House of Commons Hansard #15 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was budget.

Topics

Supply
Government Orders

March 18th, 1996 / 7:05 p.m.

The Speaker

The House will now proceed to the taking of the deferred recorded division on the motion of Mr. Strahl relating to the business of supply.

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

Supply
Government Orders

7:10 p.m.

The Speaker

I declare the motion defeated.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

Supply
Adjournment Proceedings

7:10 p.m.

NDP

John Solomon Regina—Lumsden, SK

Mr. Speaker, in a speech on February 28 in the House of Commons the Prime Minister said that corporations in Canada "have a responsibility to eliminate the human deficit of unemployment. No true balance sheet can ignore the heavy and growing cost of chronic unemployment. It is wrong. It is wrong on a human level. It is wrong on an economic level. It is wrong on a commercial level. It is wrong on a moral level".

The question to the Minister of Finance on March 5 was to suggest that Hollinger Incorporated ignored the Prime Minister's challenge in the private sector to help create jobs. It was a slap in the face because two days after Hollinger Incorporated took ownership of the Regina Leader-Post , the Saskatoon Star-Phoenix and the Yorkton Enterprise , 182 employees were terminated. Twenty-five per cent of the staff is gone because, in the words of a Hollinger representative, these newspapers made profits but not enough profits.

The owner of Hollinger Incorporated, Mr. Conrad Black, has shown a clear lack of corporate citizenship. He is flagrantly ignoring the challenge of the Prime Minister because he does not care if he creates a human deficit, in the Prime Minister's words. He is only interested in the bottom line. However, by ignoring the human factor in his profit chasing, Mr. Black is not fooling the people of Saskatchewan or his employees; he is only fooling himself.

Putting more people out of work hurts the whole economy. It means fewer consumers with purchasing power to buy goods and services. No company lives in a glass bubble. Businesses are interdependent and when we put people out of work the whole business community feels the repercussions and in some cases the whole country suffers.

The Liberals were elected on a promise of jobs, jobs, jobs but delivered nothing but talk, talk, talk and fewer jobs. It is not only Hollinger Incorporation but many other profitable corporations that made substantial profits yet terminated jobs. They terminated employees as a reward for their efforts in making these profits.

Bell Canada made a profit of $502 million yet had 3,100 fewer jobs as a result of that. General Motors had $1.39 billion in profits yet laid off 2,500 employees. Imperial Oil had a record profit of $514 million and 452 fewer jobs. The Bank of Montreal made $986 million with 1,428 fewer employees.

What these statistics show is a lack of corporate responsibility in a country which provides them with these profits as well as various tax support from our treasury.

Should Canada continue to provide these profitable corporations that downsize tax breaks when they lack a sense of corporate responsibility to create jobs? More and more Canadians think not. More and more Canadians think corporate tax breaks should only be provided to those companies that treat their community and their employees with dignity. Canadians want tax breaks only for the corporate responsible corporations and tax breaks should only be provided to those who would support a Canadian code of corporate citizenship.

What did the Liberals do in response to these large, profitable corporations? The Liberals responded with a very small youth employment program to hire the kids of the parents who lost their jobs at minimum wage. Fire the parents and hire the kids at reduced wages. That is the Liberal approach to employment. Under the Liberals, economic development has become an oxymoron.

Supply
Adjournment Proceedings

7:15 p.m.

St. Paul's
Ontario

Liberal

Barry Campbell Parliamentary Secretary to Minister of Finance

Mr. Speaker, I am pleased to rise on behalf of the Minister of Finance to respond to the question of the member for Regina-Lumsden.

The government's number one priority has always been, is and will remain job creation. A key part of this commitment is ensuring that the corporate tax system contributes to job creation. Many steps have been taken.

The government has eliminated a whole range of what the member opposite would call tax breaks. They are too numerous to mention. Last year, as the member knows, it took significant steps to reduce business subsidies which were continued in this budget as well.

A number of incentives have been kept in place. They have been studied extensively and have been judged useful for job creation, for instance, the small business tax rate. I do not think the member opposite would argue that it was not useful in encouraging job creation in the small business sector. There are also vital measures to encourage research and development. I do not think any member

of the House would argue with the importance of research and development to the creation of long term and important jobs.

To ensure that corporations contribute to deficit reduction and do their fair share, steps have been taken with regard to the large corporation tax rate. Furthermore, the temporary surtax on banks which was instituted in last year's budget is continued further in this year's budget.

Finally, in this year's budget a technical committee was created to look at other ways in which the tax system can contribute to job creation. Their report will be made public after consultations some months hence. We all look forward to seeing the committee's recommendations.

Supply
Adjournment Proceedings

7:15 p.m.

The Deputy Speaker

My colleagues, pursuant to the order made earlier today, the motion to adjourn the House is deemed to have been withdrawn.

Borrowing Authority Act, 1996-97
Government Orders

7:15 p.m.

Saint-Léonard
Québec

Liberal

Alfonso Gagliano for the Minister of Finance

moved that Bill C-10, an act to provide borrowing authority for the fiscal year beginning on April 1, 1996, be read the second time and referred to a committee.

Borrowing Authority Act, 1996-97
Government Orders

7:15 p.m.

St. Paul's
Ontario

Liberal

Barry Campbell Parliamentary Secretary to Minister of Finance

Mr. Speaker, if you were to seek it, I believe you would find unanimous consent for me to split my 40-minute speaking time with the hon. member for Mississauga South.

Borrowing Authority Act, 1996-97
Government Orders

7:15 p.m.

The Deputy Speaker

Is there unanimous consent for the hon. member to split his time with the hon. member for Mississauga South?

Borrowing Authority Act, 1996-97
Government Orders

7:15 p.m.

An hon. member

No.

Borrowing Authority Act, 1996-97
Government Orders

7:15 p.m.

The Deputy Speaker

There is not unanimous consent.

Borrowing Authority Act, 1996-97
Government Orders

7:15 p.m.

Liberal

Barry Campbell St. Paul's, ON

Mr. Speaker, it has happened on numerous occasions and if it is not acceptable to members opposite that is fine. I will just speak very slowly for 40 minutes.

Borrowing Authority Act, 1996-97
Government Orders

7:15 p.m.

The Deputy Speaker

I am reminded, as always, by the helpful gentlemen and ladies of the table that you do not need unanimous consent to split your time. Under our standing orders one can do that.

Therefore, I take it the member wishes to indicate that he will be splitting his time.

Borrowing Authority Act, 1996-97
Government Orders

7:15 p.m.

Liberal

Barry Campbell St. Paul's, ON

I am sure members opposite are very pleased that they will not have to endure me for 40 minutes. I will be splitting my time with the hon. member for Mississauga South.

I welcome this opportunity to speak on second reading of Bill C-10, the borrowing authority bill. As in previous years, the amount of borrowing authority requested in the bill is directly connected to the financial requirements set out in the federal budget. The information required to deal with the financial aspects of the bill is also contained in the budget plan.

I urge the House to approve this legislation as soon as possible. Our goal is to have new borrowing authority in place on April 1, the beginning of the government's new fiscal year. This will ensure continued regular financing operations for the government.

All borrowing authority granted by last year's Borrowing Authority Act, including the $3 billion non-lapsing amount, will be depleted by the middle of April. If this legislation is not in effect on time, it means that the government's funding requirements would have to be met by using section 47 of the Financial Administration Act.

Section 47 restricts the borrowing to short term funds. Having to resort to these could be costly to the government and Canadian taxpayers and would expose the government to the additional interest rate risk implied by increased short term funding. That is why it is critical that borrowing authority be secured.

I intend to highlight the specifics of the legislation before us. First, since this is legislation authorizing the government to borrow money, it is clearly appropriate to review our fiscal philosophy, what we do with the funds the taxpayers provide and borrowers lend to us.

The message has been driven home again and again in the finance minister's budget speech and in the debate that followed. These messages are worth repeating because no one should doubt our commitment.

The 1996 budget plan consolidates and extends the actions set out in the 1994 and 1995 budgets. Together, they implement a comprehensive strategy that is determined, measured and responsible.

It is determined because we are not letting up. As the Minister of Finance emphasized: "The attack on the deficit is irrevocable and irreversible. We will balance the books. Furthermore, we will put the debt to GDP ratio on a constant downward track year after year after year".

It is measured because our fiscal action plan is designed not as a quick fix, but structured to achieve long term, permanent progress.

It is responsible because it is a strategy that involves carefully weighing the needs of our economy and society and equally carefully designing the policy options to meet those needs.

The majority of Canadians do not want the slash and burn approach that ignores economic consequences and abandons the vulnerable. They do not want Gingrich style grandstanding. They want an approach that is fair and balanced. Just as important, it is the balanced approach that is the best way to keep Canadians onside for deficit reduction efforts.

I need not elaborate on the basis for our decision to take strong and disciplined action for Canada. High deficits and a high public debt have raised interest rates, undermined confidence, swallowed up domestic savings and made Canada's international debt soar.

With our first two budgets, we have put in place a rock-solid fiscal base. These two budgets instituted the most drastic spending cuts since the war, structural cuts spread over the entire medium term planning period. But this base entails much more yet. It means setting deficit reduction targets over two years, using conservative economic assumptions and building large contingency reserves against unforeseen economic fluctuations.

These measures ensure that our deficit reduction targets for 1995-96 and 1996-97, to bring the deficit down to 3 per cent of the GDP, will be met in spite of the fact that the GDP did not grow as much as originally forecast. One of the factors that made this possible is the sharper than anticipated drop in interests rates, which counteracted the effects of slower growth on the deficit.

The measures in the 1996 budget consolidate and extend those in the first two budgets and further contribute to our economic and financial objectives. We have maintained our focus on reducing program spending because the deficit is a problem created by government. The solution, therefore, should focus on cutting in our own backyard. In the 1994 and 1995 budgets there were no increases in personal income tax rates. In the 1996 budget there were no tax rate increases at all.

There is another way to underscore this point. Of the cumulative fiscal actions taken from 1994-95 to 1998-99, a full 87 per cent have been expenditure savings. Expenditure cuts in the 1996 budget amounted to $1.9 billion in 1998-99 and build on the reductions of the two previous budgets to keep program spending on a downward track.

Together, the three budgets and the employment insurance reform will contribute $26.1 billion in savings for 1997-98. This will ensure we hit our new deficit target to keep the federal shortfall to just 2 per cent of GDP in 1997-98. Our combined budget plans will deliver a further $28.9 billion in savings in 1998-99. This means the deficit will continue to drop and our debt to GDP ratio will fall.

There should be no doubt about the dramatic dimensions of this action. Program spending, that is everything but interest payments, was $120 billion in 1993-94. By 1998-99 we will have cut it to $105.5 billion. That is a decline of 14 per cent which means that program spending will have declined for six straight years.

These are real cuts in actual dollars, not reduction against some previously established plan. Relative to the size of the economy, program spending will fall to its lowest level since 1949-50. This drop in actual program spending is unprecedented in Canadian post-war history and virtually unprecedented internationally. Most other countries are merely trying to slow the growth of their spending.

There is another milestone I want to mention. Through such deficit action the federal debt to GDP ratio will fall 1.1 percentage points in 1997-98. That will be the first significant decline since 1974-75. It means the national income will finally be growing faster than financial obligations, putting us in a better position to manage.

There is one final fiscal measure I want to discuss which is financial requirements. In other words, how much new borrowing the government will be doing on financial markets. This is the basis by which most other countries, including the United States, the U.K., Germany, France and Italy, measure deficits.

In 1993-94 federal financial requirements stood at $30 billion or 4.2 per cent of GDP. By 1997-98 they will have dropped to $6 billion, just 0.7 per cent of the GDP. Relative to the size of the economy, that is the lowest level in almost 30 years. On that basis, we will likely have the lowest fiscal shortfall of any G-7 central government.

There is one thing we must all understand. Budget forecasts are just that, forecasts, estimates. That is because these things deal with the future and factors that can only be assumed such as economic growth and interest rates. That is why one of the budget plan foundations is to apply economic assumptions that are more cautious than those of the private sector. For example, projections for 1997 are based on interest rates 80 bases points higher than the average of private sector forecasts.

This is not a gimmick to deliver easy to reach targets. It is a discipline embraced because Canadians are tired of governments that emphasize wishful forecasts and then miss those targets again and again. We have been setting rolling targets that we have been achieving again and again, and will continue to meet.

Of course there were always excuses for the missed targets in the past, but governments are judged on their performance not their promises. That is why we built in a prudence factor to buffer us against the sort of events on which excuses are too often based.

Let me emphasize a corollary point. If economic developments are either as assumed or more favourable than assumed, the deficit will be even lower than our 2 per cent of GDP target in 1997-98. Any portion of the contingency reserve that is not needed will be applied directly to deficit reduction.

I want to turn to the legislation before us, but before I do let me just put Canada's fiscal progress again in an international context, specifically comparing it to the United States, our largest trading partner and the most meaningful comparison. The Canadian fiscal situation can be compared by contrasting our financial requirements with the U.S. deficit on a unified budget basis.

Canadian federal deficits relative to GDP have been larger than U.S. government deficits in recent years. However, with the fiscal measures in 1994 and 1995 in those budgets combined with our latest plans this performance will be reversed.

For 1996-97 the comparable Canadian deficit is projected to fall to 1.7 per cent of GDP while the U.S. deficit will remain stable at 2.1 per cent. The difference between the two ratios should widen in 1997-98, exceeding a full percentage point in Canada's favour.

The main factor behind this shift is program spending. Between 1994-95 and 1997-98 Canada's federal program spending is set to decline by 3.2 percentage points of GDP compared with only 0.8 percentage points in the U.S.

Federal program spending in 1997-98 should represent just 12.6 per cent of GDP compared with to 16.8 per cent in the United States. That is an incredible change. As I mentioned earlier, this spending will fall even further in 1998-99 to 12 per cent of the Canadian economy.

Let me now turn to Bill C-10. Like the borrowing authority bill for last year, this bill contains three basic elements: authority to cover financial requirements for 1996-97, exchange fund account revenues, and a non-lapsing amount. In total the government is requesting authority to borrow $18.7 billion for the 1996-97 fiscal year.

Let me touch briefly on the main provisions of the bill. First, there is the provision for $13.7 billion of authority to cover our anticipated borrowing to meet the net financial requirements set out in the new budget.

Second, there is the provision to cover $1 billion of exchange fund account earnings which give rise to additional Canadian dollar borrowing requirements. This is because these earnings, although reported as budgetary revenues, are retained in the exchange fund account. They are not available to finance ongoing operations of the government.

Third, there is a $4 billion non-lapsing amount. This is something I want to emphasize because it represents a change from previous years. The non-lapsing amount has been $3 billion since 1986. Our $1 billion increase is a prudent measure which will provide the government with the ability to manage foreign exchange requirements more effectively in light of increased exchange market flows and volatility in recent years.

The non-lapsing amount can either be used during the course of the year to manage contingencies or be carried forward temporarily into the next fiscal year until new borrowing authority is granted. In either event it underscores the sort of fiscal and economic prudence we believe must be the hallmark of good government in a world of accelerating change.

There are some minor technical provisions in the bill that more clearly link fiscal year borrowing authority with fiscal year borrowing requirements.

One provision provides that 1996-97 borrowing authority may be used only after the 1996-97 fiscal year begins. Another provision stipulates that for the purposes of calculating borrowing authority usage, the effective date is April 1.

If the borrowing authority bill is not passed before the start of the new fiscal year the government may continue to use in 1996-97 the $3 billion non-lapsing amount provided for in the Borrowing Authority Act, 1995-96. However, any use of the non-lapsing amount in 1996-97 will be deducted from the basic amount of new borrowing authority when the legislation before us is passed. This prevents the non-lapsing amount in any year from effectively adding to the borrowing authority in the following year.

We want the borrowing authority bill passed before the start of the new fiscal year to avoid using the non-lapsing amount, which in any event would last but a few short weeks. I appreciate the efforts of members opposite in expediting the passage of this borrowing authority.

This bill will cancel all borrowing authority remaining from fiscal 1995-96 once it is passed.

As further background information, I would like to review the government's debt operations in the current fiscal year up to mid-February.

I hope members are writing this down. I know they have been taking careful notes. So far in the fiscal 1995-96 domestic debt program the government has issued about $25.3 billion in marketable bonds, $1 billion in real return bonds and $224 million in

CSBs. There were also net redemptions of $5.8 billion in treasury bills. This provides a total of $26.5 billion in net new market debt.

I report to the House on last fall's CSB campaign. This year the government took a first step into the highly competitive RRSP market. Last fall for the first time, Canada savings bonds could be registered directly in the name of an RRSP. In January the new RRSP option was extended to all outstanding series of compound interest bonds.

The 1995 CSB campaign produced sales of $4.6 billion. After counting for redemptions during the year, the net increase in CSBs outstanding was $224 million, as I indicated earlier.

Regarding foreign currency debt outstanding, Canada bills decreased by U.S. $2.8 billion to U.S. $3.7 billion at the end of February. These are short term U.S. dollar denominated bills issued from time to time in the U.S. market to fund Canada's foreign exchange reserves.

The government launched two very successful global bond issues last year, a U.S. $1.5 billion five-year issue in May and a U.S. $1.5 billion 10-year issue in July. The five-year issue gained recognition from international financing review as the sovereign deal of the year. The proceeds of both issues were added to Canada's official exchange reserves.

In summary, this bill is straightforward and contains no unusual provisions. I urge the House to approve this legislation as quickly as possible so that new borrowing authority will be in place at the beginning of the new fiscal year and the government's regular borrowing program can proceed as the fiscal year begins.

As the debate continues we will learn a great deal more about this bill. Members will be fully informed about it. May I get a little guidance from you, Mr. Speaker, at this point?

Borrowing Authority Act, 1996-97
Government Orders

7:35 p.m.

The Deputy Speaker

I am very happy that my colleague asked that question. It is the first time we have ever made an error. Standing Order 74 says members can divide their time when they are the second speaker and not when they are the lead off speaker on a bill.

Accordingly, the hon. parliamentary secretary cannot divide his time. He is entitled to speak for 40 minutes but he does not seem to have a 40-minute speech ready in which case the next speaker will be the critic for the official opposition.

Borrowing Authority Act, 1996-97
Government Orders

7:35 p.m.

Liberal

Barry Campbell St. Paul's, ON

Mr. Speaker, thank you for providing that guidance. We regret the confusion at the front end of this. I happily yield the floor to the member opposite. We can continue the debate afterward if he needs to speak now rather than later this evening.