1988-05-13

[Stage Direction]
ALLOTTED DAY, S. O. 82-RESEARCH AND DEVELOPMENT Mr. David Berger (Laurier) moved:
That this House condemn the Government for failing to provide adequate non-tax support for Reseach and Development and for its counter-productive policies and administration of tax support for Research and Development, including,
(1)	tax reform measures that disourage research and development by reducing funds available for R & D, by increasing the costs of R & D and by delaying investment in R & D facilities and delaying the introduction of new products and new processes, all of which generally impair the ability of Canadian companies to compete in global markets; and
(2)	management of R & D tax programs that has led to serious disagreements between industry and Revenue Canada over the kinds of activities that qualify for the investement tax credit for Research and Development resulting in long delays in obtaining refunds needed to finance ongoing Research and Development activities.
He said: Mr. Speaker, this debate should be seen in the context of the commitment made by the Prime Minister (Mr. Mulroney) to double national spending on research and development during his first term.
Mr. Speaker, I may recall that this commitment was made by the Prime Minister when he was Leader of the Official Opposition. Speaking to the Montreal Chamber of Commerce on March 22, 1984, four years ago, the Prime Minister said and I quote: "We intend to double our collective national commitment to research and development during our first term. This would make it possible to create hundred of thousands of jobs and billions of dollars in new sales for Canada, on an annual basis".
However, since it came to power, the Conservative Government has reduced, not increased, support for research and development, the result being that our national effort in this respect has dropped. Before the election, nearly 1.5 per cent of GNP was spent in this country on research and development. Since the election, this percentage has dropped and is now around 1.3 per cent.
My second point is that we must not forget Canada does not provide the same level of support for research and industrial
development as certain competitor countries. A study published in 1986 by the Canadian Manufacturers Association shows that tax support in Canada compares with levels in the United States, Germany, France and England. However, nontax support for research and development lags far behind what is provided in these countries.
As I intend to demonstrate in my speech today, the Government is undermining support measures that work well. I am referring to tax measures instead of increasing non-tax measures to levels comparable to those in other countries. They are trying to undermine tax measures which, as I said before, work very well in this country.
It is a fact that in many other countries, non-tax support takes the form of massive procurement programs, often related to defence or space programs, or, as in Japan, it could be the development of a new generation of computers.
This type of program does not exist in Canada, Mr. Speaker, and that is why we have depended mainly on tax measures to stimulate industrial research, something the Government is once again undermining as a result of its tax reform measures.
The first part of today's motion reads:
(1) tax reform measures that discourage research and development by reducing funds available for R & D, by increasing the costs of R & D and by delaying investment in R & D facilities and delaying the introduction of new products and new processes, all of which generally impair the ability of Canadian companies to compete in global markets;-
Of course, this should be considered in light of the Government's trade initiative, of decreased barriers to international trade and of the need for Canadian firms to be competitive in global markets. Of course, that includes being able to compete right here in Canada in our own domestic market which is but a small part of the larger global market.
In essence, the first part of this motion is the conclusion of a Conference Board survey of some 47 industrial R and D performers which, between them, performed over $1 billion of research and development in 1986. The survey also concluded that the tax reform measures "hold the potential to harm research and development efforts being pursued in their companies and in the economy as a whole".
This survey by the Conference Board was undertaken during the fall of 1987 and was published in December of 1987. It was conducted for the Science Council of Canada which put
[Stage Direction]
May 13, 1988
Supply
out a statement at the time of the publication of this report from which I would like to quote. The Science Council believes that some of the proposed tax reforms will be seriously counter-productive in their impact on research and development performing firms. They will penalize the very firms and sectors taking the sorts of risks necessary for Canada to survive in a more competitive world economy and to move with greater confidence into the 21st century. These were the general conclusions of the Conference Board survey and the assessment of the Science Council.
The comments of respondents to the survey showed the extent to which the tax reform measures will damage research and development in Canada on a much more descriptive basis than did the general conclusions that were arrived at by the Conference Board. I would like to quote selectively from the comments contained within this survey. When I say "selectively", that does not mean that I intend to convey only a partial view. I will certainly be quoting from excerpts which I think convey the general thrust of the results of this survey. However, time does not permit me to quote at length from the survey.
There has been a tax reform change on the eligibility of buildings and structures. Buildings and structures are no longer eligible for the 20 per cent investment tax credit. One of the respondents, a large forest products firm, saw a direct impact of this change with both short and long-term consequences. There has been a deferral or cancellation of plans to construct a new research centre which represents an investment of some $15 million to $20 million. That means that $15 million or $20 million has gone down the drain in one forest products company alone.
Similar impacts were expected at a large chemical company, a biotech company, a petroleum firm, and a telecommunications concern. The large chemical company had this to say:
We expect to expand a laboratory next year or in 1989. The abolition of the 100% write-off and the 20% Investment Tax Credit on research buildings will roughly double the cost of this expansion.
The biotech company said that this tax reform measure will affect the ability of the firm to service export markets which likely will be serviced through a facility in those markets rather than in Canada.
The petroleum firm said that a proposed new $46 million research complex in Calgary may not proceed or may be significantly downsized. I do not know if there are any Members from Alberta, from western Canada or from Calgary more particularly in the House at this time, but I am sure they are interested in this petroleum firm in Calgary saying that a $46-million research complex will not proceed or will be significantly downsized.
The telecommunications firm said that the effect of this measure will be, and I quote:
Migration of R & D projects out of Canada over the next few years by large international companies. Cancellation of large long term R & D projects which proposed building new buildings (2-5 years). Reduction of new projects which would involve increased requirement for work space because of losing ITC on base cash-
This survey is full of similar examples which indicate that the tax reform measures proposed and implemented by the Government will have a devastating effect on research and development in Canada, and on the ability of Canadian companies to compete in global markets. If some Members of this House think the survey does not provide conclusive evidence of the damage these tax measures will cause, I refer them to a recent article about Jean de Grandpre, Chairman and outgoing Chief Executive Officer of Bell Canada Enterprises, which appeared in the Report on Business magazine of April, 1988. As the article points out, when economic commentators say that Canada is a world leader in telecommunications, they do not mean Canada, they mean Bell and Northern Telecom. If anyone knows anything about research and development in Canada you would expect the Chairman of Bell Canada Enterprises, owner of the largest research firm in Canada, would know something about it.
I am glad that the Minister of State for Finance (Mr. Hockin) is listening to these comments because Mr. de Grandpre, referring to the Government's plan to eliminate tax deductions for buildings, said: "I told the Deputy Minister, do you think you can do R and D without a roof over your head?" He continued to say that politicians "are all saying the same thing, that we have to have more R and D capacity in Canada, that the future of this country rests on high technology products." However, he says, "The tax reform measures amply demonstrate that politicians don't understand how the game is played. The effect of these tax changes will be that Bell will do its research in some other country and take away several hundred well-paid jobs from Bell Northern Research, the largest private R and D facility in Canada". In what is probably the most devastating comment, he says "Canadians who are graduating from our universities are going to walk over to BNR and say, can I have a job? And we will say, sorry, but we are not expanding our R and D facilities in Canada. They will say, why? Well, because the Government has introduced this stupid piece of legislation."
Here is further evidence of the devastating effect of the Government's tax reform measures. I was at a conference on university research in Edmonton two weeks ago and an official from Connaught Labs revealed that as a result of the tax reform measures, Connaught Labs had to abandon plans to raise $60 million in Canada through an R and D limited partnership. There had been some research developed in Canada at the University of Toronto to come up with an innovative therapy to control diabetes which Connaught Labs wanted to market and further develop here in Canada. The Connaught official said this research work would now be transferred to a large offshore multinational. I referred to this in a question in the House last week and asked the Minister of Finance (Mr. Wilson) to review his tax reform measures. Unfortunately, I did not receive a specific reply to my question.
May 13, 1988
[Stage Direction]
I would now like to refer briefly to the second part of the motion which refers to the management of the investment tax credit for research and development. A survey conducted earlier this year by the Canadian Advanced Technology Association has once again identified serious disagreements between industry and Revenue Canada over the kinds of activity that qualifies for the investment tax credit, and delays of up to 18 months in obtaining refunds. Consequently, many businesses which had been counting on refunds to finance ongoing activities have encountered serious financial difficulties.
One has to put this in context. Very often R and D companies are start-up companies, they are in their first years, short of financing, and they devote every cent they get to ongoing research and development. They are trying to come up with new products to sell here and abroad. They have to devote already limited resources, both financial and people, to justify previous research and development activities rather than concentrating on ongoing R and D. Imagine the situation of some of these companies. They are run by people who are really at home in applying their energy and talents to creating new products. I have spoken to some of them and they told me that they have had to spend an inordinate amount of time dealing with accountants and lawyers trying to justify their previous R and D claims to Revenue Canada rather than concentrating on ongoing research and development activity.
The Government recently made a few changes to its administration of the R and D tax credits which address one aspect of the problem, the tremendous delays incurred by certain companies, proven R and D performers, in obtaining refunds. The extent to which this will apply to new companies, start-up companies, which have new R and D activities remains to be seen. However, none of the changes affected the definition or the possibility of disagreements. Very significant problems remain, once a project is accepted by Revenue Canada, regarding the kinds of costs that you can attribute to a project, such as, for example, overhead, training and travel.
Furthermore, Revenue Canada has been unable to come to grips with companies that develop and sell prototypes. Some tax practitioners have told me that Revenue Canada is simply applying what it perceives to be the current views of the Department of Finance in that it is narrowing what qualifies as R and D. That flies in the face, of course, of all the commitments made by the Government and the Minister of Finance in the past couple of years.
Tax credits are generally supported by industry. They are the favoured form of support in industry because they are self-administered. They are not a program, you do not need to stand in line and apply. Firms choose the type and amount of R and D they want to conduct.
Again, I have been told by a number of tax practitioners that Revenue Canada regards these tax credits very much as a grant program. They want to control the type and amount of
Supply
research and development, which contradicts the very nature of this kind of self-administered program.
I understand that the Minister of National Revenue (Mr. MacKay) will intervene in this debate later today. I want him to state what are the costs of this degree of control. If the administrative costs are higher than the revenues that might be lost if we had less rigorous controls, or if the administrative costs are higher than the kind of revenues that firms would be able to generate by concentrating on R and D rather than spending their time in accounting and legal nightmares, then I suggest the Government really should opt for less rigorous controls. It would make good economic sense. It would only be a matter of common sense to opt for less rigorous controls.
I hope that putting forward this motion today and debating a subject which is often fairly technical and which very often involves the intricacies of the administration of our tax system for which we must rely on the explanations of accountants and lawyers, will advance the debate and indicate to the Government that people in the private sector are seriously concerned about these issues. They will watch the debate today and hopefully we will not hear from the Minister the kind of rhetorical response to which we are accustomed in the House, certainly during Question Period, but a serious attempt will be made to address issues which are of great concern to the private sector.
As I have indicated in my motion, these matters seriously affect research and development in Canada and the ability of Canadian companies to compete in global markets.
Hon. Tom Hockin (Minister of State (Finance)):: Mr. Speaker, I am pleased to participate in this debate today because it is not only important that the Government explain its record and approach to research and development, but also puts it in the context of tax reform. I invite the Hon. Member for Laurier (Mr. Berger) to consider what I have to say and perhaps we can have a dialogue following my speech.
The motion before the House is one that must be properly considered in the context of tax reform. It must be considered in the context of the benefits of tax reform. As we know, the central objective of tax reform is to lower tax rates because there is no better incentive for growth, investment and job creation than lower tax rates. Lower rates mean that more Canadians keep more of every additional dollar they earn and they, not the Government or accountants, will decide how best to use that money.
How do we lower rates and still have revenue flow to allow a Government to promote and progress further with objectives that are important for the country? This is accomplished by broadening the tax base and reducing the number of tax preferences. That will allow us to lower the rate. Special incentives that remain will be fewer but more effective. They will continue to be sensitive to the needs of Canadians in all parts of the country.

May 13, 1988
Supply

A tax system with lower rates and fewer tax breaks will be fairer for all taxpayers. It will fully reflect our commitment to economic growth and social justice.

The benefits of tax reform will be felt by most Canadians, first through lower personal income taxes, and again over the years as tax reforms have a positive effect on the economy. That is the basic premise of tax reform and that is how it is developing.
In fact, for 9.7 million households, over 85 per cent of the total, tax reform will mean reduced income taxes. The average tax reduction for these households will be about $490 per household. This results from the fact that the gains from tax rate reductions and the conversions of personal exemptions into credits far outweigh the reduction in any tax preferences. Some 850,000 lower-income families, of which about 250,000 are elderly, will have their income tax totally eliminated as a result of tax reform.

Older Canadians who depend mainly on pension and interest income will come out ahead from tax reform. Nine out of ten Canadians aged 65 and over will pay less income tax.

The corporate income tax proposals also present us with a somewhat similar story. They achieve three major objectives. Corporate tax rates, like the personal tax rates, will be reduced. This will promote growth and job creation in Canada by maintaining a corporate tax system that is competitive with other countries, particularly the United States.
Yesterday, I, along with other Members of the House, held very interesting meetings with the Minister of Finance of New Zealand. The Labour Government there has unleashed very strong economic growth through a number of programs, including privatization and freer trade, as well as by reducing corporate tax rates. It has resulted in unprecedented economic growth in New Zealand.
That is our strategy for the corporate tax structure as well as the personal tax structure. The elimination or reduction of many special tax breaks on the corporate side will pay for lower corporate and personal tax rates and will return the profit motive to investment by rewarding success. It will encourage investment decisions based more on economic initiative and opportunity than on tax considerations. That is the key.
The Hon. Member for Laurier was curiously old-fashioned in his remarks. He wants us to return to the 1960s and 1970s when incentives were distorted so that people focused on obtaining some sort of tax preference or loophole to make an investment decision. That is not the way to run a corporate tax system. We have tried to prune the system of these preferences and lower the rates.
A broader tax base with fewer preferences will mean that profitable corporations will pay a bigger share of the corporate tax burden and the corporate income tax will be a more predictable and reliable source of revenue.
Throughout the entire economy, corporate tax reform will strengthen incentive for firms to invest in profitable ventures. The rate of tax and the return for new investment will be reduced and the tax treatment of capital in this country will continue to encourage risk taking, initiative, growth and job creation.
The Hon. Member for Laurier stated that the Government is not doing enough in this context to support research and development in Canada. My colleague will refute this later this morning with respect to non-tax support for R and D. He will go through the support for R and D brought forward by this Government on the non-tax side. I will refute this with respect to tax reform and the tax treatment of R and D generally.
I am disappointed that the substantial support in fact provided by research and development tax credits is not fully recognized by the Hon. Member for Laurier (Mr. Berger). In 1986, for example, over $700 million of R and D tax credits were generated by R and D companies. This is a very significant level of commitment in the face of competing fiscal pressures. This Government has many fiscal pressures, and that is a large level of tax credits compared to any other activity of the Government.

This Government is committed to promoting science and technology in Canada. I am surprised to see the Hon. Member for Laurier (Mr. Berger) trying to create a negative perception of our tax incentives for research and development.

Tax reform generally represented a move to a more results-based corporate income tax system featuring broader based incentives provided through lower tax rates. In general, there is an elimination or reduction of selective up-front deductions or credits. That is what tax reform did in general. It tried to eliminate these very selective up-front deductions so that incentives could be delivered, as I have said, through a reduced rate.
However, incentives were retained, and the Hon. Member knows this, in certain strategic areas. Tax reform recognized the importance of R and D to the economic future of the country. That was one of the strategic areas. In fact, Canada continues to offer the most generous package of R and D tax incentives among the major industrialized countries. The OECD did a study, which I examined six months ago, which ranked the Canadian tax approach to R and D very, very, highly as a very generous system. We have retained that even with tax reform.
May 13, 1988

For example, the United States only provides credits for increases in R and D spending-the Hon. Member for Laurier should consult what the Americans do-while the Canadian system provides credits for all of R and D spending, not just the increases. This fact is widely acknowledged and applauded by the R and D community.
Does the Hon. Member object to this? This is a very generous approach. This is more important than loose interpretations of R and D. More important than that is to provide credit for all of these expenditures. Because of our commitment to science and technology, these generous R and D incentives were maintained. We maintained them because of our commitment to it. For the most part, following tax reform, we maintained this notwithstanding the reduction or elimination of many other incentives.
The Hon. Member's approach is a bit different. He in fact wants loose interpretation of rules, probably to bring back the scientific research tax credit approach which cost the Canadian people billions and billions of dollars. As far as anyone can tell, it promoted almost no research and development at all. That approach is to construct a great wide-open door-put research and development inside and people drive trucks through it. In fact no research is being done at all, but you get the tax benefit for it. What we have done is to maintain the special status of R and D, but we want it to be R and D.

In fact, despite what the Hon. Member for Laurier said, tax reform has indeed increased the effect of the main tax provisions for research and development.

For example, the rates of the R and D investment tax credits were maintained following tax reform notwithstanding the fact that the general and regional ITCs are being eliminated or reduced to reflect reduced tax rates. By maintaining the rates of the R and D ITCs, while reducing tax rates, the relative benefit of these tax credits is increased. The same level of R and D will now entitle the R and D performer to credits which will offset the tax on more income. This enhances the incentive impact of our R and D provisions.
I ask the Hon. Member for Laurier, does he not approve of that? Does he object to that? It is very generous and a very, very important part of how our ITCs work in Canada.
Changes were made to the R and D tax incentives to ensure that as a package they operate in an efficient and cost-effective manner which is consistent with other government priorities. We want things to be efficient and effective. We do not want simply labels that say R and D, through which tax reductions are received but through which very little R and D is done.
As the Hon. Member knows, as part of the tax reform changes, expenditures made for the acquisition of a building will no longer qualify for the R and D tax incentives. The Hon. Member mentioned this. Buildings normally depreciate slowly over time, if at all, and they have very long, useful lives. They
Supply
are eligible for debt financing, which is not generally available for more direct R and D expenditures. Accordingly, a 100 per cent immediate write-off in the R and D ITC was considered to be inappropriate in a post-tax reform environment. Is that what the Hon. Member wants? Does he want to neglect those realities? By excluding these expenditures, the tax treatment for R and D buildings in Canada will be more in line with that found in the other major industrialized countries, and the high rate of ITC could be maintained for other R and D expenditures.
The final tax reform package also provides that investment tax credits cannot offset, in general, more than three-quarters of a corporation's tax otherwise payable. The introduction of limits to the amount of ITC which a taxpayer may claim in a year is an important part of the tax reform package. It improves the fairness of the system by ensuring that large profitable corporations pay at least some tax, including those corporations that perform R and D. Corporations that perform R and D should pay some tax. Part of tax reform is to restore to our system a sense of fairness across industrialized groups. We have had some industrialized groups, for example, the real estate sector and the financial institutions sector. The R and D sector has to be part of it. They should pay some tax. Tax reform allows for that.
This limit was originally set at 50 per cent of a large corporation's federal tax liability for a year. However, consultations with industry indicated that this limit would have a greater impact on R and D-intensive sectors than was originally anticipated. Accordingly, the Government reacted and this limit was increased from 50 per cent to 75 per cent of a large corporation's federal tax liability. To be sensitive to what that sector is saying was very important to us. We listened and we increased the limit.

It will help strike a better balance between the need to encourage research and development, on one hand, and the assurance that large profitable corporations indeed pay income tax, on the other hand.

The tax credit limitation is in line, in fact, with tax law in the United States, where the general business credit, which includes the U.S. research credit, is subject to a tax credit claiming limitation of 75 per cent of tax liability over $25,000.
Over the last few days we have had questions in the House about corporations not paying tax. The opposition Members complain that a number of corporations do not pay tax. We are trying to ensure that corporations do pay tax, and the Hon. Member is criticizing that.
These limits may have some impact, I have admitted, on ITCs earned before tax reform and carried forward. It is important to note that ITCs earned before tax reform were

May 13, 1988
Supply
earned when tax rates were higher. With the reduction in tax rates resulting from tax reform, existing banks of unused ITCs can now offset a tax on a greater amount of taxable income. Most accountants know that. I encourage the Elon. Member for Laurier, who has been talking to his accountant and hearing these complaints, to ensure that his accountant knows this. From a tax theory perspective, these existing banks of ITCs could have been reduced to reflect these lower tax rates with some justification. Indeed, this was the approach taken in the U.S. tax reform.
In Canada, however, this approach was not taken. Instead, the introduction of the ITC limits obviates the need for such a reduction. The ITC limits also better serve the competing objectives of providing the maximum incentive of R and D through the tax system and ensuring that the tax system is fair and is perceived to be fair by ordinary Canadians. That is how we make it fair. That is how we ensure that people feel it is fair, to limit the amount of these credits, to ensure that corporations across Canada all pay tax.
The final tax reform proposals also contain changes to the Income Tax Act designed to prevent the syndication of R and D incentives through limited partnerships and similar arrangements. When these federal R and D incentives were first introduced, they were intended to be available to R and D performers only. They were designed to have some relationship to the taxpayers' business rather than be a tax shelter flow-out mechanism. We do not want everyone in Canada trying to protect their income by trying to identify some R and D that is really not R and D. What we wanted to do was to encourage the solid R and D performers. We have done that.
In response to flow-out strategies which were developing at the time, the disastrous scientific research tax credit mechanism was introduced by the Liberal Government in 1983. This was disastrous for reasons with which the House is very familiar. It did not work. It produced very little R and D. Billions of dollars worth of revenue were lost to the Canadian Government. With the repeal of this mechanism in 1985 by this Government and its replacement with the refundability features of the R and D investment tax credits, the expressed policy of this Government was that R and D incentives be used by the R and D performer itself, not as a flow-out mechanism to somebody else.
We recognize that no matter how generous the R and D ITCs might be, they would not provide sufficient incentives to those small and start-up R and D companies which may have little or no taxable income and therefore no tax to offset through tax credits.
What did we do in this case for the small R and D performers? Accordingly, for small corporations the enhanced 35 per cent tax credit available in respect of the first $2 million of R and D expenditures of a current nature was made fully refundable. In effect, this provides a direct payment of up to $700,000 per year for eligible corporations.
Allowing R and D tax incentives to be transferred to passive investors at this time would be particularly inappropriate in view of the Government's tax reform philosophy and approach. We have improved the fairness of the system. We have had to do this by eliminating more and more flow-out shelters. For these reasons the Minister of Finance (Mr. Wilson) announced amendments to the Income Tax Act on December 16, 1987, relating to R and D incentives. These amendments will have the effect of preventing the flow-out for federal tax purposes of R and D incentives to passive investors. Instead, it is important that steps be taken to ensure that the refundable R and D ITC program works well and provides refunds to small and start-up corporations on a timely basis.
Since 1985, this part of the R and D tax credit program has already provided a cumulative stimulus for R and D of more than $1 billion. The Parliamentary Secretary to the Minister of National Revenue (Mrs. Mailly) will be explaining this.
The Government has taken a number of important steps to ensure that funds are delivered to qualifying claimants through this program on an expeditious basis. The Hon. Member wants an "open sesame" in interpretations. That is not what the Canadian people want. What they would like is expeditious processing of requests. These changes accomplish two objectives. They will ensure that companies with a proven track record in R and D do not experience administrative delay. First, they will also permit Revenue Canada to concentrate greater efforts on validating the refund claims of first-time claimants in a shorter period of time. That is very good news.
A great deal of credit for improvements in this program since its introduction must go to Canadian industry. Revenue Canada received excellent advice directly from the industry and through its technical liaison committee.

These changes will considerably improve the operation of this important program.

In conclusion I take the view that this Government's support for R and D, both directly and through the tax system, is and continues to be substantial. The record of billions of dollars of investment for R and D is there to prove it.


Mr. Berger:: Mr. Speaker, I thank the Minister for his contribution. I feel that the debate today in the House will advance the debate in the country. It will certainly allow people to understand the opposing philosophies that are being put forward by the Government and by our Party.
The Minister said that the question of R and D tax incentives has to be considered in the context of over-all tax reform. I can tell him that I have serious questions about tying ourselves to tax reform measures in the United States, which has not had a great record in innovation in recent years and in competing with other countries where approaches may be somewhat different.
May 13, 1988

I think that he has to look at the matter in the context of what his leader said a few years ago. He said that R and D is the lifeblood of a successful company. He has to consider it in light of the fact that Canada's performance in R and D is half of what occurs in other countries. Our industrial research and development activities are anaemic. Only 2 per cent to 3 per cent of firms in Canada whose future depends on technology do any R and D.
He said that our tax system was very generous. It is equivalent to that of our major competitors, as I indicated by referring to a study by the Canadian Manufacturers Association. Where we are really deficient is in non-tax support, where we are not even in the same league as the United States, France or Japan.
What I suggest that his Government is doing now is, rather than beefing up the non-tax support, reducing the support in the tax system which is the only type of support that is available to industrial R and D performers in Canada.
Regarding the assertion that I am asking for a loose interpretation of the rules and that the SRTC be brought back, at no time did I suggest during my comments that we should bring back the SRTC. The current R and D tax credit program is a horse of a different colour. R and D has to be performed before a refund is applied for, which is far different from the SRTC mechanism.
What I suggested to him, and I make the suggestion again, is that there is an obligation on the part of the Government to tell us what are the costs of the degree of control that the Government is exerting at the present time. Gordon McNab, the head of Pre-Carn a pre-competitive R and D consortium which is in the course of being established, said in Edmonton a couple of weeks ago that the current philosophy in Revenue Canada is that one is guilty until proven innocent. What are the costs of this degree of control? Not just direct costs but the opportunity costs.
I put it to the Minister again that if administrative costs are higher than the revenues that would be lost if we had less rigorous controls or less restrictive interpretations, and if firms are able to generate greater revenues by concentrating on research and development, then the Government should opt for a more expansive definition and less rigorous controls.


Thomas Hockin: Mr. Speaker, 1 appreciate the comments made by the Hon. Member for Laurier. I am not too sure whether there are any questions in his comments, but I will take his comments and reformulate them into a question, one which I think he is putting to me.
He is saying that we have simply tightened the tax provisions for R and D and therefore we are against R and D. I think that is the burden of his argument and the burden of his comments of a moment ago. In fact, what we have done is to
have lowered the rate of corporate tax generally. He forgets that. That is very good news for anybody investing in R and D, and anybody aiming for profitability.
Second, we have made a number of important improvements since the Budget of 1985. I mentioned in my speech the change that we brought about to ITCs-


Mr. Deputy Speaker:: I regret to interrupt the Hon. Minister but it is 11 a.m. and the House must proceed to Statements by Members pursuant to Standing Order 21.



STATEMENTS PURSUANT TO S. O. 21


Mr. Felix Holtmann (Selkirk-Interlake):: Mr. Speaker, Canada's sugar-beet producers will soon receive an interim stabilization payment from the National Tripartite Price Stabilization Program. The interim payment, amounting to $6 per field tonne, will be paid to 970 eligible producers in Manitoba and Alberta by the end of May.
In total, some $6 million will be paid out. The federal Government will advance $4.3 million to make this interim payment possible.
In spite of opposition from the former New Democratic Government of Manitoba, a sugar-beet tripartite plan is now in place. The establishment of that plan has allowed for this needed interim payment, and shows the federal Government's commitment to specialized Canadian agriculture.
The former New Democratic Government of Manitoba showed no commitment. This is why it is the "former" Government.
New Democrats, both provincially and federally, have never understood Canadian agriculture.



NATIONAL DEFENCE


Hon.   Chas. L. Caccia@Davenport: Mr. Speaker, there are many compelling arguments against the Government's proposal to purchase nuclear-powered submarines. This week the Canadian Environment Network added yet another, pointing out that nuclear powered submarines are floating nuclear reactors in the fragile Arctic environment.

May 13, 1988
We therefore urge the Minister of the Environment (Mr. McMillan) and the Minister of National Defence (Mr. Beatty) to launch a public environmental assessment of the proposed nuclear powered submarines.
While this is important, there are at least two more urgent priorities: a real, national, first-class day care program for the next generation, and the badly needed sewage and water treatment program proposed by the Federation of Canadian Municipalities.
Canadians, Mr. Speaker, want basics, and not the "Beatty" nuclear power trip.



TAXATION


Mr. Gabriel Fontaine (Levis):: Mr. Speaker, today we want to pay tribute to the Government of Quebec and Minister of Finance (Mr. Levesque) for the excellent Budget he has just unveiled: lower taxes, reduced deficit, expenditure control, and harmonization of provincial and federal tax measures.
The current economic upsurge called for lower expenditures and taxes in preparation for more difficult years. The Government of Quebec did act in light of this economic tenet. Unfortunately, in a very similar context the Liberal Government of Ontario ignored this economic precept and increased both expenditures and taxes. Congratulations to the Government of Quebec!



CANADA POST CORPORATION


Mr. Ian Waddell (Vancouver-Kingsway):: Mr. Speaker, higher postal rates are to take effect in January, with the cost of mailing a standard letter going from 37 cents to 38 cents.
While rates will go up for all Canadians, some Canadians are suffering cut-backs in service. For example, those buying a new home in a suburban area of Canada, such as Port Moody, Port Coquitlam, or Coquitlam in British Columbia, will get their mail from a supermailbox, while their fellow citizens get door-to-door delivery.
This is not fair. My Leader, the Member for Oshawa (Mr. Broadbent), and I recently met with the Mayor and Councillors of Port Moody on this issue. We visited a "Mulroney" mailbox in the area.


Some Hon. Members:: Order!


Ian Gardiner Waddell: 1 attended public hearings in Port Coquitlam on this issue, and I learned that supermailboxes cause litter, lower property values, and result in traffic that is dangerous to young children, in addition to providing a lesser level of service.
Supermailboxes should be removed. The Post Office should be a public service, not a money-making machine. Canadians must be treated fairly and equally.
This is going to be an issue in the upcoming election.



NATIONAL FILM BOARD


Mr. Gus Mitges (Grey-Simcoe):: Mr. Speaker, Canada's National Film Board has finally found a producer to take on its promised new feature documentary on Billy Bishop.
The previous so-called documentary on Billy Bishop, "The Kid Who Couldn't Miss", was bitterly condemned by Canadians in all walks of life for defaming the legendary World War I Canadian hero.
The producer of the new film, George Pearson, wants firm guarantees of further extensive research into all aspects of Bishop's life before proceeding with the film. This would include information from books personally written by Bishop and his son, and from all other sources.
I believe Mr. Pearson should have these guarantees, Mr. Speaker, because I do not think the public would be satisfied with anything less, and we could thus ensure that the entire production of the film would be based entirely on facts that can be substantiated.
I do not believe that Canadians across Canada would accept anything less, nor would Billy Bishop. So, let's get on with the film.



CANADA POST CORPORATION


Mr. Don Boudria (Glengarry-Prescott-Russell):: Mr. Speaker, Canada Post has just announced its five-year plan, indicating that revenues are expected to increase and that it will again charge more for postage stamps.
Will we be paying more for postage in exchange for more services, Mr. Speaker? No way! As a matter of fact the number of so-called superboxes-for those who are not aware of this, superboxes mean reduced services-will rise from
232,000	to 340,000.
May 13, 1988

Mr. Speaker, people who live in Glengarry-Prescott- Russell, Orleans and others elsewhere in the National Capital Region simply do not want to have anything more to do with the Prime Minister's superboxes. What they want is home delivery. Nothing less is acceptable!



MINES AND MINING


Mr. Bill Tupper (Nepean-Carleton):: Mr. Speaker, I wish to commend the Hon. Marcel Masse, Minister of Energy, Mines and Resources, and the Hon. Gerald Merrithew, Minister of State for Forestry and Mines, on the introduction of the Canadian Exploration Incentive Program, an initiative that has been exceptionally well received by the Canadian mining and petroleum industries.
The program is designed to assist junior mining and oil and gas exploration companies in raising equity in the marketplace, in addition to contributing to regional economic development in Canada.
Mining is a major industry, directly employing about
105,000	Canadians. Closely related downstream industries employ another 230,000 Canadians.
The Exploration Incentive Program will provide for more than 12,000 person-years of employment, and will contribute to Canada's economic development.
In addition, the mining industry produces a market for high technology goods and services. It is more than 70 per cent Canadian owned. Early indications are that the free trade arrangement will result in Canadian mining companies increasing their ownership in the American mining industry.
This incentive program, Mr. Speaker, is good for the Canadian mining industry. It is good for the regions, and it is good for Canada.



SOCIAL AFFAIRS


Mr. Jim Manly (Cowichan-Malahat-The Islands):: Mr. Speaker, once again B.C. Premier Vander Zalm has shown his ignorance and insensitivity when it comes to poor kids and their families. He suggested that children who go to school hungry have parents who do not love them enough; that if they do not have lunches, it is because "their parents lay in bed, not really caring".
Such a callous attitude by B.C.'s First Minister must cause real despair and anguish among the thousands of British
Columbia parents who live in poverty and have to watch their children grow up in poverty.
These parents already know the impossibility of trying to stretch inadequate welfare cheques into the last week of the month so that they can pay the rent while at the same time providing their children with decent food.
Children constitute the fastest growing poverty group in Canada. Instead of blaming the parents, Mr. Vander Zalm should look to himself.
The Premier and his Government have said "no" to school lunch programs; the Premier and his Government tried to cut welfare rates for single mothers.
Premier Vander Zalm's heart must be very small and very cold. It seems there is no room in his heart for hungry children.



HOUSING


Mr. Dave Nickerson (Western Arctic):: Mr. Speaker, recently opposition Members have been criticizing the Government for not doing enough for housing in remote areas.
In respect of the Northwest Territories this accusation is categorically false.
In 1987, apart from insuring over $60 million worth of mortgage loans, CMHC spent some $48 million on social housing projects in the Territories, amounting to nearly $1,000 for every man, woman, and child. Included was some $15 million for 214 Homeowner Assistance Program houses, amounting to an outright grant of over $70,000 for each unit.
This is not miserliness, Mr. Speaker; this is generosity- almost to the point of abandon.



SOCIAL POLICY


Mr. Jean-Claude Malepart (Montreal-Sainte-Marie):: Mr. Speaker, I would like to know why this Conservative Government does not follow the example set yesterday by the Bourassa Government's Budget on family matters. Yesterday, the Bourassa Government recognized the importance of families and children with a $500 tax credit on the first two children, while this Conservative Government only provides for a meagre $65. Moreover, for a third child the Bourassa Government introduces a $3,000 tax credit, while the Prime Minister's (Mr. Mulroney) Conservative Government only provides for a meagre $130, Mr. Speaker.

May 13, 1988
Moreover, the Liberal Government extends a tax exemption on family allowance, while this Conservative Government deindexes family allowance. Mr. Robert Bourassa's Liberal Government is granting $60,000 for child care services in Quebec, while this Conservative Government does nothing for those people. While Mr. Bourassa's Liberal Government brought in a $772 million tax reduction for families, this Conservative Government has brought in increases, Mr. Speaker.
Why is this Conservative Government not following the example set by a good Liberal Government?

[DOT] (mo)



TOURISM


Mr. William G. Lesick (Edmonton East):: Mr. Speaker, next week marks a very important one for Canadians. It is National Tourism Week which recognizes one of this country's fastest growing industries.
Tourism employs over 600,000 Canadians. That is more than mining, forestry or agriculture. It generates over $20 billion in revenue and contributes 4.5 per cent to the Gross National Product. In addition it is the third largest industry. Tourism is not only big business, it is every Canadian's business.
Canada and Canadians have a great deal to offer visitors, our distinct culture, our unique heritage and, of course, our beautiful country.
I hope that Hon. Members and all Canadians will take the opportunity to help observe a week which symbolizes one of Canada's most important industries, tourism.




Ms. Audrey McLaughlin (Yukon):: Mr. Speaker, next week is Tourism Awareness Week. The tourist industry employs
600,000	and is a $20 billion industry in Canada. Each year foreign visitors who come to Canada, we hope are welcomed with open arms.
In an effort to promote a good image for Canadian tourism, most of the chartered banks cashed travellers cheques without
charge during Expo 86. But since then, with the exception only of the Bank of Montreal, the banks are levying a substantial service charge to cash travellers cheques. There has been a great deal of protest from private citizens and small business alike over this move.
Tourism plays a vitally important role in our economy. Let the banks do their part. I encourage these financial institutions to reinstate their 1986 policy, and let foreign travellers and Canadians alike know that we welcome tourists in our country.



POLITICAL PARTIES


Mr. Jean-Guy Guilbault (Drummond):: Mr. Speaker, over the week-end the Liberals are holding their fund-raising brunch. According to their so-called Quebec Leader, the Hon. Member for Laval-des-Rapides (Mr. Garneau), there should be 1,000 guests. How do they get them, Mr. Speaker? In my constituency, they are giving away the $300 per person tickets for that brunch and there is some arm-twisting going on to get people to attend. Is that what they call democratic funding? What does that prove, giving tickets away? Mr. Speaker, is that good management? Can Canadians trust a Party that sank us into debt through mismanagement?


An Hon. Member:: That reminds us of the penitentiary!


An Hon. Member:: They are a conniving brunch!


Jean-Guy Guilbault: Yes, that is it just like a conniving party!
Mr. Speaker, their leader is paying $300 per person to listen to him. Is that showing leadership and unity? How much is an unwanted leader costing the Liberal Party, Mr. Speaker?



POLITICAL PROTEST


Ms. Sheila Copps (Hamilton East):: Mr. Speaker, the Mila melee has reached hyperbolic proportions. We hear the Chairman of the Quebec caucus of the Progressive Conservatives now comparing Canada to South Africa because of an unfortunate incident.
May 13, 1988

I think all Canadians were very disappointed and discouraged with what happened in Moncton those few short days ago, but I think once again the Prime Minister (Mr. Mul-roney) does not know when to cut the rhetoric, and when to recognize that an incident which should have been avoided and was not has turned into a political disaster for himself and his Party. Ele has had the Minister from the province telegram and suggest somehow that the labour movement was involved in inciting violence. He has now suggested in a speech to students that we should have an end to "brutality", but the hype had to be when the Chairman of the Quebec caucus compared Canada to South Africa.
It is ridiculous. It is outrageous. Let's have an end to the Mila melee.

[ Translation]



THE ENVIRONMENT


Mr. Andre Harvey (Chicoutimi):: Mr. Speaker, the coming agreement between the Quebec Government and the Canadian Government on the St. Lawrence River clean-up and on the establishment of a marine national park in the Saguenay fjord is sparking a lot of interest. The enactment of Bill C-74, the Environmental Protection Act, is raising a lot of hope among all Canadians. All my fellow citizens have asked me to ask the Liberal dominated Canadian Senate to pass that extremely progressive bill, which is the most advanced in any western country, as soon as possible. For the first time indeed a federal statute includes a definition of the term "environment", Mr. Speaker. The definition of "toxic substances" now provides for protection at three levels-protection of the environment as such; protection of the environment as it interacts with human life; health protection for Canadians. Chemical substances also will be controlled at every stage of their life cycle, that is from either import or research and development to final disposal, through manufacturing, transport, distribution and use. Moreover, Mr. Speaker, in order to be really effective, it provides for strict penalties against offenders. Serious offences under the Act can now lead to charges under the Criminal Code, and the maximum penalty provided for is life emprison-ment.



NUCLEAR ENERGY


Ms. Lynn McDonald (Broadview-Greenwood):: Mr. Speaker, other countries are responding to research trends showing that the harm of even low level exposure to radiation
Oral Questions
has been underestimated. Other countries are bringing in tougher standards. Canada should be doing the same, yet a report of the International Institute for Concerns for Public Health suggests that Health and Welfare Canada is trying to raise the allowable level of cesium 137 by more than tenfold.
Radioactive fallout from the Chernobyl accident and from nuclear weapons testing in the 1950s and 1960s is particularly harmful in the far north. The caribou are contaminated by the lichen and the Inuit eat the caribou. If the new weaker standards are accepted, this will legitimize the federal Government's practice of not warning the Inuit or protecting them, yet cesium 137 is responsible for cancer deaths, birth defects, genetic damage, and a weakening of the immune system.
We need a public process to ensure that adequate standards are set and maintained. The federal Government must not be allowed to get away with this dereliction of duty.



PROGRESSIVE CONSERVATIVE PARTY


Mr. Nic Leblanc (Longueuil):: In 1984, Mr. Speaker, the Progressive Conservative Party had a great project: create jobs, set the country on a sound financial base, establish good relations with the provinces, tighten our ties with other countries, improve national security, and attract investors to Canada.
This great project has now become reality: we did create more than 1,200,000 jobs since our election, business is flourishing, and Canadian men and women stand prouder and have renewed faith in their future. Canadians, Quebecers and the people of Longueuil feel better and live more comfortably with our Party.



ORAL QUESTION PERIOD


Mr. George Baker (Gander-Twillingate):: Mr. Speaker, yesterday the President of Canada Post said that for the first time in 30 years:
This is the year ink goes from red to black.
Canadians everywhere would be delighted to know that Canada Post has stopped losing money, if only it was not losing our mail at the same time and taking twice as long or longer to deliver it.

May 13, 1988
Oral Questions
Speaking of delivering, I would like to ask the Minister representing Canada Post in this House today whether he still believes, considering the boastful announcement by Mr. Lander yesterday "that Canada Post would increase the number of supermailboxes up to 400,000", double the present number, that the superboxes are an adequate way to deliver mail in this country in the face of nation-wide rejection of them.


Hon. John C. Crosbie (Minister for International Trade):: Mr. Speaker, we are very pleased that the Hon. Member has taken the time to point out the tremendous achievements of Canada Post under the direction of the Minister of Consumer and Corporate Affairs who, I know, the House will wish to congratulate on his fine record.


Some Hon. Members:: Hear, hear!


John Carnell Crosbie: For the first time in 30 years Canada Post will make a profit this year estimated at $26 million.


Mr. Allmand:: It is not a business, it is a service.


John Carnell Crosbie: In 1981-82 the deficit was $588 million when the hon. gentlemen opposite were in the middle of their wasteful and profligate careers in the Government of Canada.
We are very pleased with the progress being made. In terms of average wages, Canada's stamp prices today are the second lowest in the industrialized world. I want to thank the hon. gentleman for giving me the opportunity to point that out to the House and to say that this fine record will continue.


INSTALLATION OF SUPERMAILBOXES IN RURAL AREAS
George Baker: Mr. Speaker, the Minister must be blind, deaf, and dumb to the complaints of Canadians. We received another one just yesterday. If a person mails a letter in one of the supermailbox slots after 11 a.m. on Friday, it will remain there all day Friday, all day Saturday, all day Sunday, to a minimum of Monday, unless it is a holiday and then it is not picked up until Tuesday. This Government dares to brag about improvements in service.
One of the places that Canada Post will pepper with supermailboxes is rural Canada. How can the Cabinet now condone the continuation of Canada Post's 10-year plan totally to eradicate post offices in rural Canada, 5,221 of them that will close? How can he condone the replacement of many of these rural post offices with these infamous supermailboxes?


John Carnell Crosbie: Mr. Speaker, there is, of course, no such plan to eradicate rural post offices totally. There is a plan for the steady improvement of rural post office service and that plan is under way now. The supermailbox that the hon. gentleman seems not
to be in favour of is, by many people, found to be very helpful in the postal system.
I might point out to the hon. gentleman that if we had door-to-door delivery for all Canadians, this would mean that we would need to have a 60-cent stamp. While I know that that does not shock the hon. gentleman opposite, most Canadians do not want to see a 60-cent postal stamp.
I might finish by saying that the hon. gentleman froths at the gills about fish, and now he is frothing at the gills about the Post Office. He should cease frothing and relax.


STANDARD OF SERVICE
George Baker: Mr. Speaker, in the past four years we have seen our postal service disintegrate to the point where many urban Canadians are no longer receiving door-to-door delivery, where all rural Canadians have lost or will lose their traditional post offices as they knew them, where mail now takes longer than ever before to be delivered, where loss and damage of mail are on an alarming increase, all due to the policies of this Tory Government. Does the Minister not think that, instead of bragging about black ink in the House today, we should be hanging out black crepe to mourn the loss of the postal service in Canada?


John Carnell Crosbie: Mr. Speaker, the hon. gentleman opposite will obviously be black and blue if he continues with such a silly line of questions. He says that he wants to continue the traditional post office. The traditional post office, a hundred years ago, had a spittoon in the corner. Is he insisting that we continue the spittoon regime, or should we not move into the 21st century which is the direction we are moving in, and give a better service at a lower cost?

[ Translation]


THE SECRETARY OF STATE
Mr. Jacques Guilbault (Saint-Jacques):: In the same line of thought, Mr. Speaker, there is no doubt that the Conservative Party has jumped ahead into the 21st century!
Last April 29, Lucien Bouchard landed at the Alma airport on his way to announce he would be running as Progressive Conservative Party candidate in the Lac-Saint-Jean riding. But like prophet Elias who rode down from the sky in his chariot of fire, he boarded a Transport Canada helicopter to travel the short distance between the airport and downtown Alma.
May 13, 1988

I want to ask the Government why a Government helicopter was used to such partisan ends? How much did such unwarranted luxury cost the taxpayers? And how many more abuses will the Government tolerate in an attempt to have the Prime Minister's school chum elected?


Hon. Benoit Bouchard (Minister of Transport):: Mr. Speaker, one has to be grasping at straws to come up with this kind of silly questions. As far as I know, on April 29 the Secretary of State did not fly in a Transport Canada helicopter to go from the Alma airport to I do not know where, for the simple reason Mr. Speaker, that Alma is not Montreal and therefore it is faster to use a car to travel around.
I think my colleague has been badly advised, and we are in for a very long election campaign if they always come up with this kind of information. I would suggest you deal with more serious issues, please!


REQUEST THAT MINISTER CONDUCT INVESTIGATION
Jacques Guilbault: Mr. Speaker, the answer is that the Minister has never heard that the other number one Minister used a helicopter on his way to announce his candidacy as a Tory candidate in the Lac-Saint-Jean riding. I would like to ask the Minister to double-check and to provide us with the information as to whether or not such a helicopter, owned and operated by Transport Canada, took the Minister from the airport to Alma, and how much it cost. I would like the Minister to double-check on that.


Benoît Bouchard: Mr. Speaker, I would like to be very serious. I cannot understand that a serious Party could raise that kind of misleading information about Mr. Bouchard and the assessment that he could use a Transport Canada helicopter.
I am the Minister of Transport and I am not even aware that we have any helicopters with Transport Canada in Lac-Saint-Jean. The helicopters belong to the Department of National Defence and they are based in Bagotville. There is not any way that Mr. Lucien Bouchard used them.
Once again, it is unbelievable that we can advance any kind of information when the Party opposite is not even able to find a candidate in Lac-Saint-Jean. I do not understand. If you want to be political, do it properly, please.


TAXATION
Mr. Mike Cassidy (Ottawa Centre):: Mr. Speaker, my question is for the Minister of State for Finance and it concerns the loopholes in the minimum tax that have enabled
Oral Questions
more than 5,000 Canadians with good incomes to avoid paying any income tax in 1986.
This week, the Minister of Finance challenged my Party to tell him how the minimum tax should be strengthened. My answer to this challenge is: Why have the Minister of Finance, the Minister of State and the Government ignored the suggestions that New Democrats have put forward to eliminate the loopholes in the minimum tax?
I challenge the Minister: Is the Government now prepared to take the New Democrats' suggestion to strengthen the minimum tax by including all capital gains that are not affected thanks to the $100,000 exemption and by including the excessive financial costs used in calculating the minimum tax? Or do you intend to maintain a minimum tax that is both ineffective and unfair?


Thomas Hockin: Mr. Speaker, the Hon. Member knows that we have eliminated many loopholes. What have we done with the money? With it, we have improved the spouse's allowance and the refundable sales tax credit, increased the child tax credit, provided advanced payments for the child tax credit, increased services for the disabled, etc. That is what we have done with the money from all the loopholes that we have eliminated.


APPLICATION OF MINIMUM TAX
Michael Morris Cassidy: Mr. Speaker, perhaps the Minister has forgotten that in 1984 Canadians wanted fairness from the tax system. One of the things they felt they were promised by the Prime Minister was a minimum tax that would ensure that wealthy Canadians paid their share of income tax.
Does the Minister recall that the Finance Department itself estimated back in 1985 that three out of four of those upper-income Canadians who were avoiding paying any income tax at all would be caught by the minimum tax? Does the Minister of State for Finance think it is fair that only one-third of those wealthy Canadians who were not paying tax have been caught by the minimum tax? Is the Minister prepared to take the NDP's challenge to come up with new additions to the minimum tax that will ensure that it is fair and that it makes wealthy Canadians pay?


Thomas Hockin: Mr. Speaker, a few days ago in the House the Minister of Finance explained the tremendous progress we have made in terms of getting high-income individuals who paid no tax to pay tax. The number of high-income individuals who paid no tax declined significantly between 1985 and 1986.
In 1985 the number of those with incomes of $50,000 or more and who paid no tax was 7,947. In 1986 it was 5,220, a decrease of 34 per cent. Those with an income over $250,000 who paid no tax went from 254 to 40, an 84 per cent decrease.

May 13, 1988
Oral Questions
Why are there still a few high-income Canadians who pay no taxes? The Hon. Member knows why-medical disability expenses, alimony expenses, charitable contributions, union dues. Is the Hon. Member saying he wants to do away with the deduction for union dues, or alimony, or medical disability payments?


Michael Morris Cassidy: Mr. Speaker, let us talk about the 40 high-income Canadians, the top 40 on the Minister of Finance's list, who had income over $250,000 in 1986 and did not pay a dime of income tax. That is not a group which has to pay union dues. That is not a group with a significant amount of alimony to pay.


Felix Holtmann: How do you know?


Michael Morris Cassidy: We have checked the figures with Revenue Canada. What we do know is that almost three-quarters of those wealthy Canadians had carrying charges amounting to an average of $227,000 apiece. That is how they were able to bring their income tax down to zero. 1 will repeat that since the Minister looks a bit surprised. Twenty-nine of those 40 wealthy Canadians had carrying charges amounting to an average of $227,000 apiece. That is how they were able to bring their income tax down to zero.


TAX LOOPHOLE
Michael Morris Cassidy: Mr. Speaker, will the Minister accept the NDP's challenge to bring in a minimum tax which is fair and just? Will the Government act so that where interest costs exceed a person's investment income, that is where there are excessive carrying charges, that loophole cannot be used by wealthy Canadians as a way of avoiding paying the minimum tax? Will he move on that now?


Thomas Hockin: Mr. Speaker, I noticed a few months ago that the NDP changed its view on a major tax deduction, flow-through shares. This Party has always believed in flow-through shares because of what they meant for northern Quebec and Ontario and the development of the mineral industry in Canada. His Party totally flip-flopped on this issue. Deductions for flow-through shares can put you in a position where your tax liability is greatly reduced or eliminated. The NDP is now in favour of this, and maybe that is the reason why there are still a few who will not be paying taxes.


RADIO-CANADA BUDGETS OF FRENCH NETWORK
Jean-Claude Malépart: Mr. Speaker, the Tories are jeopardizing the future of the French
language in Canada. According to the Gens de I'air, French is downgraded by Air Canada; a study made by the Quebec Government indicates that French-speaking athletes are neglected at international events and the fact that a coalition has been formed to promote French at Radio-Canada are additional proof that such is the case; the French language network of the CBC is seriously affected. The Coalition for the defence of the French language services in the CBC has denounced the discrimination shown against the French network where budgets are reduced while those of the English network are increasing. As an example, the Coalition draws attention to a program Le Point, a program whose budget is much lower than that earmarked for The Journal of the CBC.
My question to the the acting Minister of Communications is as follows: Is the government ready to accept the recommendations made by the Coalition: 1. That the specific character and special needs of the French language network be recognized and 2: That the budget provided by Government to the French language network of the CBC be discussed and adopted separately from those granted to the English language network?


John Carnell Crosbie: Mr. Speaker, the Minister of Communications is absent today and I am trying to fill in for her, and that is certainly difficult. The answer to the hon. gentleman's question of course is that the way in which the CBC allocates its budget among various priorities is a decision for the CBC and not the Government. If the Government interfered, the hon. gentleman would be one of the first on his feet screaming about the interference.
I believe the President of the CBC and other executives appeared before the Standing Committee on Communications and Culture yesterday to discuss their Estimates. These concerns could have been raised there. Perhaps they were. I want to assure the Hon. Member that the Minister is aware of and certainly supports the importance of the distinctive character of French-language broadcasting and this will be reflected in the new broadcasting legislation.


RECOMMENDATIONS MADE BY COALITION FOR DEFENCE OF RADIO-CANADA'S FRENCH SERVICE-MINISTER'S POSITION
Jean-Claude Malépart: Mr. Speaker, the persons who formed this coalition did not do it for the fun of it or to play politics. These are serious non-partisan people of all political stripes. The reason is that the situation is serious, urgent, and alarming. I am not asking the
May 13, 1988

Minister to get involved in Radio-Canada's affairs, but to exercise his own and his government's authority.
These people have presented two other recommendations. Firstly, they ask that Radio-Canada's budget be managed separately. That is surely the Government's business, and I hope that the Minister will have a good answer because the coalition will meet with the Liberal caucus next Wednesday. Secondly, they want the Government to increase the French network's level of funding to ensure that all French-speaking Canadians get the same quantity and quality of service as the English network.


John Carnell Crosbie: Mr. Speaker, I can certainly say that would be our objective. We want to see French-speaking people across Canada receive that kind of service. I will bring the hon. gentleman's comments to the Minister's attention and I know she will certainly do whatever she can to see that French language broadcasting is improved and strengthened in Canada.


CANADA POST CORPORATION
Mr. Rod Murphy (Churchill):: Mr. Speaker, my question is also directed to the Acting Prime Minister. As you know, he is well known for his words and his definition of words, and I wonder if he can answer this.
We are seeing postal substations being closed, rural post offices being closed, rural routes eliminated, and 200,000 Canadians have been told that they will be forced to use supermailboxes. The regular corner mailboxes are being removed. How can the Government describe this as an improved postal service?


John Carnell Crosbie: Mr. Speaker, I think the facts speak for themselves.


Some Hon. Members:: That's right!


John Carnell Crosbie: We now have a Government and Minister consulting with postal users on the merit of an independent third-party review of Canada Post's rates and services. Our predecessors would never have contemplated that.
When compared to average wages, our stamp prices are the lowest in the industrialized world. In fact, when we take account of inflation, Canadians are paying the same today for a stamp-you will hardly believe this because of the franking system-as they did in 1952. Stamp revenue this year will account for less than one-third of the needed revenue to make up for increased costs. The rest is made up by efficiency, productivity improvements, and volume growth. All of these are signs of tremendous improvements in performance and service.
Oral Questions


Rodney Edward Murphy: The Acting Prime Minister spoke the truth in 1983 and 1984 when he said if the Conservatives ever told the people of Canada what they were going to do they would never have been elected. If he is calling that improved postal service, he is obviously not telling the truth to the people of Canada.


RESIDENTIAL MAIL DELIVERY
Rodney Edward Murphy: Mr. Speaker, will the Government guarantee that there will not be any increase in postal services until some effort is made to make sure that Canadians now receiving their mail at the door will continue to receive that service even if they move to the suburbs?


John Carnell Crosbie: Mr. Speaker, the hon. gentleman has requested that we ensure there be no increase or improvement in postal services. That may be the NDP's objective, because their objective is to sabotage the postal service, or assist in the sabotaging of the postal service wherever they can. We are committed to an improved postal service and that is what we are accomplishing at less cost for the taxpayer, with the consumer paying for the service. The Minister is to be congratulated for his tremendous record.


Some Hon. Members:: Hear, hear!


AGRICULTURE
Mr. David Daubney (Ottawa West):: Mr. Speaker, my question is directed to the Minister of Agriculture. He will agree that the Central Experimental Farm partly located in my riding is the flagship of Agriculture Canada's excellent research effort and contributes greatly to the unique beauty and character of the nation's capital. Will he confirm for the House that the Government has no intention of disposing of any part of the Experimental Farm proper, and in particular that part bordered by Merivale and Fisher Avenues in the city of Ottawa?


Hon. John Wise (Minister of Agriculture):: Mr. Speaker, I appreciate the Hon. Member's continuing interest in the future of the Experimental Farm here in Ottawa. I want to take this opportunity to indicate to him that Agriculture Canada, my Department, has no plans or thoughts whatsoever concerning disposing of any portion of that property at any time. There is no question about that.
I appreciate also the complimentary remarks the Hon. Member made with reference to that very unique facility. It has made a tremendous contribution to Canadian agriculture. It is one of the four original experimental farms established across Canada over 100 years ago.

May 13, 1988
Oral Questions
In fact, next to the Parliament Buildings, the Experimental Farm is the second most popular tourist attraction here in Ottawa.


Some Hon. Members:: Hear, hear!


BY-ELECTIONS NUMBER OF OFFICES AT EXCLUSIVE SERVICE OF PROGRESSIVE CONSERVATIVE CANDIDATE IN LAC-SAINT-JEAN
Mr. Jean-Robert Gauthier (Ottawa-Vanier):: Mr. Speaker, my question is directed to the Government. I would like to get back to the by-election in the riding of Lac-Saint-Jean and the ministerial candidate who, after being temporarily parachuted into the riding via helicopter, will pick up his toys the day after the election and go play in his own backyard. It seems there are four offices in the riding, paid for with taxpayers money: two in Alma, one in Chicoutimi North, and a fourth office will open in Jonquiere on June 6, and this is not counting the candidate's election office.
I want to ask the Minister how many offices this Conservative candidate needs to "fix" his election?


Benoît Bouchard: Mr. Speaker, the question is extremely partisan. However, I realize that considering the Hon. Member's situation . .. Mr. Speaker there are two offices. One, an office of the Department of the Secretary of State, operates in Alma, with someone from the Department to respond to requests made in connection with Mr. Lucien Bouchard's function as Canada's Secretary of State. I think this is just a matter of providing a service to Canadians, which is normal. There is another office-all candidates have one in every election-to take care of the political side. We have said it before and we say it again, and, I think we can hardly accuse the Chief Electoral Officer of being partisan, that even he has stated he was aware of the situation and that operating expenditures for this office have no impact at all on election spending.
I think the Hon. Member is well aware of that. Canadians realize that there is an administrative side as well. Canadians are entitled to receive services from the Department of the Secretary of State and the Secretary of State, and they get those services and have access to them. The people of Lac-Saint-Jean are entitled to have a political office operated on behalf of a Conservative candidate, and I think the two are completely separate, and there is no connection between the two offices.


REQUEST FOR ACCOUNTING OF EXPENDITURES
Jean-Robert Gauthier: Mr. Speaker, there are two other offices, constituency offices. I mentioned them in my previous question. One is in Chicoutimi North and one is in Alma. That makes five offices if one counts the election office of the candidate.
I want to repeat my question because it is very important. Four of those offices are paid for by public funds, voted for by this House. How many offices does Mr. Clean need to get elected? Will the Minister give a full accounting of public funds used in Alma, what has been spent to date to promote that candidate, and will he file with the House a complete accounting of all the money spent to keep those five offices open?


John Carnell Crosbie: Mr. Speaker, of course the Liberal Party is desperate because it has not even found a candidate yet to run in that district. When it does, we hope it does not have any difficulty finding an office, because they were experts at finding offices when they were in government.
There is no office opened as yet for the Secretary of State in Jonquiere. It was announced some months ago that the Secretary of State Department will be opening a regional office there. It is not yet open.


Don Boudria: You are paying rent.


John Carnell Crosbie: It will be opened later in the summer.


Don Boudria: Next week.


John Carnell Crosbie: The office that is now open is a temporary office. Everything has been operating properly.
I might say that when phone calls come in making inquiries about anything to do with the campaign at all, they are referred to a phone number to get information if they want it. These entrapment devices of the hon. gentleman opposite have been an absolute and complete flop.


THE ENVIRONMENT
Lynn McDonald: Mr. Speaker, in the absence of the Minister of the Environment I would like to direct my question to whomever wishes to reply for the Government.
It is common knowledge that nuclear submarines pose a threat to the environment, especially in an environment as fragile as the Arctic Ocean.
May 13, 1988

Will the federal Government initiate an open and public process to evaluate the kind of dangers to which the environment might be exposed?


Hon. Paul Dick (Associate Minister of National Defence):: Mr. Speaker, the Hon. Member makes a statement in the form of a question. There has been no known leak from French, British or American nuclear submarines into the environment or the waters. They have 3,000 years of experience in their operation, and we believe it is a very good and safe system if treated properly. We intend to have safeguard mechanisms along with properly trained personnel to make sure that high level of expertise continues when we have nuclear-powered submarines in our Forces.


REQUEST FOR ENVIRONMENTAL ASSESSMENT
Lynn McDonald: Mr. Speaker, there is a federal environmental assessment process but it happens to exclude the military. This project could cause far more harm than many of the projects that are evaluated. Would it not be right, given the importance of this matter, the environment, and the number of lives whose survival depends on there being no nuclear radiation in the far north, to have an environmental assessment applied to the nuclear submarine project according to the same criteria?


Paul Wyatt Dick: Mr. Speaker, it is somewhat of a difficult question. The nuclear powered submarines will be out in the ocean. As the Hon. Member knows, when we are trying to neutralize used uranium in the Pickering plant in Ontario, for example, they put it into a swimming pool full of water. There are very few swimming pools in this world that are larger than the Atlantic or Pacific Oceans.


CANADA POST CORPORATION
Don Boudria: Mr. Speaker, my question is directed to the Minister responsible for the Canada Post Corporation or to the Minister speaking on his behalf today.
Yesterday, Canada Post tabled its five-year plan which indicates, among other things, that the corporation's deficit will be wiped out very shortly.
In light of this fact, could the Minister explain to the House why the policy to close down rural post offices is still being pursued? Is he prepared to make a commitment today, on behalf of his Government, to put an immediate end to this
Oral Questions
policy? Could he also give the House the assurance that all post offices closed since the Conservatives came to power will be reopened and that this will be done as soon as possible?


John Carnell Crosbie: Mr. Speaker, the hon. gentleman seems to think that the crass repetition of something that is untrue will somehow, some day make it true. That is just not the case. There is no program of closing rural post offices.


Sheila Maureen Copps: There certainly is.


John Carnell Crosbie: The hon. gentleman knows the policy. If a postmaster retires or is otherwise incapacitated, a review is instituted to see whether service can be better provided in that area by using someone in the private sector and making an arrangement with the private sector to perform a postal service. In most cases there is an improved service because the facility is open longer and a better service is provided at lower cost. There is no danger that there will be closing of rural post offices. The policy is as I have explained it, and no amount of misinformation, or whatever it is that the hon. gentleman spreads-he is from a farming area-will change that.


Don Boudria: I won't apologize for my rural background, Mr. Speaker.


SUBURBAN MAIL DELIVERY-USE OF SUPERMAILBOXES
Don Boudria: Mr. Speaker, the Hon. Minister knows full well that I revealed in the House an internal document from Canada Post which explains how to shut down rural post offices. It is not a question of whether there is a policy of shutting them down because we know that is the case.
Let me return to the issue of suburban mail delivery. Given that this deficit is soon to be eradicated, is the Government planning to stop immediately the policy of installing new supermailboxes? Why can we not have the delivery to which Canadians have been accustomed and for which they have been paying? What is wrong with getting delivery of the mail?


John Carnell Crosbie: Mr. Speaker, the delivery of the mail and the on-time delivery of the mail are improving all the time. I gave some of the facts and figures this morning. I pointed out earlier this morning that if we were to have door-to-door delivery to all Canadians, it would cost something like $1.3 billion and would result in a 60-cent stamp. If the hon. gentleman wants to go out and campaign on the basis that Canadians should pay a 60-cent stamp, and that we should not try to improve the efficiency and economy of operating the Post Office, well, he can do that, but we will meet him on the corners, and we will meet him on the doorsteps, and we will fight him door to door on that issue, and win.

May 13, 1988
Oral Questions


Don Boudria: We will fight you supermailbox to supermailbox.


IMMIGRATION
Mr. Dan Heap (Spadina):: Mr. Speaker, my question is directed to the Minister of Employment and Immigration. As the Minister knows, the immigration staff is creating a massive new registry of nearly 50,000 refugee claimants in Canada. Since Mr. Peter Harder, the senior assistant to the special adviser to the Minister, testified before the Standing Committee on Labour, Employment and Immigration on April 26 that the proposed new refugee division will not have enough members and support staff to process this backlog in addition to the new incoming claimants, will the Minister confirm that this new registry of claimants is to be used for a new administrative review or amnesty as was proposed to the Cabinet in early 1987?


Hon. Barbara McDougall (Minister of Employment and Immigration):: Mr. Speaker, I was very interested to read this article this morning myself, but if the Toronto Star cannot understand the difference between counting people and an administrative review, I do not know how to explain it, but I will try.
This registry was set up in 1986, at the same time as the last administrative review, to give the Department and Members of this House an accurate picture of what is going on in the area of claims processing, for example, how many claimants are there and at what stage are all of these claims, and what are the characteristics of particular claims. This began in 1986. I do not in any way put that together with dealing with the current backlog.
Let me say that I will not deal with the backlog, and I have said so publicly and in the Senate committee myself, that until I have the new Bills working on behalf of refugee claimants and the immigration process in Canada to make it better and faster, I will not make any decisions on the backlog.


DEPORTATION PROCESS
Daniel James Macdonnell Heap: Mr. Speaker, the project to which the Minister refers as the "old" one has been renewed and rearranged and reorganized. This is what is reported by many people other than the Toronto Star. I am asking her, if it is not intended to use an amnesty or administrative review, if it is not intended to have these people processed by the new refugee division, which is what Mr. Peter Harder told us in the committee, why is she speeding up the deportations of people who have been under the administrative review in the past so that perhaps a few hundred will be deported before all the rest are given the amnesty?


Barbara Jean McDougall: Mr. Speaker, there are three ways to deal with the refugee backlog. First, would be a general amnesty. Second, would be an administrative review along the lines taken before, with more or less rigid criteria. The third would be to set up some temporary facilities for dealing with the backlog, which has been discussed as well in a number of committee hearings. I will not make a decision on those, I repeat, until the Bills are up and running. That is the most important priority for this Department.
Let me say as well that we are not speeding up deportations. There is a process in place in this country with which the Hon. Member is very familiar. He knows full well that once a claimant has been through that process, which ends for many in the Federal Court, those orders are executed. He also knows that I deal with special cases before they get to that level on a case by case basis, and will continue to do so.

[ Translation]


FREE TRADE
Gabriel Fontaine: Mr. Speaker, my question is directed to the Minister for External Trade. Yesterday, the C.D. Howe Institute published a report stating that free trade with the United States will not lead to an exodus of U.S. subsidiaries. In fact, free trade will expand investment in this country and in the U.S.
Mr. Speaker, considering the Liberal-Socialist coalition's promises to tear up the agreement, I wish you would tell Canadians today about the benefits of this agreement and its impact, and give them the assurance that it will be implemented very shortly.


John Carnell Crosbie: Well, Mr. Speaker, I will recognize the Hon. Member's concern because the Official Opposition is going to tear it up and the unofficial opposition is going to tear it down, so it is going to be quite a competition between them whenever they get their chance.
There has been a study by Professor Sopherian-


Jean-Robert Gauthier: It is a bad deal, and you know it.


John Carnell Crosbie: Please pay attention to this. He has concluded that companies in both countries are likely to respond to the free trade agreement by increasing their foreign direct investment and technology context, that we have a good reason to welcome foreign investment-and listen to this, Mr. Speaker-because foreign control of Canadian industry has fallen to 26 per cent at the present from 36 per cent during the Liberal 1970s.



May 13, 1988

We agree with his conclusions that the liberalization of Canada-U.S. trade will increase new investment and will not lead to widespread closures of existing subsidiaries in Canada. We welcome this report.


EMPLOYMENT
[Stage Direction]
Hon. Warren Allmand (Notre-Dame-de-Grace-Lachine
East): Mr. Speaker, my question is directed to the Minister of Employment and Immigration. Yesterday the community colleges in Metro Toronto released a report indicating that there was a serious shortage of skilled workers in that region principally because this Tory Government has cut the budget for training every year since 1984. In fact it has cut these budgets by 32 per cent, from $2.2 billion in 1984 to $1.6 billion in 1988.
Does the Minister not realize that skilled workers are essential for a dynamic economy and this means more dollars now? If the Minister and the Government will not listen to us Liberals, will she at least listen to the community colleges and the advisory committees in the Toronto area?
Barbara Jean McDougall: Mr. Speaker, the Hon. Member clearly misunderstands the cause of the shortage of skilled labour in Toronto. The cause is a very vibrant economy generated by the policies of this Government.


John Carnell Crosbie: Tory times are terrific times.


Barbara Jean McDougall: As the Hon. Member knows, because he comes from an area that is not as prosperous and does not have the same kind of problem, this is a unique problem to Toronto. What we have been doing through the Canadian Jobs Strategy has two sides to it. One is the economic side, through the Skill Shortages Program, if employers are having problems getting people, then we put those on the list and move those trades ahead faster. The other side is the human side. We are trying to help the long-term unemployed and ensure they get training and they get jobs. Those persons exist throughout the country and we are continuing to make that a high priority.


Mr. Speaker:: The Hon. Member on a short supplemental.


COLLEGE DEAN'S CRITICISM
[Stage Direction]
Hon. Warren Allmand (Notre-Dame-de-Grace-Lachine
East): Mr. Speaker, it is not myself and the Liberal Party, as 1 said, who are making the criticism, it is CITAC, the advisory council in Toronto, and the community colleges. In fact Fred Etherden, the Dean of Seneca College, said: "Ottawa's Canadian Jobs Strategy Program is keeping women and the
Oral Questions
unemployed from getting quick access to job retraining programs that could help meet the growing demand". When will the Government make the changes necessary so that this program will do the job that is required? When will we have some action and less rhetoric, some dollars into this program?
Barbara Jean McDougall: Mr. Speaker, first, there have been very important changes to the program criteria which Mr. Etherden was not familiar with until I discussed this matter with him yesterday.
There are two matters which are germane. The first is that the 24 out of 30 criterion, whereby a person had to be unemployed for 24 out of the last 30 weeks in order to qualify, has now been eased. Second, the requirement that women had to be acting as homemakers for the past three years in order to qualify for that portion of the program has also been changed.
Let me also say that the over-all level has not been slashed. Quite the reverse is true. It is the same as it was four years ago.
The difficulty is that the direction of the fund has changed because 42 per cent of the funding is now private sector driven, market driven, so that there is more flexibility within the training program.


Mr. Speaker:: A single question from the Hon. Member for Hamilton Mountain.


FAMILY VIOLENCE
Ms. Marion Dewar (Hamilton Mountain):: Mr. Speaker, my question is directed to the Minister responsible for the Status of Women. Family violence remains a major problem in Canada. In 1986, the National Clearing House on Family Violence estimated that about one million Canadian women were the victims of domestic violence. Unfortunately, only 60,000 of these women could be helped in 264 shelters across the country.
When does the Conservative Government intend to keep its promise to help women who are victims of family violence?


Barbara Jean McDougall: Mr. Speaker, the short answer, which I am sure you will appreciate, is very soon.

May 13, 1988
Point of Order-Mr. Hawkes
The slightly longer answer is that the Minister of National Health and Welfare has been working quite hard on a policy regarding family violence. My officials have been working with him as well. We will be producing a policy on this matter very soon.


Mr. Speaker:: This will be the last question of Question Period. A single question from the Hon. Member for Hamilton East.


CANADA-UNITED STATES FREE TRADE AGREEMENT-EFFECT ON JOURNALISTS
Sheila Maureen Copps: Mr. Speaker, my question concerns the disastrous trade deal, the effects of which are only beginning to be felt.
When the Canadian and U.S. negotiators signed a deal which stated that Canadian journalists who do not have university degrees will not be allowed to ply their trade in the United States, did the Minister for International Trade agree that the reason these people would not be allowed to go to the States was because "the Americans are worried about semiskilled and blue collared workers"? Does the Minister really think that Peter Mansbridge and Mike Duffy constitute a semi-skilled profession and should not be allowed to practise their trade in the United States?


Some Hon. Members:: Hear, hear!


Some Hon. Members:: Oh, oh!


John Carnell Crosbie: Mr. Speaker, I certainly sympathize with the hon. lady's desire to get on The National tonight. I hope that Mr. Peter Mansbridge and Mr. Duffy will be able to attain the high qualifications which we think are required for them to become journalists.


Some Hon. Members:: Oh, oh!


POINT OF ORDER
Mr. Jim Hawkes (Parliamentary Secretary to Deputy Prime Minister and President of the Privy Council):: Mr. Speaker, earlier today during the Question Period a question was asked about the Secretary of State and helicopters. Since that question was asked, we have had an opportunity to talk to the Secretary of State. He cannot recall in his entire life being in a helicopter of any kind, certainly not within the riding.
There is some difficulty to the line of questioning over the last two or three days in relationship to the Secretary of State. I think it would be wise for the House and for Members who intend to ask questions to perhaps check their sources before laying innuendo on the House when somebody is not in the House and able to defend himself.


Mr. Speaker:: I have listened carefully to the Parliamentary Secretary on his point of order. I might respond by saying that the Chair has also listened carefully to the questions that were asked and to the answers that were given. Of course the Chair will continue to do just that.



ROUTINE PROCEEDINGS


[Stage Direction]
TABLING OF GOVERNMENT REPORT Hon. Tom Hockin (Minister of State (Finance)): I have the honour to lay upon the Table copies in both official languages of the Government's first sixth-monthly report on remission orders.

Frederick James (Jim) Hawkes: Mr. Speaker, pursuant to Standing Order 106(8), I have the honour to present, in both official languages, the Government's response to petitions, Nos. 332-4077 to 332-4101 inclusive, 332-4113, 332-4128, 332-4129, 332-4132, 332-4133, 3324135, 332-4140 to 332-4142 inclusive, 332-4145, 332-4146, 332-4149 to 332-4155 inclusive, 332-4157, 332-4161, 3324162, 332-4165 to 332-4167 inclusive, 332-4181 to 332-4184 inclusive, 332-4186, 332-4197 to 4208 inclusive, 332-4212, 332-4224 to 332-4227 inclusive, 332-4335, 332-4236, 332424! to 332-4243 inclusive, 332-4284, 332-4298, 332-4312, 332-4319, 332-4323, 332-4329, 332-4335, 332-4339, 3324344, 332-4346, 332-4348 to 332-4351 inclusive, 332-4371, 332-4374, 332-4381 to 332-4385 inclusive, 332-4458 to 3324463 inclusive, 332-4470, 332-4478, 332-4479, 332-4481 to 332-4485 inclusive, 332-4512, 332-4517 to 332-4519 inclusive, 332-4521 to 332-4523 inclusive, and 332-4540 to 332-4548 inclusive.
[Editor's Note: See today's Votes and Proceedings]


Mr. Les Benjamin (Regina West):: Mr. Speaker, I rise on a point of order. I am not sure whether this matter will correctly fall under a point of order or a question of privilege. It arises with respect to the Government's response to petitions tabled by the Parliamentary Secretary. The responses I received are with respect to Petition Nos. 332-4481 to 332-4485 inclusive under my name. The responses are identical word for word. However, one set of petitions has to do with the calling of a general election on the free trade agreement. The other set has to do with the free trade agreement with the United States. Nowhere in the response from the Government on the first group of petitions is there any mention of what the petition calls for, namely, a general election on the free trade agreement. Yet I have received the identical response to two different petitions.
May 13, 1988

Petitions
I wish to protest this. I ask the Government to look at its responses again.
If you rule, Mr. Speaker, that I have a point of order or if the Chair thinks it is more properly a question of privilege I will be glad to move the proper motion at a suitable time.


Frederick James (Jim) Hawkes: I am unsure of the point being made. I am unsure as to whether the wrong response was tabled in responding to the Hon. Member's question, or whether the Hon. Member is dissatisfied with the response given.
The particular point to which he draws the attention of the House is a difficult one, inasmuch as it is not the Government, under our British style of democracy, that has the power to call an election, but the Governor General of Canada. It is the Governor General of Canada who dissolves the House and indicates that an election is to be held.
If the Hon. Member's constituents wish to see the House dissolved, their request might more appropriately be directed to the Governor General. It is not something that is within the power of the Government of Canada.
That may be the issue. I am simply unsure as to the issue that is being raised by the Hon. Member. Certainly, I would be glad to speak to him privately in an effort to see if we can correct what may indeed be a legitimate complaint.


Leslie Gordon Benjamin: You are nit-picking.


Mr. Deputy Speaker:: I am sure I can rely upon the two Hon. Members in question, being two distinguished and experienced Members of this place, to settle the matter between them.



Leslie Gordon Benjamin: Mr. Speaker, I have the honour and the duty to present a petition signed by a number of Canadian citizens most of whom reside in Swift Current, although there are a few from Saskatoon, Regina and even one from Edmonton. They state in their petition that the Government has no mandate from the Canadian people to conclude a free trade agreement with the United States and that the proposed trade agreement would deny Canada the policy freedom to determine its own economic future and undermine our ability to build a society distinct from that of the United States. Therefore the petitioners humbly pray and call upon Parliament to dissolve and allow the people of Canada the opportunity to accept or reject the proposed free trade agreement during a national general election.


Jean-Robert Gauthier: Mr. Speaker, I have the duty to present a petition according to Standing Order 106.
Whereas the Government of Canada, represented by the Treasury Board, has not recognized the principle of a fair and reasonable amount of time of class preparation for federal language teachers; whereas that situation seriously undermines the bilingualism policy in Canada; wherefore the undersigned, your petitioners-and the names on the petition cover several pages, Mr. Speaker-call upon Parliament to commission the Treasury Board to negotiate a collective agreement with the federal teachers of the ED Group that provides for a preparation time of 15 hours a week.


Mr. Walter Van  De Walle@Pembina: Mr. Speaker, I have the honour to present a petition from the residents of Fort Saskatchewan, Vimy, Westlock, Morinville, St. Albert, Sherwood Park, and Legal, Alberta. The petition calls upon Parliament to enact legislation to protect the life of the unborn from the moment of conception.


Daniel James Macdonnell Heap: Mr. Speaker, I have the honour to present a petition on behalf of a number of residents of the City of Toronto, who are concerned with the immigration policy of our country as it relates to unmarried sons and daughters of all ages and the promise of this Government of nearly a year ago that they would be treated as members of the "family" class for immigration purposes, and that married children and brothers and sisters would be allowed 15 instead of 10 points.
The petitioners are concerned that the Minister has not yet fulfilled that promise, and they ask that the House ensure that the Government fulfils its promise now.


Daniel James Macdonnell Heap: Mr. Speaker, I have a petition to present on behalf of a number of residents of Toronto, who are concerned that the fabric of Canadian sovereignty is threatened by the proposed Mulroney-Reagan trade deal, a deal for which the government has no mandate from the voters.

May 13, 1988
Order Paper Questions
Because this deal would reduce Canada's ability to plan the economic, social, and cultural programs we need, and because it would integrate Canada further into the North American defence/industrial base, the petitioners call upon Parliament to ensure that a national debate take place on the Mulroney-Reagan trade deal in the form of a national general election before such an agreement is finalized.
* *
*


QUESTIONS ON THE ORDER PAPER
[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
Frederick James (Jim) Hawkes: Mr. Speaker, Question No. 295 will be answered today. I would ask that all remaining questions be allowed to stand.


Mrs. Sparrow: Between (a) January 1, 1982 and December 31, 1984, (b) January 1, 1985 and December 31, 1987, inclusive, were contracts awarded in the constituency of Calgary South by the Canadian International Development Agency and, if so, in what numbers and, in each case, in what amount?


Hon. Monique Landry (Minister of External Relations):: 1.
Statistical information of the Canadian International Development Agency are recorded on a fiscal year basis, April 1 to March 31.
2. The following tables present the number and total value of contracts awarded and contributions allocated by CIDA form January 1, 1982 to December 31, 1984 and from January 1, 1985 to December 31, 1987 inclusive.
Agency	Canadian International Development Agency
Riding:	Calgary-South
Program	F.Y.	Number of Agreements	Amount $	Disbursed to dateGoods and services Agreements'	Jan. 1, 1982 -Dec. 31, 1984	1	14,116	14,116Contributions under Industrial Co-operation2	Jan. 1, 1982 -Dec. 31, 1984	4	127,700	114,392Contributions under Special Programs Branch3	Jan. 1, 1982 -Dec. 31, 1984	0	0	0Total	5	141,816	128,508
Notes:
1.	Includes agreements for procurement of goods and services with individuals, firms, universities, non-governmental organizations and federal and provincial government departments.
2.	Indicates contributions to businesses under the Industrial Co-operation Program.
3.	Indicates contributions to non-governmental organizations and nongovernmental institutions in the voluntary sector.
Agency	Canadian International Development Agency
Riding:	Calgary-South
Number of Amount Disbursed
Program	F.Y.	Agreements	$	to dateGoods and services Agreements'	Jan. 1, 1985 -Dec, 31, 1987	3	136,450	114,986Contributions under Industrial Co-operation2	Jan. 1, 1985 -Dec. 31, 1987	0	0	0Contributions under Special Programs Branch3	Jan. 1, 1985 -Dec. 31, 1987	0	0	0Total	3	136,450	114,986
Notes:
1.	Includes agreements for procurement of goods and services with individuals, firms, universities, non-governmental organizations and federal and provincial government departments.
2.	Indicates contributions to businesses under the Industrial Co-operation Program.
3.	Indicates contributions to non-governmental organizations and nongovernmental institutions in the voluntary sector.


Mr. Deputy Speaker:: The question as enumerated by the Parliamentary Secretary has been answered. Is it agreed that all remaining questions be allowed to stand?


Some Hon. Members:: Agreed.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration of the motion of Mr. Berger:
That this House condemn the Government for failing to provide adequate non-tax support for Research and Development and for its counter-productive policies and administration of tax support for Research and Development, including,
(1)	tax reform measures that discourage research and development by reducing funds available for R & D, by increasing the costs of R & D and by delaying investment in R & D facilities and delaying the introduction of new products and new processes, all of which generally impair the ability of Canadian companies to compete in global markets; and
(2)	management of R & D tax programs that has led to serious disagreements between industry and Revenue Canada over the kinds of activities that qualify for the investment tax credit for Research and Development resulting in long delays in obtaining refunds needed to finance ongoing Research and Development activities.
May 13, 1988
Mr. David Orlikow (Winnipeg North):: Mr. Speaker, the motion put forward by the Hon. Member for Laurier (Mr. Berger) on behalf of the Liberal Party criticizes the efforts of the present Government in the area of supporting and encouraging scientific research and development in Canada. As such, it represents the height of Liberal arrogance and Liberal gall. There is quite a difference in how the Liberal Party talks when sitting in opposition as compared to when it is sitting on the government side.
Lor 33 of the 39 years between 1945 and 1984, this country was governed by Liberal Government. And what was the record of the Liberal Party when it came to scientific research and development? What was the view of those most knowledgeable in this area, the scientists themselves?
While the western industrialized countries belonging to the OECD and Japan were spending in the order of 2 to 2.5 per cent of Gross National Product on scientific research and development, Canada consistently, in all of those years, spent substantially less than 2 per cent. Notwithstanding the pleas of scientists in the university community, scientists in the private sector, scientists in government laboratories, Liberal Governments in that period refused to deal with the problem. Through all of those years, Canada was consistently last or second to last when it came to dedicating resources to scientific research and development.
That is the reality. Lor the Liberal Party now to criticize the Progressive Conservative Government, notwithstanding that it is deserving of criticism, constitutes an attitude of cynicism which is amazing.
And what about this Progressive Conservative Government? When the present Prime Minister (Mr. Mulroney) was the Leader of the Official Opposition, he promised that, if elected, a Progressive Conservative Government would "move rapidly to increase those expenditures and to set the goal for expenditures at 2.5 per cent of Gross National Product".
Well, Mr. Speaker, we are now some three and a half years into the mandate of this Progressive Conservative Government, and rather than seeing an increase in scientific research and development, we see that we are spending even less, with the scientific research and development budget being down to around 1.3 to 1.5 per cent of Gross National Product.
We are now spending even less on scientific research and development than was the case when the Liberal Party formed the Government.
How does the present Conservative Government propose to deal with this very serious problem? Well, it has suggested several ways. Lirst of all, it proposed the establishment of a National Advisory Board of Science and Technology, with broad representation from the scientific community, from the university sector, from business, from labour. It was a board to
Supply
be chaired by the Prime Minister, to emphasize how important a role it would play.
Well, Mr. Speaker, that board was in fact established, and has held meetings and made recommendations. It has analysed what is being done, and it is very critical of the Government's efforts in respect of scientific research and development-and I shall come back to that later in my remarks.
Yesterday we had the announcement by the Government that it proposes to establish a new super Ministry of Industry, Science and Technology, a Department which would have $1.3 billion to spend over the next five years.
What that Department will do, no one really knows. The National Consortium of Scientific and Educational Societies has called upon the Government to use $500 million of that $1.3 billion to double the base budgets of the agencies that now fund university research. Those granting councils have not had any real increases.
To show how deficient the effort has been, and continues to be, let us compare the niggardly efforts being made in Canada, rationalized on the basis of this Government's determination to reduce the deficit, with what is being done in Japan. Let me quote from statements made by Richard Samuels, Director of the Japan Science and Technology Program at the Massachusetts Institute of Technology. About the future, he said:
The real economic challenge is to generate new products and services. And that depends on a country's ability to educate and encourage people with ideas and to develop expertise in science and technology.
That's where Japan comes in. In the 1988 fiscal year alone, the Japanese Government plans to spend about $17 billion on basic scientific research, unrelated to defence. Total spending on research in Japan, including work by industry and universities, will amount to more than $100 billion.
Then he goes on to talk about the need to train students who are expert in scientific research. He says:
For example, there are 13,000 Japanese students in the U. S. and of those who will earn doctorates, 80 per cent are in science and engineering.
Japan now accounts for more than 10 per cent of the world's research spending and between 1983 and 1987 Japanese industry has opened some 80 new corporate research and development centres. Japan has had a trade surplus in technology products since 1974.
Where are we in Canada? We are not in the same ball game. We are not even in the same league. The Government proposed to deal with the problem and get greater effort by essentially freezing government expenditures on R and D and by persuading the private sector to increase its efforts substantially but it has not worked. The Government also indicated that it believes we have concentrated too much of our efforts, such as they are, on basic fundamental research and claimed that what we should be doing is putting greater efforts in research that will lead quickly to products that can be used commercially. That approach has been rejected by the two Nobel prize winners Canada has had among scientists, Dr. Hertzberg and Professor Polanyi.

May 13, 1988
Supply
Let us just look at how this supposed major effort to get industry involved is working. One of the best ideas to get industry involved was to set up an organization, Pre-carn Associates of Ottawa, headed by Gordon McNabb, to which belongs 35 major corporations in Canada including Alcan Aluminum, CAE Industries, Bell Northern Research and Falconbridge Limited. Just as it is getting going, the Government is proposing to change the federal Income Tax Act which will wipe out investment tax credits for consortium members who invest in research not directly related to their businesses.
I agree with the Hon. Member for Laurier who spoke earlier that the biggest and best research effort being done by any private sector business has been done by Bell Canada and Northern Telecom. They are part of this consortium, and their efforts to co-operate with other companies will be destroyed by the Government's very bureaucratic decision. Why did the Government make that decision? I suppose because it realized too late that the scientific tax research credit system established by the former Liberal Government was a scam. Instead of the $100 million which Mr. Lalonde, then Finance Minister, thought it would cost taxpayers, it actually cost $2.5 billion, and very little of that $2.5 billion went into real research. The present Government could have cut the $2.5 billion loss in half if it had not permitted the grandfathering of very preliminary proposals which had been made.
Let me give another example. Here we have the Canadian Advance Technology Association. Its President Roy Wood-bridge said a few days ago:
-a survey of 212 companies involved in 325 claims for R & D tax credits show that fully one-third of the claims took more than a year to be paid after they were submitted, and 22 per cent took more than 18 months.
-the Government's cumbersome approval process for tax credits seems to be an overreaction to the political embarrassment it suffered from the program's predecessor, the notoriously sloppy Scientific Research Tax Credit, or SRTC, program.
That raises another question. What we have seen in the United States, both on the East Coast and on the West Coast in California, is a host of new small companies getting started, taking some of the new basic research findings discovered at universities like Harvard, MIT, and the California Institute of Technology at Berkeley, using those ideas to develop new products which will have large sales in the increasingly technological world. These new companies are just getting started. They have as yet made no profits. If they have made no profits, tax credits are of no use to them and the Government has not dealt with that situation at all.
Let me go on, Mr. Speaker. The Prime Minister made a great deal about the establishment of that National Advisory Board on Science and Technology, to which I referred earlier, with broad representations. It has been in operation for some months now. It has had an opportunity to look at government programs. What did the board say? It said that without a massive increase in spending on science and technology and industry, Canada's economic future is bleak. It said that any boost in spending must be accompanied by a major effort to upgrade workers' education and skills.
What is actually happening? In fact, as the Hon. Member for Notre-Dame-de-Grace-Lachine East (Mr. Allmand)
pointed out there have been cut-backs in these programs by this Government in its determination to control and reduce the deficit. There have been cut-backs in funding for training. There have been no increases in the ability of universities to train people in the scientific areas in which training is badly needed.
Let me talk for a few moments about what this advisory council on science and technology has said to the Government. It has warned that Canada's weakened industrial position will deteriorate further without a massive increase in spending on science and technology to improve competitiveness. Among the problems cited by the study are that Canada ranks lowest of seven countries in research and development spending as a proportion of Gross National Product; in scientists and engineers as part of the labour force-I gave some indication of what Japan is doing-in international patents per 1,000 people; in industries in the high-tech field with a trade surplus, and in industry funded research and development as a share of economic output. The study points out that high levels of foreign ownership in Canada contribute to this situation and that Canadian-owned firms spent 60 per cent more on research and development as a percentage of sales than foreign-owned firms.
Some years ago in discussing this same subject, I pointed out that one of the largest and most successful companies in Canada with a very large labour force, Ford Motor Company, had not one person with a Ph.D. employed in Canada doing research. I doubt that anything has changed in that respect even now. The council recommends a number of initiatives which could come into conflict with the terms of the free trade agreement, including the use of government procurement to support emerging Canadian industry, although government procurement in the United States is a major way of fostering industry and research and development.
The council also recommended targeting government funds to firms which create new technology for world markets. That proposal could be challenged as being contrary to the terms of the free trade agreement. It recommended accelerating the purchase of Canadian developed high-tech products for use in Canadian industry through low-cost financing. Those are policies we have followed in the past through our regional development programs, and they could be challenged.
The report also calls for much more emphasis on developing science and technology training as part of the business school curriculum, improvements in labour adjustment programs and the establishment of paid educational leave to assist Canadian workers to adapt to the changing needs of a high-technology economy. These suggestions came from an advisory committee, broadly based, established by this Government. Is the Government listening to those recommendations? Is the Government trying to answer those criticisms? It is not, not as far as anyone can see.
May 13, 1988

The Government plans to spend, it says, an additional $1.3 billion on science and technology over the next five years. I have not been able to find out, nor has anyone else as far as I can tell, whether in fact this extra $1.3 billion will be added to the money which was devoted to scientific research and development efforts in the past or whether it is just a recycling of old money.
We know, for example, that when the Government made its decision to get involved in a major way in space research and in the development of the space platform at a cost of $750 million, a substantial part of that $750 million was to come from cuts in scientific and research programs which had been funded in other areas in the past. We know now, as some of us warned at the time, that the $750 million would not be the actual amount needed. In fact, we knew then and were told then, both in Canada and in the United States, that the estimates for the cost of building the space platform were escalating very rapidly. Now we are told that instead of $750 million, we will have to spend $1,250 million.
Where will that increased funding come from? Will it come from further cuts to programs which are already underfunded? I ask again, as I have in the past, where there is any scientific evidence that in fact the research efforts in space will be more productive, will produce more jobs and more scientific information which can be used by Canadians, than the research done in the areas in which hundreds of thousands of Canadians have worked since Canada became a nation. We have funded scientific research in agriculture, forestry, fisheries, human resources and medicine and all that research is now being restricted in order to help fund scientific research in space. We say that that is wrong.
Let me conclude by pointing out to the Minister the concerns of the universities. University research funding, which has been inadequate in the past, and was so admitted by the Conservatives when they were in Opposition, will be further eroded and harmed by the direction this Government has taken. The universities have called for a doubling of support for scientific research and development in universities over what the Government has proposed at this time.
We support this motion, although we have no confidence that the Liberals would have done better, nor did they do any better, than the Conservatives have done in their disastrous program.


Thomas Hockin: Mr. Speaker, I want to know if the Hon. Member is aware of a report prepared by a working group of officials of the Inland Revenue and Treasury of Great Britain in March of 1987. It said that for large manufacturing firms, the corporate tax system as a whole in OECD countries provides a strong incentive in Australia and Canada for firms to invest in R and D, and it goes on to talk about lesser incentives in other countries. It also says that in several countries, notably Canada and Germany, the fiscal system, broadly interpreted to include general grant programs, is much
Supply
more favourable to R and D investment by small firms than by large ones.
This report was based on OECD research and was done for the British Government. It gives us some sense of the regard with which the Canadian tax and grant systems for R and D is held by other OECD countries. I wonder if the Hon. Member was aware of that.
I listened carefully when the Hon. Member made a point about small corporations. 1 agree that we have to take a special look at that, not simply looking after the large corporations. I do not know if he heard what I tried to make clear before Question Period which was that the enhanced 35 per cent tax credit available in respect of the first $2 million of R and D expenditures of a current nature was made fully refundable in tax reform. In effect, this provides direct payments of up to $700,000 per year for eligible corporations. Making it fully refundable is the way we avoid the criticism he worried about which is that ITCs would not be useful.
Finally, the Hon. Member asked me a question in the House yesterday on another subject. He asked why so many corporations are not paying tax in Canada today, and I think today the Hon. Member for Ottawa Centre (Mr. Cassidy) asked why so many individuals are not paying tax. Then, in the last half hour, the Hon. Member made a speech about increasing tax preferences still further, increasing the flow-out provisions to allow individual investors to shelter income against tax. He seems to be talking out of both sides of his mouth.
The Hon. Member wants us to make sure that no wealthy investor escapes paying tax, but then his prescription for the R and D sector is to have more flow-out provisions which allow investors to shelter their income from further taxes. One cannot have it both ways. I would like to hear his answer on that as well.


David Orlikow: Mr. Speaker, the Minister asked so many questions that I think I will have difficulty answering them all. First, there is almost universal consensus in the university and scientific community in Great Britain that the British universities and research facilities which, for almost 100 years, were at the leading edge of scientific research and were comparable to almost every other country, are now in a state of disaster. British universities are becoming second and third-grade universities because of the Thatcher Government's determination to leave everything to the private sector.
Second, as far as scientific research in Canada is concerned, we have no objection to grants or tax credits if they are really used for scientific research. However, I remind the Minister that that scam which Mr. Lalonde fathered was only the last of many attempts by Liberal Governments to encourage the private sector to do research. There is very little evidence that the Conservative Government's attempts and proposals have had any better effect.

May 13, 1988
Supply


Thomas Hockin: The SRTC is gone.


David Orlikow: The SRTC is gone, but we have nothing in its place. Let me put on the record some suggestions which make very good sense to me. They are contained in an article which appeared in The Toronto Star on February 9, 1988. It was written by Dr. John Evans, President and Chief Executive Officer of Allelix Incorporated. Prior to that he was President of the University of Toronto. He said, referring to corporations:
Only 2 per cent invest in R and D and of these, fewer than 7 per cent account for nearly two-thirds of all R and D performed.
But 98 per cent of Canadian companies have little appreciation of the potential of technology in improving the competitiveness of their products.
He also said:
First, industries not engaged in science and technology should be encouraged to develop technological awareness and competence through exchange programs from universities and governmental labs.
Second, industries with R and D activity should be encouraged to invest some of their R and D budget externally in university and government research groups-
He made some very concrete suggestions:
-one approach to draw in more of the 98 per cent would be an R and D levy of about 1-2 per cent of pre-tax profits on all corporations-
He then went on:
Those corporations performing R and D above this level would have their contributions refunded. The remainder would contribute unwittingly to the national support of R and D.
We are not opposed in any way to real efforts by the private sector, but we say they have to be made in conjunction with government laboratories. I remind the Minister that it was a government laboratory which developed rape seed, now a multimillion dollar product for Canadian farmers. We need support for our universities, and they are not getting it. We need support for basic research, yet the Government seems to feel that it is not necessary or should be done elsewhere.


Mr. Gagnon:: Mr. Speaker, I am totally astounded that a member of the NDP can stand up and say that they want to put in place tax credits which will allow individuals and corporations to avoid paying taxes while their Leader is running around saying it is not proper for profitable companies not to pay taxes. Obviously if we go along with the suggestion made by the Hon. Member, profitable companies can use R and D tax credits to avoid paying taxes. His Leader is running around in the meanwhile saying all profitable companies should pay tax. I think he is speaking with a forked-tongue.


David Orlikow: Mr. Speaker, of course all profitable corporations and all wealthy individuals, indeed all Canadians, should pay a fair share of taxes. Of course we are opposed to corporations making hundreds of millions of dollars and paying no taxes because the tax they should have paid is deferred
because they invest in new buildings or equipment and so on. Some of them may very well never pay taxes and are proud of that fact.
We are saying we can accept the idea that companies or individuals will get tax credits if they actually do scientific research and development which is useful and will increase the ability of Canada to manage in the increasingly technical world in which we are and will be living for many years to come. We are saying we support that.
What we are opposed to is the kinds of things done by past Liberal Governments, and now by a Conservative Government, which permit companies and individuals to avoid taxes by claiming they were doing scientific research when in fact they were not.


Gabriel Fontaine: Mr. Speaker, this is the first time that I speak in the House after the Hon. Member for Winnipeg North (Mr. Orlikow) since the crushing defeat of his party in Manitoba, where he worked for the provincial government for five weeks using his expense account as a Member of Parliament.


Mr. Deputy Speaker:: May I remind the Hon. Member that his question or comment must be pertinent to the speech given by the Hon. Member for Winnipeg North (Mr. Orlikow). I would ask him to remember this, please.


Gabriel Fontaine: Mr. Speaker, the Hon. Member boasts about technological development and research. I find him inconsistent, as usual, because when we were talking about Bill C-22 on pharmaceuticals, we even saw this Hon. Member rise several times to prevent its passage. This Bill would have immediately created 1,300 jobs in Montreal, 3,000 in Canada, and resulted in investments of $1.5 billion; he was against it. I ask him today as well why he speaks for the development of research and technology and is against free trade, which would help our high-tech companies, the best in the world, go to work in the United States without restriction. Free trade lets them sell their services and specialize, but he is opposed to it! So I find, Mr. Speaker, that his representations today are completely unacceptable and inconsistent, as one would expect from him. He is as inconsistent as the Hon. Member for Laurier (Mr. Berger), who presented the motion today. He too was against Bill C-22 and is against free trade. They are inconsistent with their policy. Today they are making us waste another day in this House because of their inconsistency, the inconsistency of the Liberal-socialist alliance.


David Orlikow: Mr. Speaker, in our criticism of Bill C-22 there was not a single word in opposition to pharmaceutical companies, multinational or Canadian-


Gabriel Fontaine: You forget!
May 13, 1988


David Orlikow: I listened to the Hon. Member and did not interrupt. I would hope, particularly as my time is almost up, that he would do me the same courtesy.
We do not object to pharmaceutical companies doing research in Canada. What we object to is extending the length of exclusivity the companies had. We said, and all the evidence is there, that under the law we had until that Bill was passed the multinational corporations were able to recoup their investment in research and make substantial profits. We said drug companies are among the most profitable corporations of any in Canada. We said it was not necessary for them or anyone else to have this legislation in order to do research. For the Hon. Member to say that our opposition to that Bill would in any way harm scientific research is the same kind of nonsense we hear from him almost every day of the week.


Mr. Deputy Speaker:: Resuming debate.


Mr. Len Hopkins (Renfrew-Nipissing-Pembroke):: Mr. Speaker, first I want to compliment my colleague, the Hon. Member for Laurier (Mr. Berger), for putting forward this motion today. It is needed in order to bring out some of the inequities, indeed some of the misleading information, coming from the mouths of government Members.
In my speech today I want to zero in on the fact that the Government is reducing funds available for R and D. That certainly is true with regard to Crown corporations. At the same time, the Government is trying to give the impression that it is promoting private enterprise instead. I want to point out where that is not necessarily true either.
The Government has a habit of making high profile announcements so that people do not realize they are getting cheated. The Government makes its announcements in the midst of all kinds of publicity, with two or three cabinet Ministers in attendance or even the Prime Minister (Mr. Mulroney). The Government leads Canadians to believe that it is performing wonders, but they have come to understand the Government and the way it operates. That is why it cannot maintain credibility across the country. While it pretends to be doing more for the country, it is in fact doing less in many areas.
For example, the Government says that it is promoting private enterprise and will downgrade Crown corporations. It is creating the impression that it is against public institutions because private enterprise should lead the way. Today 1 want to point out how private enterprise is still living off the Government quite substantially in some areas.
On the other hand, we have seen the Government drastically cut the budget of one of the best research institutions in this country. In the 1985 Budget of the Minister of Finance (Mr. Wilson), the Government cut 50 per cent from its grants to Atomic Energy of Canada Limited in the research and development field.
Since then, it has lifted $60 million of that $100 million from Atomic Energy of Canada Limited, as well as $70 million
Supply
from the reserves of that Crown corporation. This represents a total reduction of $130 million to date. That is the Government's contribution to one of the great research and development Crown corporations of this country. At the same time it was going to reduce the contribution to Atomic Energy of Canada Limited by another $25 million this year and another $15 million next year, which would give the Government its pound of flesh of a $100 million reduction.
However, the people who manage AECL have informed the Government that it just cannot continue to operate if it loses another $25 million this year. The Government has spent months thinking about this situation and finally decided on one amendment. It will require the Crown corporation to reduce its budget by $11 million this fiscal year, but has said absolutely nothing about next year or the year after. The Crown corporation does not know what its financial future will be. What will happen to the other $29 million that the Government still wants to reduce from the budget of AECL?
Many people only think about nuclear energy when we talk about Atomic Energy of Canada Limited. Not only does it deal with the peaceful use of nuclear energy, AECL does research in many fields. For example, it is at the labs of AECL in Chalk River where the new O-ring for the space shuttle has been developed. People will recall that the failure of the O-ring in the Challenger was cited as the cause of that explosion. The development of the new O-ring was done at Chalk River where AECL labs were contracted by the United States. That is just one example of the major projects it has done for international governments.
AECL also performs research and development for private enterprise. It can do this much cheaper because it already has the facilities to carry out R and D. The Government is of the opinion that if it dumps more money into major private companies, the money is better spent. The fact is that it could be duplicating research activities. Furthermore, a private enterprise company that receives substantial funds in the form of tax breaks for other incentives will likely request the right of property to that new research. Therefore, it will not be shared on a broader base in Canada.
When research and development in Canada is done in Crown corporations or government Departments, that research and development is available to all individuals and companies across the country. If they cannot perform the research and development, it can be contracted to a Crown corporation like the National Research Council. That is another Crown corporation which has suffered budget cut-backs by the Government since it took office in 1984.
Let me explain how the Government wants private enterprise to proceed and stand on its own feet. It is very interesting to analyse a financial report delivered by Andre Plourde of the Department of Economics of the University of Ottawa in October, 1987. It was prepared for Energy Options, a conference highlighted by the attendance of the Minister of Energy, Mines and Resources (Mr. Masse).

May 13, 1988
Supply
This financial report deals with exploration expenditure, tax expenditures and grants, northern and offshore eastern Canada. In 1985, these companies spent a total of $2,078 billion. Mr. Plourde points out that of the $2,078 billion, $1,587 billion was paid by the Government of Canada and the company paid $491 million. That is the Government's idea of private enterprise standing on its own feet without support as the Government would support Crown corporations. This means that 23.6 per cent of the total expenditures on exploration by oil and gas companies in Canada was paid for by private enterprise companies. The Government, which says that private enterprise must stand on its own feet, paid 76.4 per cent. So they are paid over 75 per cent of the money that those oil and gas exploration companies paid out during a one year term of this Government.
[DOT] (BOO)
The Government says that private enterprise must stand on its own feet, that we are going to bring Crown corporations into line. But it cuts the budget of one of the best Crown corporations in Canada, Atomic Energy of Canada Limited, by 50 per cent, at the same time that it is giving 76 per cent of taxpayers' money for exploration by the oil and gas companies. Canadian citizens are certainly not seeing those benefits showing up at the gas pumps of this country.
AECL cannot write off taxes because it is not a profit organization. That is why it is a Crown corporation. But it can do the research cheaper, and the work it does for the companies is returned to those companies which in turn pay taxes to the Government. Long-term benefits is what we have to look at and the Government is looking at short-term, opportunistic politics and, of course, highlighting everything it does is its policy of leading people to think that it is doing more when in fact it is doing less.
The cost to the taxpayers of the oil and gas companies under this Government runs into the billions of dollars. Yet, it will cut the budgets of the National Research Council of Canada, which serves all people, all businesses and all corporations in Canada. It is the same with our other Crown corporations such as Atomic Energy of Canada Limited. We have also seen the cancellation and closing down of the Algonquin Radio Observatory in Algonquin Park in eastern Ontario. This was done without a whimper from the Associate Minister of National Defence (Mr. Dick) who tells us he is the Minister to protect eastern Ontario. Some protection. He never uttered a word.
This Government is paying out these billions of dollars to companies which are doing research and exploration for nonrenewable resources, whereas in the nuclear energy field Canada has the safest and best record in the world for research. We have enough energy in that field alone to last for hundreds and hundreds of years. It is also cheaper.
I would like to read from an article in which Mr. de Grandpre was interviewed by a certain reporter. When asked
whether Canadian politicians help or hinder companies like Northern Telecom to compete internationally it indicated: "He snaps forward and starts speaking with animated intensity, particularly with this Government. The politicians are all saying the same thing, that we have to have more research and development capacity in Canada, as the future of this country rests on high technology products. Yet Ottawa's new tax reform package would reduce the tax rates for research and development." There it is from one of our major industrialists. He says that that amply demonstrates that politicians "don't understand how the game is played".
He is quite willing to tell you what he is doing about it. He has written letters to key politicians and is making his arguments face to face with cabinet Ministers in the present Government. As a leading member of the powerful Business Council on National Issues, he has urged other chief executives of big corporations to do likewise.
I will relate back to something I have already said, and repeat that billions of dollars are being paid out to the gas and oil companies of this country by the Government which says it wants private enterprise to stand on its own feet. Do you, Mr. Speaker, think that the large corporations that represent oil and gas will speak out against the Government as long as they are getting these kinds of tax breaks from the taxpayers of this country? They are going to leave well enough alone. The article goes on to indicate that he was confronting senior bureaucrats about such matters as Ottawa's plan to eliminate tax deductions for the expense of buildings where R and D is done, and to say: "I told the Deputy Minister, 'do you think you can do research and development without a roof over your head?"'.
There is a threat. If the Government reduces the tax rates, Mr. de Grandpre says that his company will do its research in some other country and take away several hundred well-paid jobs from Bell Northern Research, the largest private research development facility in Canada. He also says: "The Canadians who are graduating from our universities are going to walk over to BNR and say: 'Can I have a job' and we will say: 'Sorry, but we are not expanding our research and development facilities in Canada'. They will say: 'Why?' Well, because the Government has introduced this stupid piece of legislation.
When Mr. de Grandpre talks like that, the politicians have to listen because his company has single handedly given Canada an international presence in technology. When economic commentators say Canada is a world-wide leader in telecommunications, they do not mean Canada, they mean Bell and Nortel. That is part of the story.
I would also like to say that Crown corporations and government institutions in this country are still very capable of doing a lot of R and D in their field as long as the Government does not continue to cut the ground out from underneath them.
May 13, 1988

I talked about the good return companies get by contracting out research and development to Crown corporations such as Atomic Energy of Canada Limited. I talked about how foreign companies and other international governments ask that certain research projects be done. The Government does not seem to understand, nor does it want to understand, the nuclear industry side of research and development of AECL. It does not understand that it is doing a broad basis of research in this country, not just the narrow things that people attribute to it.
For example, the cobalt therapy unit which is used today not only in hospitals in Canada, but throughout the world, for the treatment of cancer, was designed at the Chalk River nuclear laboratories of AECL. That is something that is not talked about very far and wide today because we have critics of the peaceful uses of nuclear energy who want to have people think there is something horrendous about all of this. At the same time this type of research and development has produced CAN DU the safest reactor in the world, which produces enough power to run 50 per cent of the industry in the Province of Ontario. Hence it can take credit for supporting 40 per cent of the jobs of the labour market in Ontario alone.
That is the type of research and development that has been done by this Crown corporation, Atomic Energy of Canada Limited, which is the Crown corporation from which the Government has cut its research and development budget by 50 per cent, from $200 million down to $100 million. It has lost some good scientists over this matter. The sad part of the proposals of the Government is that when our leading scientists find out that there is no support for their future in this country in high-tech fields they leave to go elsewhere.
I call upon the Government today to take serious note of the financial problems of National Research of Canada and of Atomic Energy of Canada Limited and to do something about it. It should treat these entities seriously because there is more involved than what the Government is paying attention to. [Translation]


Gabriel Fontaine: Mr. Speaker, while the Hon. Member for Renfrew-Nipissing-Pembroke (Mr. Hopkins) was making his speech and commenting on our scientific research programs, my colleague who happens to be a financial expert from the Province of Quebec, Parliamentary Secretary to the Minister of Finance, and Member for Trois-Rivieres (Mr. Vincent) was telling me that the team of which he was a member in 1983 had advocated the scientific research tax credit program. It had been proposed by the then Minister of Finance MacEachen who is now blocking our legislation in the Senate. He had stated that the program would cost $100 million, but twenty-odd months later $2.5 billion had been sunk into it and we put an end to the program because it had not produced anything worthwhile.
I have a question for him. What would have happened had the $2.5 billion been wisely spent on genuine scientific research? Why did they fail to impose some kind of restraints on these scientific research programs? Why did they go ahead
Supply
with this scientific research program which ended up costing Canadians an additional $2.5 billion?
Second, with respect to atomic energy research development, he said we could do a lot more to promote research in that field. I think it is a debatable issue because his own Government, his own Leader or so-called Leader of 11 out of 33 Members-22 are against and 11 in favour-and the Member sitting in the front row has been saying lately that he is against nuclear submarines ... As his representative in caucus today, can he say he supports nuclear research while at the same time speaking against putting the results of that research to good use in our own nuclear submarines?
I wish he would enlighten me on these two questions. [English]


Leonard Donald Hopkins: Mr. Speaker, with regard to the program mentioned by the Hon. Member, he cannot defend his statement that there were no positive effects from that program. There were. I pointed out to the Government today where it has gone wrong. It still has not seen the light. The Hon. Member does not see very many lights around here either, as we hear him speak from time to time.
The Hon. Member talked about the nuclear submarine program. I want to point out to him that I was at a defence committee meeting when representatives of the nuclear industry were present. I asked them a question about what benefits this program would bring directly to Atomic Energy of Canada Limited. They said that they did not want to mislead anyone, that there would not be all that many benefits to that Crown corporation. The benefits would largely be to the nuclear related industries of Canada on the private enterprise side. The Hon. Member is trying to make a mountain out of a molehill.
He talked about 22 Members in this caucus. First, he cannot identify the 22 Members. As a matter of fact, I understood after it was all over-I was busy in a nomination contest at the time-that even my name was thrown around. I want to point out to the Hon. Member that my name was never involved in that.
When we consider the results of the polls that came out the other morning I think what the Hon. Member should be doing for the Conservative Party of Canada is recommending some differences in his own Party out in the open. He would be surprised at how they might rise up in the polls across Canada. The Hon. Member has a guilt complex. In fact, I think the way the Hon. Member discussed this when he was on his feet shows that he has a guilt complex. He is not speaking out against things with which he disagrees with his own Leader and other Members of Cabinet. Surely he cannot support the Government. I know that the Hon. Member is one who gets up dynamically to say things-not always well informed-but he says them anyway. I know that a Member such as that in that massive caucus has all kinds of disagreements about the Government of Canada.

May 13, 1988
Supply


Gabriel Fontaine: No, sir!


Leonard Donald Hopkins: Why does he not have the intestinal fortitude to stand up to be counted? He is always talking about people standing up to be counted. I do not mind standing up to be counted. I support my Leader. He is ahead in the polls-way ahead of the Leader of the Government. I know that the Hon. Member has a guilt complex and is very concerned. He is worried about the next election.
In the number of years that I have been here, I have seen vocal Members such as the Hon. Member come into the House, and I have seen them leave, too. Some of them leave within four years and some after having served one term. They do so because they are always up on their feet. The public realizes that they do not always have their facts correct.
I think that the Hon. Member might be jealous of being behind in the polls. He might feel a sense of guilt because he is not coming out and saying the things that he he really means to say. I suggest that he go up to the Chalk River nuclear laboratories and get a top-notch briefing so that will understand what the Government is doing to the nation.
At the same time would he ask the President of the Treasury Board (Miss Carney) why, when she was Minister of Energy, when the cuts were made she would not even see a delegation of municipal Governments from the upper Ottawa Valley who came here to talk about these massive cuts and what they would mean to the economics of the area and to employment? The Government talks about jobs, jobs, jobs. When the Government took office there were 2,350 jobs at that site. They are now down to 1,900. There will be more cuts if the Government continues the way it is going.
I plead with the uninformed Member opposite to go to the Chalk River nuclear laboratories, taking some other people who sit over there with him. They should find out what is going on in the high-tech field in the country so that they can then stand up with pride in the House to ask intelligent questions about energy, for example, and about research and development. He does not have to drag a red herring across the floor of the House about some mystical 22 Members in the Opposition Party and talk about their Leader. We have the best Leader in the country today. The Prime Minister of Canada lacks credibility, as does his entire Government. If the Hon. Member continues in the way he is going he will not have any left either.


Mr. Deputy Speaker:: The Member for Vancouver- Kingsway (Mr. Waddell), on a brief question or comment.


Ian Gardiner Waddell: I find the logic of the Hon. Member really strange. Here we have a Liberal saying to a Progressive
Conservative that, if the PCs stab their Leader in the back, maybe they too will go up in the polls. That is extraordinary.


Leonard Donald Hopkins: They did it in 1982-83.


Ian Gardiner Waddell: Given the fact of the Chernobyl and Three Mile Island accidents, and given the fact of a lack of sales for CANDU reactors, and given the fact that Atomic Energy of Canada is all but bankrupt, where does the Hon. Member see the new thrust for nuclear energy coming? Or are we in fact at the point where atomic energy has perhaps seen its day, with energy consumers moving to non-generated forms of energy?


Leonard Donald Hopkins: The question is typical of questions coming from the New Democratic Party.


Ian Gardiner Waddell: It was a straight question.


Leonard Donald Hopkins: It is very typical of a New Democratic Party question. Here we have yet another uninformed Member. As a matter of fact, what the Hon. Member does not know is that the Soviet Union built many "Chernobyls" inasmuch as it failed to build into its nuclear plants the kind of safety features built into the CANDU reactor.
What the Hon. Member has not said to this House is that the reactor that was in use in Chernobyl, and which is in use in other similar facilities in Russia, has no relationship whatsoever in its mode of operation to the CANDU reactor. It is a different system altogether.
The Soviet Union built its nuclear plants without due regard to safety. That is not the case with the CANDU reactor. The Chalk River nuclear laboratories not only developed a safe reactor in and of itself, but built into it one back-up system after another. It is for that reason that the CANDU reactor does not suffer from the same problems as those in use in the Soviet Union.
And what is going on in the Soviet Union now as a result of the Chernobyl accident? The New Democratic Party Member does not make mention of what is happening in the Soviet Union now, because to do so would be to show the flaw in his argument. The Soviet Union today is accepting advice from Great Britain. As well, Canada has offered to the Soviet Union expert advice on developing nuclear energy for peaceful purposes. And I want to point out that when we are talking about CANDU reactors, we are talking about the peaceful uses of nuclear energy.
Is the Hon. Member saying that 40 per cent of the labour market in the Province of Ontario is not important to him or to his Party? As I pointed out earlier, were it not for the CANDU reactor, those jobs would not exist in Ontario today. At this point in time, 50 per cent of the energy consumed by industry in Ontario is generated by CANDU nuclear reactors.
May 13, 1988

To have that same level of energy generated by coal-fired plants would have involved the importing of over $7 billion worth of coal from the State of Pennsylvania.
The Hon. Member and his Party, the New Democratic Party, make a good deal of the fact that they pay a great deal of attention to the environment of this country. Just imagine what the burning of $7 billion worth of more coal would have done to the environment of the North American continent, to say nothing of Canada itself.
I think it is time that the New Democratic Party stopped talking out of both sides of its mouth. It is time that members of that Party got their facts straight. Nuclear-generated electricity is the cheapest energy source available. Without it, Ontario electricity rate payers would be paying an additional 33 1/3 per cent on their hydro bills.
We have the safest system in the world, and it is a system that produces sufficient energy to fuel 50 per cent of the industry in the Province of Ontario, Canada's industrial heartland. Just imagine what would happen to the social programs in this country without the industrial base in central Canada to generate the tax revenues to support such programs?
In knocking this program, the New Democratic Party is knocking the system that funds old age pensions, that funds the unemployment insurance program, and other social programs. In taking the position that it is in respect of this issue, is the New Democratic Party saying that it no longer supports labour in this country; that it no longer supports cheap electrical power for those Canadians who can avail themselves of it-and this service is available to citizens in parts of Canada other than Ontario. The CANDU is a Canadian-developed reactor, and it is the safest nuclear reactor available in the world today. In addition to being the safest, with built-in back-up systems, it is also the least expensive.
Are the members of the New Democratic Party saying that the taxpayers of this country should introduce a totally different system for hydroelectric generation, a system that is going to cost far more money and one which will take money away from every household in Canada?


Mr. Deputy Speaker:: The Hon. Member for Ottawa West (Mr. Daubney), on debate.


David Bruce Daubney: Mr. Speaker, I am pleased that the Hon. Member for Laurier (Mr. Berger) has raised the issue of research and development for debate today. It seems to me that these issues are not debated often enough in this Chamber.
The Hon. Member and I served together on the Standing Committee on Research, Science and Technology. In fact, we are both founding members of that committee. The fact that that committee was only founded in this Parliament is in itself an indictment of the policies of past Liberal Governments.
Supply
Prior to the present Government taking office, there had never been a committee of this House dedicated to looking at the key issues of research, science and technology.
I have the greatest respect for the Hon. Member for Laurier, and I am pleased that he has raised the issue, inasmuch as the debate provides me with an opportunity to review for the House the Government's record in the area of research and development.
Today's economic environment is one of intense international competition. In this new order, science and technology have become the driving forces in national economies, in international trade, and within our workplaces and our homes. Over the next 25 to 30 years, these developments will produce social and economic changes as profound as those we have experienced over the last 200 years.
Innovation will clearly be the key to success, and it is industry that must lead the innovation process. But, in order to effectively execute science and technology, industry needs the support of Government. Government must provide the leadership, the co-ordination, the policies which foster a spirit of innovation.
Over the last four years, the Canadian Government has made it an urgent priority to pursue our national economic and social goals through the more effective use of science and technology. More important, it has approached that task in a thoughtful and co-ordinated fashion.
We all, of course, know that not everything can be accomplished overnight. Similarly, as our predecessors in Government showed us, little is gained by adopting a "quick fix, let's throw money at the problem" approach. The issues we must deal with are so pervasive and so fundamental that we literally require a complete rethinking and transformation of government policy, with science and technology at the centre of the government agenda.
I should like to touch briefly on some of the specific policy initiatives which the Canadian Government has brought forward, actions which underline its commitment to making technology and research and development national priorities. One of the federal Government's first tasks was to develop a national agenda for science and technology.
The Minister of State for Science and Technology (Mr. Oberle), and his colleagues, held major consultations with hundreds of individuals, groups, associations, and businesses across the country, as well as with other levels of Government. Up to the time that this Government took office, there had never been a meeting of federal and provincial science Ministers. Here we are, almost at the end of the 20th century, and successive Liberal Governments up to this point had not thought it worth while for Ministers at all levels to meet in order to deal with these fundamental issues. It is little wonder that this country fell so far behind other Western countries.

May 13, 1988
Supply
Last spring an historic national science and technology policy was signed by the federal territorial and provincial Ministers. Once again, Mr. Speaker, for the first time in our history we had a national science and technology policy. We had never as a country had such a policy, a shocking indictment of the previous Government. Through this agreement all regions of the country will work together to use science and technology to promote economic, social and regional development. The policy emphasizes that governments at all levels will work in partnership with business, universities and labour to encourage the widespread diffusion of technology throughout Canada. Every effort will be made to strengthen applied research and industrial innovation. Canadian industry will be encouraged to develop strategic technologies geared toward the manufacturing, service and natural resource sectors. Canadian universities will be supported in their efforts to turn out the highly qualified people we need to develop and work with the new technologies.
For the first time federal, provincial and territorial governments have committed themselves to promote entrepreneurial activity, to recognize how critical research and development are to our economic, social and cultural future and to set about removing the barriers to research, development and innovation in Canada. The national policy was the first instalment of the science and technology framework for action. The second was launched on March 24, 1987. Innovaction is a five-track strategy which focuses Canada's science and technology efforts in five critical areas; development of strategic technologies; industrial innovation and technology diffusion; effective management of federal science and technology resources; human resources for science and technology and, perhaps most important, public awareness in science and technology.
Under Innovaction, specific initiatives have been announced to strengthen key areas of science and technology where Canada's performance has historically been weak, and to build on areas of traditional Canadian strength. These initiatives have included a $97 million federal micro-electronics strategy, a technology diffusion policy and increased funding for a number of industry support programs which have been proven effective. Our Government has also taken concrete action to ensure that Canada remains on the leading edge of space technology. Just last month the Government announced that Canada would be participating in this space station project. Our participation in this project, the most significant international space project of this century and the largest international technology development project ever undertaken, is a measure of our technological maturity as a nation. The benefits that this initiative holds for all regions of Canada for our industries and universities are immense. We estimate that more than $5 billion in space and terrestrial spin-offs and 80,000 person years of employment will be realized in Canada over the next 15 years from the space station project. I daresay that even Hon. Members opposite would have to admit that
this is a wise investment, an investment in excellence, an investment in our future.
May I say a word about the Canadian space agency which the Government has announced. It will be established to coordinate our activities in space. For perhaps the twelfth time my strong commitment is that the space agency be headquartered in the national capital region reflecting the truly national nature of Canada's space industry. Ottawa is not alone in having important space elements. Montreal is not alone in the excellence it has developed in the aerospace area. As I wrote in an article which appeared in Montreal's newspaper, The Gazette on March 31, 1987:
Significant space related industries exist now in Vancouver, Toronto, Cambridge, Ontario, Saskatoon, Winnipeg and the National Capital region.
As well as Montreal. My article went on:
The space program cannot be seen as the child of any region, without losing credibility with the rest of the country. Its headquarters must be located in politically or regionally neutral territory, so that the sub-contracting of some of its scientific facilities to the regions will not be subject to suspicions of regional favouritism.
Canada does not need a single, regional centre of excellence in Montreal.
Or anywhere else for that matter:
We need to make Canada a national centre of space science excellence. This means targeting all of our regional scientific resources to play a role in the development of our space program, and ensuring effective central scientific and political co-ordination of the program.
As I have said, working for and with all sectors of Canadian society, industry, universities, organized labour, researchers from the public and private sectors and young people is the cornerstone of our federal science and technology effort. It was one of the prime reasons for the National Conference on Technology and Innovation which the Prime Minister (Mr. Mulroney) hosted in Toronto this past January. I had the honour of attending that conference which brought together over 200 key decision makers from industry, universities and labour from across Canada.
Participants discussed some of the crucial challenges facing the economy as well as the ways in which we can take coordinated action to mount a truly national response to these challenges. I do not think I am being biased when I say that this event was a great success. I believe that most of the participants would agree with me when I say that the dialogue we forged in Toronto in January bodes well for the future.
As we speak, we are building on the consensus we achieved in Toronto and on the concerns and recommendations which were brought forward by the participants through a series of regional conferences. Regional conferences have already been held in Vancouver and Regina. The Atlantic regional conference is taking place today in Saint John and we will be convening conferences next week in Hamilton and two weeks from now in Montreal. These regional conferences have allowed more Canadians from all areas of the country to have input to this vital national dialogue. During January's national conference, the Prime Minister announced $1.3 billion in funding for new science and technology initiatives under the
May 13, 1988

Innovaction strategy. Our universities, I am pleased to say, will be the primary focus for these new funds. For example, we have already announced an $80 million National Scholarships Program to recognize and encourage our brightest young men and women to pursue studies in the sciences and engineering. We will also be establishing national networks of centres of excellence designed to support and enhance world class research in order to provide the scientific and technological base for our country's future long-term competitiveness.
Still on the subject of university research and training, the federal Government in the February, 1986, Budget introduced the first ever five-year financial plan for the granting councils totalling $3.4 billion over five years. This represents a $1.1 billion or a 50 per cent increase over the previous five-year period. A second announcement was made at the conference. While it did not receive the same volume of attention as the Prime Minister's announcement, it will likely have an even more pronounced impact on our future property as a nation.
The Minister for Science and Technology announced the launching of a $10 million national co-operative effort to increase public awareness about the importance of science and technology to Canada. This initiative will provide enhanced federal support for public awareness projects and activities undertaken by organizations outside of government. We will also be proceeding with a long-term national campaign involving governments, industry, educators and others to raise public awareness of science and technology.
Briefly, the Government's goal with respect to public awareness is to foster the development of a science culture in Canada. It is vitally important that we strengthen those cultural characteristics which can nourish the inquisitive mind the intellectual genius of our people.
More Canadians should be made aware of the significant accomplishments of our scientists, our engineers and our researchers. We also have to make more Canadians aware of the increasingly inexorable link between science and technology and economic growth and prosperity. Perhaps most important, we want to inform the young people and particularly young women of the opportunities offered by science and technology. We want to encourage them to study math and sciences and to make them aware of the exciting careers that they can pursue if they do so.
Having established a national policy and a federal strategy designed to improve our international competitiveness and create sustained economic growth and prosperity for Canada, the Government initiated a series of organizational measures to support and promote these developments. In February of last year, the Prime Minister chaired the first meeting of the National Advisory Board on Science and Technology, the first time in Canada that such a board has been chaired by a Prime Minister. The board, whose membership includes some of Canada's most eminent scientists, educators and industry and labour leaders, is assessing national goals and policies for science and technology and their application to Canada's economy.
Supply
We have established for the first time a council of science and technology Ministers to monitor the implementation of the new national policy and to continue consultations with Canada's science, technology and entrepreneurial communities.
As the House will know, yesterday the Government tabled legislation for the creation of a new Department of Industry, Science and Technology. The elevation of science and technology to a senior Department is yet another clear signal of the Government's priorities. The new Department will have the mandate to work toward a closer integration of Canadian industry with Canadian scientific knowledge and technological skills. Success in this regard will require a concerted effort with the business and science communities. One of the new Department's principal objectives will be to mobilize and to catalyse this effort.
Industry will come to see the new Department as its advocate with respect to other government Departments and agencies, whether we are talking about taxation policy as we are today or trade, resource development and regulations governing, for example, transportation or communications. The new Department will seek to ensure the efficiency of Canadian production processes, technological and managerial skill levels, availability of risk capital, access to markets and many other key issues in this all-important area of research and development.
Another key activity of the new Department of Industry, Science and Technology will be to foster the development of strategic technologies such as biotechnology, information technology and advanced materials. When talking about integrating science and industrial development, the strategic technologies are of particular importance. To this end, the Government will continue to pursue such vehicles as joint investments with firms and consortia, targeted research in government laboratories, international prospecting efforts and increased funding for the training of highly qualified personnel.
As a Member from the National Capital region, may I say a word about our national laboratories. Many of these laboratories were established over 100 years ago, and I think of the research being done at the Central Experimental Farm about which I asked a question in the House today as an excellent example of that. These laboratories have been contributing to the growth of science and technology in Canada for many, many years in an effective way. The scientists and researchers who work there are dedicated public servants who are enhancing our lifestyle and improving our national effort in science and technology. They need to work, in my opinion, in a closer way than they have in the past with the universities, community colleges and business. This is a part of the Government's effort in this area, building on the strength of those laboratories which are funded to the tune of $4.4 billion in the last fiscal year, while ensuring that the technology and ideas developed there are adapted and applied in the real world where they can create jobs and new opportunities.

May 13, 1988
Supply
All of us here are familiar with phrases like the information economy and the second industrial revolution. They are used in many obscure ways, but what they mean is quite simple. Science and technology no longer can play a minor supporting role in our society. Science and technology have become the key driving forces for social and economic growth. The task which confronts Canada in restructuring our economy, rethinking our attitudes and refitting our industries is immense. It presents all sectors of our economy and society with formidable challenges, and I can say with great pride that our Government's response to these challenges has been exemplary. Our track record in science and technology is commendable. It bodes well for the future of this great nation.
In closing, I again thank the Hon. Member for Laurier for giving me the opportunity to highlight some of the Government's significant accomplishments in science and technology.


David Berger: Mr. Speaker, I thank the Hon. Member for his contribution to this debate today, and I would say as well that I have enjoyed working with him on the Research, Science and Technology Committee. I would point out to him that while it is indeed the first time there has been a Research, Science and Technology Committee, there was another committee of the House on which I served for a number of years which dealt with these issues. Therefore, the question was not totally ignored, as some people might conclude from the Hon. Member's comments.
I would have appreciated it if the Hon. Member had spoken to the motion a bit more than he did. By way of this motion, I have tried to raise some legitimate concerns which have been raised with me by people who are involved in research and development in Canada. I would have liked to have heard the Hon. Member's comments on that.
I realize that we do not always solve these problems through debate in the House, but my intention today was to put this on the agenda to indicate to the Government that we were indeed watching and that there is a concern about this. Hopefully, we will be able to see some further progress in addressing some of the concerns relating to tax support for research and development.
The Hon. Member indicated that the imperatives for science and technology would require a rethinking and transformation of the Government's agenda. I think I know what he has in mind. Certainly those people who are intimately familiar with science and technology and the rapid pace of technological change tell us very often that we in Canada lack an R and D culture. He referred to the need for enhanced public awareness.
I would remind the Hon. Member that John Evans, the President of Allelix, a company doing research in biotechnology in Toronto, spoke to the National Conference on Technology and Innovation in January. He said that if we are talking about developing an R and D culture, why should the Department of Finance be excluded. Indeed, the kind of concerns that Dr. Evans raised are the ones I tried to raise by way of the motion before the House this afternoon.
The Hon. Member talked about the national science and technology policy. I would suggest to him that a statement of objectives alone does not make a policy. The so-called policy that has been put forward by this Government is a laudable statement of objectives, but it is very difficult, in reading that policy, to conclude how the Government intends to go about reaching those objectives. That is what is really required to have a meaningful policy against which we can measure the Government's performance and indeed, the performance of the economy. I would also say that one important objective has not been committed to, and that is any kind of a spending target for R and D. I would like to ask him to comment on that.
I would remind him that the Leader of his Party, before taking office, committed his Government to doubling spending on research and development over the life of his first mandate. We know that has not happened. It has gone down. Not only that, there is no mention whatsoever of a target and we do not even know if the Government considers it a worth-while objective to try and raise spending to any particular level by 1990, 1992 or 1997. Does the Hon. Member regard that omission in the so-called national science and technology policy as a serious deficiency? Does he regard it as important that such an objective should be stated by the Government along with some kind of guideline so that we can judge the progress we are making? Does he not feel that in order to make this statement of objectives a true policy we need such a target?
I put it to him that all of the items he mentioned are worthy of mention. Before I go too far, some of them I would take issue with. He talked about the granting councils. I ask him to try and be accurate when he talks about a 50 per cent increase over the previous budget. He knows very well that the budgets of the granting councils have in effect been frozen and that even with the Government's contribution to match those of the private sector, the budgets of those councils will barely keep pace with inflation. Yesterday afternoon people from the Association of Universities and Colleges of Canada appeared before our committee and confirmed for the umpteenth time that that is the case. They talked about a decrease in purchasing power of the council's budgets since 1984 when the Government took office.
May 13, 1988

In any event, does he not consider, as a loyal Conservative if you will, that in business thinking we talk about a bottom line? There is a bottom line when it comes to R and D and that is the amount of spending as a percentage of the GNP. That is the common indicator used to compare the performance of one country versus another. If one goes by that bottom line, the Government, despite all its initiatives, has lead us in the wrong direction. We have moved backward in R and D spending since the last election. We have not increased scientific activity and spending on research and development.


David Bruce Daubney: Mr. Speaker, I thank the Hon. Member for his series of questions. I wrote down about eight of them and I doubt that in the few minutes I have available I will be able to deal with them all. However, I will deal with them quickly in the order in which he raised them.
He referred to a previous committee of this House which dealt with these issues. I was also a member of the Standing Committee on Miscellaneous Estimates and, as the name implies, it was a grab-bag or catch-all committee which dealt with about 19 government agencies or Departments as I recall. It was a very disparate group of agencies which previous Governments felt did not justify their own committees. That meant we would meet perhaps once or twice a year to deal with key issues such as the estimates of the National Research Council and other agencies. That just was not good enough and I am delighted and proud that our Government recognized that and finally addressed the issue by creating this agency two and a half years ago.
The Hon. Member was concerned that I had not spoken to the motion. Let me say a few words about R and D from a tax point of view. I remind him and the House that prior to 1985 only scientific research was allowed for tax consideration, leaving aside the terrible boondoggle involved in the SRTC scam which robbed the national Treasury and taxpayers of billions of dollars. We are still counting the losses. That set back the whole process immeasurably, I am afraid. Leaving that aside, it was only in the 1985 Budget introduced by this Government that we added experimental development to the definition of research for tax purposes. That is a significant increase in the scope of eligible expenses for tax consideration. Our committee played a role in that.
I remind him that I and other members of the committee got together with the Deputy Minister of National Revenue and people like the Canadian Advanced Technology Association and, under parliamentary reform, we were able to get the kind of changes which have improved the tax situation for our high-tech firms. In fact, the level of R and D spending through the tax system is higher in Canada than in most other OECD countries. That level has increased significantly over the last four years. A number of international companies have looked to our tax system as one which encourages research and development. That is not to say it is perfect or that some of us would not like to see further changes.
Another area where I have fought a number of battles on behalf of firms in my riding concerns what in my view has
Supply
been a slow process in the Department of National Revenue in getting tax audits of scientific research and development spending so that these credits can be approved and put into the hands of the companies so they can do the new research they want to do. I am pleased to say as a result of pressure from myself and other Members, the Government announced on April 11 a process to expedite refunds for research and development claimants.
Let me talk about this culture, which was the next issue the Hon. Member raised. I am very excited about the public awareness program because to me this country needs to be made aware in a popular way, perhaps through a program similar to Participaction which was so successful in the fitness area, of just how fundamental these issues are to our growth as a country. One of the really exciting things to me about free trade is it is going to force Canada to think more about research and development issues. Free trade is all about competitiveness and productivity. R and D is a key to attaining both those objectives without which we are destined to be, and would have been had we followed the thinking of the previous Government and the NDP, definitely in the ranks of Third World countries at the turn of the century. Free trade will force us to do a lot more R and D and be more focused in our management and spending in this area. That in itself will contribute, I am confident, to this science culture that we have to cultivate in Canada.
I see my time has expired, Mr. Speaker.


Mr. Deputy Speaker:: Resuming debate.


Mr. Simon de Jong (Regina East):: Mr. Speaker, I, too, wish to compliment the Hon. Member for Laurier (Mr. Berger) on introducing this motion today. It is important because the question of R and D and technological innovation goes to the heart of the well-being of our country and its future. All Members who have spoken in the debate this afternoon have emphasized the importance of research and development to the nation's future. Indeed, all Members agree on the importance of research and development.
Statistics show that investment in research and development guarantees more employment per dollar than any other form of investment. A study conducted by the Ministry of State for Science and Technology showed an employment growth rate 2.3 times higher than that of industries classified as performing no research. Those research-intensive industries showed a 66.5 per cent higher rate of real output. The study also showed that these industries had a 43 per cent increase in productivity and a 57 per cent slower rate in price increases.
As this and many other studies indicate, the greater the research and development, the greater the increase in productivity and job opportunities. As well, there is a substantially lower increase in cost of products produced than in industries that do not carry out research and development.

May 13, 1988
Supply
There is another dimension to research which has not been mentioned in this debate. I believe all Members will also agree that research and development also leads to a growth in human knowledge which, in itself, is an important goal. It is important that Canadians participate in this tremendous explosion of knowledge in the 20th century.
I recall listening to the famous futurologist, Buckminster Fuller, addressing a conference in which he stated that 90 per cent of all the important discoveries that have occurred in the history of the human race were made in his lifetime. There has been a tremendous acceleration in human discoveries and knowledge in almost every field which has made life so different than ever before.
Canadians are proud that there have been some very significant Canadian contributions to this growth of knowledge. Concern has also been expressed that we are not doing enough to ensure that Canadians continue to be involved in the growth of knowledge from which the Canadian economy and our way of life can benefit.
Let me emphasize that research does not only involve industrial benefits, but involves human benefits as well. An increase of human knowledge increases not only our philosophic understanding but our understanding of the universe. Increased knowledge will provide a better understanding of medicine so that we can alleviate sickness. An increase in knowledge and understanding allows us to manage our environment and reduce environmental risks. In short, knowledge in its fullest sense can contribute to the well-being of our way of life.
In a debate such as this we must also discuss the record of the present Government. I think it is fair to say that when the Government was elected in 1984 there was a fair amount of optimism and hope among scientists and the research community in Canada. After all, in his book Where / Stand, the Prime Minister (Mr. Mulroney) devoted much importance to increasing research and development. He pointed out that the goal of a Conservative Government would be to increase research and development in this country substantially. He wrote: "Even if Canada does reach the goal of 1.5 per cent of the Gross National Product by 1985 we will still lag behind other countries. In fact, if the U.S. effort were to stand still as of today, American R and D spending will be 14 times Canada's". He went on to propose that R and D under a Conservative Government should reach 2.5 per cent of the Gross Domestic Product.
The Prime Minister was right in his criticism of Canada's record on research and development. Compared to all other industrialized countries, Canada spent just a little more than Australia and Spain. In 1986, the last year for which figures are available, Canada spent 1.35 per cent of its Gross Domestic Product on research and development.
Let us compare that to the largest 12 OECD economies. In the United States, 2.89 per cent of its Gross Domestic Product went to research and development; Japan, 2.81 per cent; Sweden 2.79 per cent; Germany, 2.66 per cent; France, 2.38; United Kingdom, 2.33 per cent; Switzerland, 2.28 per cent; Netherlands, 2.06 per cent; Italy, 1.47 per cent; Australia, 1.14
per cent and Spain, 0.48 per cent. Canada did a little better than Australia and Spain.
The statistics show that we do not have a good track record in terms of what we spend on research and development as a percentage of our Gross Domestic Product.
This situation existed for years under the Liberal Government. Following the 1980 election I had the privilege of serving as the spokesperson for my Party on the Committee dealing with research and development and science and technology. There were many committee meetings in which we heard from the heads of granting agencies, the head of the National Research Council, from representatives of industry and universities as well as the scientific community. All were bemoaning the fact that there was insufficient funding.
They stated that Canada was losing its scientists and universities were unable to buy proper equipment or provide enough scholarships to keep graduate students at home. They stated that we were missing out on the growth of research and development and the job opportunities that it entailed.
We tried to get a permanent committee to deal with research and development. Even though we got the lip service from the Ministers, we never really did get any action. I must commend the present Government for at least establishing a permanent Standing Committee to deal with research and development. It is an important step in the right direction. However, I think government Members would have to admit that the Government's record is not quite what I think they intended or hoped it would be at the beginning of its term. I think it is true to say that we have not come close to the goal of 2.5 per cent goal of our gross domestic product going to research and development. The fact is that even though we have increased marginally since the Conservatives were elected, we are still at far less than the original goal.
One other area where I think we have really missed out, and the present Government is as bad as the previous Government, is the funding of the Social Sciences and the Humanities Research Council. Doing the research is one part of a process, doing the innovation is the second part which surely must be considered in devising a national strategy. We can do all the research we want, but unless we have a strategy that will help with the innovation of the newer technologies, we are going to miss the boat. That is why the Social Sciences and the Humanities Research Council must play an important role.
Unfortunately, funding for that granting agency has been significantly reduced under this Government. I must say that I find that extremely regrettable living in this day and age, an age of many changes, not just technological changes but economic changes, psychological changes and cultural changes. Surely the Social Sciences and the Humanities Research Council must play a pivitol role in allowing our society to adjust to the changes going on all around us. Cutbacks to the funding of that agency, I think, is a regressive step.
May 13, 1988

There is another area I would like to raise in this debate because I do not believe Hon. Members have made this point. Why is it we have so much less investment and expenditure in research and development than other countries? Why are our industries, in particular, investing less than other countries? I agee with government Members when they say it is not just up to the Government to increase the R and D expenditures. Industry must play a role. The Lamontagne committee, a number of years ago, pointed out part of the problem. The study by the Ministry of Industry, Trade and Technology in Ontario, printed in 1988, also points to the same problem. The major reason industry in Canada has such a low commitment to R and D is because most of our industry are branch plants. Branch plants do not do their research and development in Canada. They do their research and development at home, mainly in the United States. When we compare the amount of research done by Canadian-owned firms, we find that in many fields it is comparable to the research and development done by those same firms in in the United States.
Let me put on record some of the statistics the Ontario study came up with. For example, in business machines, the amount of R and D in the United States is 11.8 per cent. In Canada, it is 1.5 per cent. But Canadian controlled companies do 8 per cent while foreign controlled companies only do 1.3 per cent. In other machinery, in the United States it is 2.1 per cent, in Canada it is 0.9 per cent but Canadian-controlled companies do 1.1 per cent whereas foreign-controlled companies do 0.7 per cent.
In aircraft and parts, 11.4 per cent of the total outlays in the U.S. is devoted to R and D. In Canada it is 10.2 per cent, but Canadian controlled companies have a 19 per cent rate, whereas foreign controlled companies in Canada have only 5.2 per cent. It is the same in communications and equipment and drugs and medicine. The Canadian average is 4.7 per cent. Canadian controlled companies do 7.5 per cent, whereas foreign controlled companies do 3.5 per cent. It is the same situation with other chemicals. Canadian controlled companies do 2.6 per cent, whereas foreign controlled companies do 0.7 per cent, and the list goes on.
This table demonstrates that it is Canadian controlled and owned companies that are doing the industrial research and development in Canada, whereas the multinationals, the branch plants, do not do any at all. That is the major reason we have such a low R and D expenditure in Canada. The foreign controlled companies are not doing their fair share. It makes sense that a multinational corporation will have its research and development done in its home country rather than in countries like Canada.
To achieve our goal of 2.5 per cent of our gross domestic product going to research and development-and I think all Parties and all Hon. Members agree with that goal-is not a simple problem. Again, I agree with government Members when they state that just throwing money at it is not going to solve the problem. It is important and we are going to need
Supply
money and we are going to need a public commitment. But it also requires intelligence to ensure that the public money we will invest, whether it is through tax incentives or direct grants, is fine tuned and directed so it is not wasted, so it goes to a group of winners that can support a broader industrial strategy.
We must use intelligence and husbanding of our scarce resources, in this case, money, to ensure that we get the maximum benefits from our investment in R and D. Such a strategy requires the co-operation and the working together of the public sector, that is, Government and universities, provincial Governments as well as federal Governments, industry, and I should also add labour.
One of the models we could look at that is very successful in research and development is the Scandinavian countries. These countries involve labour. In Denmark and Sweden there are labour contracts where the unions insist that management introduce new techologies. The trade union movement is in the forefront of technology change in those two countries. The reason is that the working men and women in the Scandanavi-an countries recognize that if there is technological change, there is also a social net. If a newer technology does away with a job, they know they will not lose the mortgage. They know they will be retrained. They know they will get another job.
In such an atmosphere you find that the labour movement fully participates in technological innovation. It has many important contributions to make. It is the person on the shop floor who will know how best to use the equipment to get the most out of the new machines. Very often, as the Swedes have shown, it is not the individuals making decisions in the management office, but the individuals on the shop floor who, in most cases, get the most out of the new machines being introduced into the firm.
It is a model of co-operation. It is a model of working together. We can take our scientists who are working at the universities or in the labs of companies and put them together with the trade union movements, the workers, and the public sector and co-ordinate them. Such models also exist in Japan and in Germany. In fact, such models exist in the more successful industries in Canada.
I know the Government has tried to bring some of these pieces together. However, to be honest, the Government has to admit that it has not succeeded. It has not created a critical mass that has brought all the actors together so that we have a strategy and so that our money, our energies and efforts are also focused. If the Government had done that we could claim that Canada is in the forefront of technological discoveries, innovations and development. Instead, I am afraid we remain behind. We are followers rather than innovators. Unfortunately, the Government has not lived up to the expectations, the hopes and promises that existed in 1984.

May 13, 1988
Supply
I find this not from a partisan point of view but as a Canadian unfortunate. We missed an opportunity here. As so often happens, opportunities do not come again and again. Hopefully, at some future date we will have an opportunity to bring all the elements together so that we can have a policy that is focused and which can indeed make a major contribution to the well-being of our country.


David Berger: Mr. Speaker, I want to thank the Hon. Member for his intervention in this debate. I listened with interest to his remarks, in particular when he referred to the contribution of the social sciences and humanities. Our committee yesterday afternoon met with representatives of the Social Science Federation of Canada. We were talking about the new Centres of Excellence Program.
There is concern that while, nominally, the Government says that research and the social sciences is not excluded from the Centres of Excellence Program, as medical research is not excluded from the program, the actual fine print will mean that no proposal from the social sciences field will be entertained. There was a criterion in the Ontario program which required industrial support, industrial funding for any Centres of Excellence project to go forward. As the Hon. Member knows, this in some cases may prove to be an insurmountable obstacle to a project involving the social sciences because of the dearth of private sector companies which are willing to contribute to research in that area. I do not think that it is out of the realm of possibility that some such support could be developed in the future.
A related obstacle is the provisions of the Income Tax Act which the Hon. Member referred to, if I am not mistaken. Therefore, for this Centres of Excellence Program to include the social sciences and to cover that field of endeavour, it will be necessary to pay close attention to the criteria as they are developed by the Government. It will be incumbent upon the Government to make some consequential changes, or this long awaited change to the Income Tax Act which will ensure that indeed there can be individual or corporate contributions to research in the social sciences, otherwise the Government's statement that social sciences are not excluded is meaningless.


Simon Leendert de Jong: Mr. Speaker, I thank the Hon. Member for his question. It is a problem that the social sciences face.
I am part of the Finance Committee and was instrumental in getting it to make a recommendation, which was unanimously approved, to ask the Minister of Finance (Mr. Wilson) to change the definition of science in order to broaden it. It was suggested that it should allow some of the work that is done by the social sciences and the humanities people to be included, therefore to become eligible for some types of tax credits and similar treatment. The Department of Finance is a little unwilling to do that, and in some ways understandably so.
By opening up the definition, we open up the possibilities of abuse.
For example, is motivational research which results in a different type of packaging proper research? In terms of the social sciences, motivational research is a legitimate form of research. Can what a firm spends on advertising be stuck in and be claimed to be part of legitimate research? It is a problem that I understand people in the Department of Finance have. Part of the difficulty I have in dealing with scientific research under a tax regime is that we come up against these definitions, thus opening the door to abuse.
Hon. Members have mentioned the Lalonde boondoggle which was supposed to have cost around $100 million and which ended up costing $2.5 billion. While Conservative Members point this out, I hasten also to point out that one-third of the $2.5 billion lost in tax revenues occurred when the Conservatives took office. They recognized that it was a scam. In October they tried to put a halt to it but they grandfathered it instead. This meant that if two people had an agreement written on the back of an envelope then it was still a valid agreement. The Government allowed whatever deals were made to continue until finally in May, 1985, it became too much and it shut the program down.
The whole effort by Mr. Lalonde illustrates how easy it is to abuse the tax system. Programs really have to be very well defined. Because of that the social sciences and the humanities have suffered.
The initiative of the Government to act through the income tax system as a way of boosting R and D expenditures is not the appropriate way for the social sciences to receive increased funding for the Social Sciences and Humanities Council. They must go much more into a direct granting system. Unfortunately, the government policy, both with respect to the Centres of Excellence Program and by using the income tax system, as a means of getting more R and D investment will invariably hurt the humanities and the social sciences.


Don Boudria: Mr. Speaker, I welcome the opportunity this afternoon to take part in the debate on the motion tabled by my colleague, the Hon. Member for Laurier (Mr. Berger).
First of all, I would like to congratulate the Hon. Member on the admirable motion he moved in the House today. It is, of course, a motion to condemn the Government for failing to provide adequate non-tax support for research operations.
Mr. Speaker, I think it is important to recall the promises and commitments made by the present Prime Minister (Mr. Mulroney) as Leader of the Conservative Party, before he became Prime Minister of this country, because, as all Canadians are aware, the Prime Minister made a habit of promising just about anything . . .
May 13, 1988


David Berger: The moon!


Don Boudria: Yes, the moon, as the Hon. Member for Laurier (Mr. Berger) just said. The Prime Minister promised the moon to just about anyone who would listen, before he became Prime Minister.
I have here a collection of all the promises made by the Conservative Party. We note the promise made by the present Prime Minister on March 2, 1984, when he said, and 1 quote:
"We will double our common national commitment to research and development during our first term. This will create hundreds of thousands of jobs and produce billions of dollars' worth of new sales for Canada, on an annual basis".
The Prime Minister, who was Leader of the Opposition at the time, made this promise on March 22, 1984, when he spoke to the Montreal Chamber of Commerce. I know it isn't fair to quote the Prime Minister verbatim, Mr. Speaker, and I am sorry I should have to do so. However, Canadians have a right to hear this, and as the Official Opposition, we have a duty to remind Canadians of the commitments made by the Progressive Conservative Party.
Now, what has happened since? Before the 1984 election, the previous Government spent or invested 1.5 per cent of GNP for research and development. Since the Progressive Conservative Party came to power, this percentage has dropped and is now only 1.3 per cent.
So, remember the promise the Prime Minister made in 1984, and I will get back to the Prime Minister's promises later on. You already know what has happened since the present Government came to power.
In the unlikely event, Mr. Speaker, that you think me partisan-and I know that that is probably the furthest thing from your mind-let me present you with some evidence of the fact that I am not the only one who takes the position that this Government is not doing a good job in the area of research and development. For that matter, it has not been doing a good job in any other area, either.
Restricting myself to research and development for the moment, in addition to my view and that of the Hon. Member for Laurier in respect of this Government's lack of effort in terms of research and development, we also have the view of the Canadian Manufacturers' Association, as set out in a discussion paper published in February of 1986. The document is entitled: "Improving our Industrial Competitiveness: A Science Policy for Canada". One could certainly not consider the Canadian Manufacturers' Association to be a partisan group. It is a totally independent group.
At page 17 of the publication in question is a table showing tax and non-tax government support for industrial R and D as a percentage of R and D performed in industry. The table sets
Supply
out what various countries do in terms of government tax support and non-tax support as a percentage of total industrial R and D.
In the United States, the table shows that 33 per cent is funded through non-tax support means and 7 per cent via tax support means, for an over-all grand total in terms of government support of 40 per cent. When the table speaks of non-tax support, it has reference to government grants or other incentives, including government procurement.
For the Federal Republic of Germany, the figure is 18 per cent for non-tax support and 6 per cent for tax support, for a total of 24 per cent. For France, it is 22 per cent and 7 per cent respectively, for a grand total of 29 per cent. For Canada, it is 12 per cent and 8 per cent, for a total of 20 per cent; and for the United Kingdom, 29 per cent and 8 per cent for the same respective categories, for a total of 37 per cent.
In terms of that group of countries, Canada is clearly last in terms of government support for research and development. These are not my figures. These are figures which come from the Canadian Manufacturers' Association, as set out in a discussion paper provided to Members of Parliament in February of 1986.
We have no reason to believe that there has been any substantial improvement since. That same level of funding continues to be the case. In fact, one could argue that it has become worse, or it will get worse with the passage of time.
Several prominent Canadians have indicated to us that, with the Government's tax reform program, investments in the area of R and D will diminish. I readily admit that using tax vehicles to fund research and development has its drawbacks. We are all aware of what happened with the Scientific Research Tax Credit.
We know that some people rejoice when certain tax incentives are discontinued. Without naming anyone, those of that view sit to my left in the House, and they are sometimes known, collectively, as the "not-so-new" New Democratic Party. Members of that Party sometimes rejoice when tax incentives are removed, only to end up, a few days later, asking questions in the House as to why the Government cancelled an incentive that they were asking be cancelled. However, I will let the NDP worry about the effect of their changing their policies mid-stream on the same issue.


Mr. Turner (Ottawa-Carleton):: They are confused.


Don Boudria: The Hon. Member across the way says that they are confused. I suppose they are. Otherwise they would not belong to the New Democratic Party to start with.
In coming back to the use of tax vehicles and how they can be beneficial in the area of research and development, I should like to bring to the attention of the House the views of Mr. Jean de Grandpre, Chairman of Bell Canada Enterprises, as reported in the April 1988 Report on Business Magazine.

May 13. 1988
Supply
Certainly Mr. de Grandpre is not one who spends his time looking for issues to assist the Opposition; rather, he spends his time for the benefit of the corporation for which he works. But listen to what he had to say about Ottawa's new tax reform. I quote:
The politicians "are all saying the same thing, that we have to have more research and development capacity in Canada, that the future of this country rests on high-technology products." Yet Ottawa's new tax reform package would reduce the tax breaks for R & D. That, he says, amply demonstrates that politicians "don't understand how the game is played." And he's quite willing to tell you what he's doing about it.
The article goes on as follows:
And there is a threat. If the government reduces the tax breaks, de Grandpre says his company will do its research in some other country and take away several hundred well-paid jobs from Bell-Northern Research, the largest private R&D facility in Canada. "The Canadians who are graduating from our universities are going to walk over to BNR and say, "Can I have a job", and we'll say "Sorry, but we're not expanding our R&D facilities in Canada." And they'll say "Why?" "Well, because the government has introduced this stupid piece of legislation."
That is Jean de Grandpre speaking. That is not the opposition Member from Glengarry-Prescott-Russell who may be slightly partisan from time to time.


John Barry Turner: Never.


Don Boudria: I am getting reactions from the other side of the House, Mr. Speaker. I am glad that I am keeping Members awake on this Friday afternoon. It is important for all of us to remember what the head of the largest research and development company in our nation is saying. We are cutting from underneath him what has been effective in the past.
The Government is promising to increase R & D. I read a while ago a promise made by the Conservative Party which came from the great book of 338 Tory promises, which I happen to have right here, Mr. Speaker. If any Canadian wants a copy of it, anyone can write to me, no postage stamp is necessary, and I will gladly send it out. I may have said that before but it is always nice to make the offer again.
I want to refer to other promises made by the Government. I read promise number one a while ago which had to do with increasing research and development to 2.5 per cent of GNP. The Government reduced it, so there went that promise. The second promise is to change and simplify the tax system- listen to this folks across the way-"to strengthen the capital base of Canadian companies and provide greater incentives for private sector investment". Do you hear that, Mr. Speaker? The Prime Minister (Mr. Mulroney) promised this. Because the Prime Minister always tells the truth, I figured this would happen, but that is not what Mr. de Grandpre said. He said that we are not expanding our R&D facilities in Canada because the Government has introduced its stupid piece of legislation. That does not seem to coincide too much with the promise made by the Prime Minister. It is important for us to remember that.
I have another document here called Research and Development Impacts of Corporate Income Tax Reform by Kenneth D. Hart, principal research associate to the Conference Board of Canada. It is a manuscript report prepared for the Science
Council of Canada. The document talks about the effect of some of these tax reform measures on research and development. Here is one effect. The proposed new $46 million research complex in Calgary may not proceed or will be significantly downsized. I say to my Conservative colleagues from Calgary that this is almost enough to make a Member of Parliament from Calgary not want to run again. If I were a Tory from Calgary I would not run again, having heard what the Government is doing to my city.


Mrs. Mailly:: Jealousy will get you nowhere.


Don Boudria: I do not wish that I were a Tory, Mr. Speaker. Believe me, that is one thing I do not wish.


Claudy Mailly: Especially, in Calgary.


Don Boudria: That is a fate worse than death.
The next item is migration of research and development projects out of Canada over the next two years by large international companies, cancellation of long-term R&D projects which proposed building new buildings, reduction of new projects which would involve increased requirements for work space because of losing its ITC on base cash.


John Barry Turner: Shameful.


Don Boudria: Shameful, as the Hon. Member for Ottawa- Carleton (Mr. Turner) says. I want to say to the temporary Member for Ottawa-Carleton that this is prepared for the Science Council of Canada by the Conference Board of Canada. Again these are not partisan groups which know very objectively-


John Barry Turner: I worked there.


Don Boudria: Yes, the Member says he worked there. He knows that these are very credible remarks. He surely realizes what the Conservative Government is doing to research and development in Canada. I hope he has that intestinal fortitude required to twist the arms of the Minister of Finance (Mr. Wilson) and can tell him to scrap that tax reform proposal or at least change it in such a way that it will not have the ruinous effect on research and development that it has now.


John Barry Turner: Talk about free trade.


Don Boudria: The Member says talk about free trade. I do not know what the Member intends about trade in the area of research and development. But I say to him that with some of the provisions of the free trade agreement, we as Canadians will be less able to encourage government purchases and many other purchases from the private sector giving preferential treatment to Canadian companies and we will thereby decrease opportunities and decrease encouragement to those same companies to invest in R & D. We got nothing reciprocal in that area. I say to the Hon. Member for Ottawa-Carleton that he should know of several restrictive measures in the United States in defence procurement and so on which deliberately encourage United States research. There is no parallel here. Whatever little bit we had we gave away in the Prime Minister's trade deal. That is the sad reality.
May 13, 1988

The Government is saying it is doing all kinds of nice things. It produces nice brochures. I have to compliment the printer. There is always a nice picture of a Minister in them. There is one here of the Minister of State for Science and Technology (Mr. Oberle). It is a beautiful pamphlet. I do not know what it is supposed to do. It is glossy in any case. Maybe it encourages research and development in the printing industry for the people who produce the reports. I have another pamphlet here called National Science and Technology policy. There is not much policy in it but it has lots of printing. It is a little science and technology kind of document. You could actually make a placemat out of it, it is so neat. But it does not contain anything. It is a sort of charter of economic sell-out, I guess. I really do not know what it is but it does not do anything that would encourage research and development in Canada.
I want to talk about the flow-through shares provisions that were altered in the last Budget and, of course, in the tax reform proposal as well. There is a company in my constituency which installs low head hydro generating stations. These are installed in northern Ontario and elsewhere. It is a good industry, a new one, which developed with these tax incentives. It has mini-hydro generating stations which are plugged into the grid in my Province of Ontario. They delay construction of such megaprojects as nuclear stations and so on. They provide good jobs. These stations are generally 50 megawatts or less. They are small hydraulic plants. Things have been going fairly well. A company in Toronto did the research, manufacturing and development of these mini stations and this company in my constituency had been installing them. Both of them are seriously threatened. As a matter of fact both companies may actually go down the tube. Here was a Canadian industry with research done in Canada, development done here and so on. Now it is all gone or it will be if the Minister does not do anything. I wrote to the Minister of Finance. He wrote a two page letter to me dated April 22, 1988 in which he described all the different deductions and so on. He never said he would change anything or assist this industry which had been thriving until the Government stepped in and made a mess of it.
In concluding, I would like to congratulate the Hon. Member for Laurier (Mr. Berger) for deciding to remind Canadians of the fact that this Government has unfortunately failed to remember or deliberately chosen to forget its promises to the Canadian people. However, Mr. Speaker, there is still time. I hope the Government will take today's message to heart and take immediate action to increase research and development in this country.
Supply


Claudy Mailly: Mr. Speaker, I had the good fortune to write Mr. de Grandpre's speeches when he was executive vicepresident for Bell Canada's Eastern Region and I must tell you that the language he used then was very different from the expression that the Hon. Member for Glengarry-Prescott- Russell (Mr. Boudria) seems to have given us today. I do not know why Mr. de Grandpre is frustrated, but I must tell him that when I wrote his speeches, what frustrated him most was the wastefulness of the Liberal Government of the time and also the very little research and development that were done precisely because of the total anarchy in Canada's development and science and technology policies. That is a personal comment.
I would also like to quote a document. It is a thesis prepared by ...

-the Department of Communications of the Simon Fraser University, who said exactly the same thing that Mr. de Grandpre said in 1971 and in 1972 when I was working for him and writing his speeches. The paper is entitled Policy anarchy, Industry, technology and the political agenda in Canada; the case of government support for R & D.
Mr. Leiss makes it very, very clear that this anarchy has existed since 1947 and it came to an ugly apex in 1983 under the SRTC. In his document, he quotes the Auditor General talking about R and D expenditures being out of control, but he also adds that outstanding disagreements about the meaning of the basic components of R & D activities as well as the habitual avoidance by many participants in the ongoing debate of any mention of evaluation criteria are in part the logical outcome of two decades of R & D policy anarchy.
He makes it very clear that this is a problem that existed for a long time. He also makes it very clear that something had to be done, and in that piece, he congratulates Revenue Canada for the way it has handled this absolute necessity of finding some clear evaluation criteria for these programs.
He says it is such a pity that so much money was wasted when it was required for our development, and he says also that the frequent changes in tax incentives make the task of evaluation almost impossible to perform, since various provisions are not in place long enough for meaningful comparison with R and D performance to occur. He says that this is even supposing that adequate data is being collected or analysed, and this is why, in his article, he congratulates Revenue Canada for coming up with a structure that allows for such a good analysis. He refers, for instance, to the fact that for the first time in Canadian history, there is consultation with scientists in a structured way, analysing the tax incentives which are given in these programs.

May 13, 1988
Supply

Furthermore, Mr. Speaker, I would also like to point out to my hon. colleague that when he talks about election promises, one of them was to clean up government finances, and I believe that we have done so. Indeed, the policy of grants and assistance for research and development was changed precisely to fulfil this election promise of making our programs more effective and of restoring our public finances to health. For example, when the Minister of Finance (Mr. Wilson) announced changes in May 1985, he talked about encouraging investment through tax credits that would be particularly beneficial for private companies controlled by Canadians.
So rather than burying his head in the sand and shouting that the nasty Americans are coming to take everything, he should remember one thing: we cleaned up the finances and solved the problems we had in that regard. We are now solving the problems of program effectiveness; besides, I have just come back today from a press conference held by a multinational in my riding that has invested $130 million over five years. Two hundred employees work for Erco in Buckingham, so it represents an investment of $65,000 per employee. 1 do not see why he is trying to pass his crazy ideas on to us this afternoon. It is always the same story. It is a tale of fear and exaggeration and it will do nothing to help Canada's development. Quite the contrary! Properly applied policies, such as those to clean up the public finances and those for research and development that are not based on wishful thinking, percentages tossed around at random-we really have to know whether we get results. And considering that a billion dollars has already been invested thanks to the existing R & D policy, I think that. ..

The proof is in the pudding.


Don Boudria: Mr. Speaker, no, the proof is not in the pudding, or at least not in the pudding that the Hon. Member is trying to make us eat here today. The proof of the pudding is in the eating, as my colleague from Laurier so eloquently says.
I was talking about the comments of Mr. de Grandpre on the Minister's recent tax reform. That did not exist 20 years ago, though the Hon. Member can try to make us believe that.
Let me read some of those comments again. I kind of like reading them. The article reads:
Yet Ottawa's new tax reform package would reduce the tax breaks for R &
D. That, he says, amply demonstrates that politicians "don't understand how
the game is played."
When someone asks Mr. de Grandpre if he could have a job, he will say: "Sorry, but we're not expanding our R and D
facilities in Canada". He'll ask why, and the answer is: "Well, because the Government, this Government, has introduced this stupid piece of legislation". That refers to this present Government's tax reform package, not the package of 1969, 1972 or 1947. It is not the package of 1931 or any of those other years before I was born. This is something that is going on right now. This is the April 1988 edition of the Report on Business magazine, an interview with Mr. Jean de Grandpre.
The Hon. Member says that we are fear-mongering. She thinks that my comments are a tad partisan. That is okay, as unrealistic as that proposition may be. However, surely she cannot say the same thing about the Conference Board of Canada which has prepared a serious document on Research and Development entitled Research and Development Impacts of Corporate Income Tax Reform, and it dealt with all these cancellations in construction facilities, one of them which is right in Calgary. I see that an Hon. Member from Calgary is over there.


Claudy Mailly: What year?


Don Boudria: This document was presented in December of 1987. It was made in response to the Government's tax reform package, not by me or by one of my caucus colleagues but by the Research and Development section of the Conference Board of Canada.


Paul Gagnon: Mr. Speaker, I noted that the Hon. Member for Glengarry-Prescott-Russell (Mr. Boudria) attributed to me motives for not seeking the nomination and not running in the next election. The motives he implied are totally false.
If the truth be known, I am tired of listening to the drivel, the half-truths and the misstatements of people like the Hon. Member for Glengarry-Prescott-Russell. Furthermore, if Amnesty International or any impartial body were to sit here and listen to this sort of thing, they would call it cruel and unusual punishment.


Don Boudria: Mr. Speaker, 1 know that it is hard to take. If I were a Tory, perhaps I would have a hard time taking it too. However, I have the good fortune of not being a Tory, thank God for that. The reports I was citing today are indeed very credible reports, and I say that it is time this Government smartened up.


Mr. Deputy Speaker:: It being three o'clock, it is my duty to inform the House that pursuant to Standing Order 82(12), the proceedings on the motion have expired.
This House stands adjourned until Monday next at 11 o'clock a.m., pursuant to Standing Order 3(1).


[Stage Direction]
The House adjourned at 3 p.m..
[Stage Direction]

Monday, May 16, 1988
[Stage Direction]
Prayers