Debates of Feb. 28th, 1995

The Budget

[Werner Schmidt, Reform, Okanagan Centre, BC]

Madam Speaker, I will be dividing my time with my colleague, the hon. member for Red Deer.

I wish to address this House on the business of the budget which was presented yesterday. I want to deal particularly with one part of that budget. It has to do with the provisions for science and technology. The hon. Minister of Finance said that the general objective of federal spending in science and technology is to build a stronger science and technology capability in Canada.

There are two funding councils through which a lot of this money goes, the National Sciences and Engineering Research Council of Canada and the Social Sciences and Humanities Research Council of Canada. Both promote and assist primarily university research and graduate education. Their budget was reduced proportionately less than those in other areas because, as he said, that reflects the importance and priority placement of R and D for this government.

The same thing happened with the National Research Council. It too was reduced, but not in the same proportion as were certain other parts. The National Research Council will have to eliminate activities of a lower priority.

From the above it is pretty clear government has demonstrated that science and technology is considered to be a strategic asset of government.

Let me quote directly from the Minister of Finance's budget plan: "High deficits and debt lead to higher interest rates, higher taxes and reduced confidence, which dampen investment and growth. The financial requirements flowing from chronic deficits, when not matched by increases in private sector savings, increase Canada's dependence on foreign borrowing, the servic-

ing cost of which is a permanent drain on national income and future living standards. The constant financing of deficits also reduces the government's capacity to provide important public services and to make adequate investments in the area of strategic national importance, such as science and technology."

It should be clear to everyone that this budget, because it does not adequately deal with the fiscal problems of this government, will make it difficult to develop in precisely those areas upon which the future economic development of this country depends and which must take place if Canada is to compete in the global marketplace.

Concerns have also arisen with respect to the treatment of R and D expenditures on information technology generally, and in particular those incurred by financial institutions. I quote the minister again: "As an interim measure, all information technology R and D performed after budget day by financial institutions will be excluded from the definition of scientific research and experimental development pending the completion of the review of information technology R and D".

Is this specific act a discrimination against one of the major stakeholders in scientific and technological development? Or is it as Peter Cook stated yesterday in his article in the Globe and Mail : ``Fairness to the politician does not mean burden sharing. It means goring the fewest oxen.'' Since there is not a large number of financial institutions and the chartered banks are by far the fewest and the largest of those, only very few oxen will be gored by this regulation.

The question, however, is a larger one. Does this action discourage other innovators in the information technology field? That is particularly problematic in light of the Auditor General's observations that we must recognize the global economy is increasingly driven by knowledge based industries and that innovation is critical.

He goes on to detail some of the characteristics of an innovative country. He states among other things that first, innovation has become a crucial survival issue. It cannot be treated as an option. Second, innovation trends do not arise by themselves. It is generated and sustained through the efforts of people. Innovation is where the innovative spirit is. It cannot be legislated or brought about by edict. It comes from individuals and from creative and interactive communities and it thrives in an environment of encouragement and support.

Three, he says government needs to create an environment that is supportive of innovation. If not, innovators will not innovate or leave to go to places where there is support for innovation. Four, partners in an innovative society include all aspects of our communities, all governments, communities, individuals, corporations and families. Five, he says Canada has the potential to be particularly innovative as a society because of the cultural diversity of its people. Canada could become known as an innovative country.

The Auditor General also observed that within the science and technology department there is an absence of strong leadership: "The government does not have a clear idea of precisely what it is trying to achieve in science and technology".

In response to that observation of the Auditor General, here is what the Minister of Finance said in his budget plan:

Industry Canada is developing a federal science and technology strategy. The department is drafting a national vision of science and technology through external consultations, internal review as well as an independent assessment of the national advisory board on science and technology.

Industry Canada, in conjunction with other relevant departments, is also working to increase the relevance and economic impact of the government science and technology spending; a more businesslike approach is being adopted.

This is a total statement with regard to this matter. It is vague, yet it readily admits that knowledge is where the future lies. How much money would a private investor place in a vague and wishy-washy sense of direction like that?

In this case, as in any other pursuit, it is essential that there be a clear goal as to where one is going so that one may determine the costs and know when the goal has been reached. At the moment I am afraid there is much money and a lot of activity being thrown in a particular direction but little to show for it. When resources are scarce we cannot afford such lack of accountability and irresponsible expenditure of public funds.

There are some suggestions that I would make that might be of assistance in meeting the Auditor General's message. First, in this country there are insufficient links between science and technology policy on the one hand and economic indicators on the other. Do the government policymakers ask themselves what economic indicators are being directed toward science and technology?

Second, science and technology remains internalized. While it talks about being innovative, about being an important component of economic recovery, it seems to have no idea how to activate policy to become that component. The reason for that is because any review that has come out of the department of science and technology has not had its genesis or relationship with the finance department.

In many ways science and technology and Industry Canada are having an identity crisis. They know what they want to be, an engine of fiscal recovery, but they have no idea how to get there.

We hear much about creating stronger partnerships between government and universities, government and industry, industry and university. We have not heard a whisper about the relationship that is necessary to forge between academic scientists and economists.

Many who comprise and compose the structure of science and technology have moved from the ivory tower of the university to the ivory tower of government. Neither is a traditional place where market value means much to the daily workings of the respective institutions.

Protected from the real world and from having to generate revenues to support their work, their objectives are fuelled by the desire to maintain the status quo. Instead they choose to believe that the granting system is sacred and necessary, that generating revenues is not within the purview of science.

However, generating revenues is a principal element in becoming an engine that drives economic recovery. We are relying on science and technology to produce products, jobs and a niche for Canada in the global marketplace. When we are told that science and technology can do that we believe it because we want it to be so. However, we want it to be happening now.

Do we have to wait another 30 years since the last science and technology review took place when nothing happened? One year from now is too long. It is time to get out of ivory towers and do it now.

We need to have a different structure, a necessary new configuration; one that places more emphasis on each knowledge worker and less concentration and centralization of services, one that joins Newfoundland to British Columbia by an information highway capable of sharing ideas of co-operative creation, of production teams equipped with expertise not limited to institutions, sectors, regions or governments. That is innovation. That will assure Canada's future. That is what we must do and we must do it now.

[Bob Mills, Reform, Red Deer, AB]

Madam Speaker, I rise today to give a speech that I sincerely hoped I would not have to give. In the fall the Minister of Finance promised he was going to get serious about the debt and deficit in his budget and that he realized Canadians would not accept any higher taxes.

The minister went on to conduct a much touted prebudgetary consultation process. The minister claimed again and again that he would listen to Canadians. The hopes and wishes of the Canadian public have been betrayed. It is absolutely unacceptable.

I want to talk about the tax grab of the government. Since I was elected, one of the most ironclad wishes of my constituents and the Canadian public has been that the government put a halt to increased taxes. Canadians are already taxed to death. They are bled dry by the government.

Although the government knew all about the terrible situation it is once again sticking its fingers into the wallets of Canadians and picking them clean. Only this time, since the part of Canadians' wallets that holds the bills is empty thanks to the government, the tax man is rifling through the part that holds the change, plucking the last few loonies away from the beleaguered public.

We have a tax on gas, a tax on utilities in Alberta and taxes on corporations which get passed on to the public. This is not closing loopholes. This is not taxing the rich. These are taxes on everyone who uses a light bulb, heats their home, drives a car, farmers and consumers in general.

This is totally unacceptable. The government has been told time and again it does not have a revenue problem, it has a spending problem. Last year the government spent its way to a record setting deficit. We have now racked up a debt of over $550 billion, costing the taxpayer close to $80,000 a minute in interest charges.

This is unbelievable and this is what we are leaving future generations. That is the compassion we have heard some of the members talking about. There should be some compassion shown for the future. The government seems to think that overspending by 24-odd billion dollars by 1997-98 is the greatest achievement ever accomplished. Where the government gets its priorities is totally beyond me.

What did the government not understand about the message of the Canadian public which was no new taxes and fix the deficit?

Even the Liberal Party's own personal cheering squad, the Toronto Star and many others, had come up with front page headlines like ``Get a grip on deficit with cuts, MPs told, but don't try raising taxes, constituents say''.

The government was given this message over and over again but it did not listen. I do not doubt the government has a million and one justifications for increasing taxes and I am sure the spin doctors figure they can manipulate the Canadian public into believing these taxes are in the best interests of everyone, but they are wrong.

We really feel that removing the deficit and putting in place a reformed tax system and a long term plan for the reduction of the debt will be the only way to save the programs that Canadians value.

In 1984 our debt was $190 billion. We had a fellow come along who said he was going to fix it. By 1988 he said that he was going to fix it again and then we were up to $370 billion. In 1993 we were told that there was such a terrible government and it had

built up $489 billion by election day. We were again told that it was going to be fixed.

By 1997 at the next election we will have over $600 billion. All this and the government thinks that a $32 billion deficit next year is a great achievement. I am sorry, I do not think that is good enough.

In the past the government has always figured that it could formulate policy and then bring it down from on high. The government thought it knew what was best for Canadians and imposed this on the public.

The last government was particularly good at this trick but we know what happened to it. As much as the government does not want to hear this piece of news, the days when Ottawa told Canadians what to do and how to live are over. It is time for the Canadian grassroots to tell the politicians in Ottawa what to do, and they better do it.

For months now the government has made its problem even worse because it told Canadians it was listening. The public was optimistic that a new day had dawned but now it knows. Now Canadians realize that the government was going to do whatever it wanted regardless of what it heard in the prebudgetary consultations.

It is politics as usual in Ottawa. The government pretends to listen to make itself look good and assures Canadians it has turned a new leaf but the illusion never lasts. This budget is the splash of cold water to the face of the public it needed to realize where the government really stands.

Tax and grab is the name of the game and wishes of the public do not matter. Shame on you, Mr. Finance Minister. You sit on your gold plated pension while future Canadians are sacrificed. Not only is it a huge shame that the government has chosen to raise taxes, but when I ask myself if it is at least taking care of the debt and deficit properly, my answer is no.

Our federal debt is around $550 billion and it is going up by $10 billion every few months. The interest on this debt is huge and is going up by $80,000 a minute. Every time the interest rates go up by 1 per cent the deficit rises by almost $2 billion. By the time the next election is held our yearly interest payments will be over $50 billion. This is what will really threaten our social safety net and nothing else.

The international money managers are happy today because they have just been guaranteed an ever increasing source of cash. Let me put it another way. Even if there were no more interest charges on this debt ever and a single Canadian put $10,000 per year into paying off the debt they would reduce it to zero by the year 55000000 A.D.

Faced with this debt problem, what is the government's answer? What resolute action is it going to take to save our country from economic peril? It has promised to reduce its overspending to roughly $25 billion per year beyond what we can afford by the time the next election is called.

This will mean that Canadians will only have another $100 billion dollars added to the national debt, bringing it over the $600 billion mark. Wow, what commitment and responsible action. With those kinds of fiscal skills, maybe the cabinet ministers of this government should act as financial consultants when they are looking for new jobs after the next election. I am sure financial wizards like themselves should have no problem finding a job. Maybe the savings and loan companies in the U.S. are looking for senior executives.

In all seriousness, it boggles my mind how the government can think that it has done enough. For months now Canadians have told the government that they are willing to bite the bullet in order to address the deficit problem, but the government continues to believe that it can do things as usual; it can have its cake and eat it too. It can spend the country into the ground with big government in one breath and pretend to fight the deficit in the next.

I am sorry, but it just will not do any more. Canadians are unwilling to play the old Ottawa game. They want real change, real reform, real spending cuts and no more taxes. The message is simple but the government is not listening. The actions needed are obvious but the government is afraid to act.

Over the coming year Canada will slip further and further into debt, the dollar will struggle and upward pressures on interest rates will be the norm. As interest rates rise our growth will slow and unemployed Canadians will continue to be frustrated in their efforts to find jobs. In the past the government has been fond of blaming such problems on the previous government. That time is now over. The government has made its bed and now it is time to lie in it. The people of Canada are smart. They know the bill of goods that has been sold to them and they will not forget.

The smoke and mirrors approach of Ottawa will not sell to the provinces or to the people of Canada. Enough is enough. Start from the top. Reduce MP pensions. Reduce the number of MPs. Reform and reduce the Senate. Cut upper and middle management and stop offloading cuts on the lower end of the pyramid.

We have reached a turning point in this government, a downward turn, a turn for the worse, and the Reform party will not stand idly by. Reformers have got the message, no more tax, fix the deficit. Now is the time for us to confront the government and force it to listen. We will tell it over and over, as many times as it takes, to try to get the message through that we have a serious problem and we must address it.

[George S. Rideout, Liberal, Parliamentary Secretary to Minister of Natural Resources]

Madam Speaker, I listened with interest to my colleague opposite. He said that the government did not listen, did not discuss and did not involve Canadians in the process of budget and budget reform in trying to strike a budget that at one time would deal with our financial crisis but at the same time not push the country into recession.

Canadians told us that they did not want us to raise personal income tax, that they did not want us to touch RRSPs and that they did not want us to tax dental plans. They wanted us to make substantial cuts in government so that it would function more efficiently. This government listened and that is what it did.

As I listened to the Reform budget I heard it take on the little guy and make it tough. That budget would impose a direct tax against Atlantic Canada, would attack ACOA and would attack those institutions which make Atlantic Canada function. It would attack seniors and senior women who would see their income taxes rise because of the budget that was put forward by the Reform party.

Did the Reform Party listen to anybody when it put forward its budget?

[Bob Mills, Reform, Red Deer, AB]

Madam Speaker, what we have done is really listened to the people. People are saying that they are sick and tired of government from the top down. They are saying give them programs that will let them take care of themselves at the local level.

If the hon. member had read the taxpayers' budget he would see that is exactly what it does. It puts in place things like RPSPs which allow people to take care of themselves, not depend on bureaucracy to do it and not depend on government which over 35 years has failed them; failed to guarantee the social programs and failed to provide them with services. That is what the people are saying.

The threat is that $600 billion and that $50 billion in interest payment. That is the threat to all the social programs and it is going to hit everyone where we presented a budget which was going to be fair and equal to all and would have provided a solution. It will be too late by the time these people wake up.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, I too have to comment on the member's brief speech.

The Reform Party had used the time in advance of consultation on the budget to go around stirring up so called tax revolts and really scaring Canadians by indicating the government is going to do this, the government is going to do that. As the previous member stated very clearly, the government is not taxing RRSPs or health and dental benefits. The government did not raise personal income taxes. The government did listen.

The government reduced its spending. There are $7 in spending cuts for every $1 of revenue increase. The member now, in trying to salvage some face with regard to the ridiculous tax revolt incitement, is trying to rest everything on an excise tax of 1.5 cents per litre.

I have a very simple question so that all Canadians fully understand what that means. Could the member please advise the House how much that means to the ordinary Canadian in terms of going to a gas station to fill up a tank? How much does that tax cost Canadians?

[Bob Mills, Reform, Red Deer, AB]

Madam Speaker, the answer to that question is $500 million, but there is a lot more to it than that. There are a lot more areas.

There is that 12.5 per cent to corporations which is going to be off loaded on to people. There are all of the changes when the money is transferred to the provinces to allow them less money, to allow them to increase their delivery of services.

We talk about long term. I am from Alberta and we had a premier in that province, Mr. Getty, who gave a budget very much like this. It was a feel good, be happy, do not ruffle anybody's feathers, try and keep everyone kind of balanced budget.

As far as consultation with the people, I would like to say that in terms of this consultation, the number of town hall meetings and so on that come about in that consultation I would gladly compare with anything that the hon. member does.

[Hedy Fry, Liberal, Parliamentary Secretary to Minister of Health]

Madam Speaker, unlike the last speaker, I think it is a great honour for me to stand today and support the budget. I am very proud of its very bold and visionary approach to fiscal management.

Throughout this budget the Minister of Finance had in effect courageously redefined Canada's system of government while at the same time maintaining the basic principles of fairness and equity.

There are some specific areas of the budget that I would like to address today, especially as they impact on British Columbians and on my constituents.

I would like to stress that this budget has fulfilled all the promises made by our government. It was tough but it was fair. This budget has ensured that the financial burdens faced by all Canadians will be distributed in an equitable manner. It started by cleaning house, by setting an example of frugality and fiscal prudence from the top.

There is no NIMBY syndrome in this budget. We started right in our own backyard. We redefined government by downsizing, by becoming lean and efficient and by enunciating a more appropriate role for government, one that enhances growth rather than manages it.

We did this by getting out of mega projects, by cutting back on subsidies to businesses, to farms, to transportation and to mining. We feel that these sectors can sustain themselves and be competitive if we just get out of their way. They have told us this often enough and now we are doing it.

We will commercialize viable sectors like transportation so that they can be self-sustaining and so that the users pay for their services rather than all taxpayers. We will still ensure that public safety and national standards are maintained.

This budget clearly comprises a major turning point in our economic history. In the last few years we have been straining to govern. We have been straining to survive under the cloud of a burdensome debt and a dangerous deficit.

This economic downturn we just suffered compounded the negative impacts of the deficit and the debt by affecting our credibility in world markets. Our economic sustenance was at the beck and call of investment bankers in New York and editorial writers in Washington.

We had two choices. We could continue to ride the downhill spiral toward indebtedness and even to third world status or we could take measures to change direction. We needed a revolution and this budget has provided us with one.

Over the next two years this budget will create cumulative savings of $13.3 billion, $11.9 of which will represent cuts in government spending. That equals $7 of spending cuts for every dollar of tax revenue. As a result in 1996-1997 our economic growth will finally be greater than the growth in our debt.

This is a key element. It marks the turning point in our indebtedness as a nation. It means that we will be taking in more money than we are borrowing for the first time since World War II. We have finally turned the corner.

Contrary to the rhetoric spawned by the furious and impetuous reaction of opposition parties and other groups, this budget does not reduce our commitment to social programs. I think rather it enshrines it. By taking control of our finances we have regained our sovereignty and our ability to make our own decisions about the kind of social democracy we want to live in. We have empowered ourselves so that we can make decisions based on our values as a people; values of compassion and of social justice, values that see government's role as one which creates opportunity for all, one which removes obstacles and one which protects the most vulnerable in our society.

This budget will let us protect our social programs from the investment bankers and editorialists of the world. By achieving our deficit targets we are taking action to prevent New York or Tokyo from in effect running our country and defining our social programs. A Liberal government could never allow that to happen.

I am glad to see that this budget, tough as it is, was not balanced on the backs of the poor, the sick and the elderly. As Parliamentary Secretary to the Minister of Health, I am pleased to note that his budget in no way affects the medicare standards and principles that are so dear to us and that are enshrined in the Canadian Health Act. Health care delivery across this country will continue to be comprehensive, universal, portable, accessible and administered by the public. In the red book we committed to ensuring that these principles are upheld and we are keeping that promise.

Yesterday in a typical knee-jerk reaction to the speech by the Minister of Finance, the Leader of the Opposition and his finance critic stated that the budget was merely another confirmation of status quo federalism. It is clear that the Leader of the Opposition did not read the document, or if he did he did not understand it.

The budget does the exact opposite. It clearly marks the beginning of a new era of federalism and of federal-provincial relations. It is a move in the direction of a leaner, more efficient, more accountable system which recognizes provincial responsibilities and the ability to redesign and redeliver effective services at the local level; the bottom up approach that the opposition parties so often tout but are reluctant to implement.

In reading the newspapers this morning I noticed that much of the media has focused its concerns on the new system of block funding, the Canada social transfer which will result, it says, in fewer services being provided by the provinces. On the contrary, with the new system of lump sum transfer payments, our government is in effect giving the provinces greater flexibility and greater leverage in the administration of their social programs.

The federal government's role has been redefined but in a positive way. I firmly believe that these changes will provide a window of opportunity for us to set clear national standards for all social programs. This is a move that my constituents and groups across this country have advocated for years.

Instead of balkanizing the country, this move will allow us to set national objectives for education and social security like we have done so successfully with health care.

Since its inception medicare has given over the management and administration of health care to the provinces governed by a set of principles enshrined in the Canada Health Act. This has created a health system that binds us together as Canadians, a system of which we are duly proud, a system that has freed the federal health department to concentrate on the broader issues

that affect the health and safety of all Canadians. This is what we intend to do with the devolution to the provinces.

I trust that following his consultations with the provinces the Minister of Human Resources Development will act swiftly in proposing standards and principles that will see us act along the lines of the Canada Health Act and the standards for administration and national care we see as a nation.

The Canada social transfer will do exactly what we want it to do. We have shown by our leadership as a federal government that we can provide better, leaner and more efficient government. I believe the provinces will rise to that challenge and be able to show us that they can do just as well as we can and as we have done.

I would also like to talk a bit about the changes to the Unemployment Insurance Act that I feel are very important. I believe that one of the key issues of unemployment at the moment is in keeping with our Liberal mandate, which is to get people back to work and keep them at work. If we can concentrate our efforts on employment services and training we will do exactly that.

Those Canadians who feel very vulnerable now because they are unemployed and who are concerned that this will damage their futures should not be concerned because our move is to give them the tools and skills needed to get them back to work, to stay in work and to make us a more competitive nation. We are removing the safety net but we are providing a springboard. I think most Canadians want a springboard.

We are also cutting some funding to the unemployment insurance program. By the fall of next year the funding will be reduced by 10 per cent. This is only funding that is going to be done because of downsizing of administration and because it will automatically come from the lower unemployment rates. As the House knows, we have been creating jobs and have brought our unemployment down by two percentage points, which had not been done over the last 10 to 15 years.

We are also moving to reduce some of the abuse that I hear from all over the country is endemic in the system. That will save us $200 million.

Furthermore we are looking to do something that is innovative and creative. We are looking to build a $5 billion surplus in the UI fund so that we do not have to make the same mistakes we made the last time. When the cycles of recession and downturns in the economy come we will have a buffer to start so that we do not have to increase UI premiums and therefore hamstring the businesses that need to grow, to help us to sustain the economy in bad times. This is just common sense.

By maintaining a surplus we will be able to mitigate the rates and help in periods of slow economic growth. It will also help us to encourage job creation at a crucial time when we are recovering from downturns in the economy.

In addition, I am very pleased to note that throughout the budget the government has remained totally and absolutely committed to a fair and sustainable system of protection for seniors. It recognizes the important contributions that seniors have made to Canada's social and governmental infrastructure.

I have a large seniors population in my riding. They have been very concerned that their pensions would be destroyed in the budget. I am pleased to be able to tell them that the two main pillars of the public pension system, the Canada pension and the Quebec pension plan, the old age security and the guaranteed income supplement will be maintained and improved.

In the budget the Minister of Finance has promised to sit down with the provinces in the fall to review our very shaky Canada pension plan. The Minister of Finance pledged to release a paper in conjunction with the Minister of Human Resources Development to recommend changes to the system to ensure its affordability, fairness and sustainability as many of us baby boomers move into old age.

Finally, the minister is announcing a change in the method of payment of old age security to high income seniors who have been subject to the so-called clawback. This is simply an administrative, common sense approach. If we pay out our benefits to individuals at a time every month instead of waiting until the end of the year to give in and pay back, it just prevents a lot of paperwork. That is the kind of silliness that has been costing so much money in government spending over the last few years.

The budget has also followed through on our red book promises to maintain fairness and equity in our taxation system. The Minister of Finance has refused to balance the budget on the backs of the poor. Rather it seeks to distribute the onus of fiscal frugality to those who have traditionally not been paying their fair share.

Reforms to family trusts are a good example. I firmly believe that in times of fiscal restraint all Canadians should pay their fair share and not escape through nice old loopholes.

The budget eliminates the cap and justly so for family trusts, changes to the family trust administration and will terminate the preferred beneficiary election for trust taxation years that begin after 1995, except where the beneficiary is physically or mentally impaired. Again the government has done a sensible thing with compassion so that we will not harm those who are most vulnerable.

I recognize that family trusts have many valid non-tax objectives such as helping with succession planning, but these changes ensure that family trusts will not be used to defer capital

gains for income splitting purposes. That is the loophole we were trying to get rid of. Once again the budget has shown that we are committed to reductions as long as they are fair.

There is more good news for my constituents in the budget such as changes to the government's role in transportation. The federal government's role in transportation is evolving from that of being an operator of the system into one that is primarily a policy maker, a regulator and a landlord with only limited operational responsibilities. Subsidies are being reduced and in many cases eliminated. Major operations will be given more commercialized forms and remainder operations will be made more efficient with greater reliance on users rather than taxpayers to pay the cost of the transportation system.

Thus the budget reduces net spending by Transport Canada and related agencies by over 50 per cent in 1997-98, from $2.8 billion to $1.4 billion. As a consequence the port of Vancouver in my riding and other ports across Canada will have the opportunity to thrive under the autonomy they have sought for many years now and finally become competitive.

Changes to the mining sector will have a positive impact in the long run in B.C. In the budget the federal government has decided not to renew mineral development agreements, but it also likes to emphasize that this non-renewal does not mean it has abandoned the mining sector. The mining sector has not had a fair system of taxation to assist it in different levels of mining such as reclaimed mines versus new mines. We are going to look at these issues so that we can give that sector what it needs and remove the barriers so it can thrive and become as viable as we know it can be in Ontario and in British Columbia.

I would like to comment a bit on members of the Reform Party in the House who have attacked our budget. They have said we have not done the things we should do and they have discounted our figures. They have said that we have been hypocritical.

The budget tabled by the third party was punitive and non-creative. Throughout the history of the country the Liberal Party has always been here at times of change. Whenever the country has sought to move into new areas, has sought to become a greater country or has sought to change the way we do things, there has always been a Liberal government in place to lead us into the changes.

We are moving into the 21st century. There will be many challenges for the country. We have seen we need to be competitive. We have seen we need to look at training. We need to look at employment. We need to look at jobs. We need to look at economic growth. We are focusing on economic growth. We are focusing on the engines of growth: small business, science and technology. We are going to make the country move forward.

As always, a Liberal government has been there to help Canada to manoeuvre its way through difficult times. We will be here once again to move us into the 21st century when I know the world will look to Canada for leadership.

[René Canuel, Bloc, Matapédia—Matane, QC]

Madam Speaker, I was listening to what my colleague has just said with great interest. I do believe her Liberal roots are showing.

It is full of sophisms. I will make a comment and then put a question to my colleague. How will it be possible to provide quality health care when transfer payments to the provinces will be cut by $700 million next year? How will it be possible to improve health care? She spoke at length about this earlier.

If I were a young graduate, I would be very concerned tonight. If I were on income security, I would be even more concerned. If I were unemployed, I would be extremely concerned. They are talking about cutting 45,000 public service jobs, about closing military bases in Saint-Hubert and elsewhere. The extremely competent workers who will lose their jobs will surely find other jobs, but for a 24-year old graduate, it is a different matter. One job means one job, not two jobs.

Tonight, I would be very happy if I had a family trust as I would have until 1999 to avoid taxes. Nothing to worry about. If I were the Royal Bank, I would be very happy, too. I would send you a dozen roses and we would sing together. The wealthy are rejoicing while the most disadvantaged are sad.

I would ask my colleague to really explain to these young university graduates and unemployed workers how and where this budget will help create jobs quickly, when we know that it takes $200 million away from infrastructure programs?

[Hedy Fry, Liberal, Vancouver Centre, BC]

Madam Speaker, I would like to respond first to the statement the hon. member made about health. Many studies have shown now that the health care system is appropriately funded but that the health care system needs to be managed more efficiently. That is what we should be looking at doing.

We do not need to continue to pour money into the system. The system can provide the best health care in the world that Canadians need if we manage it. It has not been managed on sound management principles. We have not looked at the outcomes of the things we do to see whether they make a difference to the health status of the population.

There are enough studies now to show that we can save significant amounts of money that we can put into important aspects like prevention and helping to improve the health status of the population so our children can grow out of poverty and be healthy. We know that poverty is a major determinant of ill health in the country. We need to shift our resources where they do the best and where they improve the condition. That is what we can do if we manage the system better.

I do not see that any kind of cutbacks in funding will make our health care system worse. It is a challenge for provinces to learn how to manage the system appropriately on sound principles and guidelines. I think we can do that and I think the provinces are equal to the challenge.

With regard to young Canadians who are looking for work and any Canadian who is looking for work, the unemployment insurance system at the moment has shown us that 25 per cent of Canadians across the country are functionally illiterate. Forty per cent in the maritimes are functionally illiterate. We are not looking at the traditional student any more. We are looking at adult populations, non-traditional students, who need skills and tools to get back to work.

On one hand, the government is trying to push the engines that will drive the small and medium size business sector which will create 80 per cent of our new jobs. On the other hand, we are looking at unemployment insurance as an adjustment that will help people to get the tools and the skills they need to get back into the workforce so they can become independent contributing citizens who contribute to the competitiveness of the country. That is what we are looking to do, create opportunity; a springboard and not a safety net.

[Jim Abbott, Reform, Kootenay East, BC]

Madam Speaker, when I listen to many of the Liberal members I am reminded of Eliza Doolittle. She was getting very frustrated and she finally sang a song which I believe was "Words, words, words. I am so sick of words".

I listened to the member talk about the proposal where the government is proposing to combine the money it is transferring to the provinces for health and welfare and for post-secondary education into this Canada social transfer act, then magically make $4.5 billion disappear.

Members should know Reform made a proposal like that. However, when we talked about it, we were talking about transferring tax points, transferring the ability of the provinces to be able to fund these. This is simply downloading.

The difficulty with this plan is that the Canada Health Act and the Canada assistance plan are both etched in stone as far as the provinces are concerned. Therefore the entity under the Canada social transfer that literally goes begging with this $4.5 billion is post-secondary education. Post-secondary education simply disappears.

I have a very specific question for the member. Considering that members' pensions are such a monumental issue in the province of British Columbia, I know that her constituents, certainly all the people in British Columbia, would be interested to know if she intends to exercise her option of opting out of the members' pension plan, thereby showing the leadership that the people of Canada are looking for.

[Hedy Fry, Liberal, Vancouver Centre, BC]

Madam Speaker, although the member made a nice little speech prior to his question that I would like to comment on, I will respond to his question first.

The hon. member is asking me if I will opt out of the pension plan because he sees it as a way of being responsible. There are many ways of being responsible. I would like to look at the whole issue. I would like to see whether it is feasible to opt out or whether I choose to do so.

Reform of pensions is a fundamental and basic issue. It has been looked at. The Prime Minister was very clear when he talked about reforming members' pensions. We have had a report from a third party that talked about a lot of reforms to pensions and to MPs incomes that I do not see the hon. member discussing in total.

It is easy to cherry pick, to take one little part of a report and comment on it. You have to look at the whole. That has been a fundamental flaw in all of the third party's policies. Its members take a little piece of a narrow strip and never look at the big picture. They never see how it impacts, whether there is a domino effect or not.

The hon. member should look at the big picture sometimes.

[Francine Lalonde, Bloc, Mercier, QC]

Madam Speaker, as the official opposition critic on human resources development, since the last election campaign, I am today faced with the Martin budget. It has been one long obstacle course.

Having come this far and despite what the minister says, I know from reading his budget and listening to his speeches that, far from giving up the idea of implementing major cuts in social programs and centralizing powers, the budget before us confirms that what the central government wants most of all is to withdraw from health, education, social assistance and other social services, but to keep the sectors where it feels it must be involved, even if they are not under its jurisdiction.

Now, without a word of warning, without any concern for efficiency, it is about to shamelessly increase duplication and overlap. During the human resources development committee's

recent tour, many groups and individuals, more than 1,000 Canadians, came and told us basically that what they needed most was not training, although it was often requested, but rather jobs, decent jobs.

There is strictly nothing in the budget on this matter. The budget is silent for some incomprehensible reason. It is silent, while budget cuts alone lead nowhere in terms of dealing seriously with the deficit and debt problem. Yes, the minister made a step in the right direction, but you need only take a good look at the budget to see that the debt will not be reduced this year, on the contrary, and that a deficit reduction was achieved at the cost of great and extremely difficult sacrifices. Considering that a single percentage point will make $1.7 billion difference in debt charges, it is obvious that we must not look only at cuts.

We must not for the sake of the debt, of course, but above all for the people whose livelihood depends, right now, on their jobs or the hope of getting one. All over Canada, people have told us that they were prepared to talk about social programs and social reform, but not in the context of further cuts. They told us also that Canada was no leader in terms of social programs. Recent OECD statistics clearly show that Canada's social expenditures are below OECD average, at the same level as that of New Zealand's, for the information of New Zealand admirers.

What does this budget say? It tells us that another $7,5 billion will be cut in social programs between now and 1998. I say "another" because we must not forget that the previous budget passed in this House also provided for a $7.5 billion cut in social programs. So, this makes two times $7.5 billion, or a total of $15 billion, in cuts in social programs over a period of four years. That is what we learned following a leak, when the Minister of Human Resources Development announced his project. In the end, after this whole exercise and after the bickering among Liberals, we realize that what was the plan in October is now in the Minister of Finance's budget, in spite of all these consultations.

People said: "The government can no longer cut into social programs". Yet, the expected cut is being made, in spite of the problems that it will generate. What else does this budget tell us? We see that the federal government is backing away from funding in health, education and welfare.

I use the term "backing away" because the federal financing of these sectors is reduced to such an extent that the provinces will experience increasingly more serious problems. The merging of the old financing, education and health programs, as well as social assistance, is called the Canada Social Transfer. This transfer hides two realities mentioned in the budget. First, because of this Canada Social Transfer, if there is a recession, the provinces will have to fully assume the additional costs related to the increase in the number of people relying on welfare. That is what I mean by backing away, Madam Speaker.

The Canada Assistance Plan, which was far from being perfect, was based on the financing, by the federal government, of provincial programs designed to help the poor. The federal government is now eliminating that structure, claiming that it will provide more flexibility. But where is the flexibility for the provinces? The federal government is not transferring responsibilities to the provinces: they already had them. Rather, it is transferring costs and, in fact, leaving the provinces to look after the problems, while knowing full well that, in the end, it is Canadians who will pay the price, and in a very dramatic way.

I will repeat a comment made by the hon. member from British Columbia who spoke just before me. She said that the government was giving back to the provinces the power to spend because they are in the best position to do so appropriately. Why is it that the government is giving back to the provinces funds which are dwindling and about to disappear? The federal government is telling the provinces to use their imagination, when it is in fact dumping its problems on them.

But there is money available, even though that may come as a surprise to you. There is a hidden fund which explains why the budget may have looked better than expected. I am referring to the UI fund and the programs financed through that fund. Quebec asked for the control of the whole manpower sector, or at least as regards vocational training. There is money for that. Where will that money go? Unfortunately, when there is money available, the federal government does not think that the provinces are in the best position to show some imagination, to know what the public's needs are, and to help Canadians. No. The federal government only recognizes the ability of the provinces when they are forced to live with cuts, to make hard decisions and to look like the culprits.

However, when the provinces could have the tools to promote employment and define meaningful strategies, then the federal government prefers to remain in control.

Thanks to the UI fund, the federal government can, in its budget, make proposals which almost go unnoticed. One such proposal is the new investment fund for human resources.

[The Acting Speaker (Mrs. Maheu)]

I am sorry to interrupt the member for Mercier. You will have ten minutes after the vote.

The House resumed from February 2 consideration of the motion that Bill C-37, an Act to amend the Young Offenders Act and the Criminal Code, be read the third time and passed.

Young Offenders Act

[The Acting Speaker (Mrs. Maheu)]

It being 5.30 p.m., pursuant to Standing Order 45(5)( a ), the House will now proceed to the taking of the deferred division on the motion for third reading of Bill C-37.

Call in the members.

(The House divided on the motion, which was agreed to on the following division:)

[The Acting Speaker (Mrs. Maheu)]

I declare the motion carried.

(Bill read the third time and passed.)

The House resumed consideration of the motion, of the amendment, and of the amendment to the amendment.

The Budget

[Francine Lalonde, Bloc, Mercier, QC]

Madam Speaker, it is always difficult to pick up the momentum one had in the first part of a speech. I am sure that we lost our listeners and viewers during the vote.

I just would like to add very quickly that there is something I find very surprising in this budget, and that is the role of the unemployment insurance fund. As we saw, the federal government is withdrawing from funding health care, education and social assistance. This spring, it passed Bill C-17, which tightened up eligibility criteria so that fewer people were entitled to UI, and received smaller benefits for a shorter period of time.

The UI fund allowed the federal government to pay itself back for the loan it had made during the recession and consequently to present a more favourable picture. But this is not all. Since the government did not lower premiums but reduced eligibility, it was able to make some incredible forecasts. This year and next, there will be a difference of $5 billion between expenditures and revenues.

What is this money going to be used for? Naturally, the government proposes, first, to reduce the deficit. Does it propose to reduce contributions, to help small and medium size businesses? No. It proposes to let a surplus of $5 billion accumulate. What it also proposes, to finance the creation of a human resources investment fund, as the budget calls it, through a new reform of unemployment insurance, is to divert money from UI to this new fund.

In fact, the unemployment insurance fund is the cash cow of the federal government. It will protect it from the effects of the next recession. By withdrawing from the financing of social programs and the CAP in particular, the federal government leaves the provinces in a position where they will have to deal with the consequences of a future recession and a future increase in the numbers of the poor, while insulating itself from such consequences. How? By having surpluses in the unemployment insurance fund.

Who generates such a surplus? Companies, of course. But not any company, the ones that are labour-intensive, that is the low-tech companies, those where things are done manually. The companies where wages are the lowest. These companies and these workers contribute in a large part to the unemployment insurance fund. Companies with more technology and higher wages, because of ceilings, are exempt. And this means that the fund is financed by workers and companies which are not the main beneficiaries of the fund. Not only do they help give the federal government some protection against the next recession, they also allow it to show a lower deficit since the money is added to the federal budget. We recommended that it not be included anymore.

Finally, not only do we see more cuts in social programs, nothing whatsoever in the way of employment, and continued interference by the federal government in areas where there is money to be had and where it can call the shots, but in the case of manpower training, the federal government no longer says that the provinces know best. That is not what it says. It maintains control over job training and all manpower issues. As I said, it does not want to withdraw from areas where there is money to be had.

However, the money in the unemployment insurance fund comes from labour-intensive corporations employing a lot of low-paid workers and from these workers. Let me conclude by saying that the workers are really the ones who foot the bill since the corporations pass on their costs onto the consumer.

It is really a shame to see the federal government use this fund to shamelessly guard against whatever the future holds, while workers will have to pay more taxes and will run into more problems in the areas of health, education and welfare.

There is another important issue I want to address and it is linked to the new national standards that we can expect with the Canada social transfer. Throughout the budget speech, we are told "This is the beginning of a new era in Canada. We have finally realized that provinces know best", especially, may I add, in tough times. But there is more.

With this new Canada social transfer, the federal government will be able to withdraw during the next recession and still have the power to set new standards.

What are we told? We are told that, for two years, this Canada social transfer will be funded at the average combined rate of CAP and EPF and that, for two years, health care standards will apply, so that the federal government will be able to withhold

payments to provinces who do not comply. We are also told that the Canadian assistance plan, or CAP, the source of half of the social program funding in Canada, no longer exists. The only responsibility that remains is to make welfare payments without minimum residency requirements.

The bottom line is that the government, by dropping CAP, wants to be seen as generous and mindful, at last, of the role of provinces. But the fact is that the government is retreating because it can no longer afford CAP. It does not want to invest the money needed to give its share to Ontario, a province that suffered a lot during the last recession. The government was in a bind and either had to find more money, or penalize Quebec. So, it decided to put on a show of openness, but at the same time to prepare with the provinces new standards applicable, as Mr. Martin said, to the Canada social transfer.

No more cuts, no more centralizing. Let the people and the provinces take care of all the problems and the debt. But the federal government got itself some breathing space by using the money of workers and small businesses.

[Patrick Gagnon, Liberal, Parliamentary Secretary to Solicitor General]

Madam Speaker, I find it strange that the opposition critic objects to this transfer of some areas of jurisdiction to the provinces. Even though the role of the opposition is to criticize the government, in this case, it is still criticizing federalism.

We talked about the surplus in the unemployment insurance fund. Certainly, these past few years, we have been forced to review our programs, to seriously reevaluate them, in order to see where we are in these programs which have existed for more than fifty years or so. We certainly must make some adjustments. We must face the new challenges of market globalization, and I believe that the federal government is fully aware of the importance of taking some corrective measures in this regard.

I would like the opposition critic to tell us what she thinks about the fact that the government has decided to do more in counselling services, in basic training abilities, as well as in training and experience in the workplace. It also intends to do more in child care services. It is even looking at the opportunities relating to the income supplement. I would like to know if, in her opinion, these are not new ways of doing or seeing things which are highly commendable and which will certainly work towards the well-being of the people of Quebec.

[Francine Lalonde, Bloc, Mercier, QC]

Madam Speaker, I thank my hon. colleague for his question.

First, I want to say that if I talked about surpluses in the unemployment insurance fund, it is because these surpluses are due to the cuts that have been made. However, my hon. colleague gives me the opportunity to say that what the federal government is about to do with its Human Resources Investment Fund is to provide itself with a fat account, because it will be supplied both by the programs presently financed through the Consolidated Revenue Fund and-this is made very clear in the budget-by the reallocation of the moneys saved by a new reform of unemployment insurance.

That means that the government will provide itself with a big fund to take action in areas of provincial jurisdiction. It will not even bother any longer to try to negotiate or impose its standards, it will take action.

The last step is the centralization in Canada of social programs since the transfer of jurisdictions, because at that time at least they sought approval by Parliament. The last step deals with direct involvement in day care services, in income supplements, because the minister's objective was to be able to take up, through federal funds, the assistance, employability and job development services, yes, but for people able to work, who from now on would not be under provincial jurisdiction but who would, because of the long term unemployed provisions, fall under the central government's control.

So, there is indeed a large reform under way, but that reform, instead of going in the direction of recognizing provincial jurisdictions, is going in the direction of giving, through funding, direct power to the central government. This government does not care about overlap and duplication. It does not care about co-ordinating its operations and setting a strategy with the provinces, which means that in fact the government will completely take over the area of manpower. Under the circumstances, it is easy to understand why it does not want to hand over manpower training to Quebec.

[Jim Abbott, Reform, Kootenay East, BC]

Madam Speaker, I would like to make my position very clear that I do not believe for a second that the people of Quebec, given the opportunity to vote in a referendum that is fairly put to the people, will vote in favour of separation. The member and I have a very substantial difference.

I want to put that on record because I would like to ask a question that would encompass both the possibility of her achieving her dream of Quebec separating and if not. In the issue of bringing education, hospital and the Canada assistance plan together under one roof and downloading as the Liberals are trying to do, at the same time removing $4.5 billion which means that if we are going to maintain the same level of service, which may or may not be necessary, the taxes would then have to go up at the provincial level.

If we can just set that aside, I would like to ask a question in terms of concept because she did raise the issue of national standards. If, as I have already stated, I reject categorically the concept of a separate Quebec but nonetheless if that should transpire, how would the people of Quebec be better off considering that there would be absolutely no national standards; in

other words there would be no joint jurisdiction between Quebec and Canada?

Second, if, as I believe is going to happen, Quebec people choose what is best for them and do stay in Canada, would Quebec and the provinces not be better off if they had the ability to raise the taxes? In other words, the federal government transfers the ability to tax the tax points to the provinces. If they were administering the programs, is that not really the fundamental problem that the BQ and the PQ are presently trying to do, to get more jurisdiction over the areas of health, welfare and post-secondary education?

[Francine Lalonde, Bloc, Mercier, QC]

Madam Speaker, if I understood well the question of the hon. member, he is wondering if we are not asking in fact for a transfer of tax points. That was the position we adopted and the minority report of the Committee on Human Resources Development refers to a transfer of tax points.

However, it is important to make a point about standards. In all regions of Canada where the members of the Committee have travelled, il was clear that everywhere, except in Quebec, people want strong national standards. As far as they are concerned, Quebecers want, with a few exceptions, to have their own standards.

Quebecers are a people, even though they do not always call themselves that way et they want to make their own standards. Often, those standards are higher than elsewhere for reasons I will not explain here, but it is nevertheless a fact. It is true for daycare services, it is true in the case of the Act on handicapped people, and I could go on.

But being a distinct people with regional differences, it is normal that Quebec wants to create its own standards. This is what I had to say on that issue. From a philosophical point of view, the economic or social organization is different from one people to another. You only have to study peoples as a whole or even peoples having a comparable level of social expenses to see that choices are different according to peoples, their history, their priorities or simply because they are different from one another.

It is therefore on that basis, without explaining it with rational arguments, that one can understand and defend the idea that the people of Quebec wants its own standards.

[Alfonso Gagliano, Liberal, Secretary of State (Parliamentary Affairs) and Deputy Leader of the Government in the House of Commons]

Madam Speaker, I must say that yesterday, I listened to the finance minister's speech with interest. I was expecting answers to the many questions put to me in recent months and weeks by the people of Saint-Léonard.

Indeed, all the people I met with and spoke to on the phone gave me much the same advice: "Make up your mind, do something, it is time to take action". They told me: "Put your fiscal house in order, we are on the road to ruin". They said: "Downsize the government, it is too expensive". And above all, they begged me not to raise taxes. They also said not to touch seniors. They said they wanted to continue to invest in their RRSPs because they needed them. They told me to cut subsidies to businesses, to support small and medium size businesses and to tax big corporations and banks.

The electorate in Saint-Léonard is realistic. People there are reasonable and pragmatic. They know that our future depends on the choices we are making now, in the budget the Minister of Finance tabled yesterday afternoon. They know that we must take the bull by the horns and learn to live according to our means. But above all, they know that without a drastic about-face this year, our standard of living and our future chances at prosperity are in danger.

Right at the beginning of his speech, the minister said: "Today, we have made our choice. Today, we take action". Yes, indeed. Our government chose to take the most drastic budgetary measures ever seen in 50 years to control this monster that our deficit has become. The federal government will tighten its belt and cut expenditures-all expenditures at all levels.

However, we will do so in the greatest respect of the values that Canadians hold so dear. We will promote job creation and economic recovery. We will protect the most vulnerable in our society. We will cut down on our life-style. And we will do all this without raising taxes, without cutting the old age pension and without taxing retirement savings plans.

Today, in Saint-Léonard as in everywhere else across the country, Canadians applaud the Minister of Finance. He had the guts to do what others had promised to do for almost ten years. For too long, we have only had smoke screens. Canadians want results, solid and measurable results, and we already have some.

Last year, we promised in our first budget to reduce the deficit to under $40 billion. Once all calculations are done, our bottom line should show that our basic deficit is some $4.4 billion less than expected. Now those are tangible results. This is something new and exciting. For ten years, there were promises to reduce the deficit, but it never happened. And now we managed to make it happen, and we did even better than we expected.

It has been a long time since anyone saw a government overestimate its deficit. The results have been very encouraging as well, here in the House of Commons. As you know, Madam Speaker, a year ago the Board of Internal Economy adopted a plan to restructure the expenditures of the House of Commons. This plan, referred to by some-rather ironically, I suppose-as

the Gagliano plan, was aimed at cutting our expenditures by $5 million annually.

The big challenge was to make these cuts while at the same time providing members and their staff with the tools they need to fulfil the mandate they were given by their electorate. However, times are changing, technology has become more sophisticated and, as a result, members as well as the general public must adapt their tools to changing needs.

For instance, the advent of fax machines and electronic transmission has completely changed our requirement for messengers on Parliament Hill. We sat down and methodically analysed our requirements. We suggested new approaches and implemented our recommendations carefully and diligently.

We helped our employees by proposing generous terms for voluntary departure, which a large number accepted. We redefined tasks and ask the rest of the staff to do their share, each employee being asked to do a little more with a little less.

This morning, the President of the Treasury Board reported on the results of this plan. So far, the House of Commons has saved no less than $5,719,500, compared with last year's budget. We have not only achieved our objective, we have already exceeded it.

But there is more. This exercise continues, since yesterday, the Speaker announced a reduction of $1 million in the budget of the Food Services Branch of the House of Commons. Implemented over a period of three years, this measure will help reduce the operational expenditures of the House of Commons by nearly $7 million annually.

That is what I call results. Concrete results that clearly show we mean what we say when we want to put our house in order.

We are the first to tighten our belts, and we are not asking anyone to do anything we are not prepared to do ourselves.

The answer is simple, and everyone knows what it is. From one end of the country to the other, Canadians are staying within their budget by watching their spending every day. The time has come for all governments, including our own, to do the same.

The Minister of Finance has clearly stated our overall plan. For every dollar of additional revenue, the government will reduce its expenditures by $7. This is an extremely bold new direction, the most cost effective seen in this country in the past 50 years.

To ensure the long term health of public finances, we must review the role and structure of government, without fail. We must centre the activities of government on the priorities of Canadians. With this budget, we are reducing the size and structure of government to a level in keeping with our means.

As the Minister of Finance put it so well, and I quote: "Our view is straightforward. If government doesn't need to run something, it shouldn't. And, in the future, it won't".

The government is therefore going to privatize and commercialize its activities whenever possible and desirable. We will progressively divest ourselves of our interests in companies such as Cameco, a uranium company, CN, Petro-Canada, the Air Navigation System and the Canada Communication Group.

We will reduce our subsidies to business by 60 per cent-I repeat, 60 per cent-within three years. Assistance to industries which we shall maintain will be targeted to the main driving forces behind economic growth, namely expanding trade, science and technology and small business.

Almost every time I rise in this House, I remind my colleagues of the important role played by small business in our economy.

It is always with great pride that I point out that small business is the main source of new jobs in our country. Small business is ever-changing, full of vitality and creativity. It helps us recover more quickly from downturns in economic cycles and makes a major contribution to community development. It should therefore be a matter of priority to provide small business with concrete assistance to ensure its survival and growth. Better yet, we should eliminate obstacles to its success, because when it succeeds, we succeed.

Last year we announced our plan to review the $500,000 capital gains cumulative tax exemption for farmers and small business owners. We have undertaken this review and have concluded that this exemption should be left intact.

I would like to go into a few details in this regard. Yesterday evening, the Leader of the Opposition tried to plant the seeds of fear and confusion in Quebec by criticizing the government for wishing to review certain issues which we must face in coming years.

True, the government does want to review and discuss with the provinces how to preserve our old age pension system, modernize our unemployment insurance system and maintain assistance programs for the poor.

The Leader of the Opposition said earlier that when governments undertake a review, it is always with cutting in mind. I say to my hon. colleague, this is not so. We must be careful not to make such generalizations. We must not plant the seeds of fear and confusion without any good reason. Reviewing means analyzing, examining. Consulting means looking for solutions.

The $500,000 capital gains exemption for small businesses and farmers proves it.

Last year, we said that we would review the matter. After reviewing it, we said that we would keep it, that keeping it was important. Therefore, we must not scare people and have them believe that we are going to change everything and take pensions away from people just because the Minister of Finance announced yesterday that he will be reviewing the pension plan.

These organizations, like the Federal Office of Regional Development-Quebec, play important roles in economic growth and sustainable job creation. Nevertheless, we will not reach these goals by showering businesses with gifts. Everyone agrees on this point. Therefore, we are going to reduce business subsidies substantially. In the future, most assistance will take the form of refundable loans to businesses.

The repayment conditions attached to these loans will promote true expansion possibilities. They will continue to really help our small and medium size businesses, yet get the most for our taxpayers' money.

Lastly, we are determined to give our small and medium size businesses access to the financing they need to remain the primary source of job creation in Canada. I have often repeated my deep conviction that Canadian banks in particular have responsibilities in this area.

We have already taken the initiative of working with banks to correct their current shortcomings. From now until the fall, we will continue our efforts in this area in order to draw up points of reference for small business financing. We want to see concrete results in that sector as well. This process will be reviewed next year, and we have every reason to believe that this collaboration will produce valid results for our small businesses.

The budget tabled in this House yesterday by the Minister of Finance marks the beginning of a new era. It proposes a new way to manage the Canadian Confederation. It features a simpler, more efficient approach that recognizes provincial areas of jurisdiction. That is why we can say without any doubt that this budget reflects our progressive, dynamic, co-operative and pragmatic approach to federalism.

No one can accuse the Canadian government of promoting or proposing the status quo. The provinces will now enjoy greater flexibility and fewer constraints in managing their areas of jurisdiction. The Canada social transfer, which combines into a single consolidated block transfer the three separate payments the provinces used to receive from the federal government, will greatly facilitate operations. This new approach will reduce administrative obstacles for the provinces while giving them maximum flexibility in adjusting programs to users' needs. Provincial governments will no longer have to identify eligible expenditures. They will prepare their own budgets and make their own decisions.

This initiative will simplify bureaucracy at the federal and provincial levels. There will be less red tape, fewer regulations and more results. That is what Canadians from all parts of the country expect from their federal and provincial governments alike. I admit that our budget is a tough one. The cuts announced are without precedent.

But we no longer had any choice. If we want to maintain our standard of living and preserve our children's future, the government has to take firm measures and implement them with determination.

Nevertheless, all should recognize that the budget is also fair. We have made sure that everyone participates in the effort to correct the situation. The residents of Saint-Léonard understand that, as do all Canadians. Our budget is tough, but it preserves the essential. It respects the fundamental principle of fairness between individuals and between regions which guides Canadians. That principle forms the very foundation of our federation and makes Canada one of the best countries in the world. If you will permit me, Madam Speaker, I would like to say a few words to my English speaking voters.

The budget the Minister of Finance introduced last night is definitely a strong budget. The question we have to ask ourselves today is whether we had a choice. In the last few months international financial markets and our own financial institutions had sent the message that we had to put our financial house in order.

The Minister of Finance, who has the responsibility to find a balance between restoring confidence in the market and not being too harsh in cutting measures, was able to ensure that economic growth would continue. At the same time, the financial markets were looking for a commitment from the government that it was serious and meant business about putting its financial house in order.

The Minister of Finance did a very good job in presenting his very balanced budget. This morning we saw the financial markets responding, as did the media and the people. I have been a member of the House for over 10 years. It is the first time that after the presentation of a budget I have seen such positive announcements and comments in the media and elsewhere. We owe a message of congratulations to the Minister of Finance and the government for a job well done.

[Lee Morrison, Reform, Swift Current—Maple Creek—Assiniboia, SK]

Madam Speaker, after hearing the reassuring words of the minister I would like to be able to say I will sleep better tonight, but I cannot.

The minister referred in his presentation to serving up illusions. The inference is that this is no longer happening to us with the present government. We have had 25 years of illusions, 25 years of rhetoric, 25 years of telling us we are going to get tough with the deficit, we are going to really move in on it this year, next year or the year after that.

What the minister forgets is that it was much easier for previous finance ministers to sell illusions than it is for the incumbent. Previous finance ministers could actually make illusory cuts and sell them, but the present minister, in order to sell an illusion, has to make real cuts. The problem is that it remains an illusion because the cuts are not deep enough.

All that is happening is that the government is making enough cuts in the projected spending for the next three years to keep even with the additional interest that it is going to have to pay on the money it already owes. The government is standing still.

It makes me think of a sailor who has been shipwrecked and is treading water madly. He sees a lifeboat about 100 yards away. Instead of trying to make it to that lifeboat he says: "That's too tough, that's too hard. I'm just going to keep right on treading water". He does and eventually he drowns. This government is treading water and Canada is drowning in debt.

I ask the minister, what contingency plan does this government have for the time when the interest payments on our deadweight debt become so great that there is no money left to maintain social programs or even basic government services? This is the direction in which we are heading.

We are heading in a direction where there will be no social safety net. There will be no pensions. There will be no welfare. There will be no UIC. There will be nothing if the whole rotten house of cards comes tumbling down. What contingency plan does this government have?

[Alfonso Gagliano, Liberal, Saint-Léonard, QC]

Madam Speaker, first I want to thank the hon. member for giving me the opportunity to express my thoughts on this matter.

I understand the member. I have the same frustration. I have been in this House for 10 years. Every year we would see the Minister of Finance get up and promise to reduce the deficit, but he never did. Last year, for the first time in 10 or 11 years, a Minister of Finance stood in this House and predicted a deficit.

The government fiscal year end is March 31 and we are now at February 28. We are one month away from the end of the fiscal year and we are predicting, after accounting for everything, that the deficit will be reduced by more than what we predicted, $4 billion more. That was the commitment we made to Canadians in the last election. It was the commitment we made to Canadians when the Prime Minister took office. We said that what we say is what is going to happen because we made that commitment and we want to make sure that Canadians know.

That is why this morning financial markets and all the economic and financial analysts were very satisfied with the budget. They finally realize that we are going to have a deficit of $24 billion next year, which is our commitment in the red book we campaigned on, of 3 per cent of the GDP. It is important to our financial markets, our financial and economic system that we make the assurance that when we predict something, when we estimate and make assumptions that we know what we are assuming and we reach those targets.

That is the first thing the Minister of Finance did in his first budget. He has continued to do it in the second budget. He has kept our commitment of 3 per cent and also has reached beyond that.

There will be a day when we will have no deficit and we can start tackling the national debt. There will be that day with this government and with this Minister of Finance.

Also, the member should not forget that besides having a financial deficit there is a human deficit. The government is not a business that can just close the door and say: "Well, too bad". This is a government. We are running a country. Besides the financial deficit there are human beings who have to be considered.

That is what the Minister of Finance and this government are doing. We are making sure we keep our commitment to reduce the deficit so that we will be able to tackle the debt and have economic prosperity in order to assist those in need. We will be able to create jobs for the youth of this country so they will have a future.

The way the Reform Party sees things, everything is black and tomorrow is the end of the world.