Proceedings of the Standing Senate Committee on
National Finance
Issue 9 - Evidence
OTTAWA, Wednesday, June 11, 2003
The Standing Senate Committee on National Finance, to which was referred Bill C-28, to implement certain provisions of the budget tabled in Parliament on February 18, 2003, met this day at 6:18 p.m. to give consideration to the bill.
Senator Lowell Murray (Chairman) in the Chair.
[English]
The Chairman: Colleagues, we have before us Bill C-28, in respect of the proposed budget implementation act 2003. The bill was referred to this committee by the Senate on June 4. This is our second meeting on this bill.
This evening, we have the pleasure of having with us Mr. Bryon Wilfert, Parliamentary Secretary to the Minister of Finance. He is the Member of Parliament for Oak Ridges, Ontario. He was first elected in 1997. With him from the Department of Finance are Mr. Yvan Roy, and Mr. Peter DeVries. Several officials from the Department of Finance and from the Department of Human Resources Development are also present to answer questions, if necessary.
Mr. Wilfert has an opening statement, and I think written copies are available for the convenience of senators.
Mr. Bryon Wilfert, Parliamentary Secretary to the Minister of Finance: I welcome the opportunity to appear today to discuss Bill C-28, to enact the budget implementation act, 2003, In the course of preparing this budget, the Minister of Finance heard from Canadians across the country about the Canada that they want. They told him that the budget choices must be more than a tallying of accounts, it must reflect the sum of our values as well.
This budget responds to those challenges. It reforms our health care system and helps our cities become more competitive and our communities more liveable. For example, it provides an additional $3 billion in infrastructure support over the next 10 years, two-thirds of which will be used for double funding of the Canada Strategic Infrastructure Fund for large-scale projects such as those located in major urban centres. The remaining one-third will fund new municipal infrastructure investments.
The budget also addresses the issues of poverty and affordable housing. It allocates $320 million to the affordable housing initiative over five years. It provides $384 million to extend the Residential Rehabilitation Assistance Program for three years and invests $405 million in the Supporting Communities Partnership Initiative to continue to fight homelessness.
As well, the budget invests in new technologies and alternate energy. It helps business become even more competitive in the North American and global markets.
In short, this budget is about the society that Canadians value, the economy that Canadians need, and the accountability that Canadians deserve. Because of our continued commitment to sound fiscal management, the government is able to meet these challenges and pursue significant new investments without risking a return to deficits. Bill C-28 implements many of the initiatives announced in this budget.
I will begin my overview of the bill with a discussion of the new investments in our health care system. Mr. Chairman, no social policy is more vital to Canadians, than our publicly funded health care system, which plays a key role in the society we value. The budget confirms $34.8 billion in increased funding over five years to meet the goals outlined in the 2003 Accord on Health Care Renewal that was reached by the Prime Minister and the first ministers in February 2003. The health care accord will improve access to the system, enhance accountability on how health care dollars are spent and help ensure that the system is sustainable for future generations.
Budget 2003 sets out funding in support of the accord. Bill C-28 sets out the investments agreed to in the health care accord, including a five-year, $16 billion health reform transfer targeted to primary health care, home care and catastrophic drug coverage that will help provinces and territories accelerate reform in these areas.
There will be an immediate supplement of $2.5 billion to the Canada Health and Social Transfer, the CHST, to help relieve existing pressures in the current system. Provinces and territories will be able to draw down their allocated funds, as they require, until the end of 2005-06.
The existing health and social transfer funding framework will be extended for an additional two years, which will provide a $1.8 billion increase in federal support for health care to the provinces and territories.
There will be an additional $1.5 billion over the next three years for the acquisition of diagnostic equipment and related specialized staff training.
As well, $600 million will go to the Canada Health Infoway to accelerate the development of electronic health records, common information technology standards across the country and telehealth applications.
Then, $500 million will go to the Canada Foundation for Innovations, for research hospitals, and $75 million to Genome Canada for applied health genomics.
In addition, the budget provides significant funding for a range of other initiatives linked to health reform. For example, funding is being set aside for governance and accountability initiatives, including funding for the Canadian Institute for Health Information, to enable better public reporting on the health system and the health of Canadians. Funding will also be provided to support the establishment of a new Canadian patient safety institute.
As a result of these investments, total annual cash transfers to the provinces and territories will rise to $26.1 billion in 2006-07 and $27.7 billion in 2007-08. All these investments — support transfers to the provinces and territories, support for research as well as spending on direct federal responsibilities — will go to improve access and the quality of health care Canadians receive.
In addition to strengthening the funding commitment, the government is taking steps to enhance transparency and accountability of its transfers to provinces and territories by restructuring the CHST into two separate and distinct transfers, a Canada health transfer and a Canada social transfer, effective April 1, 2004, as agreed to by first ministers.
The government is also strengthening the equalization program by permanently removing the ceiling on payments, beginning in 2002-03. These measures, Mr. Chairman, will provide a predictable, sustainable, and growing long-term funding and planning framework to the provinces and territories in support of health care and other social programs.
At the same time, the government strengthens the government's commitment to Canadian children and families in several key areas. Starting January 4, 2004, eligible workers will be entitled to a six-week paid compassionate care benefit under the EI program, to provide care or support to a gravely ill or dying parent, spouse or child. The benefit can be shared among eligible family members.
There will be increased assistance through the Canada Child Tax Benefit for children in low-income families. By 2007, annual benefits will increase to a maximum of $3,243, or up to $3,495 for a child under seven.
The budget also commits to transfer to provinces and territories an additional $900 million over five years for investments in early learning and childcare, as recently agreed to by social service ministers. In addition, the budget provides significant new support for those facing disability. Starting this July, a new, indexed, $1600 child disability benefit will provide additional annual assistance to low- and modest-income families with a disabled child. The budget also targets $80 million per year to provide tax assistance for persons with disabilities.
Another measure ensures that the more infirm children will qualify for a tax-deferred rollover on the proceeds of a deceased parent's or grandparent's RRSP or RRIF. This list of eligible expenses under the medical expense tax credit is expanded to include, among other things, the incremental cost to individuals with celiac disease of buying gluten-free food products.
I now want to turn to the budget measures that are designed to help build the economy Canadians need. To compete internationally and provide a better standard of living for its citizens, Canada must continue to make investments to ensure that we have an increasingly better-educated, adaptable and skilled workforce. Advancements in skills and learning will be vital to improve productivity and competitiveness and to a better quality of life of Canadians.
To help Canadians gain new skills, the budget commits $60 million over two years to strengthen the Canada Student Loans Program to put more money into the hands of students and to better enable post-secondary graduates to manage their debt.
Another measure improves access to interest relief for graduates who are in default on their Canada Student Loans or who have declared bankruptcy, while another initiative extends the eligibility criteria to student loan assistance to protected persons, including convention refugees.
The tax system plays an important role in creating a stronger, more productive economy. An efficient tax structure can enhance initiatives to work, save and invest. It can also support entrepreneurship and the emergence and growth of small business. A competitive tax system is also critical in encouraging investment in Canada, leading to greater economic growth and job creation.
The 2003 budget includes several measures that build on the five-year tax reduction plan, which is providing significant tax relief of about $24 billion in 2003 and more than $30 billion in 2004. For example, the budget increases RRSP and registered pension plan limits to $18,000 over four years and indexes these new limits. It also extends the 12 per cent federal small business tax rate to active business income between $200,000 and $300,000 over four years and eliminates the $2 million limit on the amount of small business investment eligible for the capital gains rollover. At the same time, it improves the tax treatment of automobile benefits for employees and auto expenses for employers, and eliminates the federal capital tax over five years.
Additional initiatives provide for increases in federal tax on tobacco products, effective June 18, 2002 and for voluntary arrangements with interested First Nations to levy a broadly based sales tax consistent with the GST.
Furthermore, the bill proposes three clarifying amendments to the Excise Tax Act to ensure that the longstanding and well-understood policy intention underlying the legislation in the affected areas is respected.
Before closing, I want to discuss one more issue, which is accountability. Canadians made it clear during pre-budget consultations that these investments must be backed by enhanced accountability to Parliament and the public.
Following up on the government's commitment to review the air travellers' security charge to ensure that the revenue remains in line with the cost of the enhanced air travel security system, the budget reduces the charge to $7 from $12 each way for domestic fights.
The health accord sets out an improved accountability framework that includes a commitment by all governments to report regularly to Canadians. Should foundations established by federal statute ever be dissolved, Bill C-28 ensures that any unspent funds would be returned to the government.
The budget announced the launch of consultations on a permanent EI rate-setting regime for 2005 and beyond, to provide employers and employees with certainty about contribution rates. Until that time, Bill C-28 will set the employee premium rate for 2004 at $1.98. Based on the private sector economic forecast in the budget, it is estimated that this rate would generate premium revenues equal to projected program costs for 2004.
Finally, the budget terminates the Debt Servicing Reduction Account, the DSRA, which was established to pay interest on the public debt and ultimately to reduce the debt. There is no longer any need for this account, since the DSRA revenues must ultimately be deposited in the Consolidated Revenue Fund.
This concludes my prepared remark about Bill C-28. Clearly, the 2003 budget delivers a dramatic range of action that maintains the government's commitment to prudent fiscal planning for balanced budgets. Officials from the Department of Finance and Human Resources Development Canada and others have joined me here today, and we welcome your questions.
The Chairman: Before I turn to Senator Comeau, there is one provision in the bill of particular interest to members of this committee: The provision that eliminates the ceiling on equalization payments, which we are happy about. We studied equalization a while ago and that was one of our recommendations, so we were happy when the Prime Minister, in the course of his deliberations with provincial premiers on the health issue, made that announcement.
When does the present equalization program expire? Is it at the end of March?
Mr. Wilfert: There are discussions that we will have a new equalization agreement by April 2004, I believe. As you know, the new figures from Statistics Canada will be released officially in September of this year.
The Chairman: There will have to be legislation in place, will there not, in order to keep the money flowing?
Mr. Wilfert: They are in discussions now, and we realize the deadline is coming so, yes, proposed legislation will be brought forward.
The Chairman: Perhaps you could find out, or you may know, whether one or more of our other recommendations are being considered, in particular the recommendation that we move from a five-province to a ten-province standard in the calculation of equalization.
Mr. Wilfert: At this time, I know that recommendation was made and it is certainly being considered. However, it would be premature to make any definitive comment today.
Senator Comeau: I have a few questions on some other items. I would like to continue with Senator Murray's line of questioning, especially in respect of the clawback on offshore resources in the Atlantic Provinces. Do you know if the department has given any thought to a five-year exemption to the clawback so that those provinces could reach an equitable level with the other provinces? How much would such an exemption cost?
Mr. Glenn R. Campbell, Chief, CHST and Policy Development, Federal-Provincial Relations and Social Policy Branch, Department of Finance: I will speak to the equalization provisions. Negotiations are ongoing with all provinces and territories with respect to the equalization program. They have been working for several months leading up to legislative renewal. The clawback provision, as you described, is one element being considered, but it is premature to specifically mention and comment on any specific recommendation.
Senator Comeau: Would it be appropriate for a parliamentarian, such as myself, to ask if you would do an analysis or a cost estimate for such a five-year exemption? You would not have to confirm that this would one of the elements that you would be looking at. I would simply be interested in having that figure, if possible.
Mr. Campbell: Given that these elements are outside of the bill before us today, we could get back with specific responses to detailed questions.
Senator Comeau: Currently, the EI fund surplus is projected to be about $46 billion for this year. As far as I know, the actuaries are telling us that $10 billion to $15 billion would be more than enough to cover any cyclical problems in respect of rising unemployment.
When will we see a stop to this mounting surplus and a stop to the taxing of our jobs? Taxing jobs has always been known as one of the worst forms of taxation possible because it actually reduces the number of jobs, especially in regions where a greater number of jobs is needed.
Is there any move to finally stabilize that surplus, or will it simply continue to be a source of funding for other programs?
Mr. Wilfert: That is an excellent question and the minister would concur with you that this is an important issue. In fact, in this budget and its ongoing discussions with interested parties, the government will review the rate setting. Submissions by interested parties are being welcomed until the end of this month.
Essentially, the minister outlined in the budget that the premium rates should be set transparently; that premium rates should be set on the basis of independent advice; that expected premium revenues should correspond to expected program costs; that premium rate-setting should mitigate the impact on the business cycle; and that premiums rates should be relatively stable over time. This announcement by the minister in the current consultation process is trying to address the situation that you have raised. I have met with a number of interested associations.
Senator Comeau: The brakes are on, in other words.
I understand that the air travellers' tax will be reduced from $12 to $7. Does this not come after the horses have left the barn, and some of the horses are now lost? In my region, a decent airline is much needed. Within months of the announcement of the $12 tax, Air Canada was gone, along with a means by which we could ship our fisheries products. I remember asking the minister responsible whether an impact study had been done prior to the implementation of this $12 tax. The answer was that no impact study whatsoever had been done.
Small communities lost their railways some years ago; lost their marine transport; have now they have lost their airline. In addition, their highways are deteriorating. All of that impacts negatively on those communities. Canada was built on small communities trying to survive. It keeps getting more and more difficult as time after time they are faced with insurmountable obstacles. Soon enough, these small communities lose the confidence of the business community to invest in their areas.
It is all well and good for Toronto, Montreal and Ottawa, but there are other communities that could be viable if such actions as the $12 tax were not brought in with no thought being given to the impact they may have. I would invite you to revisit even the $7 tax in respect of the impact on some of these communities.
Mr. Wilfert: Senator, I will preface my remarks by saying that, as a former president of the Federation of Canadian Municipalities, I have had the pleasure of visiting many parts of this country and to work with many mayors and councillors in rural and remote areas of Canada. I understand your comments all too well.
The fact is that, in response to events after 9/11, the minister, in conjunction with Transport Canada, brought in a charge to deal with the issue of security, based on the fact that it should be for those who use the airline system.
The government, with this reduction of about 40 per cent, remains committed to ensuring that revenue for the charge is in line with expenditures and an enhanced air traffic security system.
I would point out to you that the minister and the department continue, in conjunction with others, to review this issue. We know that it is important. I am not referring only to the security charge but a whole raft of charges. We know that there are pressures on international airlines throughout the world and, obviously, the Minister of Finance and other ministers responsible for this portfolio are looking at this closely. However, your points are well taken; and I want to assure you that, in fact, this is being examined because we cannot have the kind of situation that you have described.
Senator Comeau: The impact on certain communities has already been felt. It is too late now. I will go on to something else.
I understand that the current health expenditures now are around $24 billion.
Mr. Wilfert: Yes.
Senator Comeau: That figure was about $18.8 billion when the Liberals took power in 1993. We are now, if you discount inflation, roughly where the current government took over in 1993. It is actually less, if you factor in inflation, which brings me to my question: Has any thought been given to introducing a measure to bring about funding stability which would eliminate the kind of shock to the health care system we felt in 1993? Of course, the justification at that time was that steps had to be taken to reduce the deficit, but it did affect the health care system, and we still feel the effects of that today. Might some kind of funding stability be added as one of the cornerstone principles of our health care system?
Mr. Wilfert: I would point out that in the year 2000 the Prime Minister and first ministers met, and a funding agreement at that time was reached of $21.5 billion. Further, the Prime Minister met with the first ministers in February and concluded the new agreement. The reality is that the Government of Canada continues to be a partner in funding. The fact is that the first ministers outlined at those meetings their needs and concerns. The provinces administer the system.
Senator Comeau: My point is that in 1993, the health care system underwent a severe shock. Let us forget the rationale for doing it for the moment and whether it was right, wrong or indifferent. I think the provinces now need to know that this kind of shock will not happen again. We need some kind of a principle whereby the federal government cannot grab the funding for the massive programs that we are so used to. It took years for the provinces to make up for the deficit reduction that the federal government wanted to undertake at that time.
Mr. Wilfert: That is outside the purview of this particular legislation. Whether that is contemplated would be something for future federal-provincial meetings, either of health ministers or certainly of first ministers.
Senator Comeau: The provinces are hesitant to get into the kinds of programs that they would like to get into. They do not trust the federal government to always be there with the dollars required to sustain the programs they would like to initiate. Stability is important.
Mr. Wilfert: I could argue that the provinces have the same fiscal capacity as the Government of Canada — maybe even more — and they must assess their priorities, which is certainly their right.
Senator Comeau: They did that. After the funding cutbacks, they filled in the hole that had been left by the federal government. I think their priorities were right, and I think they did the right thing by filling in that hole. However, it was quite a shock.
Mr. Wilfert: All I can say is that suggestion may be the subject of a future meeting. It is outside of this bill, but I understand your point.
The Chairman: Was the health agreement covered under the Social Union Framework Agreement that provided, as I recall, that three years' notice would have been required for any change in financing on the part of the federal government?
Mr. Wilfert: As I said in my remarks, the agreement was designed with three key words in mind: accessibility, quality and sustainability, which were used by the first ministers. The dollars allocated are based on the needs as were outlined by those ministers at those meetings in February.
As to the specific issue of review or renewal, as you know, Mr. Chairman, in 2000 there was an agreement and, three years later, we have a new one. It will obviously have to respond to whatever the demands down the road may be.
Senator Comeau: On Tuesday, we heard from a number of witnesses from the Canadian Bar Association and the Quebec Bar Association, and their testimony left me concerned with one provision of this bill, and that is GST retroactivity for the school boards of Quebec. I am not going to go through it, I am quite sure you know the story behind it.
Mr. Potter, president of the Canadian Bar Association, told us:
...we have always long understood that these retroactive changes have severe consequences — particularly on the kinds of principles of which I have spoken: respect for the law, the rule of law, the position of the citizen in the society in which he or she lives.... which we are looking at using this unbelievable power of Parliament to change history retroactively.
Earlier you talked about the kind of Canada we want. The kind of Canada I want is not be the kind of Canada that the Canadian Bar and the Quebec Bar were talking about on Tuesday. Whatever the merits of the Crown's case — and I am not a lawyer, so I got a little bit confused as they were going through some of the provisions — the simple message passed on at that time was that there was an undertaking by the Department of Justice, yet it appeared that the promise they made on paper is not worth the paper it is written on.
Would it not have been more prudent to deal with this in a better fashion than is proposed in this bill?
Mr. Wilfert: I appreciate the question. I would like to, with a little background, outline a couple of points and directly answer it.
As I am sure members of the committee are well aware, since the inception of the GST in 1991, school boards have been able to claim rebates up to 68 per cent of the GST they pay on purchases for use in their GST-exempt activities. I have some familiarity with this because the Federation of Municipalities addressed this issue before the government of the day and arguing that they should be 100 per cent exempt. The fact is: This particular policy and the 68 per cent has been in place since 1991. It has been well understood by the sector, and it has been administered consistently since the inception of the tax.
In 1996, some school boards sought to take advantage of, in our view, a technical argument put forward by some private sector advisors, claiming 100 per cent GST funds in the form of an input tax credit, similar to what taxable businesses recover. Instead of the 68 per cent, they were looking for 100 per cent. They took their case to court.
Senator Comeau: They won.
Mr. Wilfert: If I might, while their argument was rejected by the tax court level, their case was won at the Federal Court of Appeal in October, 2001. We agree. The first challenge was initiated by 29 Quebec school boards, the Deschênes case, and they won their case, and we respect that.
The minister, on December 21, 2001, announced that a retroactive change in the law affecting the GST credit for school transportation services would apply. However, it exempted — and I emphasize ``exempted'' — the retroactive application of those 29 school boards. Therefore, those are not on the table and have never been on the table.
Since then, other boards — both in the Province of Quebec and the Province of Ontario — have come forward with claims based on that.
As you know, the announcement was very clear that minister was going to introduce legislation. In doing so, in January and February of 2003, a number of school boards did pursue the GST appeals; understanding, however, the intent of the government with regard to the legislation.
I hope all senators have copies of the letter from Ogilvy Renault and the response. The government received a letter from Ogilvy Renault dated December 13, 2002 in which they indicated that they presumed that they would be going ahead with the appeals. Notwithstanding that the announcement had been made, we wanted to send a very clear response to that particular law firm. In a response dated December 16, the last paragraph stated:
In that event, the present settlement will not constitute a constraint on the power of the Minister of National Revenue to reassess in accordance with the terms of such retroactive amendment.
The minister made an announcement on December 21, 2001. Notwithstanding that, boards — and it certainly was their right — moved forward and looked for relief. They did so under the auspices that the intent of the government was very clear: The government was going to move ahead with legislation that is now before you.
The fact is, senator, we did not get a response to the letter of December 16, 2002. There was silence. I am not a lawyer either, although I have taught law, but I would suggest that the silence means that they acquiesce. If we are to be faulted, we may be faulted for the timing. It has taken a while. The fact is that we do have, and I would refer to, the appropriateness of retroactivity. The Public Accounts Committee, in 1995, declared the appropriateness and, indeed, the imperative of retroactivity in certain circumstances and called upon the Department of Finance to develop a criterion when the retroactive amendments to the tax law are justified.
I would also point out that the proposed amendments take into account the government's established criteria for making those retroactive amendments. There is a long-standing practice and legitimacy of amending tax laws in accordance with and as of the date prescribed by a ministerial announcement that precedes the enactment of the amending legislation, and it is one that, as all honourable senators know, is established in Canadian parliamentary tradition.
It is our contention that this is not contrary to the rule of law. The fact that court judgments are issued does not change Parliament's legal authority to enact such retroactive legislation. I will conclude by saying that, in particular, the intent was very clear. In a letter dated as late as December 16, 2002, to Mr. Yves St. Cyr of Ogilvy Renault we made our position clear, and there was no response. He provided testimony, and I have been through this before the standing committee in the House
I would suggest that the measure is legal. It has certainly been prescribed in law. We made our intent well known — excluding those 29 school boards who won their judgments in October of 2001.
Senator Comeau: Someone made a technical blunder in 1991. We found this out a number of years later. The minister tried to fix the situation by going back to 1991 and, in the process, sending a message to the Canadian Bar Association. I am not a lawyer, but when I had the president of the Canadian Bar Association telling us that this will not only impact GST and other tax matters, but it will also have an impact throughout all aspects of the legal professions, it started worrying me.
I agree that Parliament has the legal authority to do whatever it wants retroactively. It can change the date of the coming into force of legislation if it wants to, but should it? Should we not be admitting that we made a mistake in 1991? Let us not compound the mistake by sending a message to Canadians that they cannot depend on their government to admit a mistake made in 1991. It was not even a government of your party at the time. You could say that the other guys made the mistake.
Mr. Wilfert: We could do that, but we are facing our responsibilities. Again, I would emphasize that, in January 2002, other school boards went forward based on the October 2001 decision to which I referred. Evidently, no agreement binding the Crown in these matters existed, and the school boards brought none forward. They appealed to the Federal Court of Appeal. They clearly had the knowledge that, in doing so, the government had made its intent well known through the minister on December 21, 2001.
Up until this decision by the school boards to move ahead, in 1996, the legislation was very clear from 1991. It is not the intent to open up the entire sector, which would include municipalities, hospitals and universities. The government does not dispute the earlier court decision. The government stated its position in writing as late as December 16, 2002, and there has been no response to that letter, I would argue that, when the bill came forward on February 18, 2003, the intent was very clear. The minister introduced draft legislation, which he had clearly signalled from the beginning. The reality is that we were dealing with this issue. We decided to correct it in a legal and constitutional way. There is nothing to prohibit it.
We are saying to the 29 boards that we agree. Once the intent was clearly signalled by the government, they decided to move forward. I will point out that other school boards were waiting in the wings. Others could have joined those 29 boards, but they decided to wait and see what happened. They were successful, so others are lining up. That is up to them, but the reality is that, once the minister made the pronouncement, they moved forward knowing that, and again we enforced that in our letter from the Department of Justice. It is important that all senators are aware of that argument.
Senator Comeau: What dollar amounts are we talking about here?
Mr. Wilfert: We are looking at a total, between the two provinces, of $18 million.
Senator Comeau: Canadian Bar Association lawyers talk about citizens no longer trusting their lawyers. Then Parliament rejects decisions of the courts. The court makes a decision; the citizen wins; the government decides it does not want the citizen to win, and changes the law retroactively. Those are the kinds of remarks that were made. You can make all the arguments you want. This is what is being passed on to me. Should I take your word and not worry about what is being said by others? Should I take the word of the Canadian Bar Association, of Mr. Potter, their president? I am tempted to heed Mr. Potter's warnings and say, ``There must be respect for the law or there will be grave consequences.'' There is an unbelievable power of Parliament. These are the kinds of dire consequences that were presented to us earlier in the week.
It worries me. For $18 million, I do not know if it is worth it.
Mr. Wilfert: Senator, I think the principle is more important than the money.
Senator Comeau: The principle of being able to retroactively change a law?
Mr. Wilfert: The principle is that, as we know, the GST application has been in effect since 1991. It was 68 per cent, and everyone knew that. There was, as you have indicated, to use your words, senator, there was a technical blunder. Maybe a technical opportunity availed itself to the boards. It does not in any way diminish the fact that the intent of the legislation is clear. The intent of the legislation is that school board ``X'' gets 68 per cent, period.
The government does not dispute the fact that they won their case in the Federal Court of Appeal in October 2001 because, up until that point, nothing was registered. On February 21, 2001, the minister registered his intent to deal with that issue. If you want to open up the entire GST legislation, that is a different issue. The only issue before you today is the fact that, clearly, since December 2001, we did not hide the intent of the government to introduce legislation to deal with the issue.
The fact is that boards went after the legislation was brought into the House in February of 2003. A letter was sent by the Department of Justice. If you want to debate or have a wider discussion about the GST, that is something we will have to talk about.
Senator Comeau: I never even suggested that. Was there not some kind of agreement between those outside the 29 school boards and the government that they would not go to court pending the outcome of the Deschênes decision?
Mr. Wilfert: I will comment again and then turn it over to Mr. Roy.
As I pointed out, there was an exchange of letters between counsel. It was clearly stated that the consenting to judgment would not constrain the Minister of National Revenue for reassessing the school boards, if the new legislation announced by the Minister of Finance in December 2001 was enacted. It was very clear. It was put in writing. That was the move forward under that understanding from the very beginning.
I will now turn it over to Mr. Roy, who, I am sure, can give you more specific details.
Mr. Yvan Roy, Assistant Deputy Minister, Law Branch, Department of Finance: From reading the transcripts of the debates both in this place and in the other place, I think it is fair to say that some people could be left with the impression that the federal government, perhaps, did not act completely honourably in this matter.
Senator Comeau: Never. Perish the thought.
Mr. Roy: Senators, let me try to set the record straight on a number of things.
The first one is the point you just raised. Prior to the Deschênes case, there was an agreement between counsel and the other 28 school boards, for those cases to be held in abeyance until judgment was rendered.
I was a bit troubled when I saw that allegation made. I went back to the record. I was not the lawyer of record on this. I am with the Department of Finance and also with the Department of Justice. However, I have gone back to these people. I have come across — because it has been shown to me — the discussion that took place before the Tax Court judge as to what was going to happen with this.
On the record, the lawyer representing the federal government said there was no agreement whatsoever that could be made, that other cases would be held in abeyance waiting for that judgment to be rendered. Indeed, if that were the case, chances are that, when the lawyers appeared in January 2002, in order to obtain judgment in the other cases that we are talking about here, this would have been raised with the judge.
The first comment I would make as a lawyer is, ``Hey, there was agreement to that effect and now we should have that enshrined in a judgment.'' That was not the case. What you simply had was an agreement that the 29 cases would proceed, and that was it.
In this matter, the proof of the pudding is in the eating. quite frankly. You have to remember that the school boards lost in Tax Court. There was no incentive for the other 50, 100 or 200 school boards that have an interest in this matter to follow suit. They also would have lost. They simply waited for the judgment to be rendered elsewhere. That is fine.
However, what you have as of December 2001 is, in my humble estimation, is a bit of a race to judgment. Less than a month after the Minister of Finance said that we would have retroactive legislation, a decision was made. It is their right to go ahead to seek judgment from the court.
There is also the notion that consent judgment means something magical, as if the government was acting in a less than honourable manner. I think it was said yesterday in the debates that took place here that the left hand did not know what the right hand was doing. On the one hand, how can you consent to judgment while on the other you go ahead with legislation?
Purely and simply, ``consent judgment'' is a term of art. There are some definitions as to what that means. I have brought a couple of them with me to illustrate my point. I will not be technical here. The Dictionary of Canadian Law says that consent judgment is purely and simply a judgment, the terms of which are agreed to by the parties.
What happened in 2001? Some people said, ``I have a right to go to court to obtain judgment.'' What is the Attorney General supposed to do in those circumstances? Is he supposed to go to court and fight this tooth and nail, if he does have a case, if the facts and the law match? The responsible thing to do is for the government to say, ``You want judgment. The law is on your side. We will have consent judgment.'' That is all that means. I think the government acted perfectly properly and perfectly honourably.
However, the government is also saying that its intention is to change the law retroactively. That is found in the letter, to which Mr. Wilfert referred, to the lawyers representing the school boards on December 13, 2002.
Three days later that lawyer said, ``Surely, this judgment I am going to get is not going to be affected by the retroactive legislation.'' The lawyer says that in so many words in his letter.
That very same day, the lawyers acting for the government said, ``No, no, do not be mistaken. This new legislation will affect this case, if that legislation is ever passed,'' and those lawyers do not know whether the legislation will be passed in December 2002. The budget comes out, of course, in February of 2003.
That portion of the letter in the original is actually underlined. Thus, there is no mistake here.
There are three points that I would like to make. First, there was never an agreement that all of those cases were to follow on what would happen in the Deschênes and other cases. The record should be clear on this.
Second, consent judgment is simply that — parties agreeing that the law and the facts match and are willing to have a judgment from the court. I would draw your attention to a passage from the discussion that took place yesterday between Senator Day and Mr. St-Cyr where he said that, basically, the judge told them that, given the state of the law, they had a right to a judgment.''
Senators, again, the proof of the pudding is in the eating. When the second batch of cases came before a judge for consent judgment in March of this year, the government said that legislation would be forthcoming. The ways and means motion had already been tabled. They asked for an adjournment. There was a refusal to agree to the adjournment and the judge said, ``I have no choice. The state of the law is this now. I have to render judgment.''
As to consent judgment, there is no moral connotation. It is a term of art. We agree on something.
Third, when that was done, it was done with the parties knowing full well what they were doing because it could not have been made any clearer than in the letters that were exchanged in December 2002.
With all of this, we are saying the government has acted honourably.
As to the policy issue that you have been raising, should we have retroactive legislation?
Senator Moore: No.
Mr. Roy: That is a fair question and a matter for debate. Is it a good thing?
Senator Moore: No, it is not.
Mr. Roy: I know Mr. Potter and I know Mr. Leduc.
[Translation]
He is president of the Québec bar association and a former classmate. I know Mr. Tassé. He is the one who hired me at the Department of Justice.
I know Mr. Potter. I have great respect for these two people. They are honourable men who defend a defensible position.
[English]
The point is this: If you push the argument put forward by Mr. Potter, you will never have retroactive legislation.
Senator Comeau: Right on.
Senator Moore: That is good.
Mr. Roy: That is, as I said, a policy position that is defensible. However, we have had a number of pieces of legislation that have had a retroactive effect. I will refer to three of them.
In 1989, in the case of Air Canada v. B.C., the Supreme Court Supreme Court decided that it was perfectly constitutional to have retroactive legislation. In 2001, in the case of Eurig, out of the Province of Ontario, it was said that in taxation matters we have to protect the tax base, and we have to protect the principle when the legislation is being used for something that is not as appropriate as it should be, and retroactive legislation was enacted.
Retroactive legislation has been passed with respect to judgments rendered. It has been said in some places that there is no precedent for this. In certain instances the government must do it. A case in point is the case involving Val- Saint-François, which some of us may remember.
[Translation]
Some of us will remember the painful ice storm episode of five years ago. The residents of Val-Saint-François saw the transmission towers crumble to the ground in their area. The Government of Quebec chose to rebuild those towers, and it did so quickly. In order to do so, it moved by order-in-council. The citizens of Val-Saint-François said...
[English]
Senator Comeau: I will stop you at this point because I understand the point and I do not need all the examples. I do not think it is a good example to compare retroactivity with the ice storm.
The Deputy Chairman: Senator Comeau, you stopped the witness midstream. Are you in agreement that it is not precedent-setting to have retroactive legislation?
Senator Comeau: That is not my line of questioning at all.
The Deputy Chairman: That is the point he is trying to make. I guess we misunderstood the question then. I think the witness is trying to answer.
Senator Comeau: Because time is running out I just have one last comment and we can go on to other witnesses.
The Deputy Chairman: Do you agree with that, senator?
Senator Comeau: I know my time is up.
The Deputy Chairman: Some time ago.
Senator Comeau: I have only one last comment. Throughout the presentation up to now, we have heard that the minister warned the school boards that he had legislation pending to correct the technical blunder made in 1991. That presumes that Parliament will pass the retroactive legislation. Should Canadians now assume that, when a minister says legislation will be passed, it will be passed? That presumes that the whip will be determined to have such bills passed, so the public should not expect lawyers to respond, if justice officials say that legislation will be introduced.
That is the one the point I want to get across. We may not always have a group of people who are willing to respond to the government's directive and the Government Whip. I say that very forcefully. We need not always assume that statements in letters saying that the minister will force a bill through will come to pass. We should not always count on that. Maybe this time it will happen; maybe not.
I will be urging my colleagues in the Senate, on principle, to say no to the minister. I will be urging them not to pass this because there has been a presumption that we will pass it. That is a fair warning to the minister and to the justice officials not to state these kinds of assumptions in letters.
The Deputy Chairman: Can we take that as a comment, or did you want a response?
Senator Comeau: That was a comment.
[Translation]
Senator Ferretti Barth: My question is naturally very different from that of senator Comeau. On page 7 of the English version of your brief, you state that the airport charges will be reduced to $7 from $12 and to $14 from $24. I would like to know if the air travellers security costs are covered by these charges paid by passengers or if these costs will be paid by other sources of revenue.
[English]
Mr. Wilfert: Mr. Chairman, the travelling public pays them and in this case it is consistent with the concerns that were raised in part of the review. The amount of $329 million is being applied to reduce the level of the charge. The charge is not there to make money; it is there simply to cover the cost of the security equipment that is being used at airports across the country.
Senator Ferretti Barth: I understand this, but my question was:
[Translation]
Are the charges paid by passengers at the airport for air transportation safety sufficient to cover the expenses related to passenger safety? Does the Department of Transport have enough money through these charges paid by passengers to cover these expenses, or must it seek out other sources of revenue to cover the entire cost? If such is the case, what are these other sources of funds?
[English]
Mr. Wilfert: The intent, senator, is that the monies raised by the security fee, projected over a five-year period, will cover those costs.
[Translation]
Senator Ferretti Barth: In part 10, in relation to income tax measures, Bill C-28 implements an increase in the national child benefit supplement. Does this increase of the supplement mean that there will be a clawback from welfare rates for those families who get the child benefit supplement?
We know that low income families are often welfare recipients. If we pay $150 for a child, it seems to me these families will have to report this amount for welfare purposes. Will the supplement be clawed back from families on welfare?
[English]
Mr. Gérard Lalonde, Senior Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance: This was one of the features of the child tax credit when it was introduced as a replacement for the previously existing family allowance, and one of the features of this was discussions with the provinces to ensure that the amounts delivered through the child tax credit would not then affect social programs. It was part of the government's efforts to fight the so-called ``welfare wall.''
[Translation]
Senator Ferretti Barth: If this national child benefit supplement is not taken into account for welfare purposes, should we understand that this is one of the means to fight child poverty?
[English]
Mr. Lalonde: Clearly, senator, that is one of the objectives of the child tax benefit. I do not propose to say that it is the only instrument of the government or governments to combat child poverty, and clearly the government has made a number of statements on that front, but certainly it is a step in the right direction.
Mr. Wilfert: It is an important instrument of government policy to overcome what would be called the welfare wall. It has been recognized by sociologists, by economists and others, as being, probably, the most important initiative to deal with the issue of child poverty that has been undertaken up to this time.
Senator Moore: I want to pursue the topic that Senator Comeau raised with respect to the school board matter and the issue of retroactivity. I want to get the facts straight.
The Deschênes decision, which was favourable to the school board, was registered in October of 2001. There were 29 school boards — 28 others plus Deschênes — that benefited from the decision to they extent that they would get a 100 per cent rebate of the GST that they paid on transportation equipment.
Mr. Wilfert: That is correct, senator.
Senator Moore: I think you said that the minister announced his intention to introduce retroactive legislation back to 1991, and that he did so. I am not sure how he did that. You said there was an announcement, and I thought you said that it was on December 21, 2001.
Mr. Wilfert: That is correct, senator.
Senator Moore: How did he do that?
Mr. Wilfert: Mr. Chairman, a press release was sent out indicating the intention of the minister. I would point out to you, senator, that a ministerial announcement that precedes the enactment of legislation is well known in parliamentary tradition. He followed a course of action, which was a press release on the Web site of the Department of Finance, et cetera.
I would point out to you, senator, after those 29 school boards obtained their judgments, there were in fact other appeals that were in the system that had not gone to trial. In fact, it is announced, and the intent of the government is very clear.
I wanted to just say, if I might, Mr. Chairman, that it is never the intent of the government, and certainly of the Minister of Finance, under any circumstances, to mislead anyone. That was very clear in the announcement. There was no attempt to mislead anyone. It was very clear in writing. A well-known parliamentary tradition was being followed, again, to deal with an issue, which I think I have outlined clearly, in response to, but not in any way impinging upon, the original judgments of those 29 cases of October 17.
Senator Moore: I understand all of that, but you say others appealed or others took action and that there were some cases in the system. They had every right to do that — every right.
Mr. Wilfert: I do not disagree.
Senator Moore: You make an announcement and, by doing so, you take away their rights. I think it is awful. I do not like retroactive legislation in any form. Society must have certainty to function. That certainty in Canada is based on the rule of law. You cannot move the goalposts. Once the pattern is set in place, people rely on it. If you make a mistake, so be it. That is life. It is not a perfect world. You pay and you move on.
I think this is repugnant to our whole system. I do not like it, and I do not think we should be doing it.
Mr. Wilfert: I could certainly argue the merits of the senator's comments.
Senator, assume that the government is at fault and brings in retroactivity to benefit individuals or applicants in cases, which has been done in the past. Should we not do that? In fact, it does work both ways. We are acting on sound legal principle, on parliamentary tradition. However, the fact is, when retroactive legislation is brought in that benefits individuals or elements in society, we do not hear complaints from people saying, ``You should not give them back money,'' because, in fact, they are entitled to it. In this case, there was a clearly recognized issue to which the minister has responded.
That is the other side of the coin. We have also done that. I would assume that we would not hear much argument against doing that.
Senator Moore: Those situations may exist, but I am looking at a situation here involving people's right to due process. I presume that some were stopped midstream. I do not know how far they were into the process. Others were told they could not participate. I do not think that is right.
Mr. Wilfert: I would conclude, senator, by saying that the intent of the legislation was very clear. It had not been in dispute since 1991. The fact that in 1996 certain boards decided to move forward, the fact that they received a judgment, and the fact that the government does not dispute that judgment prior to the December 21 announcement is not in question. What obviously is in question is your concern, and I understand your concern, with regard to the issue of retroactivity. However, I have outlined and I would continue to outline, Mr. Chairman, that we are well within our rights to do so, both for those who benefit and those who may not.
Senator Moore: You told us others had started. You stopped them midstream.
Mr. Wilfert: They had not gone to trial. Some of them waited, of course, to see what would happen.
Senator Moore: They had the right to do that.
Mr. Wilfert: They had their right, but Parliament has the right to introduce retroactive legislation, based on the fact that the intent of the legislation was clearly understood. If the intent of the legislation is 100 per cent, then say so. It is not. Therefore, the announcement, and in fact the writing of those letters, which, in fact, was underlined, is the case that I have put forward. It is the case of the minister.
Mr. Chairman, we could debate this for hours, but the reality is that that is the intent. I would like honourable senators to also consider the big picture.
We have before us an important piece of legislation: the budget. In this budget, we have important initiatives on health care, child poverty and a whole range of areas that are important to Canadians.
Senator Moore: Oh, yes.
Mr. Wilfert: I appreciate the issues you raise, honourable senators, but I want to remind you that we are dealing with a big piece of legislation, which, in fact, responds to concerns we have heard across the country. I would again like to say, Mr. Chairman, that, at any time, obviously, it is important to focus on the other issues as well, but hopefully I have responded effectively to the senator. I know the senator may have a different view on retroactivity, but I would be the first to tell you if we were doing something that was not either constitutional or legal. Obviously, we would not be in that position and neither would the minister.
[Translation]
Senator Gauthier: I am confused. You mentioned that the rule of law is supreme. You also talked about parliamentary tradition. I have been around this place for 30 years. Tell me what parliamentary tradition permits a minister to change the rules of the game by way of a press release. I do not understand. Parliament has not spoken. We have not expressed any opinion. It was a mere press release. I need a better explanation.
[English]
Mr. Wilfert: Again, senator, I refer you to 1995. The public accounts committee declared the appropriateness and, indeed, the imperative use of retroactivity in certain circumstances. It asked the Department of Finance to develop criteria, which it did, in terms of being able to justify in the case of tax law. These amendments before members of this committee are established based on the issue of retroactivity. My colleague has pointed out examples — in fact, rulings by the Supreme Court of this country — that clearly indicate that retroactivity, although viewed by some of you as not something you like, has worked in the opposite way and has benefited individuals when the government has erred.
I respect your comments, senator, but the answers I will continue to give will be the same.
I believe Mr. Roy has something to say.
[Translation]
Mr. Roy: I would like to make sure there is no misunderstanding about the legal effect of this press release.
The press release did not change any law. It simply stated the intent of the Minister of Finance to ask Parliament to pass retroactive legislation. This allowed the taxpayers and the citizens to govern themselves as they wished. The press release merely informed the citizens who might be affected about the possibility legislation might be passed.
This is standard practice. This press release was just one way of announcing that retroactive legislation would be tabled in the House. Everybody knows that the final decision belongs to Parliament.
[English]
Senator Mahovlich: I think your timing is off. I do not feel comfortable with this. You cannot have 29 school boards getting relief where other school boards are left out. That is all I want to say about that.
Another topic involves far more money, and that is the Canada Student Loans Program. Are there many student bankruptcies? How can a student go bankrupt?
Mr. Wilfert: One bankruptcy is one too many, obviously. How do they get into that situation?
Senator Mahovlich: They must have lawyers.
Mr. Wilfert: I will not comment on that. I do not know whether things have changed much since my day.
Senator Mahovlich: I would think that a sincere student would make every effort to pay off a government loan.
Mr. Wilfert: I would invite you to come to my constituency office on any day of any week. Some individuals who come in are not cognizant that they had a loan. They thought they had a grant. They did not really know the details of the loan, and, in fact some actually owe more money today than they did when they took out the loan.
I am not sure what institutions they graduated from, but I would suggest to you that, being on their own on the street is of concern to me. I say that to them. I say, please go back to your university or college, find out how much you actually owe. I ask them how they got into this situation. Some will tell me that they bought a car. That was not the intent of the loan. Young people sometimes do those things. I do not try minimize the importance of the issue. My colleagues will also tell you that they have people who come into their offices and tell amazing stories. One day I might write a book on that topic alone.
Senator Mahovlich: The Liberal government wants accountability. If they are handing out $60 million a year in loans, I think we should keep an eye on the students.
Mr. Wilfert: That is also the intent of the legislation. We do not want to give the impression we have bankrupt students all over the nation. The reality is, where there are very difficult circumstances, we will address those. However, clearly, and I am sure officials can report, the overwhelming majority of loans that are given, both provincially and federally, are repaid. There may be longer terms. People may need to extend the payments on their loans. We give information to students and that is usually all they need.
The Chairman: Is there anything you would like to say in closing?
Mr. Wilfert: Just this is the first time that I ...
[Translation]
Senator Biron: Did this letter from the government that informed the school boards of it s intent to introduce legislation advise the school boards to hurry up and to proceed without delay with their court case?
[English]
Mr. Wilfert: The intent, as I said before, was demonstrated on December 21, 2001. They had the right to move forward and ask for those consent judgments. Notwithstanding that, in response to specific letters, the Department of Justice issued the letter of December 16, clearly indicating that, notwithstanding any judgments, the intent of the government, which was demonstrated, would in fact be to take the course of action that is before you today.
The school boards, through their solicitors, would have been well apprised of the situation.
[Translation]
Mr. Roy: This press release of December 21 only stated the intent of the government. Rather than having retroactive legislation that would take away the advantage, the court decision obtained by the Deschênes school board clearly indicated those school boards would be able to get the benefit of those judgements.
As for the other school boards, they had no indication as to what might happen. The intent of the government was to advise them retroactively that they would not be entitled to these rebates.
The letters sent out in December 2002, one year later, were intended to letting the school boards who were already before the courts know — and this was after the press release issued on December 21, 2001 — that they might be able to obtain a decision in their favour under the law as it then was but that there could be new legislation coming in with retroactive effect. The government simply wanted to state the facts as they were, nothing more.
The interested parties obtained therefore their consent to judgment in full knowledge of the facts.
In 2001, the government indicated its intent to ask Parliament to pass legislation that would not affect the initial 29 school boards. Later, when all these other school boards went to court, they were told that they might be able to obtain a judgment in their favour but that legislation might be passed by government that would have certain effects.
[English]
The Chairman: On another subject, I would like to know, if someone has the information here, whether the Social Union Framework Agreement covers terms of the health care agreement reached among first ministers in February? Does anyone know the answer to that?
Mr. Campbell: Yes, the Social Union Framework Agreement does govern the provisions that come out of the first ministers' meeting. However, I would like to point out that, given it was a meeting and decision of first ministers, they in effect waived the notice provisions in SUFA.
The Chairman: Not for all time surely?
Mr. Campbell: No, but for the provision as agreed to in the accord of February 5.
The Chairman: Are you referring to the changes that were made in the accord?
Mr. Campbell: The change that was made.
The Chairman: It would not be possible, I presume, for the federal government to make unilateral cutbacks in the funding arrangements without the three years' notice provided for in SUFA.
Mr. Campbell: That is correct. I would like to point out that, as part of that agreement, stability is a most important factor. We have a five-year legal framework now that will be passed by Parliament.
The Chairman: There are those who bet they will be back at the table within two years, but that is another subject.
Mr. Wilfert: I want to say, Mr. Chairman, that I have never had the pleasure of being before this committee. I have been before Senator Kolber's committee. I appreciate the comments, the very thoughtful questions and just thank you again for hearing me this afternoon.
The Chairman: Very well. Thank you very much, Mr. Wilfert. You are a very good witness. I would also thank Mr. Roy and the other officials from the various departments.
Colleagues, with your agreement, we will move to clause-by-clause consideration of this bill. Is it agreed?
Hon. Senators: Agreed.
The Chairman: I understand that at least one amendment will be proposed by Senator Beaudoin. I know when he proposes to do that. Meanwhile, is there agreement to proceed by grouping clauses according to the 11 parts of the bill. Is that agreed?
Hon. Senators: Agreed.
The Chairman: Is it agreed to stand the title and clause one.
Hon. Senators: Agreed.
The Chairman: In Part 1, shall clause 2 carry?
Hon. Senators: Agreed.
The Chairman: In Part 2, shall clauses 3 to 8 carry?
Hon. Senators: Agreed.
The Chairman: In Part 3, shall clauses 9 to 14 carry?
Hon. Senators: Agreed.
The Chairman: In Part 4, shall clauses 15 to 30 carry?
Hon. Senators: Agreed.
The Chairman: In Part 5, shall clauses 31 to 43 carry?
Hon. Senators: Agreed.
The Chairman: In Part 6, shall clause 44 carry?
Hon. Senators: Agreed.
The Chairman: In Part 7, shall clauses 45 to 60 carry?
Hon. Senators: Agreed.
The Chairman: In Part 8, shall clauses 61 to 66 carry?
Senator Beaudoin: I have one amendment and it is:
That Bill C-28 be amended in clause 64 on page 55:
(a) by replacing line 19 with the following:
``into force on December 17, 1990, except in respects of cases in which school authorities and lawyers representing Her Majesty the Queen in right of Canada have agreed to file consents to judgment before the appropriate court.''; and
(b) by deleting lines 20 to 37.
The Chairman: The written copy in English says ``lines 20 to 39''.
[Translation]
In the French version, the deletion would be lines 23 to 45.
Senator Beaudoin: And here is the French text:
That Bill C-28 be amended in clause 64, on page 55,
(a) by replacing line 19 with the following:
``into force on December 17, 1990, except in respect of cases in which school authorities and lawyers representing Her Majesty the Queen in right of Canada have agreed to file consents to judgment before the appropriate court; and
(b) by deleting lines 20 to 39.
The Chairman: You all heard the amendment moved by Senator Beaudoin. Would you like to speak to your motion?
Senator Beaudoin: We obviously need to respect legal principles. There are res judicata principles involved here as well as the rule of law. We also have principles of partial retroactivity. Obviously, the Constitution does not preclude a certain form of retroactivity.
[English]
Senator Beaudoin: If we comply with the Constitutional system that we have in our parliamentary democracy, having regard to the facts as exposed in this committee by the witnesses and the lawyers, we must come to the conclusion that this amendment appears to be quite necessary to give effect to our system of law.
The testimony of the lawyers that I have heard leads me to the conclusion that the law has not been complied with, and this is why we are under the obligation to bring an amendment to clause 64 to give effect to the principle of administrative and constitutional law. A document is not necessarily an amendment to a statute. We have a system of law and a system of introducing amendments to statutes that we must follow under our system of law and, in my opinion, it has not been followed to the extent that it should have been followed.
Senator Comeau: On the same point, if I may, the witnesses raised the question of retroactivity. I do not think any of us is questioning the Minister of Finance's power and duty to say, in his budget and statements, ``As of this date, these are the new rules''. Eventually, Parliament will, hopefully, change the rules; however, everyone knows what the rules are at this point.
We are presented with the Deschênes decision and we are now changing the rules that applied many years ago. That is offensive, not the fact of a Minister of Finance announcing that this is what will apply from now on. It is the same as if we were to go back in history and look at Senator Mahovlich's career as a goalie and say that we will remove X number of goals from his credit during certain seasons. We should not be doing that. He knew what the rules were; he played under those rules; and we should not change the rules retroactively. It is offensive. As has been mentioned before, it is quite repugnant.
Senator Mahovlich: The goalpost was rubber, so it did move.
Senator Comeau: What is even more repugnant is the fact that the minister then says, ``Not only will I change the rules to apply retroactively, I will ask Parliament to do it''. It is presumptuous to say that Parliament will be whipped into doing this. If ministers are allowed to give press releases and state what we as parliamentarians will do, there can be no more rule of law.
What our community, citizens and taxpayers want is stability and certainty, not for the government to come along and start changing the rules after everyone has been playing for years.
I think this amendment is entirely in order and I think it is incumbent upon us in our capacity as parliamentarians to agree to it. Remember that you were all asked to serve in Parliament to do right by the Canadian public, and it is our duty to do that. Our duty is to the Canadian public, not to the whip, and not to our government leader.
The Chairman: Thank you. Senator Gauthier?
[Translation]
Senator Gauthier: Senator Comeau just raised an interesting question. Is this amendment in order, in your opinion?
The Chairman: From the viewpoint of the Chair, it is in order.
Senator Day: It will increase government expenditures.
The Chairman: The amendment would limit government responsibility and amend section 64 as follows:
``into force on December 17, 1990, except in respect of cases in which school authorities and lawyers representing Her Majesty the Queen in Right of Canada have agreed to file consents to judgment before the appropriate court.''
Therefore it does not impose any new tax on Canadian citizens.
Senator Gauthier: I do not have any problems with the motion. I trust your judgment. But I am really concerned about the credibility of our court system. It is the credibility of courts which is being jeopardized by the bill. Whenever a court renders a decision, this is supposed to mean that the matter is settled. I do not think court decisions can be changed under the rule of law without jeopardizing the credibility of our courts. So if you say that the motion is in order and that there are no fiscal implications, this is fine with me.
The Chairman: There is always a possibility to appeal to the Speaker of the Senate.
[English]
Senator Day: Mr. Chairman, if I might comment on this to bring us back to perspective: This is a budget implementation bill and it deals with many different issues.
Senator Gauthier raises an interesting point, that is, whether, in a budget bill, this committee can recommend to the Senate this kind of amendment which will result in further expenditures by the government to a select group.
The Chairman: Are you on a point of order?
Senator Day: No, I would just comment on the second point.
The Chairman: I just recalled some precedents, senator. Have you been around 24 years?
Senator Day: I hope, Mr. Chairman, that I shall be.
The Chairman: During the GST debate amendments were made to make the GST not applicable to reading materials, which would obviously have cost the treasury.
Senator Day: It would have been interesting. Perhaps I may finish with my reasons for not being able to support your amendment, Senator Beaudoin. All of the school boards, and there are many of them, can be divided into three groups. The first group are those we do not have to talk about — the Deschênes group. They got their judgment; they are excluded from this legislation. The second group is the subject of your amendment, that is, those that had pending legislation. The third group are those who did not file appeals. All of these people, from 1991 through to the time that the Deschênes people started their lawsuit, were operating under a set of rules that everyone understood. Nobody thought that this thing was broken. Everyone operated under these rules with a clear understanding of what was going on. They applied for, and got, 68 per cent of the GST that they had paid in.
Then someone came along and said to them, ``We can get you from 68 per cent to 100 per cent. We can get you 32 per cent more, and we will work out the deal with you on that, but let's do it.''
The court found that the rules under which everyone was playing — government and the school boards — were not what they were thought to be. Therefore, the government, by way of the news release that was issued, said that they had to clarify the situation to ensure that the rules were as everyone thought they were.
It is not a matter of, through retroactivity, changing the rules and the playing field. This is clarifying and rectifying something that the courts found was not what everyone thought it was.
This amendment goes against the basic principles that the Canadian Bar Association argued here yesterday. They said ``on general principle'' it should apply to everyone. Retroactivity should apply to not only one group. You have agreed that retroactivity is appropriate in certain circumstances. For me to agree to this amendment would be to agree to compensate a group of people who are represented by lawyers, who said they accepted the principle of retroactivity. In effect, what we are doing is bailing some lawyers out of a situation. That is, in effect, what is happening. I cannot agree to an amendment that favours a certain group, when their own lawyers did not negotiate that deal for them.
Senator Beaudoin: We have a statute that originated in the House of Commons, as it is in the Constitution of Canada, which has been followed, no doubt. The Senate has to accept or reject the bill, and we have many precedents in this area.
You seem to be saying that, because this will cost money, the Senate cannot do it. However, the Senate has the power to make some amendments. If this is a result of a court decision, or as a result of the application of the res judicata, as we call it in law, this does not infringe any principle — whether it is parliamentary, whether it is constitutional or not — because the legislative branch is doing its job and the courts have ruled in the field of the interpretation of law.
It is perfect. I do not see how you may come to the conclusion that, because we make such an amendment, the statute would become illegal or unconstitutional. In my opinion, it certainly would not.
One other question comes to mind. The issue is not that the government, at a certain moment, stated in a letter or in a document that was going to change the law. Laws can only be changed by Parliament. Parliament is the defender of society, and the law may be changed only in accordance with the Constitution. Parliament has the power to do it, and only Parliament has the right to do it.
I see nothing wrong in this amendment. On the contrary, we are complying with the principles established by the courts. I will appeal the matter, if it becomes necessary.
Senator Day: I look forward to it.
The Chairman: Are there other senators who wish to intervene on this amendment? If not, I will put the question. I believe all the senators at the table are members of the committee.
It was moved by Senator Beaudoin:
That Bill C-28 be amended in clause 64, on page 55...
Hon. Senators: Dispense.
The Chairman: All those in favour of the amendment, please raise your right hand.
The Chairman: All those opposed to the amendment, please raise your hand.
The Clerk of the Committee: In favour 4, opposed 7.
The Chairman: I declare the amendment defeated. Colleagues, shall clauses 61 to 66 carry?
Senator Comeau: No.
The Chairman: Is there another amendment?
Senator Comeau: No, just on division with regard to clause 64.
The Chairman: In Part 9, shall clauses 67 and 68 carry?
Hon. Senators: Agreed.
The Chairman: In Part 10, shall clauses 69 to 90 carry?
Hon. Senators: Agreed.
The Chairman: In Part 11, shall clauses 91 to 130 carry?
Hon. Senators: Agreed.
The Chairman: Shall the schedule carry? The schedule contains the list of names of First Nations and governing bodies and descriptions of that.
Hon. Senators: Agreed.
The Chairman: We go back to clause 1. Shall clause 1 carry?
Hon. Senators: Agreed.
The Chairman: Shall the title carry?
Hon. Senators: Agreed.
The Chairman: Shall the bill carry?
Some Hon. Senators: Agreed.
Senator Comeau: On division.
The Chairman: Shall I report the bill to the Senate?
Hon. Senators: Agreed.
The Chairman: I will do that tomorrow when the Senate meets.
The committee adjourned.