House of Commons Hansard #45 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was public.

Topics

The House resumed consideration of the motion.

Budget Implementation Act, 1994
Government Orders

March 25th, 1994 / 12:25 p.m.

The Deputy Speaker

I should mention that the hon. member for Mercier told me that she had to leave and that she had completed her remarks. I must point out to the members of the Official Opposition that the amendment moved by the member for Mercier is in order and there is no procedural problem. In short, the amendment is acceptable.

Budget Implementation Act, 1994
Government Orders

12:25 p.m.

Reform

Stephen Harper Calgary West, AB

Mr. Speaker, I rise today to speak on Bill C-17, the omnibus bill on the implementation of a number of measures in the recent budget. I am doing so on behalf of the hon. member for Lethbridge who is unable to be here. He has asked me to make a few comments on the general orientation of our caucus toward the bill and some of the measures in it. I will also take some time to comment further to that on some of our specific concerns with regard to the sections on transfer payments to the provinces, the area for which I am specifically responsible in the bill.

Before doing so I would like to take a moment to draw to the attention of the House that Ernest Manning High School in the south part of my constituency of Calgary West has been holding a model parliament this week where they are debating many of the same things. I had been scheduled to attend their model parliament today but due to this commitment and other commitments particularly with regard to Bill C-18 and the committee hearings we had last night, I was unable to depart Ottawa.

I have had the honour on many occasions in the past to attend model parliaments at Ernest Manning High School. If my experience is any example, I am sure the students would have much to recommend to the House in terms of not only the informed level of debate but also the democratic procedures that are in place in that particular parliament.

Having said that, let me move to Bill C-17. As I indicated in earlier remarks today when we were discussing a point of procedural order, our party would be opposed to this kind of measure, to an omnibus approach to government legislation. In my remarks today, specifically to start with, I will deal with the five general parts of the bill: part I which applies to public sector compensation considerations; part II, the cuts in the Canada Assistance Plan and PUITTA transfers; part III, the reductions in transportation subsidies of various kinds; part IV, the authorization of borrowing authority for the Canadian Broadcasting Corporation; and finally part V, the significant changes to unemployment insurance.

Our party has mixed views on these various items. It is unfortunate that the nature of the legislation itself would not allow us to independently support some of the more desirable aspects of the bill, at least at the voting phases.

In part I, public sector compensation, the effect of the measure as in the budget is to extend wage freezes that have been in place now to the end of 1997, saving the government up to $1.5 billion over the next three years. In the zero in three deficit reduction program Reformers ran on during the election, we supported general reductions to the costs of the federal bureaucracy, the civil service, and to some degree civil service compensation, although certainly we would prefer to see most of the savings in the public sector concentrated on non-wage overheads.

However it has been our experience that in the private sector-and, as members know, my area in particular is dominated by private sector activity-a general lack of raises in private sector wages has been the norm for several years now and downsizing in many organizations has been commonplace. In comparison, the public sector has been relatively lightly affected by the ongoing recessionary problems that we believe ultimately originate in the public sector through not only the expenditure practices of governments but also their taxation policies and taxation responses to deficit situations.

Public sector compensation has continued to remain generous during this period and downsizing relatively light compared to that experienced in many other areas of our society. It is only justified that the public sector would experience these kinds of wage freezes during the period in question.

I hope the committee will examine some of the specific measures and some of the broadness of the wage freezes which are actually very rigid across categories and do occasionally lead to some inequities or incongruities in application. There may be some specific things the committee could do to examine, while not violating the principle of freezing the overall wage bill, whether any more flexibility could be given.

We also would like to support the one-time adjustments involved in government policy for relocation and incentive payments to workers who are being displaced from the public sector, particularly in the military area. There may be disagreement with the specific programs proposed, but I think no one questions the principle that there is a need to provide interim relief to those affected by government cutbacks. In particular we compliment the government for beginning to encourage the use of these funds toward retraining and relocation rather than just

payments that encourage recipients to welfare when adjustment payments run out.

We strongly support the freezes we are applying to ourselves in line with this, freezes to senior people in government and to members of Parliament. We would also take this opportunity to urge the government once more to make substantial cuts in benefit related areas to members of Parliament that are out of line with standards the public expects.

I refer specifically to the MP pension plan. Even the contribution levels of members of Parliament to that plan exceed normal contribution to a plan. On top of that, the government is now matching our contributions on a six to one basis to preserve the soundness of the plan over the long haul.

This simply cannot be justified at this time. I call on the government once again to bring in serious measures to cut back the benefit of this plan. It should ensure that the tremendous liabilities which have built up are not simply the responsibility of the taxpayer and that some of the current recipients who quite unjustifiably and quite irresponsibly voted themselves this kind of defined benefit also share in the reduction of the costs of the plan over the long run.

In addition I raise the concern we have in this party about non-accountable expense allowances being used as supplementary pay. These allowances are substantial. I receive a cheque of $3,000 a month for my work here but then I receive an extra $1,775 for an expense allowance for which I do not have to account. I have absolutely no problem in saying that my expenses as a member of Parliament are high and I will account for them. However I know the total value of that particular money plus the additional expense accounts in our operating budgets exceeds the expenses I incur. I am certain they exceed the expenses incurred by members who live much closer to Ottawa. That is something the House should re-examine while it is looking at the compensation of ordinary public sector workers.

Part II of the bill concerns reductions in transfer payments to the provinces, specifically in the area of the Canada Assistance Plan and the public utilities income tax transfer arrangements. I will not comment on those at great length here because I want to do so when I am finished my more general remarks. Let me just say in summary that these measures in many ways are an extension of some existing policies of government.

Nevertheless we have concerns. We do support the fact-and we said during the campaign that the government was realizing it-that transfer payments to the provinces are substantial and will be affected by any kind of long term deficit reduction plan. We are seeing the government do that. Nevertheless it is doing it without a plan. We have some specific concerns with some of the proposals here and where exactly they are going. I will discuss that in a few minutes.

Part III of the bill concerns reduction in transportation subsidies extending and deepening some reductions in the area of subsidies both to Atlantic sectors and to western grain sectors of our economy. During the campaign our party had called for a general reduction in money spent in the area of subsidies to transportation.

We would prefer rolling together all grain transportation moneys for farmers along with other agricultural programs into a series of two or three programs. That would basically have the effect of giving individual farmers much more choice in how they utilize government assistance, particularly in the area of the type of transportation and the methods of transportation chosen to move their product. That is the direction in which we would like to go.

We emphasize, though, that we only support the continuation of these subsidies as long as there is not an equal playing field with regard to the farm situation internationally. We favour a multilateral approach through the GATT to reducing these international subsidies. In line with that we would see our subsidies drop as well.

I note that this question came up once before in the House of Commons. The government insisted that was everyone's position but of course it is not. There are people in this country and particularly in other countries who are opposed in principle to any kind of reduction in this area. We will not sacrifice our farm sector when other farm sectors are not experiencing similar reductions.

Part IV of the bill, as I indicated, is the part that perhaps gives us the greatest difficulty. The Canadian Broadcasting Corporation is being given its own borrowing authority for the first time in its history in the magnitude of $25 million. This is a thinly veiled attempt to give the CBC more money without increasing its direct grants. We have already seen the government restructure the downsizing, the subsidy reduction program to the CBC, and spread it over a number of years to allow it to be less costly to the broadcasting corporation and more costly to taxpayers.

What assurances do we have that in next year's request for moneys the CBC will not include the increased costs of paying back these loans as yet another financial need? In other words it could be a backdoor way for the CBC to get increased funding once again.

In our view there will have to be a thorough examination of whether we support a large or small reduction to the budget of the Canadian Broadcasting Corporation, a significant re-evaluation of its role and its mandate. Particularly as technology

advances and we see these tremendous changes in the world, we recognize that the CBC will have to be re-examined.

Whether or not the government likes it, shortly we will have the choice of hundreds of television stations for ordinary viewers. The CBC will be in a very different position than what it was when this kind of policy was first brought on to the stage. In recent years the CBC with this borrowing authority has been increasingly forced, like it or not, to compete, to go out into the market to raise revenues.

With the implied backing directly or indirectly of the Government of Canada, it is crowding out the efforts of private advertisers and private investors to fund their own activities, their own borrowing and expansion requirements, at a time where money is very tight in the markets. The complaint I hear constantly from people in the radio and television business, not only in Calgary but in other cities where I visit, is that the CBC is not on a level playing field.

It is a very tight and very competitive business right now. We know that a large percentage of private radio stations, for example, have gone out of business in the past several years. This is not the kind of competition they look upon favourably.

We need to decide whether CBC should be strictly a medium to promote and produce Canadian television or whether it is a market player just like other stations. If so, does it compete on a level basis or does it have an unfair advantage? Before we extend this kind of borrowing authority we should be asking what mechanisms are in place to ensure the investments made by borrowing this money are profitable. Ultimately the CBC is fully supported by the Government of Canada and may lack the necessary incentives to invest prudently.

Part V of the bill concerns the government's changes to unemployment insurance. As I have said in previous speeches on the budget, these are the most significant changes in the bill and we certainly support the general direction the government is taking.

In the second year of implementation of these changes, we will be saving the taxpayers in the order of $2.4 billion. This is a significant amount of money. It is certainly the most significant expenditure reduction in the budget. It is also a very significant reduction not just for the money saved but for the direction the government now appears to be mapping in this area which is very much along the lines of what Reformers have been advocating for a number of years.

These changes are an important signal to the marketplace. The government is hinging a great deal of faith on holding its budget through the first year to try to keep things on track, convincing the marketplace that this is the direction it is looking at and that it is looking at only less costly social programs in the future but much more responsibly structured ones.

It hopes the marketplace will buy this signal even though it is really the sole big dollar application in the budget and will be able to hold off any kind of precipitous developments in the financial markets toward the dollar and toward the Government of Canada in the next year.

As I said in my speech on the budget, that is the gamble the government has taken. I would note that except for this measure, the will is not in this budget. It is very unclear at the moment with the problems we have with interest rates and the dollar that the market is accepting this signal as the real direction of the government.

Let me mention the good things in this development with unemployment insurance. There are several. First, it shows the government is moving in a good direction by not only reducing expenditure but also reducing payroll taxes.

What is interesting is that the government claims reducing the payroll tax is one of the centrepieces of its job creation program. It is nice for us to see that the Liberals are acknowledging that decreases in these types of taxes are a real solution to the job creation problem and to the unemployment dilemma we have in the country. Certainly it is a more effective approach than things like the infrastructure program, an approach we hope they will expand in the future. We need to stimulate through tax relief sustainable private sector job creation. That really should be the focus of our economic strategy.

The second desirable point about this is that the change proposed by the government to unemployment insurance is making the program more of a true insurance program rather than simply a haven for seasonal workers to top up their income, in other words, an income support program.

The long run drift of the unemployment insurance program from insurance principles has been extremely costly in the number of dollars spent but also many economists would agree it has had a lot to do with the increase in structural unemployment and the distortion of the regional economies.

Through the changes the government is proposing in the bill and in the budget, it is taking us down the path of linking through contributory programs like UI, contributions to the program much closer to the benefits that one is eligible to receive. Of course that is really the justification on which such contributory programs should operate.

The third point in the government's proposed changes to unemployment insurance is that it is good to see the Liberals slowly crumbling their mantra of universality. I have already noted that while the government has attacked us on our proposed changes in these areas, for example changes to seniors' programs, the government itself has taken absolutely no steps to restore the clawback to old age security which it fought when it

was in opposition. In fact it has gone additionally in that area. It has now imposed means testing on some of the tax benefits to senior citizens. This is another example of getting away from universality. We could disagree with the specific mechanism but the drift is definitely there. In the case of unemployment insurance there has been an increase in benefits for lower income Canadians under some circumstances and a decrease for others.

The government is moving in all of these directions, and I repeat them: the reduction of payroll taxes, the return to a link between contribution and benefit in unemployment insurance, in other words, insurance principles and finally a move toward some targeting in this program and away from universality.

These are all positive aspects in our view. I also acknowledge they were difficult decisions. The changes will be significant for the people affected and this particular decision I am sure will not be an easy one for the government although it will have our support. I regret it is one of a very few difficult decisions contained in the budget.

I want to express one reservation. There is also a change which gives employees the benefit of the doubt when dismissed for misconduct. In our view it has the potential of encouraging employees to dispute all dismissals in the hope of collecting premiums. This could clog up the system and result in increased claims. We hope the government in committee will examine the direction it is going although I would acknowledge that some of the things the previous government did in that area were questionable.

Finally, we also acknowledge the need for the pilot projects that are part of the bill and we urge the government to keep the House current on the spending of this money and to report to the House evaluations of the success of these kinds of projects. Too often in the past we announce initiatives for the sake of lessening the impact of unpopular measures. These continue permanently, they are never properly evaluated and they end up being simply a way that we mitigate the effect of having tried to save money in the first place.

Having said those things, I regret we are unable to support the bill over all. There are many things we do support but do not support the bill over all because of its omnibus nature.

I would also like to comment very briefly on the position taken by the Bloc Quebecois regarding Bill C-17, an act to amend certain statutes to implement certain provisions of the budget tabled in Parliament on February 22, 1994.

I may add that most of the measures in this bill concern specific cuts in the government's budget, especially the government's proposed cuts in unemployment insurance.

Apparently, the Bloc is opposed to this bill, as it is opposed to any major changes proposed by the Reform Party which concern major government programs, and I find this disturbing, because I see a party that is in favour of the greatest change of all, the break-up of this country.

When we talk about federal programs, programs created under the federal system, our party is proposing major changes, while the Liberals are proposing changes that are as significant as ours, but when the government starts to discuss issues that are vital to the future of our country, we see that the Bloc is always opposed to these changes.

I find it hard to explain to my constituents why a party that cannot abide the Canadian federal system still supports federal programs and in fact supports the status quo.

The Bloc Quebecois is always prepared to recognize the benefits of federal programs and it does so clearly and incisively, but when it talks about what is wrong with the federal system and especially about the programs we are discussing here, they tend to lack that incisiveness. I must say that I find it hard to understand why they are opposed to the system, to the program in general, while they are not to specific cases.

I hope that we will get a better understanding of these positions as we debate these things in the future.

If I could for a few moments turn specifically to Part II which is the area of my particular expertise, the fiscal arrangements section of this bill, I note that it affects two areas, the Canada assistance plan and the Public Utilities Income Tax Transfer Act.

The Canada assistance plan changes are in clause 12 of the bill and the purpose is to limit future federal CAP contributions to each province to the amount they received in the year ending March 31, 1995 until superseded by social security program reform in fiscal 1996-97.

Our position generally has been to recognize the need for reduction in the area of federal transfers and specifically in the area of welfare. I guess what we ask is why we are imposing targets for reduction in the absence of any particular policy for change and even in the absence of any particular policy direction that would indicate what the changes would be.

In our view there have already been inequities created through this situation. The previous government brought in specific caps to the payments that went to the so-called have provinces:

Alberta, British Columbia and Ontario, caps that reduced quite significantly the expected revenue of these provinces from federal transfers for welfare payments. This has been a big problem in the case of Ontario.

This seems to be happening without an overall plan and now we are asked to implement additional projected cuts. Once again we do not know where this is going. In fact, we have various committees studying these things at the moment.

I am concerned about the lack of restructuring of the program, the lack of overall financial direction, just these arbitrary reductions. What is interesting is they are done really on the basis on which the Liberal Party often criticizes us, saying we are slash and burn, we have no plan and we just cut the dollars. In fact, this is precisely what this bill does. It lays out some areas for reduction to a significant social program and provides absolutely no rationalization why that would be done or plan to implement it.

Just to give some idea of the money involved, Canada assistance plan payments have been a rapidly growing area of government expenditure. In the last 10 years they have grown from $3.4 billion in 1984 to approximately $7.7 billion in fiscal 1993-94. They are projected to grow by another 5.4 per cent this year. Obviously we can agree with the fact that there does need to be some reduction.

The social assistance case load in this period has grown from about 750,000 in March 1980 up to 1.6 million today. I would point out once again to hon. members that the period of massive deficits, structural deficits, ongoing deficits and accumulation of debt has not been a period in which we have produced jobs in economic growth but one in which we have restricted and stifled it. I once again would ask the government to re-examine its view of the link between financial mismanagement at the federal level and job creation.

The ministers often assert that there is a positive link between deficits and job creation. I think the evidence is increasingly otherwise. There are projected savings from the reforms here of $466 million up to 1995-96. These are significant amounts of money. However, once again I suggest that we do not know the direction and we are concerned about further penalization of particular provinces as we had in the past as opposed to something that may treat all provinces much more fairly.

Clause 13 of the bill is the changes regarding the Public Utilities Income Tax Transfer Act. What this really does is preserve the current 10 per cent reduction of transfers under that act for an additional period of time.

Just to inform the House, the Public Utilities Income Tax Transfer Act exists because in some parts of the country, particularly Alberta but not exclusively, utility companies are private sector whereas generally speaking they are public sector utilities. As a consequence the operations of these corporations are subject to taxation whereas crown corporations are not taxed in the same manner. This has given rise to an inequity that is compensated for by the Public Utilities Income Tax Transfer Act which transfers back to the provinces some of the corporate income tax revenues that are taken out of certain provinces because they are private sector companies but not out of other provinces.

The purpose of this program has been to create a level playing field in other words. This is obviously undone when we begin to freeze or reduce these kinds of payments.

By the way this goes back to 1948. We recognized this inequity a long time ago. From 1966 on we refunded to the provinces virtually all, about 95 per cent, of the moneys that were collected from private utility companies back to the provincial governments. It was only in 1990 that we began to effectively freeze these payments. It had been done in the past but was reversed. However, in 1990 we started the pattern of freezing payments at fixed levels and of reducing the percentage that will be returned to provincial governments. In our view that is not fair.

It has a particularly unfair effect on the province of Alberta which is the major beneficiary. These tax revenues in other provinces are generally retained by the province, but in Alberta the province rebates these tax revenues to the utility companies with the stipulation that they must be passed on to their customers. In other words the purpose here is not to allow the operation of the Income Tax Act to lead to higher utility prices in the province of Alberta.

I suggest that the purpose of the act is fair. The government proposes to continue the present reductions in freezes that the Conservatives implemented. It is certainly no worse than we have at the current time but it is not an issue of equity.

I come back to that time and time again when I speak about transfer payments and how we change transfer payments to the provinces, whether it is through the equalization formula on which we have already had a bill or through cap changes here or through PUITTA changes.

In all cases what we see are programs that proceed without a plan. We either give money with minimal restriction in the case of equalization or cap it in the CAP or in the case of PUITTA. We have no particular rationalization for these things. The common theme seems to be that certain provinces, of which mine is one, seem to always come out at the short end of these non-systematic changes and revisions to policies that transfer money to provincial governments.

I remain unclear of what my view is of these measures. I can support the philosophy of the CAP transfers but I do not know where they are really headed or what the public policy purpose is. In the case of the PUITTA transfers I do not support the philosophy but I do recognize that the government has not introduced additional cuts. Of course we would fight that quite strongly. Those are measures we are going to have to examine in committee.

I see your signal, Mr. Speaker. I believe there will be other speakers on some of the other matters. I say once again there are things in this bill to recommend it. I just regret that we are proceeding with this omnibus approach to legislation which, because it lumps in things we support and things we do not support, unfortunately deprives us of the ability to support the government in votes where that would be appropriate.

I appreciate very much your patience, Mr. Speaker. I believe we will hear later in debate from the hon. member for Lethbridge, who was unable to be here today, as well as other members of our party.

Budget Implementation Act, 1994
Government Orders

1:05 p.m.

The Deputy Speaker

There are no questions or comments for the first three speakers on these matters, so the hon. member will have a chance with another speaker.

Budget Implementation Act, 1994
Government Orders

1:05 p.m.

Kingston and the Islands
Ontario

Liberal

Peter Milliken Parliamentary Secretary to Leader of the Government in the House of Commons

Mr. Speaker, I noted the hon. member for Calgary West who just spoke was bemoaning his lack of opportunity to vote against segments of this bill, but I assure him that he will have that opportunity in committee and if he moves the appropriate amendments at report stage, as I indicated in my argument this morning. We will see how many of the clauses of this bill he supports and in fact would vote for.

I look forward to the support of the Reform Party for a large part of this package because this package of proposals I submit is a sound one.

Last month this government introduced its first budget and today we are considering legislation that will help turn the budget goals into a bottom line reality for the long term benefit of Canadians.

Just a week ago, the Minister of Finance and a few other ministers attended in Detroit the G-7 special Summit on unemployment. The G-7 members confirmed the view held by many that February's budget was exactly what Canada needed at this stage of its economic development. This budget promises no panacea. Instead, it restores confidence in our capacity to cope successfully with the economic, financial and social challenges we are facing.

We will succeed because our budget proposes innovative measures taking effect immediately to deal with three major concerns raised by Canadians in our pre-budget consultations. It contains measures to ensure job creation and stimulate economic growth. It reduces expenditures and brings them under control to enable us to substantially lower the deficit. Finally, the budget is laying the groundwork of an unprecedented reform and renewal of our social security system.

Each of these points is dealt with in one way or another in this bill before us in second reading. Together, these measures will help set the strong foundation on which the future of our country will be built.

I congratulate the Minister of Finance on the leadership that he has shown to Canadians in presenting this budget of which this bill is the obvious manifestation in legislative form. I congratulate him also on the consultation process that he engaged in that has resulted in a budget that is acceptable to so many Canadians.

Before describing the specific measures in this legislation we should remember the broader budget context that the measures reflect. In the lead-up to the February budget the Minister of Finance and his colleagues, as I indicated, listened to what Canadians told them.

Canadians wanted a government to set the stage for job creation and this government has done that. Canadians wanted action to restore our country's economic vitality. This budget does that.

The government responded with such important measures as the $6 billion shared cost infrastructure program, the restoration of the residential rehabilitation program, new programs for apprenticeship and youth service and support for technological innovation and for the small business sector in particular.

Canadians also told the government that they wanted to have the deficit reduced. They wanted to have the government stop pushing the tax burden constantly higher.

The February budget makes fiscal responsibility part of a job strategy for Canadians. At the same time it recognizes that getting the deficit down is important. It also means that getting economic growth up is very important. Increasing economic growth will result in a decreased deficit and increased economic growth will lead to greater employment for Canadians.

That is why this legislation contains key measures that will reduce the demands on the public purse and accordingly on the taxpayers' wallet. These are measures affecting Parliament, the public service, the private sector and Canadians in all regions of the country.

The measures in this legislation work to one clear goal. They will set us on the path to bring down the deficit to our interim target of 3 per cent of gross domestic product by 1996-97, as promised in the famous red book.

I note that members of the opposition delight in quoting from the red book. I am delighted to see that they have taken the time to read and study that work because as my colleagues know it represents a blueprint for action. Although it is a red book it is a blueprint for action by our government and one that we as candidates in the last election were proud to support. It represented, in my view, the standard by which all other parties' programs were judged and Canadians expressed a clear preference for the blueprint in the red book.

There should be no question about the government's ultimate objective, and that is to deliver a balanced budget. Equally important, over the next three years there will be $5 of spending cuts for every dollar of revenue increases on a net basis.

Under our budget plan, gross fiscal savings including the savings announced in previous budgets and secured by this legislation total $28.6 billion over the next three fiscal years. Net savings in that period after taking into account the cost of new economy boosting initiatives total $20.4 billion.

These measures will help shrink the deficit from $45.7 billion in the year just ending to $39.7 billion in 1994-95 and to $32.7 billion in the year thereafter. The measures announced in the budget will be supplemented with further initiatives next year as we reform major spending programs. The government is taking action now and will take action in the future to ensure that the deficit continues to decline steeply.

What I would like to do now, Mr. Speaker, is turn to the specific elements in the bill before us today.

First, the bill proposes amendments to the Unemployment Insurance Act. In making these changes the government had two goals in mind. First, it wanted to provide a concrete incentive to the private sector to create jobs and, second, it wanted to begin to deal in a fair way with the serious problem of dependency that the unemployment insurance system has created for many Canadians.

Payroll taxes are recognized as a significant barrier to job creation. To ease this burden the government will roll back the unemployment insurance premium rate for 1995 and 1996 to $3. As a result, by the end of 1996 the government expects there will be 40,000 more jobs in the economy than would be the case if the premiums were allowed to rise to $3.30. That is the level required by 1995 under existing legislation if the government takes no action.

This rollback must be done in a way that supports deficit reduction. That is why this legislation proposes measures to reduce unemployment insurance expenditures by $725 million in 1994-95 and $2.4 billion annually thereafter.

It must be stressed that we are taking these steps to encourage job creation while ensuring the financial integrity of the unemployment insurance program.

Members of the House can also be assured that the unemployment insurance changes in no way prejudge the social security form process announced by the Minister of Human Resources Development. Indeed, many of the provinces have undertaken their own work in this regard and of course the federal government will continue to work closely with the provinces to ensure stability for Canadians.

Second, the bill deals with the process of social security reform which will involve the federal government and the 10 provinces and the two territories.

The common goal of all will be to renew and revitalize Canada's social security system over the next two years. The government will preserve and protect those most in need in order to survive. The government will work to improve incentives for Canadians to work and the government will ensure that the social safety net remains affordable.

To help create a positive, co-operative climate for this challenging task the government is providing a two-year period of predictability and modest growth in social security transfers under the Canada assistance plan and established programs financing.

This means that in 1994-95 there will be no new restraint measures applied to either CAP or EPF transfers. The legislation before us today however will place a ceiling on subsequent CAP transfers to each province. As a result, these transfers will not exceed their 1994-95 levels. This ceiling will remain in place in 1995-96 pending social security reform in 1996-97.

Established programs financing transfers are not affected by this legislation. However existing restraints will be maintained. EPF will grow in line with the population in 1994-95 and then a GNP minus three percentage points for subsequent years.

The following part of this bill affects us all personally. It extends the present salary freeze for public servants, the Prime Minister, members of Parliament and senators, federal magistrates, the Canadian Armed Forces, the RCMP and other government workers for a two-year period. Also, pay increments will be suspended for two years.

We recognize that this measure will have repercussions. Some 391,000 people will be affected by this freeze. The need to take this action is explained by a simple inescapable reality: salary

costs make up much of the government's operating budget. Any measure to control the deficit must take these costs into account.

Many public servants in my riding are affected by this freeze. Like them I feel the pinch the government has applied in making this applicable to all members and to all members of the public service. I do not think there is a member in this House who has not had some comment from a constituent about the freeze. It is regrettable but it is a necessary part of the government's fiscal program.

Next, this bill provides for changes to regional transportation subsidies under the Atlantic Region Freight Assistance Act, the Maritime Freight Rates Act and the Western Grain Transportation Act. Some brief background perhaps would be helpful.

Under the first two acts, government payments defray part of the cost of certain freight shipments in the four Atlantic provinces and the Gaspé region of Quebec. Payments to the railways under the third act help reduce the transportation costs paid by western grain producers.

The budget proposed to reduce these subsidies by 5 per cent. This legislation takes that action. As well, it implements the 10 per cent reduction announced by the previous government for 1995-96 and subsequent years, a reduction not yet implemented in legislation.

This saving is in keeping with the overall reduction being made in most federal grants and contributions. It is important to remember that during the pre-budget consultations a constantly repeated suggestion was to reduce subsidies to business. This measure honours that advice. The 5 per cent cut to these subsidies announced in the February budget will save in the order of $40 million annually.

The bill also confirms a reduction in transfers under the Public Utilities Income Tax Transfer Act. These transfers return to provincial governments most of the federal business income tax paid by privately owned utilities.

In 1990 the federal budget established a ceiling on PUITTA transfers. Then in 1992 a 10 per cent reduction was imposed for 1993-94 and 1994-95. This legislation confirms last year's budget announcement which extended both of these measures beyond 1994-95.

Finally, this bill implements a measure to provide flexibility to the CBC. We propose to give the CBC authority to borrow up to $25 million subject to case by case approval by the Minister of Finance. As well the granting of this borrowing authority will be reviewed in two years' time.

This borrowing authority will allow the corporation to operate more efficiently. It will give the CBC the flexibility to take advantage of investment opportunities that promise a healthy return. It supports the government's pledge to provide this important national institution with a more stable funding environment.

Mr. Speaker, as you can see, the bill before us today is an essential element of this government's program to put Canadians back to work. This bill would ensure that our budget goals translate into concrete results. It is based on the advice we received from every region of the country. It outlines our overall socio-economic situation and meets the challenges facing us. In short, it proposes measures to create jobs and revive the economy, measures to reduce the deficit and bring the debt under control, and measures to overhaul and sustain a social safety net all Canadians are proud of.

By taking this action this bill, as with the budget announced by the Minister of Finance, builds a solid foundation for success. It is one based on frugality, on fairness and on a clear focus on the future.

With that in mind I urge all members of the House to join the Minister of Finance, his cabinet colleagues and members on this side of the House in supporting this bill.

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Government Orders

1:20 p.m.

Reform

Paul Forseth New Westminster—Burnaby, BC

Mr. Speaker, in one part of the hon. member's speech he specifically mentioned a freeze on the general percentage grid increase.

There is a contract in place and the movement within the grid, the annual increments, should be honoured and the savings made elsewhere. We can support the broad general percentage increase. However we believe the increment freeze itself within that grid will increase disparities rather than relieve them. Will the hon. member comment more specifically on the rationale for the general freeze as well as for the freeze on the increments within a grid?

This is particularly disturbing to the RCMP. I understand there was a meeting in Surrey, British Columbia of over 800 members of the RCMP. They were very upset that promises were being broken. Certainly within its structure the RCMP is given a budget and rules to live by and therefore cannot do much about it.

We are saying that the breaking of a promise or a contract to honour the increments within an overall framework needs to be addressed even though we agree with the broad approach of a spending freeze.

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1:20 p.m.

Liberal

Peter Milliken Kingston and the Islands, ON

Mr. Speaker, I am surprised to hear my colleague from the Reform Party talk about the virtues of undoing any of the freezes the government has put in place, given that party's obsession with deficit reduction.

The government chose the freeze as the method of dealing with this problem. It was not because it was going to be a popular method or an easy sell to the public servants, the members and the senators who are affected by the freeze. The government chose this option because it was very concerned if it did something else, it would result in substantial layoffs in the

public service. We have witnessed that in the provinces, particularly in Ontario where there was a social contract put in place with rather disastrous consequences.

The purpose of the government in choosing this particular option was to ensure that as many members of the public service as possible could retain their jobs. In spite of the significant cutbacks in funding that are available for all manner of government programs, by freezing we have avoided the necessity to eliminate jobs while others get an increase.

Even if the increments could be allowed to employees, as I am sure the government would like to do, that would result in an increased salary cost to the Government of Canada. That would have to be met out of the existing budget. Since the government has no additional funding to give to government departments for this purpose the only solution to capping the total salary cost would be to eliminate someone else's job. That is why there is a freeze on the increments and that is why there is a freeze on salary increases.

I do not think it is popular. I do not think it is the greatest thing by any means. However it is the best thing the government could come up with given the financial circumstances we are facing.

I know the hon. member and his party are very supportive of government cutbacks and government freezes. I am delighted to know he will be supporting this part of the bill.

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1:25 p.m.

Reform

Val Meredith Surrey—White Rock—South Langley, BC

Mr. Speaker, I would like to follow up on the point my hon. colleague raised. Our party has very little problem with freezing salaries. However when we start talking about freezing increments it goes a little bit further.

With the RCMP constables the government is cutting into what was considered training advancement through an incremental process.

British Columbia has the largest number of RCMP. It is the largest division in the country. There are over 700 constables in the E division. A large part of the cost the member is talking about controlling is municipal. It is through the municipal taxpayers.

In the Surrey detachment 90 per cent is picked up by the municipality. Provincially, 70 per cent is picked up by the province. When the hon. member starts talking about saving real dollars for the federal government he is talking about minimal savings on the backs of low paid constables who are in training.

The Reform Party certainly supports the concept of freezing salaries. However it does not support freezing increments which are based on training that are part of an ongoing contract with these individuals and should not have been put into a collective package.

I do not think the government can make those kinds of decisions without looking at individual circumstances in different programs that fall outside the normal salary range. I would like the minister to give this further consideration.

Morale in the RCMP is at an all time low. There was a meeting of 800 members of the RCMP in my constituency last night. The deputy commissioner made the statement: "It would be futile for me to say that there is not a morale problem in terms of this incremental freeze". Would the hon. member please respond to this.

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1:25 p.m.

Liberal

Peter Milliken Kingston and the Islands, ON

Mr. Speaker, I am surprised to hear this from the hon. member for Surrey-White Rock-South Langley because she is a member of a party that keeps telling us there is only one taxpayer. It does not matter two hoots if the federal government raises the salary costs for these people but then recoups 90 per cent of the cost from her municipality which taxpayer is paying. It is the same taxpayer that is going to pay that cost. It is just that instead of the federal government paying it, the municipality or the province in which she resides is going to pick up the tab.

She nods her head that that is okay. Yet the other members of her party, and I am sure she has been part of this, keep telling us there is only one taxpayer and we have to cut costs. When we do it I am surprised we face criticism from the Reform Party on this matter.

Let me turn to the essentials of the question. She says it would not cost the federal government anything to allow the increments to go into place for a group of RCMP officers in the province of British Columbia. I do not know for certain but I would bet any money that the rates are the same across the country. If the federal government is to give that kind of increase in British Columbia, it will have to give it in other parts of Canada too. It will have to give it in parts of Canada where it does not receive a subsidy from a province for operating a police force such as all RCMP forces in Ontario and in Quebec. While there may be fewer, the cost would still be significant for the federal government.

Surely the hon. member agrees with me when I tell her that it would be unfair to give the increase in the provinces where the federal government picks up only a part of the share and not give it in the provinces where it is paying the full shot. I think she would agree with that. She must recognize the wisdom of the government's decision in this matter, given the regrettable circumstance that led to it, the very substantial deficit that her party said it would eliminate in three years.

The next time she asks a question, I ask her to tell us where she was going to make the cuts to eliminate the deficit in three years. She would not have only frozen the increments. She would have slashed the wages of these people and she knows it. She would face much tougher criticism then.

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1:30 p.m.

Reform

Jim Gouk Kootenay West—Revelstoke, BC

Mr. Speaker, I have a short comment to make. The member opposite knows well where the Reform Party would makes its cuts because they were well publicized.

Would the minister be prepared to amend the bill so that the increments were paid if the Reform Party showed him how to save $2 for every $1 it costs without causing any job loss?

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1:30 p.m.

Liberal

Peter Milliken Kingston and the Islands, ON

Mr. Speaker, the Reform Party likes to talk about its steps to reduction plan. As I read the figures, it announced an $18 billion reduction in government expenditures and said that $18 billion would bring the deficit to zero in three years.

The deficit we now know is something like $45 billion or $47 billion. Whatever it is this year it is a very substantial figure, and $18 billion off that takes it down to about $28 billion. Where would the other $28 billion come from? That figure was a fraud. The whole paper put forward by the Reform Party during the election was a complete fraud. I invite hon. members to tell us the truth. Where was the $45 billion coming from? That is what the deficit is. We have never heard that figure from anybody in the Reform Party and we never will.

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1:30 p.m.

The Deputy Speaker

There are about three minutes left to be divided between the two members.

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1:30 p.m.

Reform

Jim Gouk Kootenay West—Revelstoke, BC

Mr. Speaker, it will not even take me that long to expose the hoax of the question he posed.

The parliamentary secretary knows well that much of the reduction was coming through a growth in the economic situation in the country. Using a figure lower than the one proposed by the finance minister at that time, using a figure that was compatible with the one that the Liberal government is using right now, it was based on a real deficit, not one that was propped with non-recurring factors added to the budget to make it look worse than it really was.

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1:30 p.m.

Liberal

Peter Milliken Kingston and the Islands, ON

Mr. Speaker, the hon. member can argue that if he wishes. I will go back to Mr. Mazankowski's budget deficit figure last year which I think was $35 billion, if I am not mistaken. If the hon. member subtracts $18 billion from $35 billion, my arithmetic takes it down to about $17 billion. Where were the other $17 billion in cuts? The question is the same. It is only a matter of the amount. However $17 billion is $17 billion. Maybe it should have been $25 billion, I will not argue that. I still ask: Where are the other $17 billion in cuts?

The Reform Party had no idea where those cuts would come from. It still has no idea where those cuts would come from. We will never hear from them as to where those cuts would come from because I predict that when the time comes for the Reform Party to tell us those figures it will be a dead duck.

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1:30 p.m.

The Deputy Speaker

Resuming debate. I should perhaps tell the hon. member for Lévis we have about ten minutes of debate left.