Debates of Feb. 19th, 1997
House of Commons Hansard #133 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was tax.
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Private Members' Bill C-339
The Deputy Speaker
Do colleagues agree to the hon. member's request?
Private Members' Bill C-339
Some hon. members
(Motion agreed to.)
The House resumed from February 18, 1997, consideration of the motion that this House approve in general the budgetary policy of the government.
February 19th, 1997 / 3:30 p.m.
Yvan Loubier Saint-Hyacinthe—Bagot, QC
Mr. Speaker, I am pleased to once again speak on behalf of my party regarding the fourth budget tabled by the Minister of Finance.
Yesterday, immediately after the presentation of this election minded and self-serving budget, I had an opportunity to give the official opposition's initial reaction.
We took a more thorough look at the budget last night. As you know, the official opposition works very hard. We are not lazy people.
However, when we look-and this will be the first part of my presentation-at the evolution of public finances over the last three years, and when we look at the track record of the Minister of Finance, we have no choice but to say that the minister is lazy. Why?
I now get to the first part of the presentation. Some may look at how public finances have evolved and think the Minister of Finance is an extraordinary manager. However, we can say, based on an assessment of his track record, that his reputation is overrated. Why? Because if we consider budgetary revenues from 1993 until today and what federal spending has been since the Liberals came to power, since the Minister of Finance has been the head of the Department of Finance, we see that if the minister had sat around twiddling his thumbs, the result would have been exactly the same as far as reducing the deficit is concerned. We could have put Youppi, the Expos' mascot, in his place, or Alcide, the mascot of the Granby Zoo, as suggested by the hon. member for Shefford, and the result would have been the same.
Why? Simply because the Minister of Finance was able to take advantage of an extraordinary rate of economic growth, that unfortunately is not reflected in job creation because of the minister's inertia, but that increased the federal government's tax revenues by $22 billion. Where did our wonderful manager of public moneys, our national mascot get those $22 billion? Not just anywhere. He got them from individual taxpayers, from middle income people whom he continued to bleed dry, exactly like the previous government, by maintaining high taxes, income tax and even premiums, including those for the unemployment insurance fund which generate a surplus of $5 billion annually. He generated
$22 billion in new revenue. It is easy to reduce the deficit with this kind of increase in tax revenue.
There is another very important item on the books of the Minister of Finance. He never dwells on his past achievements. He only talks about the present and the hoopla around his budget, but we should look at what he did before: he cut government spending by $14 billion. Where did he make those cuts? We should take those $14 billion and find out exactly where he cut most vigorously and effectively as a good public administrator.
Well, we see that more than 50 per cent, or to be more exact,52.1 per cent of those $14 billion in spending cuts over the past three years, when we look at the revised figures the Minister of Finance gave us yesterday, is the result of cuts made in transfers to the provinces. It is easy to be in debt: if I have debts, I will let my neighbour pay. Now that is good management. And that is what the Minister of Finance did. Since he became head of the Department of Finance, 52.1 per cent of the $14 billion that was cut was the result of cuts in transfer payments to the provinces. Meanwhile, he walks around saying: I am a good manager, but in Quebec, they are not, they cut all over the place and they downsize.
Of course, our Minister of Finance is too lazy to do the job himself and lets others do the work for him, while he goes around with a big smile, making theatrical gestures and exuding charm, as some people said, but he is the worst public administrator the federal government has ever known, because he lets others do the dirty work. Fifty-two per cent from downloading onto the provinces. It is easy to be a good manager.
The proportion of operating expenses in this $14 billion is 20 per cent. Twenty per cent of $14 billion comes under his control as manager and represents cuts in government operations. It is a small amount compared to the 52 per cent he left up to the provincial governments. And included in this figure is the despicable cut of $4.5 billion in social programs and in transfers to the provinces to cover post-secondary education, health and social welfare.
Actually, in the past three and a half years, the Minister of Finance has managed to reduce government operating expenses by only 6 per cent. I think people understand now that the reputation of the Minister of Finance is overblown and that he sitting there like an overpaid manager. He is sitting there watching events saying: "I am not going to do anything, because if I do, I might make a mistake". Every time the government rose to propose things, it made mistakes too.
We need only think of the promises on the GST and the promises of $720 million for the daycare system. We need only think of the bad decisions made in the implementation of employment insurance, which will, and I will come back to this, marginalize a whole lot of workers, who will be so discouraged by the eligibility criteria that they will simply withdraw from the labour market and swell the ranks of welfare recipients and be in the pay of the provinces.
From this alone, we can see that the government had only one thing in mind: to keep the system, maintain the unwarranted advantages of wealthy Canadian families-and we will have an opportunity to return to this shortly when we talk about the revision of the tax system-and continue to bleed middle income earners and the unemployed, as it has done since the start of its mandate.
The Minister of Finance has wasted an excellent opportunity to leave his true mark, not the false image of a good administrator who has reduced the deficit, the only one in Canada's recent history to have kept his promises. In the kind of economic situation that this minister has enjoyed, Michael Wilson, Don Mazankowski and John Crosbie could have done much better than he did.
He has lost an excellent opportunity. Why? Because he could have taken advantage of the relatively good economic situation to do the things we are entitled to expect from a true administrator of public finances.
First of all, he could have brought in tax reform. Our tax system has not been changed in 30 years. We have said this many times. We even made it one of our campaign commitments, just as the Liberals did. That is another red book promise that has not been kept. They talked about making our tax system more efficient, more in line with the reality of the 1990s and the next decade and more fair and equitable for all taxpayers, but they have not done it.
In the three and a half years he has been at the helm of the finance department, the Minister of Finance has lost an excellent opportunity to reform our tax system.
Last year, we did the job our lazy minister should have done. We formed a small task force. We sought advice from experts across Quebec and across Canada; we even used the briefs that were submitted at numerous meetings of the finance committee where tax experts were invited to talk about corporate and personal taxes.
Last year, with our small team from the official opposition, and with the full support of my colleagues, who were good enough to make suggestions for the reform of corporate taxation, we tabled a substantial, almost exhaustive analysis of all major tax expenditures that applied to Canadian businesses.
For the benefit of taxpayers in Quebec and in Canada, tax expenditures are all the exemptions, everything in tax legislation that applies to corporations, as well as to individuals-in this case I am talking about corporations-everything that lowers the taxes paid by corporations.
We reviewed twenty or so of these tax expenditures and found that things had changed in the last 30 years. Some small improvements, some cosmetic changes, had been made but, overall, things had been terribly neglected and a number of unfair advantages to large corporations for which there was no longer any justification had been left intact. And they continued on this course. Three and a half years of the Liberals in power, three and a half years of our super tough manager, our mascot, the Minister of Finance, and not a line written about the reform of corporate taxation.
The Bloc Quebecois' analysis showed how, through tightening the rules and abolishing outmoded tax expenditures, $3 billion could be saved, and we suggested to the Minister of Finance that he take this $3 billion and plow it back into the corporate tax system in order to support SMBs in their job creation efforts. People are looking for jobs, and the Liberals are telling us that jobs are their priority.
I recall that, when we tabled this report, the Minister of Finance rose to his feet and congratulated the Bloc Quebecois. Even the newspapers reported that the Minister of Finance had congratulated us on corporate taxation. But that was as far as it went. He congratulated us. We were very flattered, very pleased. My colleagues and I in the Bloc Quebecois were very pleased to be congratulated, but that was not why we did what we did. It was not so he could take this report and shelve it, like other reports by royal commissions of inquiry have been shelved by the federal government over the last 25 years.
We offered him these detailed, documented, very simple but highly logical suggestions so that he would do something, so that he would stop sitting back and watching the world go by, so that he would stop going with the flow and doing nothing to improve the tax system.
He did nothing. That would have been easy. We made a very simple suggestion in this report, which we repeated in our report on personal income tax published more than two weeks ago: we asked the minister to eliminate a tax provision that applies to corporations and wealthy Canadian families, and consists in taxing only75 per cent of capital gains. For instance, only 75 per cent of the value of equity holdings owned by a corporation or an individual would be taxable.
When a worker earns $300, the entire $300 is taxable, not just75 per cent. But the rich, wealthy Canadian families, the same ones who take advantage of almost perpetual tax referrals connected with family trusts and who transfer money abroad without paying income tax, the very same people who go around with powerful lobbyists, go to see the minister and say: "You must not touch that". Once again, the lobby of wealthy Canadian families has won.
I must say that when we look at the government team and the Prime Minister's office as well, we can see that the lobby of wealthy Canadian families is very close to the government. I think that explains much of this government's inertia. They were elected to preserve all these advantages, because the minute the government does anything about these tax provisions and revises the system as we suggested, to be fair to businesses that do pay taxes, especially small businesses, these undue advantages that accrue to the friends of the Prime Minister and the Minister of Finance will disappear.
I get the impression that is largely why the Minister of Finance has been so slow to act and did not write a single word about corporate tax reform. For the past year, and actually I am proud of this, the Minister of Finance has been waving three pages at us: "Look, I have three pages of measures with which I eliminated tax loopholes, three whole pages".
A week and a half ago we wisely asked the Minister of Finance to table the document he had been waving around for a whole year in this House.
We were right to do so, because it allowed us to analyze each of the measures the Minister of Finance claimed eliminated tax loopholes. He would rise and list them endlessly. Sometimes we did not quite understand. From this document we can see why we did not quite understand. Of all the measures listed on these three pages, only one quarter actually serve to eliminate tax loopholes.
Three quarters of the measures he waved in our face every question period each time we asked him about corporate and individual tax loopholes are erroneous, do not make sense, were never carried out, have nothing to do with loopholes or are duplicates. The repetitions go on for three pages. As if we could not figure out that they repeated the same measures two or three times over the three pages so they would appear to look like more, rather than the meagre showing they were compared to the 400 pages we gave him on corporate and individual taxes.
Really, this takes the cake. This is not being a little partisan or election oriented; this is electioneering in spades, despite an important responsibility to Quebec and Canadian taxpayers.
Since he came to this House, the Minister of Finance has been and is still hiding behind a smoke screen. He claimed he had done great things to deal with tax loopholes, but judging by what he presented, it does not seem to amount to much.
With regard to personal income tax, it would have been so easy for the minister and his team-I suppose it must be impressive, at least in terms of numbers and volume; I believe its total weight
must be around several million pounds. There are many brainy people at the finance department, they are all over the place, at the revenue department as well, experts who advise the Minister of Finance and who could have conducted in-depth analysis, far better than what we presented, with regard to the reform of the personal and corporate tax systems. Why was it not done? Why is it that in the last budget, as in the previous three, there was no measure to make personal taxes more equitable?
Another red book broken promise. In the red book, they talked about tax fairness, tax equity. You can go and see for yourself. They have been quoting it less often lately, perhaps because of the election, they know we are going to annotate it and rub their noses in it. Again, they said the tax system should be made fairer and more equitable, one more empty promise. Nothing, a big zero, is what they have done to change the personal income tax system.
Two weeks ago we presented a report suggesting a few possible measures. We were not asking the finance minister to implement them immediately in his budget. However, he could have announced that he was contemplating a reform of personal income tax for next year, or some mechanism to improve the equity and justice of the system. But no, this would have been too much to expect from the Minister of Fiance. He is used to sitting back and letting things happen. So he did nothing in these areas.
For example, if he had wanted to reduce poverty for families, and particularly single parent families with children, he could have replaced the income tax deductions for child care expenses, as provided in the Income Tax Act, with a refundable child tax credit, just as we had suggested.
He could have implemented measures so that even the single parent families without any taxable income on their return would have benefited from the refundable part of the credit. We have estimated that families, depending on their income and the number of children, would have saved an additional $600 to $1,000. The minister could have done that. But no, he did nothing of the sort.
In order to focus taxation on job creation, he could have adopted our suggestion and implemented a job creating RRSP similar to the home ownership RRSP. Like the people participating in the home buyers' plan, people could have withdrawn $25,000 out of their RRSP to start up a new business.
Last year, more than 60 per cent of new jobs were self-created, that is to say people created their own jobs. That is the way of the future. People are being told over and over again that it is the way of the future and that is the goal they should pursue. However, no government is willing to give them a hand. Yet, this is a new reality of the labour market that should be acknowledged, and the tax system should be adjusted accordingly. But there is nothing in the finance minister's budget in this regard.
We are not creating enough jobs and he is sorry for it. Here is an official in charge of managing public finances, making sure that the economy is sound and the labour market more productive, and he apologizes, like the Prime Minister. No, the Prime Minister does not apologize, because he never admitted that he can make mistakes. The Minister of Finance apologizes by saying: "We could do better, but we did not". Yes, he could have done better, much better.
For example, he could have restored the $5,000 ceiling on contributions to labour-sponsored investment funds, like the FTQ and CSN funds in Quebec and others in the rest of Canada, as we suggested. Last year, he reduced the ceiling to $3,500. He says that he is working to create jobs, but he is cutting off funding for one of the best job-creating vehicles in Quebec and Canada.
There again, they are short of ideas, they are short of means. I have a feeling that they lost their drive. Instead, they would rather wait until they have won another election to play dirty tricks once again, as they have been doing for the last three and a half years, and they will be at it again. This is the Liberal establishment: they continue to maintain undue advantages for rich families and rich corporations. This is the Liberal Party of Canada.
I would like to remind the House of one thing that became obvious to me when the analysis of corporate taxation was done. It is always under Liberal governments, the previous ones and this one, that tax deferrals by big corporations have consistently increased. Every time the Liberals have been in office, all of a sudden, there has been an increase in the number of tax loopholes and tax deferrals by big businesses, for a total of $36 billion until now.
The finance minister also did not think that this issue should be examined and that-for big corporations that will never pay a penny in taxes, because for them it is not a deferred tax but a scrapped tax-a mechanism should be put in place to get, like in the United States, at least a small minimum, minimorum as we say in Latin, the smallest minimum in taxes.
Once again, the finance minister has nothing to his credit. I find this is quite a bad way of completing a first mandate as finance minister. I think Canadians are starting to understand the game played by the finance minister and are starting-and we will see thisduring the election campaign-to question the ability and honesty of some of the people on the government side.
The finance minister, if he had been hard working, if he had been the kind of beaver that he says he represents, because it is Canada's emblem, could have taken advantage of exceptional circumstances
in terms of tax revenues, as I was mentioning earlier, and in terms of people's expectations.
Yesterday, the finance minister in his budget speech painted quite a picture when he talked about deficit forecasts for this year and next year. Our initial analysis of his statements is as follows: in the past-since the past is the key to the future-the finance minister has always somewhat underestimated his performance, so that six months later, the first actual figures are spectacular, exceeding forecasts by 30 per cent, and have a major political impact. This is all he thinks about. He gets up in the morning and only thinks about the way of looking like the best manager of the government. In fact, the finance minister is a comedian, a real comedian.
He tells us: "I must be careful. I cannot put in too much. I can allocate no more than so many millions-a pittance, crumbs here and there-to the fight against poverty". The fact of the matter is that the Minister of Finance is hiding the truth from the public. The fiscal flexibility he will benefit from, not because of his managerial skills-as I said earlier, Youppi and Alcide would have done better-but simply because of the economic situation, could total between $8 billion and $10 billion this year and the next.
What is this flexibility? It is the difference between last year's deficit forecasts for this year and next year and the actual results achieved because of the economic circumstances.
Even if he took $8 billion from his deficit reduction target, thanks to the economic situation, he could still achieve a zero deficit by the year 2000-achieving a zero deficit by the year 2000 is no small feat; the financial marketplace would be delighted to hear that-but he is not yet committed to a zero deficit by the year 2000. The Government of Quebec, on the other hand, made that commitment long before he did. Achieving a zero deficit by the year 2000 would be possible if he took the $8 billion or more at his disposal, and applied it to something else than deficit reduction.
The federal deficit could be eliminated by the year 2000 by allocating $8 billion to various other things, to alleviate the job crisis, to fight growing poverty, and so on. The Minister of Finance did not tell us that yesterday; he was silent on this issue. Do you know why? It will be very simple for him. Let me predict what will happen during the election campaign. Let me pretend I am Bernard Derome. I would say: At 3.55 p.m. this afternoon, I predict that, when the election campaign is in full swing, the Minister of Finance will release revised figures on deficit reduction. He will say: "This is wonderful. The Liberal Party of Canada and the Minister of Finance-because he really likes to be a star-managed to achieve results that greatly exceed all expectations, including the minister's own, when he tabled the budget".
We know that. One only has to make a simple calculation to see where the deficit reduction curve should be in the year 2000, based on the budget forecasts made last year by the minister, and to see that there is a margin of $8 billion to $10 billion for this year and next year.
So, there is some leeway with this $8 billion margin. This is a great opportunity for a government interested in doing something about job creation, about poverty. But the government is passing up the opportunity. The government could have added an extra $2.5 billion to this $8 billion, by committing to reform the personal tax system this year. It would have had that extra $2.5 billion by eliminating undue benefits for those who earn $150,000 or more, while giving back some of the money to low income earners, who have been bled dry with a tax burden of $22 billion over the last three and a half years. So, this additional $2.5 billion could have been added to the $8 billion margin, that is the money available to the minister to take some action.
To this amount, the minister could have added another $500 million, and we were hoping to see this in the budget, as stated in the document that we tabled last week, by saying yesterday that, being the good manager that he claims to be, he was going to fight the underground economy. Had he done so, he could have got another $500 million.
In 1994, Statistics Canada estimated the underground economy at $6 billion, so $500 million out of a total of $6 billion is not all that much. By trying a little bit harder, the minister could have generated those revenues. All things considered, in the first budget he tabled in the province of Quebec, Mr. Campeau was able to generate a lot of money by using the necessary resources. This additional $500 million would have given the minister more leeway.
In his last report, in the previous one and in the one before that, the auditor general kept pointing to $2 billion to $3 billion in inefficiencies and waste. Last time, besides that $3 billion, he indicated that the federal government is spending $1.2 billion more than needed to manage its inventory. That is $1.2 billion too much. As a good manager of our public finances, the minister could have promised, each and every year, to fight all that waste and try to give himself more leeway.
All in all, this year, if he had been willing to, he could have given himself a lot more leeway, in fact between $8 billion and $14 billion more-that is a lot of money-and still maintain his objective of eliminating the deficit by the year 2000. It is very sad indeed. He could have told us: "Look, I can do these two things at the same time." Instead, he stuck to his fight against the deficit, the only thing that matters to him, his only real achievement. He wants to show the people that he can not only reach his goal and completely eliminate the deficit by the year 2000, but that he can
also generate surpluses immediately and go for a third election campaign and maybe also run for the leadership of the Liberal Party of Canada, something he seems to be interested in.
He had a margin of $8 billion to $14 billion. What could he have done with that? He could have distributed it to his wealthy buddies. That would have been his natural reaction. He could have done things for all taxpayers in Quebec and Canada. He could have helped the real people, the people he claims to serve, the people the Bloc Quebecois actually does serve.
He could have said: "I will forget about the $4.5 billion cut in the Canada social transfer, the transfer payments to the provinces for welfare, post-secondary education and health care. I will give back to the provinces the $4.5 billion I took from them in my last budget".
Thus, with the established programs and resources in the provinces, especially in Quebec, we could have really fought poverty. Instead, the minister announced a program that was all show and only designed to get votes.
Thanks to the leeway he had, he could also have afforded to stop doing what he has been doing for the last two years, that is, using at least $5 billion of the unemployment insurance fund a year to reduce his deficit.
I want to digress about the first measure, which is to put $4.5 billion back into the Canada social transfer to the provinces. Yesterday, the minister announced that he would fight child poverty with determination. Over the past few months, he has made a show of being compassionate toward poor children. He wants us to forget that his $4.5 billion cut in social programs is the very thing that increased poverty for families, for the parents of poor children.
He indicates today that there will be a supplementary child benefit of $600 million. When you consider only that, it is fine. But do not forget that the cuts amounted to $4.5 billion and that the $600 million will only be implemented next year, after an election.
We must not forget the promises made during the 1993 election campaign. Everybody remembers the promises made by the Prime Minister and his ministers who were only candidates then: "We will create hundreds of thousands of jobs". Where are those jobs? "We will abolish GST". What happened to the GST? "We will invest $720 million in the day care program". Where is the $720 million?
And now they announce a new $600 million child benefit for 1998. We do not believe them. They are not believable. Nobody believes them. We have our doubts about what will happen after the election. It seems that they suddenly forget their promises once they have been elected. They ignore them. They dismiss them and act as if they had never existed.
There is a real national emergency in terms of child poverty. The Minister of Finance said it was. According to our analysis, it is more than an emergency. In fact, we should have done something in the past three years. We should not have cut $4.5 billion in social programs. On the contrary, we should have increased funding to help families, the most disadvantaged families, the parents of these children living in poverty.
Instead, this year, we will spend only $50 million to fight child poverty. Have you thought about what $50 million means? They cut $4.5 billion from social programs, which will worsen the problem of poverty. They will spend $600 million, but only next year, because this problem is not enough of an emergency for the government. They will spend $50 million this year to fight child poverty. This amount shows how compassionate the Minister of Finance is. We do not believe him either. He is not believable when he says that he is greatly concerned about child poverty.
When he places his hand on his heart, I think what he really has in mind is his wallet. Child poverty is the least of his concerns because, once again, if he did not have his mind set on merely partisan or crass electoral things, he would have put the money where it is needed, and at the levels that his margin of $8 to $14 billion a year allows. He would have put $4.5 billion in social programs instead of literally robbing the provinces of that amount. That is where he should have put the money.
Concerning the unemployment insurance fund, once again, the Minister of Finance could have been more shrewd, more hard working, less lazy. He could have said: "I will use part of the $5 billion surplus in the unemployment insurance fund to substantially reduce unemployment insurance, now called employment insurance, premiums". Not a reduction of a nickel or a dime, which is what he has accustomed us to. As a matter of fact, every analyst is saying today that, in this regard, the minister's budget is worthless, that it will not have any impact on corporate competitiveness and job creation.
He could have done three or four times better. And with the rest of the surplus, he could have given back the protection he took away from the unemployed with the introduction of the employment insurance program last January. He could have done that, but not this finance minister. We know him and we know how he is putting his fiscal house in order on the back of others, so we could not expect him to use this cushion that he is hiding from us to stimulate employment by reducing unemployment insurance premium rates, and especially by helping small and medium size businesses create jobs and by improving the situation of those who fall victim to unemployment. He has not done that. Absolutely not.
I remind the House also that he has not followed our suggestions on corporate income tax reform, which would have freed up $3 billion that could have been used to support employment in the small and medium size business sector. He applauded these
suggestions but he did not act on them. He applauded them just for show, for his image. Image is very important to our finance minister. He is paving the way to becoming the leader of the Liberal Party of Canada some day. He came to thank us. He was even quoted by a newspaper as congratulating the Bloc Quebecois, but he did not do anything in the area of employment. The same goes for our proposed employment RRSP. He applauded that suggestion but did not act on it.
Speaking about employment, do you know what new measures are contained in this budget to create jobs? I remind you that we are experiencing a shortage of jobs. There are 1.5 million people officially unemployed; there are another 1.5 million unofficially unemployed, people who are discouraged, marginalized, driven to welfare, who no longer show up as actively seeking work. This adds up to 3 million underemployed people in Canada. He has set aside $25 million in new money for job creation. This represents 90 cents for each Canadian. Direct assistance during the Great Depression was more generous. It is terrible, 90 cents.
It is cynical, laughable, but sad at the same time, because 3 million people are waiting for help, while with great fanfare the Minister of Finance is presenting his empty, ridiculous measures. It is unacceptable.
The only new measures in the budget are measures that will lead to confusion.
In addition to being partisan and despicably election oriented, these measures, when presented by the Minister of Finance, suggest that the public will swallow anything. Apart from that, there is the confusion that will result. The Minister of Finance is proposing, and for three and a half years that is all his government has been proposing when there is any reform, a wholesale invasion of provincial jurisdiction. This is all this budget is.
It talks about health programs. Under the 1867 and the 1982 Constitutions it is clear that health comes under provincial jurisdiction. The same clearly goes for education. Income security and social assistance are areas of provincial jurisdiction.
The government tells us it has no more money for social programs. It is cutting $4.5 billion, and all of a sudden we are seeing little programs with "Government of Canada" at the bottom and the Canadian flag at the top. It does not get much more partisan.
There is no longer any money for social programs provided jointly with the provinces. In particular, the government is cutting $1.3 billion from the Government of Quebec's social programs. And with a fraction of the amount it has stolen, it is setting up a child benefit program to fight poverty. If that is not confusing and inflammatory, I do not know what is. The Minister of Finance is playing with fire.
The same goes for the Foundation for Innovation. The purpose of the Foundation for Innovation, an $800 million dollar undertaking, is to fund research and infrastructure in the areas of biomedical research, post-graduate research and so on. Once again, this is an intrusion into health and education.
What the Minister of Finance does not tell us is that his fund is just a band-aid solution for a huge gaping wound, one he himself has caused with the various measures he has put in place in the past three years. When he cut $4.5 billion from social programs and health, part of that was going to biomedical infrastructure and research.
Moreover, people far smarter than those across the way came before us in the finance committee to say that the cuts imposed by Minister Martin in his first three budgets might compromise all biomedical research. We are talking about major cuts here. They slashed research budgets by 30 per cent, with the full knowledge that we are already trailing behind all other industrialized countries. A 30 per cent reduction is tantamount to a death sentence for biomedical research.
The Minister of Finance announces to us, with great fanfare: "are going to create an $800 million foundation to fund research". This budget is a total joke, a kind of vaudeville act. It is sad to see a minister of finance behaving in this way, when there are crying needs in the areas of poverty and job creation. He leaves the provinces scrambling to keep their heads above water. He cleans up his government's finances at their expense, and goes about patting himself on the back for being a good manager.
We need to know where the Minister of Finance is getting his $800 million to start up the Foundation for Innovation. It might have been expected that he would get it from the $8 billion available, plus all the items I have referred to, which could yield between $8 billion to $14 billion to work with. If he had been a good manager, if he had not had an exaggerated obsession with waging war on the deficit, with immediate, spectacular results, in order to bolster his image, to make him look like a Canadian leader in training for a leadership fight, one might well think that he would have taken the money from there. But no.
When we look at last year's budget, the 1996 budget-which I am not allowed to use as a prop, but I do have in my hand-when we look at his forecasts for overall transfers to the provinces, including the equalization payments, the Canada social transfer and so on, and when we compare them with the forecasts in yesterday's budget, we see that last year he projected $800 million more in transfers to the provinces than in this year's budget. Fascinating coincidence.
There is new spending totalling $800 million for the Canada Foundation for Innovation, and there is $800 million less available for transfers to provinces. What a coincidence: exactly $800 million. So this is a big coincidence, but it is rather odd, because we do not know why the minister deliberately decided to take away another $800 million from the provinces or it may be the economy or a combination of the two, but in any case, there is no new money here.
He did not take advantage of the flexibility he has to establish this kind of foundation. As I said before, this is just a band-aid on a gaping wound he opened in the course of the last three budgets by attacking provincial budgets for health care and education.
I would like to touch on one last point in this budget. I think this is a very important issue on which there is practically a consensus in Canada. I am referring to the harmonization of the GST with the Quebec sales tax.
As you know, in 1991, the Quebec government offered to harmonize its sales tax with the federal GST. It did so because it felt that with a harmonized system, the sales tax would be easier to manage by business and its administration would also be easier, since the Government of Quebec would administer both taxes on behalf of the federal government. It also wanted to improve Quebec's competitive position and trade balance. In fact, Quebec Finance Minister Bernard Landry made this clear when he started to demand compensation last April. He made it clear why the Government of Quebec decided to harmonize its sales tax with the GST.
We did so in good faith, and we did so with a view to improving the situation in 1991. What do we see six years later? That the federal government thought it was a such good idea that it suggested the same to the maritimes. However, to persuade the maritimes to go along with it, it offered them about $1 billion. That is $1 billion over the next three years to harmonize the sales taxes of the three small maritime provinces with the federal tax, the GST. One billion.
And now, the Minister of Finance says: "It is not the same thing, the harmonization is not being done the same way". Is that right? We harmonized in 1991, and they harmonized in 1997. They are entitled to $1 billion and we do not get a red cent.
The Minister of Finance in rejecting the demand of minister Landry for some $2 billion in compensation pushed arrogance to the point of saying: "We based our calculations on the formula we used in the maritimes. Unfortunately under the terms and the subtleties of the formula, you are not entitled to it". Oh, come on.
According to this logic, the government can exclude whomever it wants whenever it wants. This is exactly what the government wanted to do. In setting up the formula, it justified paying out $1 billion in the maritimes and denying Quebec any compensation.
I heard the minister say in question period: "We did the calculations. The Government of Quebec made money with harmonization". My eye. In terms of tobacco and gasoline alone, we lost something like $600 million in tax revenues, because we wanted to harmonize with the federal government and make things easier in terms of taxes on consumer goods. For these two items alone, $600 million.
The claim for $2 billion is justified. It is justified to such an extent that the government of Mike Harris, the Government of Ontario, I am pleased to say, as it does not happen often, is supporting Quebec's demand for $2 billion.
Even the Government of Alberta is supporting Quebec's demand. The Government of Manitoba is supporting Quebec's demand. British Columbia is supporting the Quebec government's demand for $2 billion. This is unheard of. The finance minister told us he owed us nothing. He gave $1 billion of our own tax dollars to the maritimes and told Quebec: "No, you are entitled to nothing. You went ahead, you did it all on your own, you spend money for the others, but you are not entitled to anything, only the maritimes are."
We would have expected to see in this budget an indication of a possible first payment, a first instalment to pay off the $2 billion debt the federal government owes the Government of Quebec, but nothing. A big fat zero.
There are many other things I could speak up against in this budget-my colleagues will have the opportunity to deal with specific elements of the budget over the three days set aside for the debate-but I would like to end on the following note. The finance minister wasted three and a half years he could have used to improve things. He could have used these three and a half years to make the tax system fairer and more equitable for everyone.
He could have taken steps to reduce the outrageous benefits for the richest Canadians, who are said to represent 2 or 3 per cent of the total population; I am not saying they should be eliminated, they could have been allowed to keep some of their benefits-one way or another we do have to keep them here-but at least they should have been reduced in scope and what is collected redistributed among middle and low income earners, who have borne the brunt of increased income tax and other tax hikes over the last 15 years, and who have been the victims, over the past three years, of a $22 billion tax grab.
With the manoeuvring room he had, thanks to the economic recovery, not thanks to him-because he, I have made up my mind on this, he is not the best manager I know-he could really have helped the poor and given back to the provinces the money he stole from them in the last two budgets, $4.5 billion.
He also could have helped the unemployed. Hew could have helped to create jobs. My overall assessment of this budget is that it is good for the shredder, the waste basket. If it was meant to be a pre-election budget, the Prime Minister should call an election tomorrow morning with the budget as a platform. Let me tell you, as the Prime Minister himself said, they will get clobbered.
We are ready for the election. We are ready to compare our record to theirs, our reality to theirs. Our reality is more in line with that of the grassroots, closer to what real people experience, more attuned to the circumstances of the have-nots who were ignored by this government over the last three and a half years.
I would like to move an amendment to the government's motion. I move, seconded by my colleague, the member for Anjou-Rivière-des-Prairies:
That the motion be amended by replacing all the words after the word "That" with the following:
"the budget statement by the Minister of Finance be rejected by the House of Commons because it:
unilaterally maintains major reductions in transfer payments to the provinces in the fields of postsecondary education, health, and social assistance, while intruding in areas of exclusive provincial jurisdiction, particularly by creating the Canada Foundation for Innovation from money earmarked for the provinces, introducing a national child tax benefit system, and setting up pilot projects filled with national unity propaganda in the field of health and social programs;
proposes no tangible job creation measures, does not substantially reduce Unemployment Insurance contribution rates, or improve protection for unemployed persons, which has been greatly reduced by Employment Insurance;
conceals its lack of action in creating jobs and fighting poverty, knowingly reducing effectiveness in these areas and distributing electoral gifts around Canada and Quebec;
does not include an in-depth reform of the tax treatment of businesses or individuals, for example, by maintaining benefits for large corporations and rich Canadians; and
introduces no measures to compensate the Quebec government for the 1991 harmonization of its sales tax with the federal GST, although Quebec would be eligible for this compensation in light of the $1 billion being paid to the maritime provinces."
The Deputy Speaker
I must tell the hon. member for Saint-Hyacinthe-Bagot that I can see nothing wrong with this amendment, but we will need some time to determine whether it is in order. We will let you know as soon as possible.
The Royal Assent
The Deputy Speaker
I have the honour to inform the House that a communication has been received as follows:
Government House Ottawa
February 19, 1997
I have the honour to inform you that the Right Hon. Antonio Lamer, Chief Justice of the Supreme Court of Canada, in his capacity as Deputy Governor General, will proceed to the Senate Chamber today, the 19th day of February, 1997 at 5.00 p.m., for the purpose of giving royal assent to certain bills.
Secretary to the Governor General Judith LaRocque
The Royal Assent
The Deputy Speaker
It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Waterloo-Canadian Securities Commission; the hon. member for Rosedale-Exports.
The House resumed consideration of the motion that this House approves in general the budgetary policy of the government; and of the amendment.
The Royal Assent
Preston Manning Calgary Southwest, AB
Mr. Speaker, we are here to discuss the federal budget. The Liberals say it is a good budget. What is more important is what Canadians are saying about it. In our view Canadians will say: If this is such a good budget, why don't I see the benefits. Where are the jobs? Where are the health care and pensions that I can count on? Where is the tax relief? Why is it that federal government revenues go up by 20 per cent and family incomes go down by 10 per cent?
The good news is that the majority of the provinces have already balanced their budgets and the benefits are starting to flow. It is Ottawa and the federal Liberals that are furthest behind and most off track. The big task facing Canadians in 1997, in a federal election year, is to get the federal government on track with respect to job creation and tax relief.
There are two options before Canadians. Reform offers its fresh start platform designed to balance the federal budget now, and then leave more dollars in the pockets of Canadians through broad based tax relief. Notice the order: balance first, tax relief second. The Liberals offer this tax and spend budget designed to get more tax dollars into the hands of the federal government and then further spending.
The options are Reform's fresh start tax relief versus the Liberal tax and spend budget. These are the principal fiscal options facing Canadians in an election year at the federal level and should be the focus of both public debate and this budget debate.
If we are going to have any kind of debate, one of the prerequisites is to establish the facts and to separate myth from reality. I would like to spend a little time on that because the budget is loaded with myths. Budget myth number one is that federal finances are finally under control. What is the reality? The federal deficit is still at $19 billion. The debt will pass the $600 billion mark this spring. The federal government will spend $46 billion per year on debt service, more by far than it spends on social programs. This is represented as prudent fiscal management. Only in Ottawa would that be believed.
Budget myth number two is that the federal government has reduced the deficit by controlling its spending. What is the reality? Almost the opposite. Eighty-four per cent of deficit reduction has been achieved by increasing tax revenues. Two-thirds of the remainder of deficit reduction has been accomplished by offloading on the provinces and through defence cuts. Only 6 per cent has been achieved by reducing the federal government's direct spending on other programs.
I noticed that at the beginning of the minister's budget speech, he thanked everyone and his dog for contributing to this speech. The people he did not thank were the Canadian taxpayers who are responsible for 84 per cent of the reduction of the deficit.
Budget myth number three, Liberals are the great defenders of medicare. The reality is that they have cut medicare by 40 per cent, closing hospitals across the country and increasing waiting lines in every province, but leaving others in local and provincial governments to take the blame. This pretence of defending medicare while gutting it is the ultimate hypocrisy.
Budget myth number four, Liberals are attacking child poverty. The reality is that their new $600 million child benefit is completely negated by the $7 billion federal cut in health, education and social spending since 1993.
If one thinks about it, Canadians are a kind, caring and compassionate people. If the average Canadian were willing to spend $1,000 on helping a poor family or a poor child how would they do it? They might make a direct contribution to that family or that child, or they might make a contribution to a local agency or church that was in the business of helping those people. They might even be persuaded to pay $1,000 in taxes to their local government or the provincial government which has services offered at the community level.
However, I doubt if there is one Canadian in 1,000 who honestly and sincerely wanted to help a poor family or a poor child who would think that the best way to do it was to write a $1,000 cheque to Revenue Canada because they know what would happen.
The $1,000 would go to the minister of revenue who would take a bite out of it for administration and then pass it over to the Treasury Board. The Treasury Board would take a bite out of it for allocation and then pass it on to the human resources minister. The human resources minister would take a bite out of it by having a conference with all of his provincial colleagues and a bunch of experts to decide what to do and then he would pass it on to his provincial colleague who would take a further bite out of it and then pass it on to some agency. Out of the $1,000 that went in at one end of the pipe, we would be lucky if a loonie got out the other end.
Canadians know a better way. Canadians know that if Liberals and Tories were so concerned about the poor and the children of the poor then why are these people paying taxes in the first place? Why is a single mother with one child making $2,000 a month paying federal income taxes at all, let alone $1,300 a year? It is because government after government made them pay taxes and offered no tax relief.
Of course the greatest thing one can do for the working poor is to get more jobs, which brings me to budget myth number five, jobs, jobs, jobs. The reality is 1.5 million Canadians unemployed, 2 million to 3 million underemployed, 700,000 having two jobs to try to make ends meet, 17 per cent unemployment among young people, 1 out of 4 workers afraid of losing their jobs, and the worst string of unemployment numbers since the depression, 76 consecutive months with unemployment rates over 9 per cent.
Some day the finance minister's picture will hang in the hallowed halls of Parliament. At the rate he is going, I suspect they will hang it next to the picture of the finance minister in R.B. Bennett's government, the only other government that ran up unemployment numbers like we are experiencing today.
The Liberal budget is accompanied by a booklet called the government's job strategy, but it contains no reference to tax relief. A job strategy without tax relief is like a beaver without teeth. It is like a truck with no wheels. We can rev the engine, flick the lights and honk the horn but it is not going anywhere, which is precisely the Liberal record on jobs.
That brings me to the biggest myth of all. The finance minister would have Canadians believe that he has not raised taxes. That is a big whopper. The reality is that since the Liberals came to power in 1993, the GST revenues, the hated GST, are up by $2 billion, corporate income taxes are up by $6.8 billion, personal income taxes are up by $15 billion, and other taxes are up $500 million. That is a $24 billion increase in tax revenues over what they were on the day the Liberals took office.
Just last week, in the biggest tax grab of them all, there was a 70 per cent increase in Canada pension plan contributions. It is the government's Achilles' heel, the tax grab that will be to the Liberal's what the GST was to the Mulroney Conservatives. It is the tax increase that brings to 36 the total number of tax increases introduced by the Liberal government.
Enough of these myths. Enough of the fudge-it budget. There has to be a better way and there is a better way. It is described in the platform which Reform has put forward under the heading of a fresh start for Canada.
I suggest that the next election will be a contest between two very different visions of the country, and the vision that captures the hearts of Canadians will be the vision that shapes the Canada of the 21st century.
One vision held by the government and by the Conservatives before them revolves around big government and the high taxes that go with it. It is based on the belief that the Canadian economy, Canadian social services and Canadian unity all need aggressive intervention and management by a big spending federal government. It is the vision of Ottawa and the politicians who control it as the centre of the universe.
This is a vision which has Canadians working more than half a year just to pay taxes. It is a vision that promises job creation and social justice and has delivered chronic unemployment and chronic poverty. It is a vision which trivializes Canadians' sense of themselves by implying that only through government programs, government spending, government initiatives and government propaganda can the country be held together.
The other vision, the one offered by Reform, is of a Canada defined and built by its citizens rather than by the government. The citizen, not the government, is at its centre. It is a vision in which strong families and communities and local governments, not more federal programs, are the principal pillars of social security. It is a vision of a country where tax freedom day occurs in April instead of in July. It is a vision of a country in which the unemployment rate is 5 per cent or lower instead of 10 per cent, thanks to initiative and entrepreneurship, innovation and hard work. It is a vision of a smaller government and lower taxes. It is a vision based on the proposition that a dollar left in the pocket of a consumer or a taxpayer or a lender or an entrepreneur will create more jobs and economic and social security than that dollar in the hands of a federal bureaucrat or a politician.
We are talking about the budget, so I want to conclude with the fiscal plan that makes that vision of a new and better Canada a reality. Our fiscal plan calls for balancing the federal budget by 1998-99 at a level of expenditure lower than that proposed by the finance minister, and then running surpluses thereafter.
Note that what we are proposing is balancing the budget first and tax relief after. Many members opposite seem to think we are trying to do the two things at once. We have made this abundantly clear; balance first, tax relief after.
We then get to surpluses and these surpluses are the real light at the end of the tunnel, the beginning of the hope for the future. We propose to apply those surpluses as follows. A $5 billion down payment on debt reduction by the year 2001, with a fixed proportion of future surpluses being dedicated to debt reduction. In other words, the federal debt would be set up like a mortgage and the first payment made every month is a payment on the mortgage.
Second, $4 billion per year transfer for health and education purposes to the provinces to repair the damage done by the Minister of Finance.
Most important of all, broad based tax relief which follows, not precedes, balancing the budget. Seven tax relief measures to deliver $1 billion per year in tax relief to the people of Atlantic Canada; $3.2 billion per year in tax relief to the long suffering people of Quebec, the most highly taxed jurisdiction perhaps in North America; $5.4 billion per year in tax relief to the people of Ontario; $2.3 billion per year in tax relief to the people of the prairies and $1.8 billion per year in tax relief to the people of British Columbia.
Put another way, it is $2,000 in tax relief per average family by the year 2000 or tax relief that lifts 1.2 million lower and middle income Canadians off the federal tax rolls altogether.
To put this into perspective, Reform proposes a trimmer, more focused $94 billion a year federal government. We can get a lot of government services for $94 billion. This compares with a bloated, unfocused $109 billion a year federal government from the federal Liberals and Tories. The difference between the two is about $15 billion per year. The number one question to be decided in the next federal election is whether Canadians should allow that $15 billion to be collected by the federal tax man and spent by Ottawa or whether that $15 billion should be left in the hands of the Canadian consumer and business community.
Reform believes that a fresh start for Canadians lies in the direction of leaving that $15 billion in the hands of the people to whom it belongs.
I therefore move:
That the amendment be amended by inserting after the words "health and social assistance" the following words: "a measure which is not the answer to stronger sustainable social programs";
and by inserting after the words "proposes no tangible job creation measures" the following words: "such as lower taxes to create long term jobs";
and by inserting after the words "electoral gifts around Quebec and Canada" the following words: "which, among other things, hampers the government's ability to balance the budget".
The Royal Assent
The Deputy Speaker
The amendment made by the hon. member for Saint-Hyacinthe-Bagot is acceptable. The subamendment by the hon. leader of the Reform Party would appear to be acceptable, but again, as with the Bloc, I would ask permission to give it a formal ruling as quickly as can be done.
Questions and comments.
The Royal Assent
Monte Solberg Medicine Hat, AB
Mr. Speaker, I have a question for the member for Calgary Southwest.
In the House today and over the last couple of days the Reform Party has criticized the government for its approach to the Canada pension plan. I think when an opposition party comes to Ottawa it has an obligation not just to criticize but also to offer an alternative.
I wonder if the member for Calgary Southwest, the leader of the Reform Party, would care to inform the House and Canadians what exactly is the plan of the Reform Party with respect to reforming the Canada pension plan.
The Royal Assent
Preston Manning Calgary Southwest, AB
Mr. Speaker, I thank the member for his question because a lot of confusion has been spread, mainly by the Minister of Finance, on what Reform's position is.
First of all, Reform's position is broader than that of the government. Our aim is to get more retirement income for seniors at lower cost through both pension reform and tax reform. That is a broader objective than just rescuing CPP. It includes rescuing CPP but it is a broader goal.
We propose three measures to accomplish this objective. First, we propose to guarantee existing seniors that they will receive all the benefits they are entitled to under CPP. We propose a modification to CPP designed to achieve that guarantee.
Second, we propose to shift middle aged and younger workers on to an expanded RRSP program. The RRSP program gives higher benefits per dollar spent than CPP. And so our modified CPP plus our expanded RRSP program give pensions at a lower cost than the Liberal approach which is focused mainly on rescuing CPP.
The third thing we add is Reform's tax relief program. By lifting 1.2 million Canadians off of the federal income tax rolls altogether, including many seniors, it helps seniors further, whereas the Liberals have been increasing the burden on seniors on every front by clawing back the seniors benefit, by gouging the contributors to CPP and by restricting the use of RRSPs rather than expanding them.
Reform's aim is to get more retirement for seniors at lower cost through pension and tax reform. Our proposal rests on three pillars, not one: a modified CPP; an expanded RRSP; and tax relief including tax relief for seniors.
The Royal Assent
Rose-Marie Ur Lambton—Middlesex, ON
Mr. Speaker, I would like the hon. member to provide some clarification on the Canada pension plan.
There have been numerous statements made that the Canada pension plan is a tax and not a pension. In my opinion when I pay my taxes I do not expect any funds back over x number of years. Presently as the CPP sits it is a pension and in due time whether it be through disability or retirement people expect to have a return for their funds invested.
Could the hon. member clarify his position that it is a tax and not a pension?
The Royal Assent
Preston Manning Calgary Southwest, AB
Mr. Speaker, what Reform has said is not that the pension is a tax but that the premium paid is a payroll tax. This is not just Reform's opinion.
The Minister of Finance has in his department the economic analysis and forecasting division which did a lot of work on this budget. Joe Italiano who is with that division put out a paper on April 25, 1995 called "Growth in CPP/QPP Contributions". In it he defines CPP contributions as a payroll tax. Incidentally he goes on to analyse the impact of increasing those payroll taxes from 1986 to 1993 and concludes that they killed 26,000 jobs. This is not me speaking; this is the finance minister's own department defining CPP premiums as a payroll tax.
The government gets a lot of statistics from Statistics Canada. A number of officials in Statistics Canada put out a paper in the Canada Tax Journal a short while ago. They identified payroll taxes and listed what they were and the list included CPP and QPP contributions.
Last night Judith Andrew of the Canadian Federation of Independent Business was discussing the minister's budget. She referred to the hike in the CPP premiums as a payroll tax. If there is any group in the country that would know a payroll tax when they see it, it would be the CFIB because of course these are the people who are actually paying it.
Reform says it would be very appropriate for the minister, since his department acknowledges it, Statistics Canada acknowledges it, economists acknowledge it and business people acknowledge it, to acknowledge that the CPP premium is a payroll tax. When it is increased by 70 per cent, that has extremely negative effects on employment.
The Royal Assent
Derek Lee Scarborough—Rouge River, ON
Mr. Speaker, it appears to me that the leader of the third party is engaging in a semantic exercise in using the term payroll tax.
The premiums deducted for the Canada pension plan at source are paired equally, one to one with an employer contribution and paid over into the Canada pension plan. The identical thing happens with the employer's pension plan. The employee is deducted an amount of money at source. It is paired with dollar for dollar by the employer; the identical sum the employee puts in, the employer puts in. It is the same as with the Canada pension plan. Those funds are turned over and paid into the employer's pension plan.
Does the leader of the third party agree that there is a pension plan in both cases? In both cases it is mandatory that the employees contribute. The contributions end up in pension plans and ultimately the party making the contribution, the pensioner, will draw the benefits from the plan.
Why does he insist on referring to one of those two options as a tax when it is not?