Madam Speaker, governments come and go, but nothing changes. At least, that is the distinct impression one gets from the February 22 budget, once the veil of pretence has been lifted and the many statistical pirouettes have been figured out.
Yet, the members opposite claimed they had understood a few things: first, the urgent necessity to drastically reduce the federal budget to reverse the debt spiral which is spinning out of control; second, the price to pay in terms of credibility for padding forecasts for future economic progress; and third, the need for openness and transparency to win people over, as they are the ones who pay and do not appreciate being mistaken for something they are not.
There was also a fourth thing, which the government seemed to distance itself from more and more as the fateful moment to table the budget drew near. The federal government is unquestionably responsible for creating the debt spiral, and therefore the budget crisis that Canada is currently facing. Logically, it should make some sacrifices and clean up its own act.
Given that the federal government had recognized in December, at the premiers conference, that overlapping jurisdictions and policies were a problem, some were nevertheless hopeful.
Alas, on all four fronts, the budget is a surprising disappointment, especially since the government has, at the very beginning of its mandate, a wide-open window of opportunity, both politically and economically. Any recovery, however slight,
still gives more leeway than a recession. This golden opportunity was missed.
Let us look at the substance. The billions in cuts announced left and right combined with the spectacular increase in federal revenues would have led any person unfamiliar with the vocabulary used by successive finance ministers to believe that the trend in the federal deficit would finally be reversed as early as next year. Nothing could be further from the truth.
We will go from a deliberately inflated $45.7 billion deficit in 1993-94 to an almost $40 billion deficit for the coming year. The government's budget plan tells us that the 1993-94 basic deficit, excluding non-recurring factors, will amount to $42.1 billion and that, without any political change, next year's deficit will go down to $41.2 billion.
Let us compare this $41.2 billion figure with the $39.7 billion deficit announced by the Minister of Finance. We must conclude that all this figure shuffling by the government results in a very modest deficit reduction of $1.5 billion. The Minister of Finance wants to convince us that he deserves a gold medal in deficit reduction. In fact, he deserves a paper medal.
Why paper? Because a paper medal has two sides, one for recording revenues and the other for recording expenditures. When we look at it more closely, we see that the finance minister's alleged achievement is entirely based on a revenue increase so large that we are taken aback, especially since his economic forecasts for 1994 are both realistic and modest. But it is pretty useless if we do not arrive at the right conclusions. Even if we exclude non-recurring factors, revenues only went up by 1.2 per cent between 1992-93 and 1993-94, while the GDP grew by 3.3 per cent in nominal terms.
With a wave of the finance minister's magic wand, revenues, excluding increases due to a broader tax base, will suddenly jump by 4.6 per cent with a GDP nominal growth of 3.9 per cent.
We must ask the question that the Minister of Finance has been avoiding: What would be the impact of a more realistic tax revenue increase of, say, 3 per cent? The deficit would amount not to $39.7 billion but to $42.9 billion. The basic deficit for 1994-95 would stay the same as that for the fiscal year ending in one month. At first sight, this outcome would seem the most likely.
The government backed down after the general outcry caused by the trial balloons on RRSPs and employer-financed health insurance plans. But it will still take $1 billion from the pockets of the middle class over the next three years, while some tax shelters reserved for the wealthiest stay in place. They told us about making taxes more equitable, but that will have to wait.
If the government wants its revenue forecasts to materialize, it must allocate additional resources to create jobs by making further cuts in less sensitive federal expenditures. There would then be a real deficit reduction with, as a bonus, a beneficial effect on long-term interest rates and, in turn, on consumption and investments.
The government is acting as though Canada was not facing a structural economic crisis. The year 1994 did not start well on the employment front as 38,000 jobs were lost last month so that, nearly two years after the recession ended, 47 per cent of the jobs lost during the recession in Canada have still not reappeared. The 143,000 jobs created in 1993 were not even enough to absorb new arrivals in the workforce. Quebec still has to recover 60 per cent of the lost jobs. The Canadian economy is still performing well below its potential. The Minister of Finance himself predicts that 173,000 jobs will be created in 1994, which is barely enough for the new arrivals and is not enough to continue making up lost ground.
One of the obstacles to a real recovery of the Canadian economy is the level of longer-term interest rates, which are still high, especially because of this huge debt hanging over Canadians like a sword of Damocles. Historically, long-term interest rates did not exceed 4 per cent in real terms. Today, they are still 6 per cent and, even worse, have started to rise again in the last few weeks under pressure from the U.S. economy.
The only way of bringing back the momentum of lower long-term interest rates is by substantially reducing the federal deficit. When we have a debt of $511 billion, a one point decline in rates represents more than $5 billion less in interest payments. Half the federal debt is of a short-term nature and half is of a longer term nature of is more than one year. This momentum can feed on itself but it has to be sustained and propelled by a government that knows where it wants to go. This does not seem to be the case.
As things stand now the prediction of the Minister of Finance on long-term interest rates seems too optimistic. In a few months the federal deficit will appear to be still out of control and significant economic growth will again be postponed. Job creation was supposed to be the rallying cry of the Liberals. The Minister of Finance predicts a real boost in job creation but unfortunately not this year. It will be next year only.
I am reminded of the metallic plaques in a few French cafés and brasseries bearing the inscription: "Tomorrow free beer". It is tomorrow only and we read it today.
In the meantime what are we supposed to make of a budget that acknowledges one of the first measures of the new government enacted last December was and is a job killer. It is written in black and white on page 2 of the backgrounder on the proposed changes to the unemployment insurance program.
Referring to the rollback in the premium rate from $3.07 to $3 next January it says:
-will provide significant financial relief to businesses. By the end of 1996 there will be 40,000 more jobs in the economy that could be expected if premiums were allowed to rise.
Certainly 40,000 jobs are not something to be looked down upon in these uncertain times. It represents maybe $1 billion in wages.
The government is going to roll back its own increase in the premium rate this year but only in 10 months. In the meantime this increase is killing thousands of jobs. It is strange indeed.
But how do you explain that the announced cuts of several billion dollars do not have any real impact on the deficit? This is because there are two kinds of cuts: real cuts and artificial cuts. For several years, finance ministers have become real specialists in making false cuts.
What is an artificial cut? It is an announced reduction of planned future spending. What was usually foreseen before, of course, was an increase. Reducing or eliminating this increase, in the jargon of technocrats at the Department of Finance, becomes a cut. An employee whose salary raise goes from 5 to 3 per cent has his pay cut 2 per cent, from this point of view, although in fact it is a 3 per cent increase, which will be accounted for as such in the budget of the company or the department.
Such an approach obviously has several advantages for the government. For one thing, it is a good show for the media, since the billions pile up fast in this game, especially since there is no time limit. They will talk about cuts spread over the next three or even five years. And since they are in the habit of adding the cuts over several years, even if it only makes the debate more confusing, they quickly come up with impressive amounts that they can boast about.
What this approach does, in reality, is keep the public guessing as to the government's determination to take the bull by the horns. These budget papers, like all those that came before, do not include the expenditure forecasts of the previous budget. This makes it easier for the government to pull the wool over people's eyes and to more or less distort the facts.
Before I give you a few examples of this sleight of hand, Madam Speaker, I want to say that not only are we not impressed with all of these special effects, we also deeply deplore the lack of transparency in the budget process. The nice words spoken by the Minister of Finance at the University of Montreal last November were quickly forgotten, along with all of the other good intentions. However, the government will not resolve the serious debt crisis by playing hide-and-seek with the opposition parties and with the taxpayers.
At this point, I would like to highlight a discrepancy which, considering the sums of money involved, is perhaps only a minor one, but one that is nonetheless symptomatic of a dangerous attitude. The government appears to be saying that since no one will bother to check the figures, it can take the liberty of concealing the truth. Here is one example of this type of attitude which we are not used to seeing, given the traditional accuracy of Finance Department budgets. On page 32 of the Budget Plan, we note the following: "International assistance funding is, therefore, being reduced by 2 per cent for 1994-95 from the 1993-94 level". However, on page 34, the figure quoted for 1994-95 is $91 million. This represents a reduction of 3.4 per cent compared to this year's international assistance budget, which was pegged at $2.7 billion. Therefore, this is not a 2 per cent reduction. Does this mean that we have to check every single percentage in the Budget Plan? Is there a catch here? Is the government trying to conceal something? We want an answer.
The budget announces new cuts in business subsidies. On page 33, the following is stated and I quote: "These reductions are over-and-above the reductions in grants and contributions announced in the April 1993 budget. By 1996-97, grants to business will be on the order of $3.1 billion, down by just under 10 per cent from $3.4 billion in 1993-94". While this last sentence is accurate, it completely contradicts the first one. Expenditures for this item already exceed the forecasts contained in the April 1993 budget. It was projected that expenditures would decrease from $3.3 billion in 1993-94 to $2.5 billion in 1997-98.
All of this is quite complicated and difficult for anyone to understand. However, this approach generally allows the Finance Department and the Minister of Finance to hide behind distorted facts that have been introduced into the debate. In this instance, the lack of transparency is accompanied by a lack of consistency.
This is doubly worrisome. Not only are facts being distorted, but the total accuracy of table 8 on page 34 can be viewed as questionable. This particular table is very important as it details reductions in expenditures associated with the restructuring of federal programs. Consequently, the formula used to calculate the deficit can also be viewed as questionable. In fact, in some cases the figures listed under such items as international assistance and defence relate to the April 1993 budget, while in other cases, they do not. They do not even represent new artificial reductions. The references are complex and confusing. We are dealing with apples and oranges and the average person has trouble sorting the whole mess out.
The situation with respect to business subsidies is also true of federal government operating expenses, at least for 1994-95. It should be noted-and this is far from reassuring-that the federal government is having a lot of trouble controlling its operating expenses. Over the last two fiscal years, these expenses have clearly exceeded budgetary projections. The Budget Plan announces that the new reductions for 1994-95 will be over-and-above those announced in the April 1993 budget. At the time, reductions of $468 million were projected for
1994-95. Yet, in Tuesday's budget, we see that the operating expenses for the new fiscal year are identical to the forecasts in the April 1993 budget. It is in the defence sector, Mr. Speaker-I just went from the feminine to the masculine and the people reading Hansard will realize that our female Speaker has just been replaced by a male Speaker-so it is in the defence sector that we hit the jackpot of false cuts. Seven billion over five years compared with the April 1993 budget. In this case, it seems to be somewhat consistent. But the real cut is much smaller, since the defence budget will decrease from $11.3 billion in 1993-94 to $10.5 billion in 1995-96.
As there will be no real reduction in federal operating expenditures and in business subsidies, and as the overlap problem will remain unresolved, the Minister of Finance had to do something to at least give an impression of movement. So what was left? Social spending. So they went full speed ahead.
Make no mistake. We would dearly like to see the unemployment insurance budget reduced to zero for lack of unemployed people, except for those in between jobs. But the minister is cutting the budget without reducing unemployment. He will eventually carry out a global reform combining, we are told, training and re-training programs. But, in the meantime, he is striking with full force. He himself estimates that 85 per cent of unemployed workers will receive reduced benefits while only 15 per cent will see an increase in theirs.
Disadvantaged regions will be hit the hardest. Let us not forget that the minister's own forecasts for 1994 are not the greatest. Social assistance, mainly funded by the provinces, will see an increase in the number of claims.
At the same time, the Minister of Finance is reducing his cash transfers to the provinces by $800 million. I am referring to Table 17 on page 56 of the Budget Plan, a $800 million reduction in cash transfers. The value of tax point transfers will increase by more than that, but cash transfers, the only transfers that the federal government can regulate, are the only ones that matter in terms of the federal government's policy in this regard. So the federal government's heavy responsibility in the budget crisis, the practice of shifting the deficit burden to the provinces remains popular. That is a heavy price to pay and we will come back to that later.
Again, an accurate assessment of the unemployment insurance shortfall will have to wait. The Minister of Finance talks about savings of $725 million in 1994-95, but compared to what? It is not clear. What is surprising is the total cost of unemployment insurance benefits, which stays at practically the same level between 1993-94 and 1994-95, despite the new rules and the stable unemployment figures. Given other estimates of budgetary expenditures, we are entitled to see the finance department's detailed simulation.
Is there, Mr. Speaker, more significant evidence of this government's lack of moral fibre than the avowed intention to achieve the most drastic cuts, $5.5 billion over three years in this particular sector? During the election campaign, the Liberals were rending their clothes over the protection of social programs. They are now trying to mend them but their stitchwork leaves much to be desired.
The copy tabled by the Minister of Finance deserves a single annotation: "This Budget is all smoke and mirrors". This is not what Canada and Quebec were hoping for.
