House of Commons Hansard #32 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was pay.

Topics

Questions On The Order Paper
Routine Proceedings

3:45 p.m.

Fundy Royal
New Brunswick

Liberal

Paul Zed Parliamentary Secretary to Leader of the Government in the House of Commons

Mr. Speaker, I ask that the remaining questions be allowed to stand.

Questions On The Order Paper
Routine Proceedings

3:45 p.m.

The Acting Speaker (Mr. Kilger)

Is that agreed?

Questions On The Order Paper
Routine Proceedings

3:45 p.m.

Some hon. members

Agreed.

Motions For Papers
Routine Proceedings

3:45 p.m.

Fundy Royal
New Brunswick

Liberal

Paul Zed Parliamentary Secretary to Leader of the Government in the House of Commons

Mr. Speaker, I ask that all Notices of Motions for the Production of Papers be allowed to stand.

Motions For Papers
Routine Proceedings

3:45 p.m.

The Acting Speaker (Mr. Kilger)

Is that agreed?

Motions For Papers
Routine Proceedings

3:45 p.m.

Some hon. members

Agreed.

Message From The Senate
Routine Proceedings

3:45 p.m.

The Acting Speaker (Mr. Kilger)

I have the honour to inform the House that a message has been received from the Senate informing this House that the Senate has passed Bill S-2, an act to amend the Canadian Human Rights Act (sexual orientation), to which the concurrence of this House is desired.

Budget Implementation Bill, 1996
Government Orders

3:45 p.m.

Hull—Aylmer
Québec

Liberal

Marcel Massé for the Minister of Finance

moved that Bill C-31, an act to implement certain provisions of the budget tabled in Parliament on March 6, 1996, be read the second time and referred to committee.

Mr. Speaker, as my hon. colleague, the Minister of Finance, stated when he delivered the 1996 budget, Canadians do not want rhetoric from their government. They want action. They want progress. And that is what this government intends to deliver in introducing the budget implementation bill.

The 1996 budget is the third milepost on this Liberal government's journey to securing fiscal stability, and a vibrant, dynamic and competitive economy. The legislation we are proposing today is in the spirit and tradition of any Liberal government. It is in keeping with our ongoing commitment to ensure that the most

vulnerable and those in the greatest need will continue to benefit from fair, sustainable and secure social programs in the next century.

Our programs which were built by previous Liberal governments have established us as one of the most envied nations in the world. Clearly, one of our highest priorities must be to preserve Canada's network of social programs.

Over the last two and a half years, Canadians have turned to governments to provide and economic and social environment that encourages the economic growth needed to create new jobs. The legislation we are introducing points to this government's commitment to meet this demand.

Through this bill, we will double our youth programs, expand our international trade and boost Canada's innovative capacity by in investing in new technologies.

We are determined to restore fiscal health to this country to balance the books. This year's budget consolidates and extends the actions resulting from the 1994 and 1995 budgets. Once this legislation is passed, these budgets will work together to help Canadians secure their future in a number of key areas.

To secure our financial future, we will meet or exceed our fiscal goals year by year by sustaining reductions in program spending. The 1996 budget reaffirms the government's fiscal responsibility to Canadians. To get government right, we are taking further action to define a more appropriate and effective role for the federal government.

To secure social programs for the next century, we are acting to restore confidence in providing a secure, stable and growing system for medicare, post-secondary education and social assistance. To invest in the future, we are reallocating money to new investments in priority initiatives to support youth, technology and international trade, areas critical to future jobs and growth.

I do not intend to speak today about all the amendments we are proposing. Rather I would like to give the House a general sense of what we are setting out to accomplish in the budget legislation.

I will begin by outlining how our plans will secure a solid financial future for all Canadians.

Our two previous budgets set in motion actions to ensure that the deficit targets for 1995-96 and 1996-97-down to three per cent of the GDP-will be achieved. The 1996 budget secures the government's deficit target of two per cent of the GDP in 1997-98. This means the deficit will have fallen from $42 billion, or 5,9 per cent of the GDP, in 1993-94 to $17 billion in 1997-98.

To achieve this, the government is continuing to place priority on expenditure reductions. There are no tax rate increases in this budget, not personal, not corporate, not excise. In fact, there have been no personal tax rate increases in any of our three budgets.

Through the continuing program review, the 1996 budget contains $1.9 billion in additional spending cuts for 1998-99. This will help sustain the reduction in program spending-that is, all budgetary spending except interest on the public debt. Program spending will decline, from $120 billion in 1993-94 to $105.5 billion in 1998-99.

With this proposed legislation, we are also encouraging young Canadians to continue their education and develop their skills by reallocating from within the tax system an additional $165 million over three years. We will create new employment opportunities for youth by reallocating $315 million of budget savings over three years. We are doubling funds for the 1996-97 student summer employment placements to $120 million.

The budget also increases the investment in technology and innovation through a number of actions over the next three years funded by reallocations of $270 million from budget savings. For example, the SchoolNet program will expand, connecting every school and library in the country to the information highway by 1998. With the help of 2,000 computer students, 50,000 small businesses will be connected to the Internet and their owners trained for full access to the information highway.

Finally, a technical committee will carry out a comprehensive business taxation review with three goals: promoting jobs and growth; simplifying the system; and enhancing fairness.

That brings me to the tax system and our proposals to ensure that it is not only as fair and effective as possible, but also supports jobs and growth. We are reallocating revenues to priority economic and social intiatives such as improved tax assistance for students, charitable donations and care of the handicapped.

To encourage renewable energy investments, we will change the tax rules to create a level playing field. Proposed changes will improve tax rules to finance some renewable energy and conservation projects, including extending flow-through share provisions.

The budget also includes more measures to get government right, to help shape a focused more affordable government that effectively advances the key priorities of a productive job creating economy in a modern Canadian federation.

Under program review, departments were asked to examine their programs and services to determine how best to provide Canadians with smaller, more effective and affordable government. Canadians have sent us a clear message. We must meet the challenges of globalization, financial pressures, new information technologies and demographic shifts. Canadians seek affordable services and programs delivered in the most effective and efficient manner possible.

We are also acting to ensure that social programs are affordable and will be there for Canadians in the future. We will restore stability and subsequent growth to transfers to the provinces with a sustainable system of long term funding under the Canada health and social transfer.

The federal government will legislate a new five year Canada health and social transfer funding arrangement beginning in 1998-99. For the first two years federal support, that is tax transfers plus cash, will be maintained at $25.1 billion. Over the following three years transfers of both cash and tax points will grow at an increasing pace related to the economy to approximately $27.4 billion. Also, to increase protection to provinces, a new legislated cash floor will guarantee that the cash portion of the transfer will not fall below $11 billion in all years.

When I tabled the main estimates on March 7, I announced measures we would take to "get government right." These are rooted in four objectives; to redefine the government's roles and responsibilities; to redirect its resources to the highest national priorities; to provide Canadians with more modern, accessible and responsive service delivery; and finally to achieve affordable government.

To support these objectives, we carried out a fundamental review of all our programs and services. I might add that, not since the second world war has a government engaged in such a far-reaching review.

During this program review, we have examined all major federal programs and activities to reassess what we do, how we do it and, how we can to it better. Our aims is to deliver services that are relevant, responsive, accessible and affordable. We are now putting into place the results of this review.

Based on these results, most departments will have their budgets cut by at least an additional 3.5 per cent in 1998-99; some will be cut much more. Changes are occuring not just in direct service delivery areas but also in our internal processes and systems.

Together, these and other measures will reshape and redirect the structure of government to bring quality services to Canadians in a fiscally responsible manner.

As we continue on this path of reform and change we must pay equal attention to the federal public service which, as the administrative arm of government, delivers in large measure our programs and services to Canadians. The public service supports us and helps us deliver our commitments to the people of Canada. We recognize that changes are also required to transform the public service into a modern and dynamic institution. The changes we are proposing in this bill will put in place some of the building blocks to do just this.

The legislative measures we are proposing to get government right are based on three key themes: alternative service delivery; compensation and collective bargaining; and pension reform.

I will begin with the alternate delivery of services and programs. By this I mean creating service entities, special operating agencies and other organizational mechanisms to deliver services. One example is NavCan which delivers the air traffic control system.

In the budget the Minister of Finance announced our intention to move in similar directions by creating a single food inspection service, a parks agency and a national revenue commission. We will undertake other such arrangements case by case as we continue to examine the best ways to deliver services to Canadians.

When we create these organizations, public service employees working in these areas will of course be affected. We must ensure that these employees are treated fairly and reasonably. That is why we met with the public service unions earlier this year to discuss the subject. I am pleased to say that we reached an agreement with most of the unions on the transfer arrangements for employees who move to alternative service delivery organizations.

The amendments we are introducing today will allow us to put in place fair arrangements for all employees affected by such transfers. They will also allow us to implement enhanced arrangements that some unions successfully negotiated on behalf of their members. This government is committed to working with public service unions and believes that the negotiated agreement is always the preferred option.

We are also proposing other legislative amendments to various statutes that will allow us to put in place these arrangements. For example, we are proposing changes to both the Canada Labour Code and the Public Service Staff Relations Act to introduce successor rights. These rights continue to cover union representa-

tion and the collective agreement until the term of the agreement expires, when employees move from public service employment to other federal employers.

Also we are introducing changes that will ease the transition to and the operation of alternative service delivery organizations. We want to make sure that these organizations have the tools they need to operate effectively from the outset.

An example is our proposal to amend the Financial Administration Act to allow us to use multiyear appropriations. If approved, we could use this authority with the three new agencies where flexibility is warranted and appropriate. Implementing this flexibility would need parliamentary approval through either an appropriation act or specific legislation.

I should add that this is an enabling clause only and Parliament will retain the right to determine when and if multiyear appropriations are suitable to these or any other future organizations.

Let us now turn to compensation and collective bargaining in the public service. The Public Sector Compensation Act , which was first introduced in 1991, restrained collective bargaining. Public service wages have been frozen for five of the six years that this legislation has been in effect.

I was pleased to announce that the Public Sector Compensation Act will expire as planned in February 1997. Public service employees have contributed significantly to fiscal restraint, and now, we can return to collective bargaining for public service employees.

Salaries for MPs and senators will remain frozen at the 1992 levels until at least January 1998 when the law will be ressessed as prescribed by Parliament.

However, we are also proposing to suspend the binding arbitration process to resolve collective bargaining disputes for three years. We cannot run the risk of allowing independent arbitrators-who are not accountable to Parliament-to award compensation increases that the fiscal framework could not accommodate.

Binding arbitration will continue for employees of the House of Commons, the Senate, Library of Parliament and the Canadian Security Intelligence Service. This is because their respective legislation prohibits strikes and requires the use of binding arbitration. In these case, however, arbitrators will be required to take into account wage settlements that have been reached for comparable occupational groups within the public service, where Treasury Board is the employer.

We are also seeking authority to amend the Public Sector Compensation Act to reinstate increments and performance pay which were suspended when the government introduced the wage freeze.

This bill would also provide authority for a 2.2 per cent wage increase for non-commissioned members of the Canadians Forces. This measure will correct the disparity in wages, that existed before the wage freeze between members of the armed forces and public service employees.

Our final theme centres on pension reforms. These reforms are intended to provide individuals and groups of employees with greater pension portability that meet the standards of the Pension Benefits Standards Act. Specifically we propose to revise the Public Service Superannuation Act to protect employee pension accruals and make them portable. This portability will be enhanced by the two year vesting and lock-in provisions.

I indicated that I would not discuss every legislative proposal but for the most part they are all related to one of the three themes I have described. I would just like to draw the attention of the House to other measures.

We intend to modify the Financial Administration Act to make changes to public service group insurance plans, for example, the health care plan. Another proposal will deal with the needs of our student employment programs by amending the Public Service Staff Relations Act.

Together these changes, particularly in the areas of alternative service delivery, compensation and collective bargaining and pension reforms, will let the government do its business using a modernized legislative and policy framework.

In conclusion, we believe that the measures we are introducing today are fair and reasonable to Canadians. They will help us secure the financial future, get government right, secure social programs for the next century and promote jobs and growth for Canadians.

Budget Implementation Bill, 1996
Government Orders

4:10 p.m.

Bloc

Richard Bélisle La Prairie, QC

Mr. Speaker, the President of the Treasury Board told us a few minutes ago that Canadians are not interested in flowery rhetoric. And yet, that was what I seemed to be hearing last March 6 when I listened carefully to the finance minister's budget speech.

It was a lovely speech, but now we must go over it all again today, because today is when the real budget measures are being tabled in this House, in the course of the debate on Bill C-31, while most of the members of this House are in committee. And I have the feeling that that is exactly what the government wanted.

It seems to me that this Bill C-31, tabled yesterday at first reading and submitted to the House today at second reading, is a tactic by the President of the Treasury Board, who is doing the dirty work for the Minister of Finance, whose erratic management has not really succeeded in reducing the deficit to date.

The bill is an example of this government's inability to control the deficit and the debt through concrete measures and a fiscal policy that is consistent and fair for all groups in our society.

To put it another way, when we see the measures contemplated in this bill, the number of acts amended, the number of federal ministers and federal agencies affected, the staff upheavals, the planned cuts, this bill starts to look like a fire sale by a government that has lost control and that is trying with varying degrees of success to stop the leaks in the fast-sinking Liberal boat.

This Budget Implementation Act, 1996, will enable the Treasury Board to ensure the transition of human resources in the context of what is described as the diversification of ways of providing services. The Financial Administration Act is amended; it will allow tens of thousands of employees to be laid off, public services to be transferred in some cases, and measures designed to facilitate these transfers to be taken.

The Canada Labour Code and the Public Service Staff Relations Act are amended so that collective agreements and labour representation can be maintained when personnel is transferred to other employers as part of the public service restructuring described by the President of the Treasury Board.

Public servants who are transferred will lose certain rights. The changes made to the Public Service Employment Act will allow the Public Service Commission to delegate powers to non-public servants, thus eliminating de facto the right to appeal an appointment.

Transfers to the private sector must of course be made attractive, which means that benefits enjoyed by public servants must be reduced.

This is all that is being done here. The freeze on the salaries of non-commissioned members of the Canadian Armed Forces is ended. Instead of conducting an objective inquiry into the blunders of the army, particularly in Somalia, the government rewards first the military responsible, whose salaries will be the first to be unfrozen.

An amendment to the Public Sector Compensation Act will make these changes possible. A right for which workers fought hard is withdrawn for a period of three years. Indeed, an amendment to the Public Service Staff Relations Act will suspend compulsory arbitration.

We are told that the Public Service Superannuation Act is also being amended to facilitate the transfer of individual and collective pensions, and provide the flexibility required to maintain or suspend the application of the act to an entity and to its employees.

Transfer and flexibility: these are the key words. The government is cutting in the rights and pensions of its employees to better transfer them to the private sector. These transfers will affect thousands of public servants. According to the bill, collective transferability will be made possible thanks to amendments aimed at facilitating the conclusion of agreements between the government and eligible employers.

The government could not make it more clear that it intends to transfer a number of its responsibilities to the private sector. We are told about transitional protection, but what are the guarantees for the employees affected? The bill is silent on this and no transfer procedure is specified.

This bill also confers upon the Minister of Transport the power to dispose of railway cars belonging to CN which are used to move grain.

To show you the extent of the sales that will be coming, the bill states: "It would also provide for an increase in the maximum rates for movement of grain after at least 10,000 of the railway cars or rights with respect to at least 10,000 of the railway cars are disposed of".

All of this goes to show, without a doubt, that the government is selling out our heritage, the train-which was the first link between the various regions of our country-our assets and the government employees' expertise built up over the past decades. These massive sell-outs will only pay the grocery bill. The government's fire sale will not, in the end, reduce the deficit by any significant amount.

Another blow, this time not against its employees but against all workers. After having laid its hands on the $5 billion surplus in the UI fund, the government is changing the Unemployment Insurance Act by setting maximum insurable earnings for 1996 at $750. It also sets maximum weekly benefits at $413 for recipients who start receiving benefits in 1996, i.e. new recipients.

Bill C-31 also implements a number of measures with budget impact. The government is taking advantage of this bill to push a number of extremely controversial measures through. It is trying to use a back door approach, to rush through unpopular measures including some that penalize the unemployed.

The historically maintained tax pact between Ottawa and the provinces is being shoved aside. The Federal-provincial Fiscal Arrangements Act is amended. The Canada social transfer for 1997-98 through 2002-03, as well as the method for calculating the amounts to be transferred to the provinces, is defined.

All that this fine business reveals is that federal transfers to the provinces are in free-fall. In the end, all this complex accounting will simply produce smaller envelopes: $26.9 billion in 1996-97, $25.1 billion in 1997-98 and each year thereafter until 1999-2000. For each of fiscal 2000-01 to 2002-03, the calculations used will merely reduce the Canada social transfer even further.

The transfer to a given province is related to the calculation of a weighting value that decreases from 1.0 in 1997-98 to .5 in 2002-03. In other words, the amount will be reduced progressively by 50 per cent over five years.

The Government of Canada is changing the rules for distributing the Canada social transfer among the provinces. The new rule is based on the size of the population and no longer on need, as should be the case for social programs. Quebec, once again, is hardest hit by the cuts. The Canada social transfer now benefits the wealthiest provinces: Ontario, British Columbia and Alberta, whose populations are growing the fastest.

By cutting its transfers to reduce the deficit, the federal government is passing the bill on to the provinces, dumping the deficit in their lap. There is less and less redistributing in the federal transfers. The cuts and the new rules for distribution mean in fact the end of fiscal federalism.

The only measure that is fair for taxpayers in Bill C-31 is the amendment to the Old Age Security Act, which will change the pension paid to people with fewer than ten years' residence in Canada after their 18th birthday. This pension will now be calculated according to the number of years they have actually lived in Canada after this birthday. This is only fair to all taxpayers.

The Canada assistance plan, the Radiocommunication Act and the Student Loans Act are amended, with the last one being changed to provide stricter terms for the repayment of student loans.

This all-purpose bill amends various acts and has a single purpose: to reduce the amounts spent by the federal government to pay its employees; to cut the number of federal public servants; to undermine the rights of those who will survive the cuts; to chop transfer payments to the provinces. National standards remain, but related funds are falling.

UI benefits are also being cut in order to augment future surpluses in the UI fund, where the Minister of Finance will take the amounts needed to hide his mismanagement and his real deficit. The deficit will also be reduced by selling crown assets, like the thousands of railroad cars used to transport grain across the country.

Collective agreements are being tampered with and the rights of public servants undermined. The right to appeal on appointments

of priorities is being eliminated and, more importantly, binding arbitration is being suspended for three years to make federal organizations more attractive to private sector buyers.

All this shows a blatant lack of respect for public servants, something the President of the Treasury Board did not brag about a few minutes ago. This bill mixes the sale of railroad cars with the doctoring of collective agreements so that entire components of the public service laboriously developed by the country since the 1940s can be sold off.

Above all, this shows the finance minister's inability to carry out his mandate to balance the federal budget. In fact, clause 64 in this bill provides for the payment of $961 million to New Brunswick, Nova Scotia and Newfoundland as adjustment assistance for the purpose of facilitating their participation in an integrated national sales tax system.

The Liberals never keep their election promises, to say the least. After condemning the Tories so strongly, they are doing the exact opposite of what they promised.

As members may recall, in 1979-80, after vigorously condemning the 18 cent increase in the price of a litre of gasoline called for by the Tories, the Liberals were quick to raise the tax on a litre of gasoline even higher after returning to power in 1980.

History repeats itself. After slamming the GST during the 1993 fall election campaign, the Liberals are again trying in 1996 to harmonize the various provincial taxes with billions in hidden subsidies to the provinces.

Budget Implementation Bill, 1996
Government Orders

4:25 p.m.

Bloc

Jean H. Leroux Shefford, QC

To win votes.

Budget Implementation Bill, 1996
Government Orders

4:25 p.m.

Bloc

Richard Bélisle La Prairie, QC

Exactly.

The Liberal government has negotiated with three of the Atlantic provinces an agreement combining the provincial sales tax and the GST into a single national sales tax. The new tax will amount to 15 per cent. Current tax rates in the Atlantic provinces are quite high: 12 per cent in Newfoundland and 11 per cent in Nova Scotia and New Brunswick.

So, the federal government has forced these provinces to bring their tax rates down to 8 per cent, and to this end, their service tax base was broadened. The cost of this whole operation, or $961 billion, will be borne by the federal treasury.

The federal government will also look after collecting the tax. For this purpose, a national revenue commission will be created to take over the administration of the unified tax from the Atlantic provinces by January 1998. This is an attack in due form, aimed at eventually taking over all tax collection in Canada. The actual amount of the tax will be hidden in the sales price but will show on the bill. The government is creating a hidden tax, which will make

it easier to raise it later on. The minister also introduced a stringof technical changes to the GST that only an expert could make sense of.

Regardless of the actual words used in the Liberal's red book, the fact remains that a promise was broken. Two Liberal members, namely the hon. member for York South-Weston and the hon. member for Broadview-Greenwood have left the Liberal caucus, and this does them credit. They were strongly supported by their constituents in making this decision. There are at least a few members who stand on their own two feet. The same cannot be said about the Deputy Prime Minister, but at least some still do.

Budget Implementation Bill, 1996
Government Orders

4:25 p.m.

Bloc

Yvan Loubier Saint-Hyacinthe—Bagot, QC

Bloc members do.

Budget Implementation Bill, 1996
Government Orders

4:25 p.m.

Bloc

Richard Bélisle La Prairie, QC

Yes, exactly. The hon. member for Saint-Hyacinthe-Bagot is right.

This goes to show the Liberals have reneged on their promises and the public knows it.

Just one week before the 1993 election, the Deputy Prime Minister stated on the CBC, and I quote:

"I have already said personally and very directly that if the GST is not abolished I will resign".

The Prime Minister himself said, and I quote:

"We will scrap the GST".

In May 1994, he added: "We hate this tax and we will make it disappear".

It is quite something when a Prime Minister says that he hates a tax. Did the Prime Minister suddenly fall in love with the GST? Or is he the victim of a love-hate affair? I personally think that the Prime Minister is a great comedian who uses all means available to him.

There is no harmonization. The provincial sales tax will disappear. It will become part of the GST. The GST will literally absorb the provincial tax and its management will be the exclusive responsibility of the federal government, which will thus increase its control over indirect taxation in this country.

By including the tax in the price of goods, the government shows it could not care less about consumers and is making it easier to increase the tax later on. Several associations, including the Consumers' Association of Canada and the Association des manufacturiers du Québec, opposed including the tax in the price of goods.

The federal government is making all Quebecers and Canadians pay for the harmonization of sale taxes in the maritime provinces. Given the amount of money to be paid by the federal government to these provinces, Quebec will have to contribute close to $250 million but will get nothing in return. The government's goal is still to integrate the GST to sale taxes everywhere in Canada. If it must compensate every time an agreement is reached, how much will it cost in the end?

The government itself says that compensation will also be necessary in the case of Saskatchewan, Manitoba and Prince Edward Island. Quebec has already harmonized its sales tax and no adjustment is anticipated in the future. This means that there is no possibility for compensation in the case of Quebec. Such is the price that Quebecers must pay when their province co-operates with the federal government.

Provinces joining the national tax system will lose their autonomy, because they will no longer have full control over their taxation rate and their tax base. "The federal government will assume responsibility for all aspects of administering the provincial value added tax". This is what it says in the memorandum of agreement on the harmonization of sales taxes, an indication of the extent to which the provinces that sign will give up their fiscal autonomy to the federal government.

The Bloc Quebecois is offering the government an opportunity to kill two birds with one stone. The first step would be to abolish the GST, to turn the whole field of indirect taxation over to the provinces and to offset federal losses resulting from the abolition of the GST with an equivalent reduction in cash transfers to the provinces. In this manner, the federal government hangs on to its financial equilibrium, the Government of Quebec controls all indirect taxation within its borders, and the result is less federal interference in the health, education and social assistance sectors.

This approach, the one the government is suggesting, is completely out of date. The savings generated by all the sales and cuts resulting from bill C-31 will be spent on paying the provinces to accept a national sales tax.

Financial management under the Liberals is a bottomless pit. They do not realize the efforts they are asking of everyone: public servants, taxpayers, the unemployed, seniors, the provinces. They are asking all these groups to make significant spending cuts, and then, at the end of the bill, in clause 64, they wipe out, in one fell swoop, close to a billion dollars in efforts so that they can bring three provinces on side with their national sales tax.

Why pass this Bill C-31 if, once again, they go back on election promises and eliminate with one hand all the efforts made by the other hand. The Bloc Quebecois cannot in all decency support this bill. This bill the government is rushing through contains major amendments to at least ten statutes that have a very large impact on government management. I will summarize them here to show you the importance of all these legislative amendments that will flow from Bill C-31.

The following statutes are amended: the Financial Administration Act, the Public Service Employment Act, the Public Service Superannuation Act, the Unemployment Insurance Act, the Federal-Provincial Fiscal Arrangements Act, the Old Age Security Act, the Canada assistance plan, the Radiocommunication Act, and the Canada Student Loans Act.

The common denominator in all these amendments is the withdrawal of the federal government from its responsibilities as an employer and from its historic commitments to the unemployed, seniors and the provinces.

The Liberal government is abdicating its responsibilities. Bill C-31 is admission that it is abdicating before the voters send it packing for good. This morning's La Presse described the plan proposed yesterday by Ottawa as "somewhat frantic".

In closing, I would like to draw the hon. members' attention to the fact that the Liberals have a worse record than the Conservatives as far as the Constitution and taxation are concerned. In the first instance, by reducing Quebec to the "principal homeland of French language in North America", and in the second, far from eliminating the GST as it had shouted from the rooftops that it was going to do in 1993, by reinforcing it, trying to bury it in the price.

So what about the transparency this government was promising? Through this double failure, the Prime Minister and his Minister of Finance are once again demonstrating their incompetency, which far exceeds that of their predecessors.

Budget Implementation Bill, 1996
Government Orders

4:35 p.m.

The Acting Speaker (Mr. Kilger)

Before resuming debate, it is my duty, pursuant to Standing Order 38, to inform the House that the question to be raised tonight at the time of adjournment is as follows: the hon. member for The Battlefords-Meadow Lake-Parks Canada.

Budget Implementation Bill, 1996
Government Orders

4:35 p.m.

Reform

Herb Grubel Capilano—Howe Sound, BC

Mr. Speaker, I have spoken on the subject of the budget before and I was going to cede my place to my colleagues, but a new development has taken place which has very serious implications for the budget.

The Minister of Human Resources Development has joined a chorus of demands by labour and employers that there is a need, if not an obligation, on the part of the government to lower premiums on unemployment insurance contributions made to the unemployment insurance fund.

If these premium rates are lowered, as I think they should be and I think they will be, then the government's vaunted target of 2 per cent deficit of GDP in two years' time cannot be met. There is even doubt that this year's projections can be met. This is a very serious matter.

According to the budget document, the government will violate tradition. For reasons I will indicate in a moment, it is almost illegal. However, I do not know if I can call it illegal. On the one hand by keeping up the premiums or on the other hand it does the right thing with respect to premium rates, the government will not be able to meet its target.

This is a summary of what I would like to include in my speech. I would like to build to a conclusion and support it with some more careful analysis and numbers.

Let me first remind people that the unemployment insurance system is an independently funded account which by law has to balance over time. I took the trouble of calling the solicitor for the Department of Human Resources Development to ask what the law is. He told me that it should be balanced over time. A few years ago the auditor general required that the government adhere to this principle.

When the balance accumulates the government is, therefore, obligated to lower premiums. If the balance becomes negative, premiums have to be raised.

The government is making the argument that is really pro-cyclical, that is, it aggravates the business cycle because the funds accumulated in the UI system are likely to become negative when there is a recession. If during this recession the premium rate is raised, it will result in the further withdrawal of purchasing power. It therefore aggravates the size of the business cycle.

Therefore, I agree with the government that we should accumulate a certain reserve during good times so that the fund would be able to ride out the next recession without having to raise premium rates again. However, there ought to be a limit to the amount which the unemployment insurance system can accumulate.

Why is this system separate and is there this rule that the balances must come to zero through time? The reason is quite obvious. The unemployment insurance premiums have two very serious characteristics. First, they are regressive. The maximum contribution that individuals pay to the fund is $1,320 a year. This $1,320 a year is paid by someone making $30,000, someone making $100,000 and someone making $1 million. The percentage which this $1,320 represents of total income is much higher for lower income earners than for higher income earners. This is clearly a regressive tax.

The reason why the rule exists that this must not be used to finance general government expenditures is that general government expenditures accrue to everyone and they are part of a system income redistribution, and so on. Therefore, this is not money that should be used to finance general government pensions and various other things. Those government functions should be financed by general taxes in the form of personal income taxes, the GST and corporate income taxes because all of those benefits are accruing to all Canadians. All are paying for it and it accrues to all of them.

The UI contributions, on the other hand, are simply for providing protection against the risk of becoming unemployed.

The second damaging characteristic of unemployment insurance revenues is that over one-half of them are paid by employers. People who go out and think that they can afford someone to work in their donut shop for $10 an hour will be deterred from doing so because the government says: "That is not enough. You have to pay the 3 per cent to the government in the form of a contribution to UI". This is why it is widely known and has been given the name by the government of a job killing tax.

Any time that the government legislates increases in the cost of labour which have not been negotiated in the labour market, it raises the cost of labour and is therefore detrimental to employment.

It is quite clear that it is not in the interest of society. It is not legal for the unemployment insurance fund to be in surplus for a prolonged time or in a surplus that is used to finance general government expenditures. That is why the representatives of labour and employers have been coming in droves to the hearings of the human resources development committee and have been asking for a reduction in the premium. That is why recently the Minister of Human Resources Development noted that he too believes the premiums are to be lowered.

Just to give an idea of the magnitude of this effect, the revenue from insurance premiums in 1995-96 will be $18.5 billion. People have great difficulty envisioning what $18.5 billion is. Let me compare this with what is expected to be collected from corporations. Corporations are expected to pay $14.5 billion. The UI system is expected to contribute $18.5 billion to total revenue.

On it goes through 1997-98. It is expected that by 1997-98 the unemployment insurance contributions revenue collected by the government will be $19.5 billion. That may or may not be a lot; it all depends on what the obligations of the UI system are.

The budget again has an answer for that. In the year 1995-96, the $18.5 billion is required to provide unemployment insurance benefits worth $13.8 billion. The difference between revenue and expenditure is $4.7 billion. It is in the budget which is being debated today that over this year and the following two years the excess of revenue collected from workers and their employers minus what is being paid back to them through unemployment insurance benefits will contribute to the nation's surplus $4.7 billion, $4.6 billion and $5.0 billion in each of those years respectively.

A surplus also existed in 1994-95. At that point it was the highest it had been in a long time, $5.4 billion. It was used to reduce the accumulated deficit of the system, but by the beginning of this year the surplus, the reserve of the system, has begun to grow. It is estimated that by the end of this year it will be about $4.5 billion, the following year $9 billion and thereafter $14 billion.

Again, people have very great difficulty relating to these numbers. The $14 billion at the end of 1997-98 is equivalent to one full year's outlay in the budget for unemployment insurance benefits, one full year of reserves, the highest these reserves have ever been in the history of Canada. I have a graph which shows this.

It was $2.2 billion. The government has predicated the achievement of its deficit target on the assumption that this accumulation of surpluses will go to $14 billion. It is not reasonable. The largest cumulative deficit that ever existed was $5.8 billion.

These premiums by all standards must be lowered. They cannot go on like this. It is almost illegal. It is killing jobs and it is unfair. As some people have said, the money in the UI fund does not belong to the government for its general programs, it belongs to the workers. I have made that case and it is fair and justified.

A very great problem is developing for the country and for this government. This is what it will mean two years from now using the government's figures. If the government did the right thing and lowered the unemployment insurance premium, there would be no addition to the system's reserves. In 1997-98 the deficit is projected to be $17 billion. If the $5 billion generated as a surplus by the UI fund were not available, the deficit would be $22 billion, just a little bit less than the preceding year, which is next year. There would have been no improvement.

The Minister of Finance brags on Wall Street and everywhere else: "I have achieved our target. I have broken the back of the deficit". The entire government plan and the minister's proud achievement are predicated on keeping money that does not belong to the government but belongs to the workers. It is in the books. The auditor general said so. It makes complete economic sense. The government is coming close to the mistake it made on the GST.

I cannot believe that a man with the intelligence, background and integrity of the Minister of Finance and with the huge resources he has available in terms of this country's best economists would say in front of investors on Wall Street that he has broken the back of the deficit, without acknowledging that his prediction is based on the assumption he will have $5 billion in each of the next two years coming in as revenue he knows does not belong in that account. That revenue belongs to the workers.

That revenue should not accrue because by tradition in the way the UI fund has been set up the premium rates should be lowered. Again I have a graph. It shows that whenever the cumulative deficit was large enough the rates would be raised. If there was a surplus, the rates would be lowered. I have not had time to look at the speeches made by the Liberals when they were in opposition,

demanding I am certain the lowering of benefits because the money belonged to the workers. However, here they are using it to achieve their target.

What are the Liberals going to do? Are they going to shamefully make that fund grow to $14 billion when the highest ever in the history of Canada has been $2.2 billion? It certainly is in the budget. If we do not do it, the target is not going to be met.

Where have the media been? Have they not noticed this? Where are all the incisive analyses that should be going on about this subject? If they would like some background information, they could call me.

There is no way in which this government should resist the supremely justified demands of employers and employees, and organized labour is adding to the chorus that the Minister of Human Resources Development do the right thing and lower this regressive tax which is killing jobs. The government should be lowering the premium rates which are taxed rates. They are regressive because they fall so heavily as a percentage of income on workers in the lower echelons. They are killing jobs and they add to the cost of employing labour. This is a major scandal. It is a scandal which I predict will become very similar to that of the GST.

I know the minister in response to questions on this subject will say that the government has plenty of reserves built into the system. Let us look at that. He has built into the 1997-98 budget a $3 billion contingency reserve. Part of that will already have been eaten up by the money which he has just committed to pay as an inducement-and some people in the Government of Ontario are calling it a bribe-