Wednesday, February 14, 2007

Income Trust Fraud

Dianne Urquhart speaking before the Commons Finance Committee investigating Income Trusts on Tuesday, January 30, 2007,in answer to a question from NDP member Judy Wasylycia-Leis said that indeed according to both Canadian Securities law as well as American securities law that there may have been unethical sales of Income Trusts to seniors based on false promises and could be investigated by the RCMP as fraud.

Judy Wasylycia-Leis was making the point that even with the change in taxation status the Trusts themselves operate in a fashion that current accounting practices would be considered illegal. A point neither the Liberals or Conservatives have bothered to deal with.

I support the income trust tax plan, with no increase in grandfathering beyond four years. I strongly urge that the income trust tax plan be enhanced by the addition of prescribed conditions to the Income Tax Act to stop income trusts from reporting deceptive, non-gap financial measures. Cash distribution must be defined as income distribution and return of capital distributions. The cash yield calculation should be restricted unless there is an equally prominent income yield calculation.

The federal government should not be giving tax incentives for an investment targeted to seniors where the product is an unsuitable investment based on the investment objective of secure retirement income and preservation of retirement capital. The high-risk design of income trusts and their deficient investor protection legal framework makes them unsuitable for seniors.

Making matters worse, the tax incentive is promoting the purchase of an investment where there is considerable malfeasance in the financial reporting and marketing material, which I'll speak about in a moment.

I have found that two out of three business income trusts pay distributions well in excess of their incomes. The average amount that the cash distributions are above income is 60%. The sources of the extra money are borrowed money, reserves from prior financing, and not retaining cash to replace plant, machinery, equipment, and software. This financial engineering, without proper transparency, is causing the return of capital to be capitalized as income. This is causing excessive pricing in the market.

In my research “Heads I Win, Tails You Lose”, I found that the business income trust market was trading at a premium of 55% relative to the TSX/S&P60, which comprises sixty of Canada's largest public corporations and a few income trusts. I also compared it to a sample of Canada's non-cyclical public corporations, which comprise the banks, the telcos, the utilities, and the power companies. On that basis, Canadian business income trusts were trading at a 55% premium. Even when I looked at the cashflow from operations, I found that income trusts were trading at a 40% premium. I believe the tax advantages in income trusts contributed 16% of the 55% premiums.

I conclude that the income trust tax plan with a four-year grandfathering period has a 10% negative impact on prices. My calculations differ from the calculations Mr. McKay asked about earlier with respect to what the investment losses have been since October 31 and the announcement of the plan. Business income trusts and energy income trusts, based on a roll-up of each of the individual trusts, are down 13%—up to about two to three days ago—for a loss of $23 billion.

On the basis of my detailed analysis of the tax advantages and the elimination of the premium associated with the tax advantages, it's my opinion that the income tax loss associated with the decision to introduce the income tax plan is $17 billion. This damage is a necessary consequence of a government closing a tax loophole that is not achieving benefits for the economy and is promoting the purchase of an investment by seniors for which this investment is unsuitable.

For a properly diversified portfolio with less than 20% invested in income trusts, the new tax damage is 2%. This is clearly capable of being absorbed by Canadians who invested in this security. Those who have higher losses than this have seen them occur as a result of improper diversification, or perhaps they have suffered the losses as a result of the malfeasance with respect to the improper marketing of income trusts to seniors.

I want to note that on May 3, 2006, the Canadian Accounting Standards Board said that the failure to distinguish clearly between returns on capital and returns of capital is inaccurate and potentially misleading, particularly when terms such as “yield” are used to describe the amount distributed.



Ms. Judy Wasylycia-Leis:
Thank you, Mr. Chairperson.

I just wanted to say that I didn't hear Dianne Urquhart condoning Enron. What I heard Dianne Urquhart saying was that we need to be vigilant at all times, and whenever there is the possibility of unethical practice or even criminal undertakings, we should be ready to crack down on it.

I want to ask Dianne, since I'm just getting up to date on this Prudential Securities issue, are you saying that what is common practice in Canada would be considered criminal in the more tightly regulated U.S. environment?

Mrs. Dianne Urquhart:
I would say that the RCMP and provincial and municipal police forces have the tools within section 380 of the Criminal Code today to call the deceptive cash yields...as has been said by the chairman of the Canadian Accounting Standards Board and by Paul Hayward, OSC senior legal counsel, who said in a tax journal in 2002 that an investigation could be conducted and fraud could be found. I'm not making that allegation specifically, but the wording concerns the Canadian Accounting Standards Board and Paul Hayward, OSC senior legal counsel. The actual criminal charges in the United States suggest that the misconduct of the limited partnerships of the eighties and early nineties was similar to that which has occurred in the Canadian income trust market, and it could be considered criminal in Canada upon investigation.

Ms. Judy Wasylycia-Leis:
Thank you.

I have one more question for Dianne Urquhart and then one for Mr. Teasdale.

Dianne, as you and others know, I have publicly stated that I support measures to shut down income trusts used as a way to avoid paying taxes, and I accept the statistics we've now had from a number of jurisdictions and a number of years, which are consistent with what you and others are saying.

My question to you, Dianne, is given the fact that the ways and means motion is likely to go through, based on the previous vote in Parliament.... And I've been working on this issue you've raised about the undervaluing—or overvaluing, sorry.

Ms. Judy Wasylycia-Leis:
No, it's clearly overvaluing.

It's a serious issue to change the Income Tax Act to deal with this. Is it still worth my while to do this, given the fact that, hopefully, we'll see over the grandparenting period the end of income trusts? Is it still important for consumers that we do it?

Mrs. Dianne Urquhart:
Yes, there is still $200 billion of current income trusts in the market, and 288 of the trusts are, I believe, in non-bifurcated markets--full transparency. I don't want those who know that their income trusts are overvalued having the opportunity to sell them to unsophisticated players. I believe we should have immediate requirements; the sooner we can get this into the Income Tax Act the better. The sooner we get transparency on the return on capital and the distributions, then we can have a market that's honest and not one in which sophisticated players dump trusts onto those who do believe the return on capital is there for their household expenses. It's just not there, because there is a limit on access to the amount of cash that's on the balance sheets and on the financial markets paying it.

A further hit on income trusts came when Seniors, those folks whom everyone in the income trust business says they speak for, spoke for themselves.

''The federal government should not be giving tax incentives for seniors to purchase an investment that is risky and does not have a proper investor protection regime in place,'' the National Pensioners and Senior Citizens Federations said in its brief to the committee. President Art Field noted that even before Flaherty announced the tax on trusts, the federation had passed a motion expressing concern seniors were being urged to invest money in what it called ''unsuitable'' and ''questionable'' income trust investments.


The Liberals who continued to opportunistically defend Income Trusts, as does Ralph Klein speaking of strange bedfellows, stated they of course would NOT have taxed Income Trusts...now they should have made that an election promise.


McCallum, meanwhile, defended the former Liberal government, noting it had moved to level the playing field between trusts and corporations, but by reducing the tax on corporate dividends rather than putting a tax on trusts. ''It's difficult to say what else we would have done had we stayed in government,'' McCallum added.

Well now we know what they would have, should have, could have done.

They issued their press release on the last day of the hearings, yesterday after Judy had issued her own private members bill, a bill that got NO attention from the MSM.

Despite the fact that neither the government nor the Liberals have addressed the real problem with Income Trusts that they are a Ponzi Scheme. An attempt to separate seniors from their pensions, since pensions are a vast untapped source of capital.

That is the elephant in the room,that the NDP has addressed in their private members bill.

“This NDP bill will bypass government inaction,” says Wasylycia-Leis.“We have a Finance Minister who claims he wants better securities regulation but continues to ignore this urgent problem. Meanwhile, our self-regulating investment system acknowledges there is a serious problem but has failed to produce an enforceable solution, and the industry continues to sell its products to unsophisticated investors using fuzzy numbers. This is unacceptable.”
See

Income Trusts

Pensions

Ponzi




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Tuesday, February 13, 2007

Prey For A Miracle

Canada's evangelical TV network can no longer promise God will buy you a colour TV or Mercedes Benz if you donate to them. Miracle Channel told to repent, on pain of losing licence

The Miracle Channel, a religious television station that has come under fire for its on-air fundraising campaigns, could lose its broadcast licence in the future if it doesn't follow new rules on how donations are solicited.

The channel's revised fundraising policy sets out examples of appropriate statements that can be made on air. Hosts are allowed to make comments such as: "We ask you to consider the best gift that you are able to pledge at this time." They are not allowed to say: "If you don't give today, you are robbing God and could go bankrupt."

The document also states "fundraising appeals must not create unrealistic donor expectations of what a donor's gift will actually accomplish." Allowable phrases include: "We believe that as you give, God will bless you in your area of need." The new policy does not allow statements such as: "Because you gave a gift of this amount, God says you will see your income double this month."


Guess they will just have to play more Janis Joplin ads on air.


Oh lord, wont you buy me a mercedes benz ?
My friends all drive porsches, I must make amends.
Worked hard all my lifetime, no help from my friends,
So lord, wont you buy me a mercedes benz ?

Oh lord, wont you buy me a color tv ?
Dialing for dollars is trying to find me.
I wait for delivery each day until three,
So oh lord, wont you buy me a color tv ?

Oh lord, wont you buy me a night on the town ?
Im counting on you, lord, please dont let me down.
Prove that you love me and buy the next round,
Oh lord, wont you buy me a night on the town ?

Everybody!
Oh lord, wont you buy me a mercedes benz ?
My friends all drive porsches, I must make amends,
Worked hard all my lifetime, no help from my friends,
So oh lord, wont you buy me a mercedes benz ?


See:

TV

Media

Christian

CRTC


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Homolka's Child

The announcement , or rumours, that S&M kink freak and serial killer Karla Homolka had given birth, reminded me of this....

The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?
W.B. Yeats The Second Coming



And thinking of her victims, this....
I HAVE NO MOUTH, AND I MUST SCREAM


See

Karla Homolka


Serial Killer



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Condos The Problem


In Alberta rents are rising 400% in Calgary. Edmonton is just as bad. Rent controls are needed. But of course the Alberta Government opposes rent controls.

In an interview Friday, Service Alberta Minister Lloyd Snelgrove said rent controls are a no-go."It just discourages landlords from building any new (units)," Snelgrove said. "It might seem a good thing for the person in that apartment at the time, but for the 2,000 people that are moving to town next month, there will be no buildings.



What a lot of blather and bullshit, landlords have not built any new apartments in years, the developers are all building condo's or transforming existing apartments into condo's.

While big property companies buy up existing apartments and slap a coat of paint on them and up the rents. Forcing renters to now become homeless.

Calgary based Boardwalk bought up many independent rental properties across Canada, making itself one of the largest rental monopolies in the country and one the largest REIT Income Trusts.

   Commenting on the Trust's Q3 2006 results, Sam Kolias, President and
C.E.O., said

"We are pleased to report a strong third quarter for our Trust. Excellent
market fundamentals aligned to produce positive effects on the Alberta rental
market. After the strong summer we just enjoyed, our Trust is positioned to
end 2006 on a high note. We anticipate a solid winter and remain confident in
meeting or exceeding the majority of objectives detailed in our 2005 Annual
Report.
"The rental market remains robust in Alberta, as substantial net
provincial in-migration, high home prices, exceptional industry growth and
record low unemployment combine to generate solid demand. Our Alberta market,
which makes up in excess of 50% of our total portfolio, saw its already low
vacancy decrease still further through the third quarter."
"Current average monthly market rents in Alberta increased by
approximately $328 in the first nine months of 2006, from $817 as at
December 31, 2005, to $1,145 at September 30, 2006. Even as rents increase,
however, the gap between home and condominium ownership costs versus the cost
of renting continues to widen still further, pricing many would-be homeowners
out of the market. Given the 45% gains in house purchase prices seen across
Alberta in the past year, rental rate increases prove to be substantially more
affordable than home purchase. In fact, increasing home purchase prices make
renting the best value in accommodation available in Alberta today. These
market fundamentals continue to bode well for Boardwalk's future."


As this unplanned, unorganized, uncontrolled boom continues renters in Alberta suffer from housing flips and speculation. Proving once again as Proudhon said; property is theft; when landlords deny possession of property to renters.

Should the government adopt rent controls to level the playing field for the working class. Of course. Business always calls for the government to regulate in order to avoid a monopoly and to 'level the playing field', so why should rent controls be any different. They allow the government to cool down an overheated market that is exploiting an artificial lack of rental properties to gouge and screw renters.

Rent controls would be a solution, condo's and housing flipping are the problem.

A h/t to Werner Patels.

See:

Housing



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Baird Misquoted Me Says Gore




Well I am glad to see Al Gore is clearing the air about being associated with Conservatives, even if it was only by being quoted by Harpers mouth that roars; John Baird.

Former U.S. vice-president Al Gore has denounced the federal Conservatives for twisting what he terms words of encouragement into an endorsement of the government's work on climate change.

"I understand that last week Canada's Minister of the Environment, Minister John Baird, mischaracterized comments I made last summer as praise for the Harper government's actions on global warming," Mr. Gore, who has become one of the world's best-known environmental activists, said in a statement yesterday.

"The comments I made were designed to encourage the Harper government not to abandon Canada's tradition of fighting above its weight class on the world stage as part of the Kyoto process."



See

Baird

Environment



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Cuban Boom

Cuba booms thanks to Canada.

Speaking Friday at a congress of leftist economists, Rodriguez said Cuba had transformed its economy since the collapse of the Soviet Union, once its chief supporter and trade partner.

An economy whose exports were 90 percent goods and only 10 percent services in 1989 now leans toward services, he said. Services now account for 76 percent of Cuba’s overall economy while primary goods, such as crops, amount to only 4 percent.

Rodriguez said growth in Cuba’s GDP "should reach more than 10 percent this 2007" despite high prices for imported food and fuel. Cuba has been aided by steadily rising domestic oil production as well as by significant fuel aid from Venezuela.

He said that if social services and commerce were dropped from the count, Cuba still would have shown 9.5 percent growth last year.

Cuba was aided last year by high prices for nickel and cobalt and by a continuing flow of tourists.

Rodriguez put the number of tourists for 2006 at 2.22 million – a slight drop from the 2.3 million Cuba reported for 2005 to the Caribbean Tourism Organization.


And it is far safer as a tourist resort than Mexico.

Air Canada launches seasonal Cuba link

Cuba ranks among Canadians' top three holiday destinations, Smith noted, adding that Air Canada flies to the Caribbean island 27 times per week.


And Canada's economic and political relationship with Cuba not only includes the tourist industry, but Sherritt and its unique bilateral trade agreement with Cuba for production of coal, oil, nickel and cobalt. Despite American attempts to apply their laws against Sherritt and other Canadian companies doing business in Cuba.

The U.S. government also appears to be stepping up its enforcement of the best known of its extra-territorial measures - laws enforcing its 45-year-old Cuban embargo.

One law prevents foreign subsidiaries of U.S. companies from having virtually any dealings with or in Cuba, while another allows U.S. entry to be refused to executives and directors of any company found to be "trafficking" assets confiscated by Cuba after the 1959 revolution.

Under the latter legislation, executives and directors of the Toronto resource company Sherritt International have been barred from the U.S. because the company has interests in a nickel mine and oil-and-gas ventures in Cuba.


And thankfully Canada continues to exert its sovereignty when dealing with Cuba.

Canada's silence on Washington's Cuba policy speaks volumes

Canadians continue to visit Cuba by the millions each year. Canadian businesses pursue mining, tourism and other interests on the island. And the Canadian government maintains normal diplomatic relations with Havana, normal being the operative word, says longtime Cuba observer John Kirk.

Both Kirk and Ritter, who visit the island regularly, emphasize that nothing is likely to shift in Cuba for many years, with or without Castro. They note that Cuba's economy has been getting progressively stronger over the past decade, with higher nickel prices, cheap oil from Venezuelan ally Hugo Chavez and more tourists - all developments that point away from civil unrest in the country.

That cheap oil from Chavez is payment for one of the service industry exchanges that Cuba is exporting; Docs-for-oil trade shows Cuba's flair

The OAS is now looking at its position on Cuba, and Canada as a member of the OAS is in the position of offsetting the United States, which opposes any rapprochement with Cuba.

And thanks to Canada you have a further extension of civil liberties in Cuba

US-based Episcopal Church names woman bishop in Cuba

Cuba was a diocese of the U.S. church until 1967, when it was forced to break away because hostility between the U.S. and Cuban governments made contacts difficult. Cuba's communist leaders were embracing official atheism at the time, a stance abandoned in the early 1990s.

It has operated under a Metropolitan Council now chaired by the archbishop of Canada, Andrew Hutchison. It also includes Jefferts Schori and the archbishop of the West Indies.

And Cuba's export Rum; Havana Club is number two in world sales, which included Canada and Europe but not the United States. Their loss.

I particularly like the Havana Club seven year old amber, which is has a smoky chocolate flavour and is so smooth you can drink straight or on the rocks, no mix. It is like a fine brandy or cognac.

The number one brand is Bacardi which continues to use its wealth to fund anti-Cuban Terrorists in Florida.


See

Cuba



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No Travel Warning For Mexico

Foreign Affairs still has not posted a travel warning for Mexico.

Despite a new poll that shows Canadians want a travel warning issued. Especially those in Ontario where all of the Canadian tourists killed in Mexico have come from.

The Canadian government issues travel advisories, which are warnings used to alert travelling Canadians to stay clear of certain countries and areas when their personal safety cannot be guaranteed. Do you think the government should issue a travel advisory for Mexico?


All

Ont.

Yes

40%

51%

No

36%

33%


The Conservative government yesterday brushed aside opposition calls for an emergency debate on the escalating violence in Mexico.

"I don't think that it's necessary to have an emergency debate on this because millions of Canadians have travelled to Mexico without incident," Secretary of State for Foreign Affairs Helena Guergis told the Toronto Star yesterday.

Yeah and millions of Canadians have traveled to Israel and Lebanon and live there but they are on the travel warning list. The difference is the Middle East is a war zone, while Mexico just suffers from drug wars and graft ridden police and justice bureaucracy.


As Foreign Affairs Minister Peter MacKay arrived Wednesday in Mexico for high-level meetings on the deaths and mishaps that have befallen Canadian tourists there in the last year, Amnesty International released a scathing report on Mexico's justice system.

The report raises questions about the level of trust Canadians should have in the assurances they have received from Mexican authorities that they can investigate these cases, said Amnesty and Liberal opposition critic's. The human rights group and Grit MPs also argued the report should give MacKay ammunition to push Mexican authorities to allow greater intervention from Canada.

The report documents serious flaws in Mexico's judicial system, such as: arbitrary detention, torture, the flouting of the presumption of innocence, fabrication of evidence and the targeting of human rights defenders.

And what did Pete do? Ignore the Amnesty Report and blithely accept assurances from corrupt incompetent officials

Foreign Affairs Minister Peter MacKay said yesterday he was assured by Mexican officials they will follow investigations into a string of violence involving Canadian tourists.
Meanwhile I wonder how he missed this; which is worthy of a Travel Warning

Acapulco's rising drug violence imperils Mexican tourist industry


See

Crime

Mexico

Peter MacKay


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Statist Anti-Terrorism Act


The extension of the Anti-Terrorism Act being discussed in parliament hoists the Liberals on their own petard, for now they speak out in favour of 'liberalism' defending civil liberties as paramount, while the Conservatives speak in favour of totalitarianism; ie. law and order.

Once upon a time five years ago the Liberals too spoke in favour of totalitarianism, they embraced law and order and to hell with civil liberties.

Former Liberal justice minister Anne McLellan defended them this way: "And that's why preventive arrest is in this package. We have to look at stopping these people before they get on those planes and put them through the World Trade Centre."

Of course the Liberals have a history of defending statist totalitarianism squashing civil liberties in Canada with the War Measures Act. Today they find themselves opposing the extension of their own terrorism act only because they are Her Majesty's Official Opposition, and it is the Gnu Conservative Government that wants to extend the act.

The Liberal shift surprised national-security experts, who were expecting an extension to sail through Parliament. "I'm shocked," said Craig Forcese, an expert in national-security law at the University of Ottawa. "They were pretty enthused about it while in government."


Only the NDP has been principled and consistent on this issue since WWII, taking the unpopular stance of opposing the War as the CCF. Opposing the War Measures Act in 1970 and opposing the Liberals Anti-Terrorism Act. Because they are civil libertarians, and because they do not and have not held state power.

The State can never be truly liberal, for once it is threatened it reveals itself to be what it is armed force in defense of property and the propertied classes. Hence the Law and Order State which is what the Harpocrites are advocating.

Whether crime is really on the increase, it isn't, or whether there really is a terrorist threat in Canada, there isn't. But there is the appearance of crime being out of control, thanks to the government saying so. There is an appearance of a terrorist threat, thanks to the government saying so. That does NOT make it so.

The rule of law, which emanates from the state, has the right then to declare when to pass an “exception” violating the rights of a given number of individuals. And it is at this specific moment that politicians call “practical exception,” when the link and resemblance between totalitarianism and liberalism gets clearer as to develop into the same nature: liberalism becomes totalitarianism.

That the Liberals are hypocrites is a given, for they oppose the very act they introduced, and their actions resulted in the detention and torture of Canadians abroad, the building of the secret prison in Kingston which currently holds three detainees without right to habeas corpus. And when they invoked the War Measures Act in 1970, they claimed it was because 'of an apprehended insurrection', that is the State thought it was facing an insurrection. It wasn't.

Given the armed powers and nature of the State it becomes totalitarian when it feels threatened. Not because it is actually threatened. And it has nothing to do with defending our rights, our property or person, it has to do with the fact that the State itself feels threatened. It is the State which acts to curtail our rights for the good of the State, claiming that this also for the 'public' good for the good for its citizens. It isn't.



while the law wants to prevent and prescribe, security wants to intervene in ongoing processes to direct them. In a word, discipline wants to produce order, while security wants to guide disorder…security imposes itself as the basic principle of state activity. What used to be one among several decisive measures of public administration until the first half of the twentieth century, now becomes the sole criterion of political legitimation.

A state which has security as its only task and source of legitimacy is a fragile organism; it can always be provoked by terrorism to turn itself terroristic…the difference between state and terrorism threatens to disappear…In the end it may lead to security and terrorism forming a single deadly system in which they mutually justify and legitimate each others' actions

See

Arar


Crime


Terrorism



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Monday, February 12, 2007

Tweedle Dee Tweedle Dum Green Poll


Too bad they didn't include all the party leaders in this poll. The results would have been interesting.

However when it comes to whose more Green, Dion is ahead of Harper. Despite Harpers recent conversion.

No surprise since Dion has made the politics of the environment his hobby horse and he is a one trick pony.

Luckily the majority of Canadians don't trust either of them when it comes to who is really green.



(Angus Reid Global Monitor) - The two major party leaders have not convinced many Canadians about their commitment to the environment, according to a poll by Angus Reid Strategies. In the survey, 31 per cent of respondents believe Liberal leader Stéphane Dion cares the most about the issue, while 13 per cent select Conservative leader and prime minister Stephen Harper. However, 28 per cent of respondents pick neither politician, and 27 per cent are not sure.

Polling Data

In your view, which of these individuals cares the most about the environment and global warming?


All

Men

Women

Age 18-34

Age 35-54

Age 55+

Stéphane Dion (Lib.)

31%

37%

26%

33%

28%

34%

Stephen Harper (Con.)

13%

16%

10%

9%

12%

20%

Neither

28%

25%

32%

30%

30%

25%

Not sure

27%

23%

32%

28%

31%

21%

Source: Angus Reid Strategies
Methodology: Online interviews with 1,122 Canadian adults, conducted on Feb. 6 and Feb. 7, 2007. Margin of error is 3.1 per cent.


See

Environment

Dion


Harper

Polls


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Even Albertans Get It

From todays Angus Reid poll showing the majority of Albertans are concerned about climate change global warming. And though this is a Conservative stronghold in the NDP provinces of Saskatchewan and Manitoba the numbers are the same.


Views on Climate Change

Q1. We are interested in your views on the debate currently underway in Canada on global warming. Do you think global warming represents a serious threat to the world, or is the issue being overplayed?

All

BC

Alta.

Man. / Sask.

Ont.

Que.

Atl.

A serious threat

73%

72%

63%

61%

74%

77%

81%

Overplayed

20%

26%

33%

31%

19%

13%

10%

Not sure

7%

2%

5%

8%

7%

9%

9%
















Environment





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