STANDING COMMITTEE ON INDUSTRY
COMITÉ PERMANENT DE L'INDUSTRIE
[Recorded by Electronic Apparatus]
Wednesday, April 29, 1998
The Chair (Ms. Susan Whelan (Essex, Lib.): I'm
going to call to order our meeting today. We are going
to continue, pursuant to Standing Order 108(2), our
study on the document entitled Sustaining Canada as
an Innovative Society: An Action Agenda.
We are very pleased to have with us today, informally,
Sir Robert May, the chief scientific adviser for the
U.K. government, and joining him at the table,
the British High Commissioner, Anthony Goodenough.
Just to give you a brief background, Sir Robert May is
currently, as I stated, the chief scientific adviser to
the U.K. government and the head of the U.K. Office of
Science and Technology. He holds this position on
leave from his Royal Society research professorship in
the department of zoology at Oxford University,
Imperial College, London. Previously he was class of
1877 professor of zoology at
Princeton University from 1973 to 1988, and professor of
physics at the University of Sydney from 1969 to 1973.
He's trained as a theoretical physicist and applied
mathematician and for the past 20 years or so has
studied various aspects of the way populations and
communities are structured and how they respond to
change, both natural and human-created. He has a
varied background and varied experience, and we're
pleased to have him today in front of us.
Notable among his many prizes and medals, I'd like to
mention the 1996 Crafoord Prize from the Royal
Swedish Academy of Sciences. This award is intended
to complement the Nobel prizes by cycling on a
three-year basis among mathematics, earth and space
sciences, and biosciences and ecology. Sir Robert May
is cited for pioneering ecological research and
theoretical analysis of the dynamics of populations,
communities, and ecosystems.
We're very pleased to have you join us today, Sir
Robert May, and I should let you know that we're also
very pleased to have in our audience the Forum for
Young Canadians, who are young Canadians from all
across Canada who come to Ottawa to learn about
government and how it operates. So now they get to
meet people from the U.K. and from Canada at the same
So, Sir Robert May, would you like to begin with
your opening statement?
Sir Robert May (Chief Scientific Adviser to
the UK Government and Head of the UK Office of
Science and Technology): Yes. I would first like to
say thank you very much for inviting me here to have
this informal discussion.
What I would like to do is briefly say a little bit
about what my job is and a little bit about how I see
going about discharging it.
My role as chief scientific adviser has three
Firstly, it is to look across all of government
spending on research and development in science,
medicine, and engineering, not owning any of the
budgets but offering advice to government,
particularly with reference to coordination and things
I think could be done better or where there ought to be
more or even less money spent.
Secondly, I have a particular responsibility for
trying to make sure that the unusual and indeed
disproportionate strength of British science remains
Thirdly, most interesting and most difficult is to try
to help us do a better job of translating that strength
in creating new knowledge and trained people into
business and industrial strength. I come from outside
government, and in discharging that job, I see myself
as having to walk a delicate path between being a
well-behaved civil servant and being somebody who is
and is seen to be offering independent advice. I have
indeed slight worries about whether it is proper for a
British civil servant to discuss these things with you
in this formal context, but it is exactly the kind of
interesting collaboration and interesting risk that I
am happy to take.
Let me say briefly a few words about some of the
things the United Kingdom is doing with respect
to cashing in on the innovative abilities of our
scientists, engineers, and medical researchers.
Many countries—Germany, Japan, Australia—have had
exercises in foresight of trying to think about what
are the important and interesting developments that lie
in the future. We also in Britain have a foresight
exercise that is defined very broadly, going right
across all areas of industry and business, from the
conventional sorts of things such as energy, materials,
health, and life sciences, through aerospace and
defence, through to food and drink, retailing,
The aim of this is to bring together people from
academia, people from government, and people from
business and industry to try to form better connections
among them, better awareness of each other's strengths,
better awareness of the opportunities for exciting
fundamental research that are generated by practical
problems, and better awareness on the part of business
and industry of the sources of inspiration for new
ideas or the capacity for problem-solving that lies in
I'm trying to form those connections through the
foresight exercise by getting people together to think
about likely future developments, recognizing that they
won't of course really anticipate the future, but that
they will, in sharing thoughts about the future, form
new connections. We have a variety of detailed
mechanisms for creating new sources of partnership
funding, with matching funds from industry and from
government, to try to then carry forward some of the
interesting new partnerships that have come out of
As another example, in the recent interim budget, the
chancellor has created, at the level of about £50
million, a new university challenge fund, which is
particularly targeted for venture capital of relatively
small amounts. It's a £50 million fund—again, a
partnership between government, industry, and the
university sector—for venture capital proposals worth
less than £1 million. Due diligence and care and
responsibility of funds in the city mean that in
Britain we have difficulty with venture capital
projects of less than about £1 million, and this new
project is, again, a deliberate design to try to cater
for starting up on a small scale adventurous things.
Let me just say one other word or two about the
government's use of scientific advice, which is also
one of my responsibilities.
As chief scientist, I report to the Prime Minister and
the cabinet. The office of the chief scientist
exists to be there as a resource to offer advice on
problems large and small. It may be coordinating
difficult advice, because we can only offer it in terms
of risk and probability, to the remaining inhabitants
of Montserrat. It may be about such mundane things as
the policy on vitamin B-6.
It may be reassuring cabinet that the various agencies of
government are indeed doing an excellent job in
thinking about questions like the release of
genetically modified organisms.
On the other hand, my role is also not just to be
reactive but to be proactive in thinking about
questions where science advice is an essential
ingredient of policy formation, though it may not be
We have adopted in Great Britain a new set of
guidelines as protocols for science advice in
policy-making, and there are committees of chief
scientists or their equivalents in all government
departments, which meet regularly under my
chairmanship to make sure that we try our best to
coordinate things across departments.
The last preliminary remark I would offer is that I also
have responsibility for international scientific
things—not large enterprises like CERN that have
a focus, but more general policy things, trying to draw
together the different agencies of British government
that fund post-doctoral or other exchanges, and get a
shared sense of how the British Council, the Foreign
Office, the Royal Society, the research councils, and
the Department for International Development
differently do things, and a better coordinated
picture of it.
There is the negotiation of the European Union's Fifth
Framework program for European research, which
is now 7% of total R and D funding in the United
Kingdom—a little more than 15% of government funding
on R and D. The task of coordinating the planning for
the Fifth Framework under the British presidency of the
European Union is something that falls to the Office of
Science and Technology.
I think that's enough by way of a preliminary talk.
I would be very happy to share any thoughts or
discuss anything else you would like to.
The Chair: Thank you very much for your opening
comments, Sir Robert May. I should remind the
committee members that you are a guest. Sometimes when
we ask questions we have a tendency to be a little
pointed, and it would be nice if we had an open
discussion today that was a friendly discussion. We do
have the Forum for Young Canadians here as well,
so we want to ensure that we leave a good impression.
Sir Robert May is only with us until just shortly
before 4.30 p.m. He has a plane to catch. Bearing
that in mind, we'll begin with Mr. Schmidt.
Mr. Werner Schmidt (Kelowna, Ref.): Thank you very
much, Madam Chair, and welcome to you, Sir Robert May,
and also to the high commissioner. Thank you very much
for being here. It's great to have you here, and to
garner some of the wisdom that you obviously display.
I have a very practical question for you. You say one
of your major functions is to coordinate. With all
the paraphernalia that goes with coordination, we have
here in Canada some 16 government departments that are
very much involved in development in scientific
research, technology, and so on. We don't have a chief
I'm just wondering, in your operation as the chief
science adviser, whether you ever find that it is
difficult to coordinate these various science
endeavours so that they actually focus on what Britain
wishes to do, rather than what, say, the defence
department wants to do vis-à-vis the agriculture
department, or the fisheries and oceans department, to
use just three examples.
Sir Robert May: The answer to that is yes and no.
If I could take as an example climate change, the
recent report and the thing about which I spoke
yesterday evening, where the note I published was
based upon discussions I had had with the Prime
Minister and the cabinet about what the background
facts were and what were my recommendations personally as
chief scientist were about the implications that had for
policy-making, my own advice was based on my
consulting with the Department of the Environment,
Transport and the Regions, which is the lead
department in Britain in that, but also with the
Department of Trade and Industry, which includes
energy and also is importantly involved, and my
consultation with the various arms of the scientific
community, the Natural Environment Research Council,
the MET office, and various such things.
I tried very quickly to pull all that
together, and it would, in my mind, be an example of a
story where, for all the particular and sometimes shaded
differences among the departments, there was a very
good pulling together.
I would say the majority of examples I have had of
trying to do this coordinating job, even in cases
where the departments involved come from a different
direction, and indeed have a different view, has not
been a process fraught with undue friction as one tried
to come to some consensus. But equally, I could and
shall not give you examples where the path has not been
easy. I have chosen examples where I think policy
science advice in the making of policy in Britain is in
some ways—I would say in climate change—exemplary,
but you can think for yourself of other examples where
our handling of affairs has been less than exemplary.
Mr. Werner Schmidt: Thank you very much, sir.
I think the other question that follows from this has
to do with the evaluation of science itself. As you
know, when government determines policy, some of which
requires a scientific input...and your example of the
environmental study is a particularly good one,
especially with regard to Kyoto and other places, and
we know that in certain areas scientists do not agree.
Sometimes they're very legitimate disagreements and in
other cases it's just plain bad science versus good
In your role as chief science adviser, how do
you determine which is good science and which is bad
science; and how do you persuade your Prime Minister and
the cabinet to listen to good science as compared to
Sir Robert May: It's a very penetrating question,
and in every country today, in a world that
increasingly faces problems that are the unintended
consequence of good actions based on our greater
understanding of the world, I think it's a question that
faces all of us, not just government but the populace
in general. Too many of us come away from school or
even university with the vision that science is
something that gives precise answers that cut across
controversy. That is easier to teach and to set little
exam questions on things to which there is an answer.
The interesting questions of policy-making and,
indeed, life that involve scientific questions more
commonly than not involve problems where we do not
have full understanding. More commonly than not,
they involve problems where at best the things we can say
are like the weather report, which is given in terms of
I will answer your question in a more philosophical
way by saying I think one of the very important parts
of my job is to bring a wider understanding in
Whitehall and, more generally, in the community that
the role of science is often to recognize that it is
primarily a tool for sharpening questions and
suggesting ways in which we can narrow our domains of
ignorance, but that it rarely will resolve political
discussion by telling you there's one answer.
Let me give you examples. I referred to the volcano
on Montserrat, which poses many different kinds of
risks, not just lava flows obliterating you but
crystallite particles, which are rather like
asbestos. There are different kinds of risk, different
kinds of places in the island. We don't have such a
good understanding of volcanoes or earthquakes that we
can tell you exactly what's going to happen.
Predictions are based in a sense on a natural history
of similar volcanoes.
The advice that is given to the populace has to be in
terms of probabilities in different parts of the
island. That's an example of many other kinds of
advice the government must give to its citizens. I
enjoy the challenge of trying to do that and I have
enjoyed the challenge of trying to draft the broadsheet
given in Montserrat in probabilistic terms that are
accessible to lay people, whose common sense is often
There will be other examples, as in climate
change, where there are not two opinions; there is in
fact a distribution of opinions. Over time, that
distribution of different opinions, rarely just two
opinions as if it were a sporting contest, is
narrowing. And the conclusion from the Intergovernmental Panel on
Climate Change that said the balance of evidence is now
such that it seems overwhelmingly likely that the
change we have recently seen in climate is indeed
caused by our activities, is the result of a process
that has engaged some 3,000 experts from many different
countries, who do not all agree but whose area of
disagreement is narrowing and is an interesting process
that itself, I think, points the way to many similar
but different processes in the future where we bring
together on an international—not just a
national—basis all the experts, recognizing that
different ideas will contend and try nonetheless to
sift out of that what the balance of likelihood is.
Mr. Werner Schmidt: What proportion of your
national budget is devoted to research and development?
Sir Robert May: The fraction of the U.K. gross
domestic product that is devoted to research and
development, public and private, is just around 2%,
2.05% last year. Of that, about 60% is private, from
industry, and about 40% is from government.
If you'd asked me that 15 years ago, we would have
been essentially equal firsts, along with the United
States and Germany, among all countries in the world
for that figure. The United Kingdom's figure has
fallen over the last 15 years so that we have seen
Japan go past us, and Switzerland and Sweden. But we're
still comparatively high. But I believe, and my
consistent advice is—not simply because as a scientist I
want more, but because in comparison with the people we
would compare ourselves with we have lost ground—that
decline has been a decline in public spending not
offset by an increase in private spending. So
industrial R and D has increased as a percentage of GDP
over that time, but public spending has decreased as a
percentage of GDP.
Within the public spending, defence spending has gone
down markedly as we realize the peace dividend. So
those countries that were heavy spenders in R and D for
defence, the United States and the United Kingdom, have
seen more of a decline in public spending than have
countries that were not so heavy.
The U.K. spending on basic science through the research
councils and the higher education funding councils has
seen a modest increase, but it has been overwhelmed by the
decrease in defence spending and a decrease in public
spending in other government departments—health, food
and fisheries, and so on—which itself is primarily a
decrease in the breeder-reactor spending. It's a
Mr. Werner Schmidt: Thank you, Madam Chair.
The Chair: Mr. Shepherd.
Mr. Alex Shepherd (Durham, Lib.): It was a very
fascinating presentation. It's a little break from
what we're used to doing here.
I'm very interested in how one rationalizes your
research and development expenditure, in the sense that
you want to create a system of competing forces to
evolve new technologies, for instance, but at the same
time you don't want to be reinventing the wheel all the
time. There's a general perception that the
Japanese have been very good at this. That may be
wrong, but they have been able to pick various
industries and so forth where they're going to
concentrate and they're going to eliminate the
possibility of duplication and overlap and get the
maximum bang for their bucks in their science
portfolio. Do you attempt to do some of that in the
Sir Robert May: Yes, indeed. Let me first, by way
of an initial digression, say I have just spent three
days in Japan.
The Chair: We apologize, Sir Robert. There's a
quorum call. Once the bells stop, the member's will come back.
Sir Robert May: I could conjecture this was about
to happen, but feared alternatively it may be a fire
alarm of a particularly subtle and delicate kind.
It is very interesting to discuss these questions with
people in Japan. I think, like all generalizations,
the generalization that countries like Britain are good
at creating new knowledge and countries like Japan are
good at exploiting them has a grain of essential truth,
which, the moment you look at it closely, dissolves into
a much more confused and complex picture.
It is really a most engaging experience to spend a few
days in Japan, where there is much worry in their
economic circumstance of how they can learn from us how
to do a better job of capturing the fruits of basic
research. It's very ironic, and I kept wishing I could
take a representative collection of people back to
introduce them to some of the people I discuss these
Do we worry, however, about managing things more
efficiently? Yes, we do.
One interesting measure of how efficiently one does
manage is the science base. Let me focus for a moment
and then widen the answer on basic science creating new
knowledge and accessing other people's new knowledge
and creating a cadre of trained people.
How do I measure the efficiency of our or other
countries' efforts in this? Well, I have actually done
this over the past year, not by asking people or
collections of their friends whom they think is best,
but by counting the output of the science base as
measured by published, refereed scientific papers in
the huge database created by the Institute for
Scientific Information in Philadelphia—some 10
million papers, and some 100 million references to them.
There are many flaws and biases, but nonetheless that's
a measure of output—published, refereed science. That
is then divided by the input, an estimate of the money
spent on basic science, both by government and by
charities and by industry—my estimate of that, not a
conventional OECD statistic.
An interesting result emerges. If I count papers
published in 1993, for example, divided by spending on
the science base in 1990, a few years earlier, I get an
interesting lead table that is led broadly by the Anglo
and the Scandinavian countries—by the countries who
tend to do the science in non-hierarchical ways that
allow young people to express their creativity.
The number one country, I have to tell you, is the
United Kingdom, partly because our output is strong,
and partly because we spend less on the science base in
relation to size than most of the other major
Also very high on that lead table are the United
States, Switzerland, Sweden and Canada. The ratio of
output to input of those countries is more than twice
that of France, Germany or Japan.
Many of my academic colleagues suggested this was a
dangerous enterprise. They said, may not the treasury
say that if you're doing such a good job you don't need more
money? The answer is, not at all.
Here is a demonstration that the, to my mind, not
enough money we spend—because we do spend per capita
less than our competitors; on a per capita basis we
spend less than Canada on the science base in the
U.K.—is spent, however, with maximum efficiency.
There is demonstrably no country that does a better job
than the United Kingdom of avoiding waste in
expenditure, which is not to say that I do not believe
we should spend more. I believe we should spend
no economic theorem that says how much you should
spend, but I would think the valid comparison is to
spend broadly the same amount that our competition is
in relation to size and GDP, our competition being the
other major countries and the other major scientific
All the time we're doing that, we should be asking how
to cut administration so that we maximize expenditure
on doing the science and how to avoid wasteful overlap
while not being too rigid and not allowing a certain
amount of noise in a system which is necessarily
imprecise as it funds the unknown.
Now I've focused my answer on that very important
question on the science base. I earlier sketched an
example of the kinds of initiatives we're taking to try
to help us do a better job of encouraging collaborative
enterprises between the science base and industry.
We have spent money, for example, on a foresight
challenge program that gives matching money, government
money and industry money, small amounts of money—£30
million two years ago—for projects that draw industry
and academia together in novel associations to think
about, for example, bringing Ministry of Defence
approaches to risk management into Lloyd's in the
insurance industry. We have several other initiatives
there with respect to trying to bring new methods of
risk analysis into the city. That was matched not 1:1
by private sources, but 2:1. That was matched by £62
million of private money.
We can still do a better job, and I think we still
have a lot to learn from the more adventurous modes of
North America in doing that. The venture capital fund
I mentioned is an attempt to do that. Broadly, I
think, the record of the Bank of England study indeed
recently shows that for adventurous capital we do
better than the rest of Europe, but not as well as
North America. That is one of the things I'm working
Because I can give you a harder and clearer answer
about the science base, I spoke longer about that.
The Chair: Thank you, Mr. Shepherd.
Ms. Francine Lalonde (Mercier, BQ): Sir Robert, I would have
a number of questions, but we don't have much time.
I wonder what is the prime objective of your work. You are
looking for efficiency. That's all very well if efficiency is
defined as the right thing to look for. It has to be, either in
terms of jobs or to ensure that Great Britain is indeed in the
position it strives to be in, compared to other countries, a
competition Paul Krugman, whom you know, I am sure, questions. What
is your objective?
Sir Robert May: You have presented me with a
wonderful challenge, because I did not succeed in
finding the translation button.
Some hon. members: Oh, oh.
Sir Robert May: I'm going to try to answer the
question and we will have a wonderful existential
experiment in how good my schoolboy French is.
I confess with embarrassment that I am a monoglot, a
Ms. Francine Lalonde: British.
Some hon. members: Oh, oh.
Sir Robert May: —Anglo. I don't even speak
English. I speak Australian.
Some hon. members: Oh, oh.
Sir Robert May: I think you asked me what
ultimately is the point of my work—
Ms. Francine Lalonde: Yes.
Sir Robert May: —beyond trying to see Britain
high at the lead table. Is that the sense of the
The Chair: Yes, that's pretty good. The
efficiency that you're striving for....
Sir Robert May: I see my job.... And I may be
answering the wrong question, but I will give you an
interesting answer nonetheless and then we can solve
the problem and answer the real question.
Ms. Francine Lalonde: It's the second one.
Sir Robert May: In the grandest and most ambitious
sense, I see my job as being the voice at the centre of
government which recognizes that in many unintended
ways our increasing ability to understand and interfere
with the physical world around us and ultimately to
understand and begin to interfere with ourselves is
going to raise questions, ethical questions and
practical questions, that need to be addressed
individual countries but by the world at large.
The reason I am here, the reason I travel more than my
predecessors and more than my analogues in other
countries, is that I see that as a hugely important
part of my job.
I referred to the Intergovernmental Panel on Climate
Change to begin with partly because I think it is a
very interesting model, whether one agrees or disagrees
with its findings, in providing a forum to address a
question that is global, not national, through a
convocation of scientists that is global, not national.
I see many of the questions that our increasing
understanding of the machinery of life is going to give
us, whether they are ethical questions about cloning or
whether they are safety questions and ethical questions
about xenotransplantation, about putting bits of
other animals in us, which has both an ethical
dimension and a practical dimension with its potential
to create new plagues by creating new viruses, as
things that should not be addressed by one country when
the implications are global.
I see that as a central and exciting part of my
job—even if it wasn't the answer to your question.
Some hon. members: Oh, oh.
Ms. Francine Lalonde: Did you find the place?
Sir Robert May: I have. That's where I thought I
Ms. Francine Lalonde: Thank you.
My question was formulated so as to give you a lead which
obviously wasn't the right one. I was asking whether the objective
of your work was, for instance, to create jobs or to improve
No, no, I understood perfectly what you said, because at the
country level too, it's important. However, I am going to add other
questions a little more specific. Have you been in your position
long? Were you appointed by the social-democrats? Is social
research, research in the area of social sciences, encouraged?
We had here granting organizations specializing in social
sciences research and they insisted on the importance of the issues
raised by changes which are taking place today in Canadian society,
and, to a large extent in Quebec society, where I come from.
Indeed, those changes have a profound impact on some fundamental
elements of society, the family, for instance. They also erase, so
to speak, monolithism in some areas, by creating a kind of
companionship with other cultures, people of different origins and
These are a few questions the general thrust of which you
understand, I am sure. In any case, I'll be interested by your
Sir Robert May: First, I apologize profoundly,
with real embarrassment, for my misinterpretation of
Yes, I do see the creation of jobs at the heart of
much of what I do and, I must say, not just the
creation of jobs for researchers in science, medicine
and engineering, but the translation of that new
knowledge into high-quality jobs in Britain. And I see
that the motivating force for wanting to do a better
job of capturing the fruits of the new knowledge and
the trained people we create is indeed to create a
Britain where the life of the people in it is better,
both by virtue of the quality of the life itself having
improved and the jobs we create going hand in hand with
The mantra, motto, or slogan under which the foresight
been launched is sustainable wealth creation and
quality of life. Sometimes people see wealth creation
and quality of life in opposition, but I see them as
seamlessly related. You can't have quality of life
without wealth creation, but there's no point creating
wealth if it diminishes the quality of life. They have
to be seamless.
Then you asked some detailed questions about, for
example, the nature of my appointment. It's an
apolitical civil service appointment. I'm seconded
from academia for five years. I'm in the middle of
that five-year term, so I had almost two years under
the previous government.
The transition for me has been rather smooth because
with many of the things I'm concerned with, such as the
environment and scientific issues, the governments have
had very similar views. The Blair government, for
example, frankly acknowledges the good work done in
starting the foresight program and in many
environmental things. So it has been easier than it
might have been in a country where the parties differed
more on these questions.
I think it is important that my appointment is not
political. It is indeed an appointment at the highest
level. I'm a permanent secretary, which is what I
think would be called here a deputy minister. I'm a
member of the group of permanent secretaries who weekly
meet to share experiences. I sit with many ministerial
committees. I sit with the cabinet committee on
economic affairs, and at budget time I meet with the
cabinet committee on the budget to offer an opinion of
cross-cutting R and D issues.
Do I think the social sciences are important? Our
structure of the research councils is interesting.
There are research councils for several areas:
medicine, engineering and physics, the natural
environment, biology and biotechnology, and economic
and social issues. There's also a research council that
deals with big things such as particle physics and
astronomy. Those are the research councils.
I have frequently said—this is a personal statement
now—that the Economic and Social Research Council is the
most important of those research councils. To go back
to the more philosophical answer I incorrectly gave to
your question, I think the most important problem in
Britain and other countries is dealing with the
unimaginable wealth of new knowledge and understanding,
and the power that gives us to change the world—this
is intended for good, but sometimes in more complicated
ways, this has unforeseen adverse consequences—and how
you marry that with our human institutions.
Still, I sometimes personally feel we're showing much
more clearly our evolutionary past that has shaped
human behaviour and social organizations, which are not
much more sophisticated than that of any of the other
primates. I think it is the Economic and Social Research
Council that has to deal with those problems that are
hugely important. Sometimes, having so pleased the
people by saying that, I end by saying that these are
problems too important to be left to the community, as
currently constituted, of social scientists.
On the other hand, we do not have a humanities
research council. The recent inquiry into higher
education in Britain, the Dearing inquiry, has
recommended that we create such a research council.
I, again personally, am enthusiastically in support of
that. There are, however, interesting technical
questions about how it should best be placed.
I have one last comment. The irrelevant
remarks I made about my feelings about bioethics and so
on will, I hope, speak to you of the sincerity of my
belief that all these things are ultimately important.
I have just reconstituted our Council of Science and
Technology, which has its analogue here as an
independent group that offers advice to the Prime
Minister. In reconstituting the Council of Science and
Technology...it has about twelve people; two of its
people are not scientists, they are
distinguished humanists, and I think it is important that
the Council of Science and Technology have, in
offering such advice for science and technology, that
broad a perspective.
Important among the guidelines I have offered for
science advice and policy-making is that for important
issues we promptly seek the best advice, not just from
experts in the field, to make sure that we have an
appropriately broad canvas, and that we make the data
freely available to everyone, recognizing the messy
discussion that will then take place in the marketplace
of ideas. But I believe that is the way science
operates best, and I believe it is the way to convince
a public that is wiser than we often think, that we are
indeed going about things in the right way.
The Chair: Thank you, Madame Lalonde.
Mr. Murray, you have a question.
Mr. Ian Murray (Lanark—Carleton, Lib.): Thanks,
Sir Robert, you referred earlier to Britain's gross
expenditure on research and development as a percentage
of GNP as it compares with other countries. In Canada,
this has been an ongoing debate for many years. We
haven't come close to the 2% or 2.4%, to the same mark
as other countries.
If I've understood you
correctly, there has been a shift towards more
industrial R and D in Britain and less government R and
D. If that's the case, has there been a concurrent
decline in basic research in Britain, and if there has
been, does that trouble you at all?
Sir Robert May: No, I was not clear in answering
that question earlier.
As a fraction of GDP over the last 15 years, R and D
expenditure in Britain has fallen overall from about
2.3% to around 2%. As I said, that has been made up of
a slight increase, as a percentage of GDP, in private
spending, which is now 60% of the total, and an
overcompensating decrease in public expenditure. But
the public expenditure on basic science has in fact
increased. So the overall decline in public
expenditure is primarily a decrease in defence R and D
spending. That, in common with the United States, is a
realization of the peace dividend and is part of the
marked decrease in overall ministry of defence
Ministry of Defence budget over the last 10 years has
decreased 26% in real terms. It is also—and now I'm
getting very technical—because the move to spin off
things into the private sector has meant that as much money
is probably being spent in the R and D that underpins
military industry, but it is now being treated not as
Ministry of Defence R and D but as part of the
purchasing costs and thus has become R and D in the
private sector. So some of that apparent increase in
the private sector and decrease in the public sector is
in fact a bookkeeping change in the way we do things.
Nonetheless, overall it's still accurate to say, as a
percentage of GDP, R and D expenditure in Britain has
slightly fallen—slightly increased in the private
sector and more than slightly fallen in the public
sector. The fall is mainly decline in defence R and D,
representing the peace dividend.
Mr. Ian Murray: If we set aside the national
defence expenditures, would it be fair to say that
there has been an increased focus on technology
transfer from government labs to industry? Has that
been the experience in Britain?
Sir Robert May: Yes, both in defence and elsewhere
there has been a deliberate attempt, and indeed we have
a rolling program of looking at all government research
laboratories, both research council laboratories, like the
Grassland Research Institute, and the Royal Greenwich
Observatory, one noted case—the Royal Greenwich
Observatory no longer being an observatory as such but
being a joint enterprise between Cambridge and
Edinburgh that built equipment for telescopes—and also
other department research laboratories, like the fisheries
laboratories run by the Ministry of Agriculture, Food
and Fisheries, and the fisheries laboratories run by the
Looking at them one by one, we ask, do we still need
to do this, and if we do, should it still be owned in
the public sector or should it be in the private
sector? If it should be in the public sector, should
it be run as government-owned but contractor-operated,
or should it be government run but perhaps as a company
limited by guarantee? We have seen a great deal of
rationalization and spinning out into the public sector
as a result of that.
It's a complicated process, but if you have to give it
an oversimplified one-line summary, it would be the
feeling that technology transfer is best effected by
letting the market make some of the decisions,
recognizing there are some things that really have to
remain in the public sector, and I think we've done
that fairly well.
My office, the Office of Science and
Technology, is responsible for conducting this review
Mr. Ian Murray: Thank you, Sir Robert.
The Chair: Thank you very much, Mr. Murray.
Sir Robert, we've really appreciated your being here this
afternoon with us. I know the commissioner's been
very quiet. I don't know if he has anything
to add to this.
I know tonight the Forum for Young Canadians is having
a dinner with MPs from various areas in order to meet their MPs,
and I understand there's a student from my riding,
Christine Myers from L'Essor Secondaire, so we'll be able to
quiz each other on what she's learned or what I've
learned. I'm sure other members can do the same.
I wonder if you would like to leave us with just one
final thought before you rush off to catch your plane.
Sir Robert May: Well, it's unlike me to decline an
opportunity to talk further, but the one final thought
I would leave you with is that I greatly welcomed the chance
over the last two days to share in such a varied way
with so many of the people, both in government in the
civil service and in science, our similarities and
differences in approaches to things.
I have had the personal experience of
having Canadian post-docs and Canadian graduate
students, and indeed now a fellow faculty member in the
zoology department of Oxford who is Canadian,
benefiting from exchanges with younger people. I think
nothing is more important, ultimately, to binding our
countries with our shared past together, as a step
toward binding the world together, than scientific
exchanges, particularly of younger people.
If I have one thought to leave—as you can see, I have
accepted your invitation de facto—it would be
to welcome the openness of the exchanges we've
had and the enthusiasm for continuing to share
experiences and people, and to embrace the risk
Britain takes by sending its better young people here
for a few years, and for you to take similar risks of
sending your better young people to Britain for a few
years. Those are risks that ultimately redound to our
The Chair: Thank you.
Sir Anthony Goodenough (British High Commissioner,
Ottawa): Thank you very much indeed for giving me the
opportunity just to say one word. I would like to
thank you for welcoming me as high commissioner to your
I was faced with a difficult decision today because I
had a choice between accompanying Sir Robert here in
Ottawa on his round of calls, and going to Sudbury to
take part in the inauguration of the neutrino
observatory, which Stephen Hawking is also taking
part in. But I decided I ought to be here with Sir
Robert; it gave him the opportunity to attend this
But I do think we ought to
just pause for a moment and note that it is a very
important event taking place in Sudbury today, and
Britain is very proud to be a junior partner—very much
a junior partner—in that tremendous venture in
Thank you very much.
The Chair: Thank you very much for reminding us of
that. I don't know how many watched the news last
night, but if we could have had the industry committee
meet there, we all could have attended that event as
Thank you again for joining us and for coming. We
wish you well on your journey, Sir Robert May.
I'm going to suspend this sitting for about three
minutes to change witnesses.
The Chair: We're going to resume the meeting.
Pursuant to Standing Order 108(2), a study on
information technology preparedness for the year
2000, we now have before us Catherine Swift, the
president of the Canadian Federation of Independent
Business, to continue with our study for the year 2000.
We welcome you, Catherine, and look forward to your
presentation. I'll turn the chair over to you for a
few opening remarks before we turn it to questions.
Ms. Catherine Swift (President, Canadian
Federation of Independent Business): Thank you very
much, and thank you for the opportunity to appear here
I've handed out just a very brief summary. We
actually released these data, as you can see,
about 10 days ago or so on a survey we did among
our small and medium-sized business membership on the
year 2000 preparedness issue. As you probably know, I
was also the small business representative on
Industry Canada's task force on the Y2K issue, so
I participated in that exercise as well.
There was an earlier Statistics Canada survey done in
October of last year that you have probably been made
aware of already by Industry Canada people and what not.
I might just note that Statistics Canada survey only
surveyed firms with six employees and up. Given that
right now about 70% of businesses in the Canadian
economy have five employees or less, it obviously
missed a big chunk of the business community. But it
had its reasons for doing that.
One thing our survey
did—granted it was several months later as
well—was cover all sizes of businesses. We
modelled our survey on the Statistics Canada survey, so we
asked similar questions and therefore could get some
comparability of results.
However, because a very large proportion of our members
are five employees and fewer, we also included
that smaller-firms component, which was absent
from the Stats Can survey.
To summarize, we actually got results that
were reasonably similar to the Stats Can survey,
in aggregate—for example, the awareness level
being quite high that there was some issue
hanging out there about the year 2000.
People might not necessarily have known about it
in detail, but they certainly were aware
there was some issue.
The Stats Can survey got an awareness level of about 91%.
We got one of almost 97% in our survey. I think the fact
that the surveys were done about five to six months apart
probably played a role in that. There's definitely
been increasing awareness, over the last six to eight months,
of this issue among the business community.
I believe that showed up in our results.
By the way, just under 10,000 businesses were
surveyed. That's a pretty good sample size,
which suggests results that are statistically sound.
We also found—and I was quite heartened by this,
because I actually didn't know what to expect
of the very small firms, notably—that quite
a significant proportion of the businesses, over half,
were taking steps to ensure that their technology
and their business would be functional in 2000.
We also saw—and again, I thought this was a relatively
high proportion, although I don't know what my
expectations were—formal plans undertaken by quite
a significant number of businesses.
For example, even in the category of zero to four employees,
the very smallest category, about 20% actually had
a formal structured plan. That is much higher than
in the Stats Can survey.
Among the larger small firms, if you will,
those with 50 employees or up, those numbers
increased to about one-third to 40%
with some type of formalized, structured plan.
In summary, we've done quite a bit of work
as an organization alerting small business,
hoping to point them in the right direction and
encouraging them to seek out the resources they need
to get themselves into the Y2K-compliant situation.
Although these survey results suggest that there
certainly is a good chunk of small and medium-sized firms
out there doing something about it, I still don't think
we can by any stretch be complacent. There's clearly
You've probably seen in today's Globe and Mail
that the Toronto Stock Exchange encountered major
challenges that they didn't foresee.
I think the conclusion we reached from this survey
is that there's still an awful lot more work to do.
It's very much an education job as well as simply
an awareness situation. We do have a high proportion
of businesses aware of it, but still, I guess,
they don't have a sufficient sense of urgency
to think that they really need to do anything
The major thing that our members told us they needed
to help them was further information. That's
something that I think we're certainly trying to
provide as an organization. I know various government
agencies are already trying to provide it.
So I don't view this situation as unmanageable,
but there certainly is an urgency that continues
to have to be reinforced among the entire business
community, let alone simply the small business community.
I'll stop there with that brief overview.
I'd be happy to try to answer any questions you have.
The Chair: Thank you very much, Ms. Swift.
Mr. Werner Schmidt: Thank you, Madam Chair.
Welcome to our committee this afternoon. I want to
particularly commend you for having done the kind of
survey you have. I think it's nice to have the hard data
to be able to recognize what's going on out there.
The question I have—and perhaps your study covered
this, but it's not reported here—has to do with
the impact of a failure in the supply of telecommunications
and electrical services.
Even though the small
business is ready, has its computer ready, is
compatible, and all those things, if there's no power,
it doesn't help. If there are no telecommunications,
So what kinds of contingency plans do small businesses
have, or did your study deal with the contingency plans
that the small businesses have, vis-à-vis a failure in
some of those suppliers in the two areas I mentioned?
Ms. Catherine Swift: We didn't specifically look
as yet at contingency plans, because this is by no
means the only thing we're planning to do. As you
probably know, the Industry Canada task force is doing
another update with another Stats Can survey in the
next little while, and we'll be following this up,
getting into some of those issues in that survey.
So although we didn't take a read specifically on
contingency plans in this particular exercise, one
thing that did come out and has come out in a lot of
our work on this area is the fact that many business
people haven't looked too much beyond their own firm.
They've become aware of the issue. They've said,
“Okay, I'd better get my systems operational; I'd
better get mine functional.” They've done that, but
then when you ask them if they've checked out suppliers
of whatever kind—telecommunications services and power
are obviously key ones, but also even networks of
customers, other networks that they're linked into in
one way or another—again, this isn't scientific, but
just from all the discussion and work we've done on
this issue, that seems to be something where people
shake their heads and say, “Oh yes, I guess I'd
better be concerned about that.” It isn't something
that occurred to them a priori.
That's probably going to be the biggest problem we're
going to face: all these, not only suppliers of
infrastructure types of things, as you're talking
about, but all the interconnectedness among businesses,
even with customers, with suppliers, and with other
businesses. I tend to think those will be the most
problematic and will probably cause the most problems,
because most businesses—there are always going to be
exceptions, but most businesses—are going to have
their own ducks in a row and maybe feel secure, and
wrongly so, because they won't have canvassed the entire
network that they're also dependent on.
Mr. Werner Schmidt: The other question I have has
to do with comparing why no steps have been taken yet
and the confidence level that systems will be ready on
If I look at why no steps have been taken, I notice
that 8% of the businesses said they could not afford to
fix the problem and 17.1% said no time or resources
were available to do this. That represents roughly
25.1% of your survey results. Yet, when you get to the
confidence level, no one falls below 92.1% as to
whether or not they're going to be ready on time.
If they don't have any time to fix it and they don't
have resources to fix it, how come they're so
Ms. Catherine Swift: Well, I think it's the
entrepreneurial spirit, myself.
Some hon. members: Oh, oh!
Ms. Catherine Swift: There's no question there's a
certain amount of subjectivity in these results and the
Stats Can survey results, because we're asking people,
“Are you ready or are you close to being ready? Do
you think you will be?” and so on, so there's no
I should also note that, for example, with the 8% and
the 17%, this is one of those questions where the total
adds up to more than 100%, because people could choose
more than one option. Therefore the 8% and the 17% you
can't just add and assume 25%. There will be some
overlap within those two.
Actually I found that possibly the most worrisome
Mr. Werner Schmidt: Yes, that's a tough one.
Ms. Catherine Swift: —was that there was nevertheless
a significant chunk, whether you want to say it's 20%
or 22%, who feel they don't have time to deal with it
or they don't have the money or the resources to deal
with it. I thought that was probably one of the more
problematic findings we had in our survey.
Maybe, however, it also expresses the view—and
there's no question this is there among the small
business community—that they're going to go out
mid-next year or something like this and buy a couple
of new PCs. Although there are certainly exceptions, a
five-person firm is not going to have, as a rule,
terribly complex information technology systems.
Many of them do believe they're going to be able to go
out and just buy a new system or new off-the-shelf
software that will solve their problems.
Although that may well be true in a lot of the cases,
something we continue to stress is you'd better, first,
make sure it's available, because there's going to be
a run on all this stuff by the time we get closer and
closer to the deadline, and secondly, make sure you
test it, because the testing part is something I don't
think people have factored in, and it will be
time-consuming. So you might think you have time, but
That's how I partly read that particular result.
Mr. Werner Schmidt: Yes, I think it's particularly
worrisome from the point of view of the complacency that's
Ms. Catherine Swift: Yes.
Mr. Werner Schmidt: If the lowest level is 92% and
anyone with 500 or more had 100%, and 100 to 499
employees was 99.4%, it's no wonder these people are
saying we have no problem, why should we
get all excited about this? I think that's very
Ms. Catherine Swift: So do I.
Mr. Werner Schmidt: I think that these kinds of
results can lead us into almost a sleep mode and
saying it's okay, why worry? Even though I agree
with you that perhaps we shouldn't add 8% and 17%, but
taking 8% alone, which is the lowest, even
that one causes problems.
Ms. Catherine Swift: I agree that there's still
too much complacency out there about this issue. In
many instances it won't be difficult to fix for a small
firm, but in many it will. That's where we have focused
our efforts, on not trying to be Chicken Little and
pretend the sky's falling, because that's not likely an
effective communications strategy either, but to very
much say you'd better get on it now so you're ready
ahead of time. That's not such a terrible thing,
instead of waiting until the last minute and then
finding that you're going to have trouble...and to go
through that testing phase because that is essential.
The Chairman: Thank you very much.
Mr. Werner Schmidt: Thank you, Madam Chair.
The Chair: Mr. Bellemare.
Mr. Eugène Bellemare (Carleton—Gloucester, Lib.):
Madam Chair, I'm a fan of yours every time you
go on TV.
The Chair: Thank you.
Mr. Eugène Bellemare: If my questions may appear
abrupt, it's because I am very concerned
about SMEs. I think you are not ready. I think this
is overly superficial. Excuse the tough love questions
or points, but in the interfacing, I find, in small
businesses they seem to be overconfident. Business is
rah, rah, rah and they're always confident. You talk
to car dealers, for example, and the attitude they have
is everything is perfect. But I think that is where
the double-edged sword is and that is where I find
we're going to see bankruptcies, we're going to see
defaults, we're going to have problems.
The problem will come up in the interfacing situation.
You interface, whether it's using the ATM, using credit
cards, using the telephone or using the hydro. Hydro is
my big problem. I find that the hydro—Ontario Hydro
in our case—have not committed themselves—
Ms. Catherine Swift:
Inaudible]...numbers across the
Mr. Eugène Bellemare: They are not guaranteeing
that things are going to work.
Ms. Catherine Swift: Yes.
Mr. Eugène Bellemare: We are part of a North
American grid. If there's a breakdown, it won't be the
little problem we had last winter, it will be across
the continent, and I don't think we have a contingency
plan. I don't think the small businesses are aware of
this. I don't know what they would do if the
telephones break down and they don't work, if the
emergency systems, ambulances and fire trucks don't
operate because of the hydro, because of the telephone
system breaking down.
Do your small businesses have
contingency plans and management control systems in
place, not just saying they're going to buy a new computer
and they're going to spend this and that? What are you
doing in leveraging these questions that are going to
You could go out and talk to a small business that has
three computers, that sells insurance, and they're all
okay. They feel they're okay. But if the hospitals break
down, or the telephone system breaks down or the
utilities break down, they break down; they cannot
supply and they cannot even get their accounts payable.
It's a disaster for some people who are very often
living at the edge in small business.
What's your reaction to that?
Ms. Catherine Swift: Part of the work of the task
force, of course, was to put people together
representing a lot of different constituencies for
precisely the kinds of reasons that you're talking
about. Obviously, your average small business owner
can't control a hydro utility or can't ensure that
the hydro utility—on their own, I'm saying. That's an
issue outside of their immediate control.
The targeting I've seen in some quarters, of small
business having more problems than other areas of the
economy, I frankly don't agree with. I think there are
problems everywhere and I think
the problems may well start with our utilities,
telecommunications infrastructure... The financial system
infrastructure in itself could be quite
How does one deal with it? I know, as an association,
our work on the task force, which is continuing, is
to offer as much due diligence to encourage every player
in the economy to be aware of the issues, to be aware
of the pitfalls, have contingencies in place as best
they can, as you
mentioned. There are definitely going
to be bankruptcies, there's no question about that.
There are going to be things missed, even with best
efforts undertaken. With people going through lines of
code, stuff will happen, mistakes will be made and we
will have problems. The objective, of course, is to
With the ongoing work we've seen with these
various corporate interests, via the task force and via
other groups, I think the government could do quite a
bit more, to be honest with you, to raise the profile
of this issue and keep it alive. We recommended, for one,
that a mention in documents that are highly publicized
would be good. Mention
in the federal budget, for example, some of
the issues here. Come up with programs that would be carrots
instead of sticks to businesses. You might want to
target a sector, you might want to target small
business, whatever, but some kind of programs,
accelerated depreciation allowances, things along that
line, because that will be more of a positive inducement
than...you whack people over the head long enough and
they just don't hear you any more.
Already I have read articles, which I find really worrisome,
that Y2K fatigue is setting in. Everybody's fed up
with hearing about it. There's been talk about this
and everybody's fed up with hearing about it, so
they're tuning out. Well, that's the worst scenario
that could happen, in my view.
There's certainly no magic bullet, although, who
knows, we might see some software manufacturer come out
with it in the next six months and we'll all have
wasted our time. I hope that happens. But that hasn't
happened yet and I tend to think it important to
continue to keep
this issue in the public eye, giving firms the
resources—I don't mean money per se—perhaps measures like
accelerated depreciation, whatever.
what the Business Development Bank has done in setting
aside some money in special loans was a good idea.
Chartered banks could do the same thing. It would be a
good PR strategy and I think it would be quite
effective. Again, it would be a positive inducement
to businesses to say there's something I can
utilize to help me get into that situation.
There's obviously no one simple step. I'm
concerned, too. Our survey results certainly take
people's opinions, which is what all surveys do, and
we're going to continue to do so. In our history, I
think small business owners and, frankly, I
think this would probably extend to large business
executives as well, probably tend to be a little more
overconfident or they wouldn't be doing what they're
doing. In any event, we have found, on balance.... Our
surveys are pretty reliable. We've done it for 27 years
now, so we have a reasonable degree of history to look
back on and see how they work. Nevertheless, I
share a lot of your concerns and perhaps....
One of the questions we asked on our survey was
how confident the small business owner was that other
entities were going to be prepared—things like
supplier networks, customer networks and so on—and the
people they had the least confidence about were
the government agencies and utilities and things along
those lines. Of course, they're so highly dependent on
them, that has to be pretty worrisome.
The Chair: Thank you. Thank you, Mr. Bellemare.
Ms. Lalonde, please.
Ms. Francine Lalonde: Good afternoon, Ms. Swift. First, let me
congratulate you on your election as president. I did not know
about that and, as a woman, it makes me very proud.
I share my colleagues's worries about the sense of security we
can get from this data. I think that, in fact, they mostly show
confidence on the part of business people and maybe also that they
are not really aware of the importance of the problems. I heard you
say that, in six months, someone might find a solution.
My colleagues will correct me if I am wrong, but it seems to
me that if there is one thing we learned, after all this time spent
on the subject, it's that there won't be any magic bullet, any
quick fix, because it will be necessary to get inside each of these
This is the problem we face, as MPs and it will also be a
problem for MLAs. Maybe you can help us find a solution. It seems
to me that the problem will be to find people with the required
skills to help businesses of many sizes which use all kinds of
A document issued by the Library of Parliament rang a bell. It
was sent to us during the recess period. It comes from Britain. The
British teach us quite a few lessons these days. In the U.K., under
Tony Blair, it was decided last November to invest in the training
of 50,000 "bug busters", as they are called in the country of
Shakespeare. Fifty thousand! Britain, with a population of around
60 million, gave itself six months to train people with the year
2000 in mind. This is one aspect of the British plan; the other is
investing money in the project.
I know enough about small and medium businesses to realize
that, if the only solution for them is to borrow to get people—who
might not even be available—to help them or to buy new systems,
even if it could be considered as an investment, they are going to
have a big problem.
This is why, the other day, I told Minister Manley that, if he
really wants to help SMEs—which, I believe, is indeed what he
wants to do—then maybe he should do something more than
authorizing loans by the Development Bank of Canada. In any case,
that bank charges more than the others, for obvious reasons.
Shouldn't we be thinking about...? I then mentioned tax credits. It
could be another form of assistance. So I think it's imperative to
find other ways to help, and as far as I am concerned, this should
be part of our recommendations. Otherwise, we can say what we want,
that it's not this or that...
The Chair: One question from Ms. Swift.
Ms. Francine Lalonde: Yes. I'll leave it at that.
The Chair: If you're going to spend five minutes
talking, we're not going to have any time for the
Ms. Francine Lalonde: Listen, Mr. Schmidt got to speak longer
than I. I just wanted to explain my views. Don't you think that we
should do more to help SMEs which often have barely enough to
survive and face up to the competition?
Ms. Catherine Swift: I agree entirely. We have made a few
recommendations, for example, accelerated depreciation. We have
also suggested tax credits, as you mentioned yourself, and a number
of other measures. I think it would be worth it. In the short term,
it will cost a bit of money, but we believe that it will cost less
than the many bankruptcies, the problems due the loss of jobs and
all the other consequences we would have to face if SMEs are not
prepared for the year 2000.
Ms. Francine Lalonde: Thank you. Do I still have some time?
She scares me and then...
Do you think that businesses are ready? There must be
companies using products with computer chips. Do they know that
they might have warranty problems? If their own products are not
year 2000-ready or if they are not prepared to face up to other
problematic dates, they might find themselves in the position to
have to guarantee their product. Which means that they'll have to
pay for inappropriate products.
You mentioned consumers. How could we, do you think, make sure
they are informed? I sent a copy of the bill to every consumers
association in Quebec, together with explanatory notes and the
Federation's documentation, to alert people to the problem, to tell
them: Some products will not be up to the standards any more. There
will be a warranty problem. Who is going to pay? You should look
into this. I didn't get any answer. So I am going to try again.
Ms. Catherine Swift: It certainly will cause problems. I think
that, right now, it's impossible to assess the extent of these
However, we know for sure that, in particular, there will be
legal problems in terms of warranties. But each company faces a
different problem and it's very difficult to determine precisely
what makes the difference between two companies. One thing is for
sure, it's impossible to know the extent of the problem.
Ms. Francine Lalonde: What about consumers?
Ms. Catherine Swift: It's the same thing. Certainly, many
lawyers are going to be quite richer after the year 2000, which is
unfortunate, except, of course, for lawyers.
Ms. Francine Lalonde: Thank you.
The Chair: Thank you, Ms. Lalonde.
Ms. Jennings, please.
Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.):
Good afternoon, Ms. Swift. I have a few questions.
The first one is about the study which was done. On the last
page, under the title "Steps Taken to Correct the Problem», it says
that 92.9% of companies which have 500 employees or more have taken
It's under 10%; everywhere else, it's more than 10%.
The most troubling thing is companies that have fewer
than 50 employees.
When I look at your first page, I see that 56.9% said
they'd undertaken steps, which means that 43.1% haven't
done so. So that means the overwhelming majority of
that 43.1% is made up of companies with fewer than 50
Ms. Catherine Swift: Yes.
Ms. Marlene Jennings: That means that it's really
concentrated in the really small companies.
Ms. Catherine Swift: I'm just looking back,
actually, at our original survey question, because we
truncated them somewhat do fit on these charts.
The one thing that I think hasn't had enough
examination and needs to be examined more.... Again,
it's a huge undertaking from a factual basis—
Ms. Marlene Jennings: I understand that.
Ms. Catherine Swift: —because all of the surveys
are surveying opinions. It's undoubtedly indicative,
but say you actually had people—that's if one could,
but this probably won't happen—go into businesses and
survey so many with 5, 20, or 100 employees and do some
kind of an audit, or almost like an audit.
I tend to think that for a lot of the really small
firms, they're not going to have a huge problem. I
think their problems will come from—
Ms. Marlene Jennings: The outside environment.
Ms. Catherine Swift: —other things that they're
hooked up with. The little guys are going to have some
systems that—there will be exceptions—by and large,
will be reasonably easy to deal with. They're off the
shelf, straightforward, not proprietary, etc.
Ms. Marlene Jennings: Yes.
Ms. Catherine Swift: So as a result, I guess I'm
less concerned about some of that situation than I am
about this whole network and exactly how all
the interdependencies are going to really hit
It's not just the little ones
who will be affected by that.
Ms. Marlene Jennings: Okay.
The other question is how many employees work at
Ms. Catherine Swift: Right now we have about 200
Ms. Marlene Jennings: Is CFIB ready for the year
Ms. Catherine Swift: Yes.
Ms. Marlene Jennings: What about your suppliers?
Ms. Catherine Swift: We've been looking into that
for a while. Our major ones are compliant.
Ms. Marlene Jennings: Yes.
Ms. Catherine Swift: We also own a building. It
was actually interesting, because I first heard about
this issue some two years ago, I guess. So I started
to look into it. I asked our information services
person whether we were ready. She said that we were.
Then I started thinking about the building.
Well, we're getting a new security system because it's
not Y2K compliant. We're having to do some work with
our elevator software.
So even though the original focus was that we were
ready, there were elements of things that occurred to
people afterward. This is what's going to happen. I
guess that's why we keep trying to promote the message
to businesses that they should get on it right now,
because even though you see A, B and C, there are
probably going to be a couple of other things that
you'll notice later that you're going to have to fix.
Ms. Marlene Jennings: Has CFIB checked with your
banking or your financial institution to see whether or
not it's prepared for year 2000?
Ms. Catherine Swift: Yes.
Ms. Marlene Jennings: So you've done what you're
trying to get your membership to do.
Ms. Catherine Swift: We probably have things yet
to do that will come up in the next little while, but
we've certainly covered our main bases. Let's put it
Ms. Marlene Jennings: Okay. Thank you.
The Chair: Thank you, Madam Jennings. Mr. Pankiw.
Mr. Jim Pankiw (Saskatoon—Humboldt, Ref.): Thank
I notice that on this handout you gave us the results of
your survey. On one chart, it's indicated that large
firms with more than 500 employees are 100% confident
that they'll be ready on time.
Ms. Catherine Swift: This was a very small sample.
We don't have many firms of that size in our
membership, so that result should really be lumped in
with those that have 100 and up. Do not statistically
trust that column.
Mr. Jim Pankiw: Okay. Anyway, this can really be
said of all the categories. If you notice, the
percentage who are confident they'll be ready on time
isn't lower than the percentage who have taken steps to
correct the problem. So you have firms saying they're
confident when they have really done nothing.
Ms. Catherine Swift: Or they haven't done
something very formal or something like that. Again,
probably one of the key challenges to overcome in the
next 18 months or whatever—hopefully in the next 18
weeks—is that people feel they have lots of time left.
To me, this is an indication that people feel they
still have lots of time. That's why they're confident
that they'll be able to deal with this next year, next
October, or whenever it may happen to be.
A lot of them are probably right, but there's the fact
that they're probably going to have to pay through the
nose for some of that, which I don't think people have
factored in sufficiently. Also, some of them are going
to be wrong, because they think they can do
it all in three months or six months, but they're going
to find they can't. But then it will be too late to
fix it and they'll be having manual system
contingencies or things like that.
So to my way of thinking, those results indicate that
people are still thinking they've got quite a bit of
time to deal with this problem. We've been trying to
promote the message that you might be right, but you
had better find out now so that you can fix it, and if
you're ready early, so much the better.
Mr. Jim Pankiw: It would also indicate that some
were not taking the problem seriously.
Ms. Catherine Swift: Yes, exactly. Or they may
just be thinking that they'll procrastinate on this a
little bit longer or something like that. Yes.
The Chair: Thank you, Mr. Pankiw. Mr. Lastewka.
Mr. Walt Lastewka (St. Catharines, Lib.): Thank
you, Madam Chair.
First of all, I want to thank you for coming here
today to help us get through this Y2K problem. The
other thing is that I know your participation on the
Jean Monty study, and the report that was
issued was very valuable. In fact, your checklist
survey has been copied I don't know how many times and
sent out to businesses. We continue to request members
of Parliament to do that in their areas: send that
survey out just to get the attention.
I took the time last Friday to visit three small
companies or businesses in the 10- to 20-person
category. I found out
from each one that they hadn't been notified. They
received a lot of information. It was something they
were going to get around to.
To me, there seems to be a complacency of “getting to
it”. I don't think they took the attitude that it
was a silver bullet but just that they had to go and
start doing it. That message was very clear to me with
So my first question is what are you doing to get
that additional message out? The message is that you
can't leave it until the end, and by the way, it's
going to cost you more money if you leave it to the
My second question is this. Are you getting any feedback
from the small businesses that all of a sudden their
bank loans and so forth are being tied to due
diligence, such as whether they are ready for Y2K? The
banks or large corporations might be saying that their
system has to be tied into that of the others, and if
they're not ready, they're going to lose business. Are
you getting that type of feedback yet?
We'll start off with those three questions.
Ms. Catherine Swift: Three? I only got two.
Mr. Walt Lastewka: What are you doing to get them
to move on?
Ms. Catherine Swift: Yes, and then the banks
Mr. Walt Lastewka: Then there are the banks and
the large corporations on purchasing.
Ms. Catherine Swift: Oh, okay. I just lumped
We've been doing stuff for
quite a while, actually, as an organization. We've had
some data up on our web site, for example, that we've
also produced in a paper form and distributed to
members. Part of our contingent of employees are
representatives in every community across the country.
About 150 of them visit an average of 2,500
to 3,000 businesses a week. So we have a pretty good
network out there to get things out, and we've been
I do a lot of speaking, and I ensure that I mention
this issue in every single speech I do, wherever that
may be, and talk to people about it and whatnot. Part
of our web site, too, recommends resources that people
can go to and other sources of information.
It really has been mostly an informational campaign
to get the message across that you may be able to fix
it in a month or two, but wouldn't it be better to be
sure of that and indeed have it done than to wait until
the last minute and find out you're either going to pay
a fortune because the resources are so scarce or it's
unobtainable? I'm concerned a lot of small firms will
find not only are they hugely costly but unobtainable,
because at that point they will all have been snapped
up by the larger corporations, governments, agencies,
So that's what we've been doing and what we're going
to continue to do. This survey alone, I thought, was a
really valuable information tool. Even if people
didn't fill it out, it has to ring a few bells when
people see things along these lines.
As for your second question, we haven't heard anything
yet, but I'm waiting for it, because there's no
question.... John Cleghorn did a press conference
about three or four weeks ago, I think, talking about
how there would be some predicating of loan
availability or whatever.
On the task force itself, I was very cautionary to my
banker colleagues on that group, because although I
think any business person would expect something like
that, there would have to be an element of due
diligence. I don't think it's illogical to say
anything that could risk a firm is going to have to be
a factor that has to come into consideration by a
lender or an insurer or a supplier. And businesses
should be looking at their networks for precisely the
But if we see this used as yet another excuse to deny
credit to small firms, then we're going to start having
some serious problems with it, because the other thing
that is tough about this, just by its very nature, is
if one business says they have a formal plan and the
other business says they have an informal plan, unless
you're going to conduct audits on everybody, which is
just not feasible, there is nothing to indicate that
one firm is more ready or less ready than the other.
So there's a lot of subjectivity here, and we already
know bankers sometimes can be rather difficult to pry
money out of, especially if you're a small business.
We're keeping a watching eye on it for precisely that
reason, but so far we haven't heard anything. I'm
sure it will happen, but it hasn't happened yet.
Mr. Walt Lastewka: What about the large companies
on the purchasing side and their systems production
Ms. Catherine Swift: I haven't heard it on the
Y2K, not yet. But again, I would expect to be hearing
about that at some point in the not-too-distant future
as well. But it doesn't seem to have filtered out
Mr. Walt Lastewka: This is my last question, Madam
I know you mentioned having a carrot instead of a
stick, and I heard Madame Lalonde talk about what Tony
Blair has done and so forth. I know when Minister
Manley talked to Tony Blair last June and July, they
didn't do anything, and all of a sudden we brought a
lot of things to their attention during an exchange.
My concern as we get down the road is that we haven't
helped a lot of companies—they've done it on their
own—and all of a sudden the last-minute ones are going
to look for handouts. I don't think that's right.
Ms. Catherine Swift: This is always a problem:
where do you draw the line? That's why most of the
recommendations we have made have had to do with things
such as accelerated appreciation, which could be used by
any business that's already done it or whatever, and
things could be structured.
We're never in the business of recommending handouts,
and we haven't been on this issue either. As I
mentioned earlier, some of these loan programs—which
are loan programs, so they're fully recouped by the
entities involved, such as the Business Development
Bank—have been good ideas.
We haven't recommended handouts here. As you say,
it's an issue some businesses will have already dealt
with or be part-way up the curve on. But we do think
measures could be structured that wouldn't be unfair
and that could be an inducement to businesses to get
Mr. Walt Lastewka: Thank you.
The Chair: Thank you very much, Mr. Lastewka.
Mr. Werner Schmidt: I have a question that relates
to part of the question Mr. Lastewka just asked,
but also to the task force and the situation that
happened with the Toronto Stock Exchange. It was
published this morning.
We have an almost independent group now saying
“fix your problem” and we have the banks fixing their
problem. Let's say the banks are totally
compatible and the individual industries are
totally compatible, but the two systems—the bank's
system and the businesses' system—aren't necessarily
compatible. They're 2000 ready, but they don't talk
to each other.
That's exactly what happened at the Toronto Stock
Exchange. The individual businesses here were
compatible with the year 2000, but they were not
compatible with the new system the TSE was going to
implement. Consequently, the TSE now has to go back to
its old CAT system and retrofit it so it will tie
in with these businesses. After the year 2000, it will
implement this new system and put this on the table, at
double the cost. This is a very serious problem.
Did your task force anticipate that kind
of problem, and is there a recommendation
from the task force to say that if you're going to do
retrofitting, replacement or whatever, be sure somehow
these are now compatible horizontally as well as
vertically—if we want to use vertical as sort of a
time line? How could we bring about that sort of
coordination to make sure these are all
compatible both ways?
Ms. Catherine Swift: The issue did come up. The
TSE example is a very good case in point. It wasn't
known at the time, I guess.
Again, I think government can do some very positive
things here, because it's obviously a coordinator
of a lot of these different entities. But
a lot of the responsibility lies with business
itself. It's a difficult issue. I'm not a computer
person, so on
the technical side, I think those types of problems
should not be rife, because compatibility has improved
so much within systems in the last decade or so, compared
to where we were a number of years ago.
In the TSE case in particular, they were ready to
convert to a new system. That's when a lot of these
problems arose. They found out they weren't compatible
and had to go back to their old system, etc. I'm not
sure whether that was a special case, but I don't see
any simple solution, other than continuing to ensure
that everyone looks at their networks and so on, so we
hopefully end up with a reasonably workable system.
Mr. Werner Schmidt: The longer we get into this
thing the less likely, it seems to me, we will be ready
for this thing. If a big operation like the Toronto
Stock Exchange, which has been on the CAT system for a
number of years now, didn't—
Ms. Catherine Swift: They've had huge problems
with that system for years, too.
Mr. Werner Schmidt: They have. You're absolutely
right. The banks have also had problems with their
system. I recall that when the Bank of Montreal first
introduced the automatic bank machines, for example,
it had a horrendous experience. It had to scrap the whole
system. So this is very significant.
These are big organizations with lots of resources,
and if they don't anticipate the problem with their
experts, what is the real role government ought to
take? If they can't do it, how are we to do this?
Ms. Catherine Swift: Do you mean within
Mr. Werner Schmidt: Yes. I think we're talking
about action now. We're long past the study business.
What kind of action do you, as a member of the task
force now, think government should take to make sure
the coordination takes place and is of the type that
is valid and will bring us to the solution of the
Ms. Catherine Swift: Number one is leadership. I
still don't think the government—
Mr. Werner Schmidt: What does that mean?
Ms. Catherine Swift: I think it means mentioning
this issue in throne speeches—that wasn't done—and
bringing up this issue in every public context.
Mr. Werner Schmidt: We have only one throne speech
Ms. Catherine Swift: I know. That wasn't the only
example. It means incorporating this into documents
that come out of Industry Canada, the Department of
Finance and the key economic ministries that should be
very concerned about this issue.
The Prime Minister should talk about it. I don't know
that I've heard him talk about it once. Maybe he has.
Mr. Werner Schmidt: No, he hasn't.
Ms. Catherine Swift: But people listen to that
and think, oh gee, there is something there, or
I think there has been a reluctance, actually,
for very senior...and I don't know why.
Mr. Werner Schmidt: There has been. I agree.
Ms. Catherine Swift: Maybe they don't want
to look like Chicken Little. But I think it
can be done in such a way that this won't happen.
The task force will continue its work to try
to coordinate, to try to promote the provision
of information, pointing people in the direction of
the resources they need. It's not so much research
that needs to be done as practical work to help
provide solutions for given sectors. I know
a lot of industry associations, especially the more
information technology-oriented ones, are very
involved in this and will continue to be.
But there's no one and easy path, I guess.
From what I see, the Canadian government's
having enough trouble getting its own ducks
in a row on this issue right now, internally and
administratively, let alone worrying about
Mr. Werner Schmidt: Very good.
The Chair: Thank you, Mr. Schmidt.
Mr. Alex Shepherd: Thank you.
When I look at your survey, I guess I have
some problems when I see that 56% say they're
doing something about it, but of the people
who are not doing anything, they think
they're already compliant because they've bought
recent equipment. We all know that Windows '95,
for instance, isn't even compliant. So there's
a certain disbelief there.
You talked about governments and what they can do.
From an economic point of view, we think it's your
members who are going to take it on the chin.
If you start taking the actual statistics
of the possibility of a recession—and some good
economists in both Canada and the United States
advocate that—then we're talking about business
failures. We're talking about how many of your
members are going to go down the tube here.
I don't know what studies you've taken
to say how much your members account for
the Canadian GDP, and the impact they have.
For instance, I think it's a reasonable expectation
that we could lose $1 billion off our GDP.
Ms. Catherine Swift: Well, on a $700-billion GDP,
that's actually pretty modest.
Mr. Alex Shepherd: That's right. It's pretty
modest. But your members are going to be a big chunk
of that. We know the banks and so forth
probably will be ready, so it's your members—
Ms. Catherine Swift: Even if they're not ready
our members will be the ones who pay, in all likelihood.
Mr. Alex Shepherd: One way or the other.
Ms. Catherine Swift: Yes.
It's a good point. Right now, small business
represents about 40% of the gross domestic product
Again, it's tough to be precise about this
because we're not dealing with hard data
in so many aspects of this issue, but
I don't know; I think opportunities
are also going to come out of this, and small firms
will take advantage of those. But there
definitely will be bankruptcies. I have no doubt
about that for a moment.
From a purely arithmetical standpoint, 99% of
the businesses in this country are classified as small.
So if x percent of businesses are affected,
there's no question that the vast majority of them
are going to be small, just because of the arithmetic
of this whole situation. But I also think that
individually, your average small business has
a way less complex compliance task than does
your large firm, for all the obvious reasons.
So I guess I'm not among the pessimists who see the
horrific recession being spurred by the year 2000
and so on. What I do see is that the economy is
probably going to be slowing. We're probably going
to be cooling down from our current growth period
by that point anyway, and Y2K problems can hasten
what is going to be a slowing economy in any event.
Mr. Alex Shepherd: Getting back to the question of
leadership, I wrote you a letter on March 20
talking about a specific application for capital cost
Ms. Catherine Swift: Yes.
Mr. Alex Shepherd: I've never heard from you.
I've heard from other business organizations in
This may well form part of our proceedings in this
committee. Is it an approach you're in favour of?
I know you've talked today about capital cost
allowance, incentives, and so forth, which
that addressed itself to.
Ms. Catherine Swift: Yes, it was a similar kind of
recommendation that actually was included in the task
force report in terms of some kind of depreciation
consideration and what not. Again, I think any of those
measures would be commendable, because I think they will
get businesses' attention if they can do something that
will facilitate their ability to become Y2K compliant.
I think if you had three or four different measures,
that would be fine too.
So I don't think any one focus is necessarily the right
thing, but I think if there were several measures to
assist business that would be positive.
Mr. Alex Shepherd: The rapid capital cost
allowance is something that's doable in government.
I'm not so certain about tax credits. The concept of
tax credits actually is a form of
I'm talking about a timing difference on capital cost
allowance to allow small and medium-sized businesses
a rapid write-off today. They
can't write it off tomorrow.
Ms. Catherine Swift: Right. From a
fiscal perspective, that's probably the
least costly, or one of the least costly ways, of
accomplishing it, and as a
result, it would probably be more feasible.
The task force report came out before the federal
budget, and we were actually hoping we might see
something along those lines in the budget, not unlike
what you suggest. But anyway, it wasn't there.
The Chair: Thank you very much, Mr. Shepherd.
Thank you, Ms. Swift.
Ms. Lalonde, do you have another question?
Ms. Francine Lalonde: Yes. It's to clarify the one I asked
regarding tax credits. You told me you too asked for such a
measure. When answering Mr. Lastewka's question, you said that
there won't be any handout. We agree on that one. However, we still
have to find ways to get companies which need help to make the
required changes, even if it's rather like what happened to the
eleventh-hour worker in the Bible—which wasn't fair either.
I just want to stress, as you say, that... But first, you
agree with me, right?
Ms. Catherine Swift: Yes, yes, I agree. As far as I and the
the SMEs which are members of our Federation are concerned, it all
depends of the way these tax credits, for instance, would be
structured. It's important that all businesses be treated fairly.
I think it's possible to structure these tax credits in such a way
that they would adequately answer the needs of companies and cover
many of their other costs, so as to avoid a blow to the economy
should the problems we have to face be too serious.
Ms. Francine Lalonde: Right. I am going to go back to my
question. Given your experience, do you believe that all the
computer experts and all the technicians required are available
Ms. Catherine Swift: It's difficult, I think, to answer that
question precisely. In all likelihood, it's not the case.
Ms. Francine Lalonde: Thank you. Thank you, Madam Chair.
The Chair: Thank you.
Thank you very much, Ms.
Swift, for being with us this afternoon and for sharing
your survey with us. I hope some of the larger
businesses that you may not represent but also some of the
ones that you do represent will take notice of what the
Toronto Stock Exchange is going through today, or what
the article said they're going through, and maybe wake
up and realize they may not be as ready as they thought
I appreciate your trying to bring awareness to all the
small and medium-sized businesses—small businesses in
particular—that you represent across Canada, because
that's the challenge, as you said. If they represent
40% of our GDP, we don't want to see any blips in our
economic growth in this country, nor do we want to see
any type of recession, by all means.
We thank you for being with us, and we look forward to
meeting with you again soon.
Ms. Catherine Swift: Thank you very much.
The Chair: The meeting is now adjourned.