with regards to the practice of medicine, and the Royal College of Physicians and Surgeons of Canada also sets rules, and those often provide for provincial licensing of practitioners and laboratories.

There are existing rules, but not specific to HR in most of the provinces.

The Chair: We would expect that Health Canada would be cooperative during this transition.

Ms. Quesnel: Absolutely. There is quite a bit of work. I have been with this file for six years, and we were ready to go forward and had done a fair bit of policy analysis and recommendations. We would be most happy to share that with the provinces, should they have an interest in doing so.

The Chair: I think colleagues would be interested in knowing as well who was it that challenged the federal government's authority.

Ms. Quesnel: It was the Province of Quebec that challenged the constitutionality of this act under criminal law. As it turns out, the Supreme Court upheld their court decision in some regards but not in others. It was a very controversial decision. It was split. It was a historic decision for how split it was and how separated the views were between Justices LeBel, Deschamps and McLachlin.

The Chair: Thank you very much. I do not see any other senators who would like to ask questions. That is probably because they are nervous about the bell ringing and we have to be upstairs in about 15 minutes.

Ms. Quesnel: What luck.

The Chair: Thank you very much for being here and persevering because I know you are the last witness at this stage of our review. We appreciate your being here and staying so we could finish the work.

Ms. Quesnel: Thank you very much.

The Chair: Colleagues, we have finished this phase of our review of this bill. The remaining work on this bill will start next week, and that is hearing from certain individuals and agencies that are impacted by the legislation, and what they think about it. Up until now we have been dealing with the government and proponents of the bill. If you have any outside witnesses that you would like us to consider, please let us know as soon as you can.

I would like to thank Heather Hickling and Kathleen Manion. Kathleen had retired and came back just to ensure everything went smoothly for us. Heather will be carrying on with us. I am sure this will be happening again and we will have budget implementation number two. We look forward to seeing you then.

(The committee adjourned.)