5

Building Canada

for the 21st Century --

Building a Secure Society

Highlights

The budget provides funding for initiatives announced over the past year, including increased health and social transfers to provinces, establishment of a new blood system in co-operation with the provinces and territories, a new partnership with aboriginal peoples, implementation of the international landmines treaty and increased support for Canadian culture.

The 1998 budget provides:

▪	support for families with children through a further increase in the Canada Child Tax Benefit;

▪	additional help for families with child care expenses;

▪	support for individuals caring for infirm or elderly family members;

▪	assistance for self-employed individuals who pay health and dental insurance premiums;

▪	assistance for persons with disabilities;

▪	support for communities and the voluntary sector;

▪	measures to address environmental challenges; and

▪	resources to further international co-operation.

Introduction

A strong economy is the bedrock of Canada's national programs. A strong economy creates jobs and generates the resources needed to sustain the programs that contribute to a secure society.

Strong national programs enable Canadians to confront the economic changes now underway and to approach the future with confidence and security.

Canadians believe that they can prosper in the economy of the 21st century. But they are concerned about how economic change will affect them, their families and those less able to take advantage of the opportunities that change will bring. They are also concerned about the future of the health, education and social programs that serve us all.

Canadians want their governments to respond to economic change by providing national programs that are affordable, sustainable, and reflect Canadians' priorities and needs. Canadians expect their governments to consult and harmonize their efforts in pursuit of shared goals, working in partnership and collaboration with stakeholders and voluntary groups.

The improving fiscal situation has allowed the federal government to increase funding for health, education and other social programs. Over the past year, the government has taken action to:

▪	improve health care services by increasing transfers to provinces for medicare and social programs;

▪	address key health priorities by providing additional funding for the transition to a new blood system, renewing HIV/AIDS funding and raising tobacco taxes;

▪	secure a sustainable public pension system;

▪	improve the well-being of children by increasing child benefits for low-income families;

▪	increase support for persons with disabilities;

▪	increase support for the voluntary sector by providing stronger incentives for charitable donations;

▪	build a new partnership with aboriginal peoples by responding to the Report of the Royal Commission on Aboriginal Peoples; and

▪	provide increased funding for Canadian cultural initiatives.

Table 5.1

Building a secure society -- measures announced before the budget

1997-98 1998-99 1999-00 2000-01 (millions of dollars) Improving Canada's health care system Increase CHST cash floor1 200 900 1500 1500 National HIV/AIDS Strategy1,4 41 41 41 Establishing a new blood system 30 30 Total 200 971 1571 1541 Assistance for persons with disabilities Increased funding for EAPD

(net)2

15

20

20 New partnership with aboriginal peoples Aboriginal Health Institute1 5 5 5 Aboriginal Head Start1 25 25 25 Urban Aboriginal Youth

Centres1

25

25

25 Preserving & teaching aboriginal languages1 5 5 5 Healing Strategy 350 RCAP: expanded & new initiatives3 66 66 66 Total 350 126 126 126 Promoting Canadian culture and sports Canada TV and Cable Production Fund 50 100 100 Funding for Canada Council1 25 25 25 25 Publishing industry1 15 15 15 15 Amateur sport1 10 10 10 Total 40 100 150 150 Furthering international Co-operation Landmine treaty 20 20 20 Total 590 1232 1887 1857 Less: Increase excise tax on tobacco products -70 -70 -70 Total 590 1162 1817 1787

1 Initiatives contained in Securing Our Future Together.

2 EAPD is Employability Assistance for Persons with Disabilities Program, which replaced the Vocational Rehabilitation of Disabled Persons (VRDP). This amount represents incremental funding net of a $10 million contribution in 1998-99 and $5 million per year thereafter to be provided by the Department of Human Resources Development.

3This amount represents incremental funding net of $60 million per year from reallocations within the Department of Indian and Northern Affairs.

4In addition to these funds, a further $1.5 million per year will be provided by Health Canada.

Building on actions already taken, this budget:

▪provides assistance for unincorporated self-employed individuals who pay health and dental insurance premiums;

▪	ensures that the alternative minimum tax does not reduce the benefit of using RRSPs to set money aside for retirement;

▪	increases support for families with children through a further investment in the Canada Child Tax Benefit;

▪	provides additional help for families with child care expenses;

▪	enhances support for individuals caring for infirm or elderly family members;

▪	increases assistance for persons with disabilities;

▪	provides additional support for communities and the voluntary sector;

▪	increased support to address environmental challenges; and

▪	furthers international co-operation efforts.

Table 5.2

Building a secure society -- measures in this budget

1997-98 1998-99 1999-00 2000-01 (millions of dollars) Improving Canada's health care system Deductibility of health/dental insurance premiums 90 110 Sustainable retirement income system Alternative minimum tax and RRSPs 70 20 20 Support for families Canada Child Tax Benefit1 320 750 Child care expense deduction 20 45 45 Caregiver credit2 30 120 125 Total 50 485 920 Assistance for persons with disabilities Disability tax assistance measures 5 5 5 Strengthening communities and the voluntary sector Emergency services volunteers 5 10 10 FedNor 20 20 Total 5 30 30 Addressing environmental challenges Industrial Research Assistance Program2 34 34 34 Climate change 50 50 50 Total 84 84 84 Furthering international co-operation CIDA funding 90 50 Total 90 264 714 1169

1	Costs for the Canada Child Tax Benefit increase in fiscal year 1999-2000 correspond to three quarters of the $425 million increase in annual benefits starting in July 1999. Costs in fiscal year 2000-2001 correspond to the full increase of July 1999 and three quarters of the further increase starting in July 2000. Annual ongoing year costs will be $850 million thereafter.

2	Initiatives contained in Securing Our Future Together.

Improving Canada's Health Care System

Canada's public health care system is an expression of Canadian values. Medicare is a fundamental pact between Canadians, their governments and health care providers. Medicare ensures that access to medically necessary health care services is based on need, not ability to pay.

As part of this contract, all Canadians, wherever they reside, expect high quality health care services. The federal government has identified health care as a national priority and has taken steps to put medicare on a more stable and secure financial footing, and to address the health concerns of Canadians.

As a result of the federal government's improved fiscal performance, the government introduced legislation to increase the Canada Health and Social Transfer (CHST) cash floor from $11 billion to $12.5 billion, as recommended by the National Forum on Health. The legislation will provide provinces with nearly $7 billion more in cash over the 1997-98 to 2002-03 period, which they can invest in their most pressing health and social priorities.

The latest estimates indicate that total CHST contributions to provinces, including both cash and tax transfers, will grow from $25.3 billion in 1997-98 to $26 billion in 1998-99.

In addition, the federal government will provide an estimated $8.8 billion cash in unconditional Equalization transfers to provinces this year. These cash transfers also support provincial public services, including health care. Equalization is particularly important to Atlantic Canada where it represents about 25 per cent of provincial revenues.

The federal government also supports national health priorities, research and the adoption of best practices.

▪	The 1996 budget allocated $65 million over five years for the Health Services Research Fund.

▪	The 1997 budget provided $300 million over three years for the following initiatives:

•	$150 million was allocated to a Health Transition Fund to help provinces experiment with innovative forms of health service delivery and share results with other jurisdictions;

•	$50 million was provided for health information systems; and

•	$100 million was allocated to expand the Community Action Program for Children and the Canada Prenatal Nutrition Program.

▪	In September 1997, the Minister of Health indicated that the federal government would increase its contribution towards the establishment of a new blood agency by $60 million over two years, starting in 1998-99.

▪	In December 1997, the Minister of Health announced a five-year, $211 million renewal of the National HIV/AIDS Strategy, as promised in Securing Our Future Together and the Speech from the Throne.

To promote advanced research and graduate study, this budget provides $134 million in increased funding for the Medical Research Council over the next three years. As well, the increased funding of $37 million over three years for the Social Sciences and Humanities Research Council will strengthen its capacity to support health policy research.

Tobacco tax increase

The federal government announced increases in its excise taxes on cigarettes and tobacco sticks as part of a co-ordinated federal-provincial process to restore tobacco taxes in a gradual and sustainable manner so as not to encourage contraband activity.

Federal taxes were increased by 60 cents per carton on cigarettes for sale in Ontario, Quebec, Nova Scotia and Prince Edward Island, and by 40 cents per carton in New Brunswick. Equivalent increases in taxes on cigarettes were implemented concurrently by these provincial governments.

Increases were also announced in the excise tax rates on tobacco sticks for sale in all provinces. These increases, which vary by province, ranging from 80 cents to $1.52 per carton of 200, were announced to realign the rates between different cigarette products.

These measures will raise additional revenues of about $70 million a year and contribute to the government's continuing efforts to discourage smoking.

Helping the self-employed with health

and dental insurance costs

Many Canadians receive supplementary coverage for prescription drugs, and dental and vision care through private insurance plans.

The number of self-employed Canadians is growing; many operate unincorporated businesses. Currently, self-employed individuals owning an unincorporated business cannot deduct premiums paid for their own supplementary coverage, while owner-operators of incorporated businesses may receive tax-exempt coverage through their business. This is unfair.

This budget seeks to redress this imbalance to better reflect the increasing role of self-employment in job creation. Starting in 1998, unincorporated owner-operators will be allowed to deduct premiums for supplementary health care coverage against their business income, to a maximum amount. More details on this measure are provided in the supplementary information on tax measures.

A Sustainable Retirement Income System

One of the defining features of a secure society is its capacity to provide a secure retirement income for its senior citizens. Canada's population is ageing. The number of persons over age 65 will almost double by 2030, as Canadians live longer and the baby boom generation moves into its retirement years. The number of workers for each retired person will drop from five to three. Action is therefore being taken to ensure that the public pension system can be sustained in the face of changing demographics.

The Canada Pension Plan

The federal government and the provinces are joint stewards of the Canada Pension Plan (CPP). In 1996, they held extensive consultations about the future of the CPP with Canadians in every province and territory. The message from Canadians was clear -- they told their governments that they wanted to preserve the CPP, and they wanted the necessary action taken quickly.

The federal and eight provincial governments agreed on changes that ensure that the CPP can be sustained. The changes mean that the CPP Fund will not run out of money, and CPP contribution rates will never have to increase to anywhere near 14.2 per cent, as would have been the case if action had not been taken.

Legislation has been passed that provides for increases in contributions, a new investment policy and some modest changes to benefits.

▪	The combined employer-employee CPP contribution rate will rise to 9.9 per cent between now and 2003 and stay at that level thereafter, rather than increasing to 14.2 per cent by 2030.

▪	CPP funds will be prudently invested in a diversified portfolio of securities in the best interests of plan members. The Fund will be managed professionally at arm's length from governments by an independent investment board.

▪	A number of changes to the way benefits are administered and calculated will moderate escalating costs. There are no changes to benefits currently being paid, and benefits will remain fully indexed to inflation. The age of retirement also remains unchanged.

The CPP ensures that all working Canadians have a basic income on which to build for retirement. Canadians of all ages can now be confident that the CPP is secure.

The Seniors Benefit

Over recent months, the government has consulted interested groups on the 1996 budget proposal to replace the Old Age Security (OAS) and Guaranteed Income Supplement (GIS) programs by the Seniors Benefit. The government is currently reviewing the details of the proposal in light of the valuable suggestions received during these consultations and is committed to proceeding with the best possible policy to ensure that public pensions will be preserved for Canadians who will need them in the future. The fundamental objective remains to slow the growth in costs, while protecting and enhancing pensions for low- and modest-income seniors, most of whom are women. The government intends to introduce legislation on the Seniors Benefit for consideration by Parliament in the coming months.

The Guaranteed Income Supplement

The 1997 budget indicated that the Seniors Benefit legislation would include some administrative changes to the Guaranteed Income Supplement and Spouse's Allowance programs.

These changes involve:

▪	Shifting the annual GIS renewal date from April to July to allow benefits to be calculated from income tax returns. This will avoid processing delays and unnecessary duplication.

▪	Adapting the GIS formula to modern computerized calculations and harmonizing income definitions more closely with income tax definitions; providing consistent treatment to supplement recipients who change marital status; and ensuring that persons applying for Widowed Spouse's Allowances under international social security agreements are subject to the same restrictions applied to all other GIS and Spouse's Allowance recipients.

These changes will improve the way in which the GIS operates, provide better service to Canadian seniors, and eliminate short-term hardship for the most vulnerable. Legislation will be introduced very shortly, in advance of the Seniors Benefit legislation, so that these administrative changes to the GIS program can be implemented in 1999.

Alternative minimum tax and RRSPs

The alternative minimum tax (AMT) was introduced in 1986 to address the problem of high-income individuals paying little or no income tax by using various deductions and tax credits. Despite the limited number of individuals paying AMT (an average of about 20,000 per year), it still plays a significant role in ensuring fairness in the tax system. Individuals who might otherwise use tax shelters aggressively to avoid tax may not do so because they would be caught by the AMT.

In recent years, however, an increasing number of individuals have become subject to AMT as a result of roll-overs of severance pay to registered retirement savings plans (RRSPs) following lay-off. The current treatment of roll-overs also threatens to undo some of the benefit of the 1997 budget measure on pension adjustment reversal (PAR). PAR will allow individuals who receive low termination benefits when they leave an employer pension plan to recuperate RRSP contribution room. It would be inappropriate to subsequently levy AMT on individuals who make large RRSP contributions to compensate for the loss of employer-provided pension benefits. In fact, the existence of separate limits for RRSPs and the introduction in 1996 of indefinite carry-forward of RRSP contribution room suggest that all RRSP and registered pension plan (RPP) contributions should be excluded from the AMT base.

Although many taxpayers are able to recoup AMT payments through the seven-year carry-forward mechanism, some may not have sufficient income and tax payable before retirement to fully recover their AMT payments. This may be the case, for example, for an individual laid off at age 55, who has insufficient income to recover his AMT before retirement, and would thus lose a portion of the retirement benefits of his severance because of AMT on his RRSP contributions.

Accordingly, the budget proposes to remove RRSP and RPP contributions from the AMT base. Given the fact that the number of affected taxpayers has increased significantly in recent years, the budget proposes to make this measure retroactive to 1994.

This measure is expected to cost about $70 million in 1998-99 and about $20 million annually thereafter.

Support for Families

The government is committed to helping Canadian families meet the challenges of child rearing and caring for infirm or elderly family members.

Building a National Child Benefit System

Equality of opportunity means a good start in life. When children are deprived of the opportunity to reach their full potential, the country is deprived of reaching its full potential.

The federal government and provincial governments are working together to create a National Child Benefit (NCB) System to provide better support for low-income families with children. This co-ordinated effort of both levels of government is an important initiative designed to combat child poverty and to make it easier for low-income parents to enter and stay in the labour force to support their families. Over time, this initiative will build a more secure base of benefits and services for Canada's neediest children, providing them with a better start in life and laying the foundation for their future participation in Canadian society.

As an initial contribution to building the NCB System, the federal government announced in the 1997 budget the allocation of $850 million to create an enriched and simplified Canada Child Tax Benefit (CCTB).

The federal government will introduce legislation to implement the Canada Child Tax Benefit in July 1998. The CCTB will provide benefits of $1,625 for the first child and $1,425 for each additional child for families with income up to $20,921. Benefit levels will be gradually reduced for families above that income level. Benefits of $1,625 will be also provided, under the Children's Special Allowances Act, to provincial agencies for children in care (e.g., foster homes and group homes).

The Canada Child Tax Benefit will provide a national benefit to all eligible families with children. As part of the NCB System, social assistance payments made by provinces and territories will be adjusted in accordance with the increase in the CCTB. The provinces and territories will then reinvest the savings from social assistance to improve benefits and services to all low-income families with children whether they are on social assistance or working. Provinces are currently finalizing their reinvestment plans and are considering a variety of reinvestments, including provincial income benefits, earned income supplements, extension of medical and dental benefits to low-income working families, and increased support for child care. To ensure that aboriginal children on reserves benefit like other children from this initiative, the Minister of Indian Affairs and Northern Development is working with First Nations leaders and provinces to develop appropriate reinvestment strategies.

The National Child Benefit System is an important initiative to increase assistance to low-income families and reduce barriers to work, building on the respective strengths of the federal and provincial governments in achieving shared goals.

As part of the National Child Benefit System, the federal government has also made a commitment to further enrich the Canada Child Tax Benefit during the course of this mandate by $850 million annually. This budget allocates $425 million as of July 1999 and a further $425 million as of July 2000 to fulfil this commitment. After discussions with provincial and territorial partners and Canadians, the federal government will announce details of the enrichments to the Canada Child Tax Benefit in the 1999 budget.

Helping families with child care expenses

Many Canadian families with children incur significant child care expenses. To better reflect the costs these families incur, this budget increases the limits on the child care expense deduction from $5,000 to $7,000 for children under age 7 and from $3,000 to $4,000 for children age 7 to 16.

With these increases, the child care expense deduction will better recognize the costs of child care faced by parents paying for full-time, full-fee care. This measure will provide additional tax relief to about 65,000 working families with children.

Example

A parent earning $45,000 and paying fees of $14,000 for the care of two pre-school children can currently claim only $10,000 under the child care expense deduction. The increase in the deduction limits will allow this parent to claim the full costs. This will provide this parent with about $1,600 in additional federal-provincial tax relief.

Helping individuals caring for family members

Many Canadians provide care for family members -- very often an elderly parent -- at home. The support caregivers provide is very important. The tax system already recognizes this through measures such as the disability tax credit, the medical expense tax credit and the infirm dependant credit.

In 1996, the government enriched the infirm dependant credit by increasing the maximum credit amount from $270 to $400 and increasing the threshold at which the phase-out of the credit begins from $2,690 to $4,103 of the dependant's net income. This change provides more tax assistance to individuals supporting infirm relatives with less than $6,456 in net income. Still, most taxpayers who provide care to an elderly relative living with them cannot claim the credit because payments under the Old Age Security and the Guaranteed Income Supplement programs are well in excess of this income threshold.

To provide additional tax assistance to individuals providing in-home care for relatives, the budget proposes to introduce a new tax credit for caregivers.

The caregiver tax credit will reduce federal tax by up to $400 for individuals residing with and providing in-home care for a parent or grandparent over 65 years of age, or for an infirm dependent relative. The credit amount will be reduced by the dependant's net income in excess of $11,500.

The caregiver tax credit will provide $120 million annually in new federal tax assistance to about 450,000 caregivers. This credit will be especially beneficial to caregivers of elderly relatives.

Example

An individual caring at home for a senior relative receiving only OAS and GIS in income (about $10,750 in 1998) will receive about $600 in federal-provincial tax assistance from the caregiver credit.

The caregiver credit will also provide for increased tax assistance to parents providing care in their home to a relative with a disability. Families may not currently claim the infirm dependant tax credit as soon as the disabled family member receiving $6,500 or more in income. Many such families will be eligible to claim the caregiver credit and to receive up to $600 in federal-provincial assistance.

Assistance for Persons with Disabilities

The government is committed to helping Canadians with disabilities. As previously announced by the Minister of Human Resources Development, funding for the new Employability Assistance for Persons with Disabilities (EAPD) Program, which replaces the Vocational Rehabilitation of Disabled Persons (VRDP) Program, will be increased by $25 million to $193 million per year starting in 1998-99.

In addition, as part of the $250 million, five-year extension of the Residential Rehabilitation Assistance Program (RRAP) announced by the Minister Responsible for the Canada Mortgage and Housing Corporation in January, assistance for the disabled will be doubled from $4.1 million to $8 million per year.

This budget also provides $14 million annually for grants for students with disabilities to better enable them to pursue their studies.

A number of tax measures were also introduced in the 1997 budget to better recognize the impacts of disability-related costs on ability to pay.

This budget proposes to further improve tax assistance for persons with disabilities by:

▪	allowing existing homeowners to use the Home Buyers' Plan to purchase a more accessible home or a home for a disabled dependent relative;

▪	allowing supporting individuals to claim the medical expense tax credit for expenses for training courses related to the care of disabled dependent relatives;

▪	allowing occupational therapists and psychologists to certify eligibility for the disability tax credit; and

▪	exempting students with disabilities using RRSPs for lifelong learning from the requirement that their studies be on a full-time basis.

In addition to enhancing income tax support for persons with disabilities and their families, the government will exempt from the goods and services tax (GST) and harmonized sales tax (HST) the service of providing temporary care to a person who, by reason of infirmity or disability, has limited means of self-supervision or self-care. The proposed extension complements GST/HST relief that is already generally available for nursing home and home care services. Additional information regarding this measure is contained in the supplementary information section under sales tax measures.

Strengthening Communities and the Voluntary Sector

The government is committed to strengthening partnerships with non-profit and voluntary organizations that provide services which enhance the quality of life for Canadians.

Social needs are not met by governments alone. They are also met through services delivered in the social economy by people such as caregivers, social workers and volunteers. In the process, jobs and opportunities for skills development are generated. Government can play its part by supporting these important activities.

The 1997 budget further recognized the vital role of the voluntary sector. Among other initiatives, tax assistance for donations of certain appreciated publicly traded securities was enhanced and the annual income limit on the use of charitable donations tax credits was increased to 75 per cent for most charities. These measures have been well received. The voluntary sector has indicated that various organizations serving communities across Canada have already benefited from major new donations.

Emergency service volunteers

Many Canadians provide emergency services such as fire-fighting and first aid on a volunteer basis to small and rural communities. These volunteers give freely of their time and expertise, often at considerable risk to themselves, in the service of their community. The government recognizes that smaller communities are often unable to maintain full-time emergency staffs, and depend on the vital services of these volunteers. To further support volunteer emergency service providers, beginning January 1, 1998, the tax-free allowance for volunteer firefighters will be increased from $500 to $1,000, and extended to other emergency service volunteers.

Voluntary Sector Network Support

The federal government has been working to assist the voluntary sector in expanding its technological capacity, through Industry Canada's Community Access Program.

This budget provides funding for Voluntary Sector Network Support as part of the $205 million for SchoolNet and the Community Access Program which are discussed in Chapter 4.

As announced in Securing Our Future Together, this initiative will enhance the voluntary sector's capacity to engage Canadians by linking 2,500 voluntary organizations per year to the Internet and to each other. Emphasis will be placed on improving access to computer equipment, network support and training. Many services will be delivered by young people, providing them with employment opportunities and skills valued in today's economy.

Rural Canada

Nearly one-quarter of all Canadians live in rural Canada. They, like other Canadians, are experiencing the challenge of economic adjustment and need to be able to take advantage of new opportunities. In the 1997 budget, the government took steps to promote opportunities for growth and diversification in rural Canada by providing $50 million in additional capital to the Farm Credit Corporation. It also expanded the Community Access Program, that is creating 5,000 Internet access sites in rural Canada.

This budget confirms $20 million over the next four years to a multidepartmental Canadian Rural Partnership initiative announced in Securing Our Future Together. Led by the Minister of Agriculture and Agri-Food, this will build on a broad range of programs and services already in place in support of rural Canadians. It will involve a number of pilot projects that engage rural communities. It will also examine new ways to deliver information and programs so that rural Canadians are full participants in Canada's future prosperity.

Continuing support for

Northern Ontario communities

Through the Federal Economic Development Initiative for Northern Ontario (FedNor), the federal government plays an active role in Northern Ontario communities by strengthening and diversifying their economies. FedNor funds community economic development initiatives, as well as programs that improve the availability of capital for small businesses in partnership with lending institutions.

The government previously announced $60 million over three years for FedNor. Recognizing the challenges faced by Northern Ontario communities, the government is confirming that the financial commitment currently being provided to FedNor will be maintained at $20 million per year after 1998-99. This puts FedNor funding on an ongoing basis, similar to regional development funding in other parts of the country.

New Partnership with Aboriginal Peoples

Gathering Strength, the federal response to the Royal Commission on Aboriginal Peoples, was released on January 7, 1998 by the Minister of Indian Affairs and Northern Development, and the federal Interlocutor for Métis and Non-Status Indians.

Gathering Strength contains a number of initiatives to be developed in partnership with aboriginal organizations to benefit Canada's aboriginal population. A $350 million fund has been set aside for a Healing Strategy to help address the legacy of abuse in residential schools. Another $126 million (combining $66 million in new funds with $60 million reallocated within the Department of Indian Affairs and Northern Development) has been allocated to new and expanded aboriginal programs. These funds will be spent on basic services including housing, water and sewer systems, and on supporting structural changes in the areas of education, social and economic development.

Gathering Strength reaffirmed the government's commitment to a number of aboriginal initiatives outlined in Securing Our Future Together. This budget provides funding for an extension of the Head Start program to on-reserve aboriginals, Urban Aboriginal Youth Centres, an Aboriginal Health Institute and an Aboriginal Languages program. Canada's aboriginal families will also benefit from the significant funding under the Canada Child Tax Benefit.

The Canada Millennium Scholarships and other initiatives in the Canadian Opportunities Strategy described in Chapter 4 will enable more aboriginal persons to pursue higher education and to upgrade their skills, so that they can more fully participate in the Canadian economy.

Addressing Environmental Challenges

Canadians attach a high value to the environment. They want Canada's rich endowment of natural resources to be managed wisely. They are conscious of growing problems associated with urban congestion and smog, and want to know that their health and that of their communities will be protected. They also recognize that much greater efficiency in the use of energy and an expanded role for renewable and alternative forms of energy will be needed in the years ahead.

Working in this direction makes not only good environmental sense, but also good economic sense. It means important opportunities in the form of new and more environmentally friendly and efficient technologies, new businesses and new markets, both in Canada and abroad. It can also contribute to lower costs. In other words, it is possible to protect the environment while at the same time strengthening the Canadian economy and creating jobs. Industry, from automobile makers to fossil fuel producers, is beginning to move in this direction.

That is why, in the 1997 budget, the government increased its direct financial support for energy efficiency and renewable energy by $60 million over three years beginning in 1998-99. In recent budgets, the government has also put in place tax changes to move toward a more level playing field between renewable and non-renewable energy so that, for example, renewable energy projects can now access tax-assisted financing using flow-through shares. The government will continue to examine cost-effective ways of encouraging energy efficiency and renewable energy through the tax system.

The negotiations which took place in Kyoto last December highlighted the importance of intensifying efforts to protect the global environment against the risk of climate change. Canada undertook to achieve substantial reductions in its emissions of greenhouse gases, as part of a global climate change initiative.

The government is committed to act in a genuine spirit of collaboration and partnership with the provinces and territories, the private sector, non-governmental organizations, local communities and consumers, as well as the National Round Table on the Environment and the Economy. Moving steadily forward, step by step, Canada is seeking solutions to lower emissions in such a way that no region or sector is asked to bear an unreasonable burden.

Prior to the 1997 budget, the government was investing over $100 million in direct spending each year to combat climate change. The additional $20 million per year over the next three years provided in the last budget reinforces these efforts. This budget provides a further $50 million annually over the next three years, to be invested by the government to build momentum toward concrete action and results.

Through partnerships and leveraging, these funds will help lay a strong foundation for early action, such as accelerated technology development and diffusion across many sectors; greater energy efficiency in government operations, industrial processes, vehicles, homes and small business; green infrastructure; community-based and citizen-based initiatives; broader public engagement within Canada; and the transfer of Canadian technology and expertise to the developing world.

Emissions trading offers the scope to achieve emissions reductions at lower cost and in a more market-oriented way than conventional regulation. Canada needs to be able to play a leading role in shaping an international approach to emissions trading that reflects Canada's circumstances. This includes how best to recognize early action by industry to reduce emissions. The government will be consulting widely with provinces, industry and non-governmental organizations, as well as international organizations including the World Bank, on the complex issues associated with developing an emissions trading system and how it could be designed for greenhouse gases.

The Minister of Natural Resources and the Minister of the Environment will be providing further details in the weeks and months ahead.

As reflected in Securing Our Future Together, funding for the National Research Council's Industrial Research Assistance Program (IRAP) will be increased by $34 million annually beginning in 1998-99. This funding, which will involve both grants and repayable contributions, will help small and medium-sized businesses to foster strategic innovation and to implement state-of-the-art technologies and approaches for using energy, water and natural resources more efficiently and for preventing pollution.

Promoting Canadian Culture and Sports

Canada's culture is rooted in shared experiences, national values, landscape and geography. Our cultural diversity and creativity unite us as citizens and distinguish us in the world. The government has already fulfilled several commitments made in Securing Our Future Together to support the creativity of Canadians and the excellence of our athletes. Earlier this year, the Minister of Canadian Heritage announced the following initiatives:

▪	an additional $25 million a year to the Canada Council starting in 1997-98 to support Canada's artists and arts organizations;

▪	an increase of $15 million a year in support to the Canadian book publishing industry, starting in 1997-98, to promote a viable and competitive book publishing industry; and

▪	an additional $50 million over the next five years to support athletes and coaches, and provide more opportunities to train and compete.

To make it possible to more easily mount major exhibitions of fine art and heritage objects in Canada, the government is exploring how to reduce the costs associated with insuring travelling exhibitions through an indemnification program.

Tax assistance to the Canadian film industry

The Canadian film production industry receives significant support from the federal government through the tax system. It benefits from two federal refundable tax credit programs. High Canadian content films certified by Canadian Heritage are eligible for a credit that can be up to 12 per cent of the total cost of the film. Other films are eligible for a lower-rate credit encouraging film producers to hire Canadians and produce films in Canada.

Canada Television and Cable Production Fund

Since 1996, the federal government has also provided significant direct support to Canadian television programs in both English and French through the Canada Television and Cable Production Fund.

In the 1996 budget, the federal government provided funding of $100 million in 1996-97 and 1997-98, and $50 million in 1998-99, to supplement the $100 million annually provided by the cable industry's production fund and Telefilm Canada.

The Fund has been an unqualified success. In the first full year of operation, the Fund generated some 2,200 hours of Canadian programming. This supported 19,600 full- and part-time jobs in all regions of the country, and leveraged a total of $625 million in television and production activity.

As announced recently by the Minister of Canadian Heritage, funding for the Canada Television and Cable Production Fund will be increased by $50 million in 1998-99, and $100 million in 1999-2000 and 2000-01. The Fund will therefore be maintained at $200 million annually until 2000-01. This will ensure that the Fund is able to:

▪	increase Canadian television programming during prime time;

▪	improve distinct Canadian drama, including feature length films, and variety, documentary, children's and arts programs; and

▪	promote the growth of skilled employment across the country.

Furthering International Co-operation

Canada has a long tradition of applying the shared values that define this country to furthering international co-operation and peace. Canada is recognized as the world leader in peacekeeping practices. Recently, the Canadian government has taken a lead role in successfully pursuing a global landmine treaty.

On December 3, 1997, Canada was the first country to sign the Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti-Personnel Mines and their Destruction. This treaty will enter into force once it has been ratified by 40 countries, expected within two years.

Canada will contribute $100 million over the next five years to help meet the goals of the treaty banning anti-personnel landmines. Canada's financial contribution will go towards implementing Ottawa Process II, an agenda for action. A key goal of this process is greatly expanded humanitarian assistance for landmine victims, to help with their medical care and to help rebuild their lives. Other goals include working towards universal adherence, early entry into force of the treaty, and assistance to countries which lack the means to fully implement their commitments under the treaty to clear mines and eliminate stockpiles.

The government will also devote an additional $90 million to the International Assistance Envelope in 1997-98. These funds will be used to pay calendar year 1998 commitments to international organizations, thus freeing up resources to be devoted to development initiatives in 1998-99 in the areas of environment, health, youth, and governance. A $50 million increase in the International Assistance Envelope for 1998-99 relative to the level previously projected for that year will also free up resources for such initiatives. This additional support is a signal that, as its fiscal situation allows, and consistent with its other priorities, the government will, as stated in the 1996 budget, make progress towards the official development assistance target of 0.7 per cent of gross domestic product (GDP).