Stephen Harper

[Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions Act, February 8th, 1994]

Mr. Speaker, I rise to lead off our party's contribution to this debate on amendments to the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act. In Bill C-3 we are discussing amendments or renewal of the equalization program.

As I understand it this bill does several things. The parliamentary secretary alluded to these and I will repeat them. It renews the current equalization program to the end of fiscal 1999. It retains the GDP ceiling on equalization transfers. It makes some changes to tax base calculations in the formula tax base updates. It provides relief on tax back of some unique resource capacities in certain provinces.

Under this bill equalization payments are projected to grow from $8.4 billion this year to about $10.4 billion by the end of the century. That will be an annual growth rate of about 5 per cent per year. It includes about 2 per cent additional growth that is being added by the measures in the bill. Because of the cost of the program, rather than the particulars of the formula or some of the elements of the bill, our finance committee within the Reform caucus has recommended to Reform MPs that they oppose this bill at second reading.

During the past election our party campaigned-and I have made reference to this several times-on the need to undertake a dramatic program of expenditure reduction to get us on the path to long run financial sustainability of all our most valuable programs. It was the zero in three plan to balance the budget within the life of this Parliament.

In that plan we have projected and continue to maintain that spending at the national level is at least 15 per cent above our long run ability to sustain it. We have attempted to examine categories of spending and we will continue to do so, including spending on social programs and within that transfer programs to the provinces.

The zero in three program proposed relatively small cuts in these areas. That was the feedback we received through consultation with the public. In fact we had proposed only reducing federal transfers to the provinces by about 5 per cent of the total from this level of government or about $1.5 billion. Another way to put it would be about 1 per cent of provincial tax revenues.

Let me review what we are talking about in this particular envelope of spending. I am quoting from a recent publication of the Department of Finance. It states that in fiscal year 1992-93 this category of spending would include such things as established programs financing in the health care field, $8.3 billion; the equalization program discussed in this bill, $7.4 billion; Canada Assistance Plan transfers, $6.7 billion; established programs financing transfers for post-secondary education, $2.9 billion; and various other transfers, the so-called minor transfers.

Things become minor when they are less than $1 billion. That includes significant transfers to territorial governments, all of which total according to the documents roughly $28 billion that fiscal year. That does not include tax point transfers which add considerably to the total. We are talking about one-quarter of all program spending and more than that if we take into account the tax points.

As I indicated, people did not want to target the area of social programs and transfers generally for reductions. However given that these are now two-thirds of all current spending, it is hard to avoid some kind of action in these areas.

In developing our program we found that what people wanted to preserve most strongly were the funds dedicated specifically to the maintenance of health and post-secondary education programs. The public felt there was some room to reduce

transfer payments toward such things as equalization and the Canada assistance plan.

I suspect the reason for the less strong support for those programs as compared to the others was not just the nature of the programs but the fact that these two programs have strong discriminatory elements that are funded more favourably in some provinces than in others.

I do not want to say that the bill costs too much but I would specifically suggest to the government this alternative. We have proposed that equalization payments should be reduced by about 10 per cent at some point and that these reductions should focus on middle income rather than on the poorest provinces. Something like this could be achieved by reducing the equalization standard to less than 100 per cent of the average fiscal capacity. If one says in the range of 98 per cent to 99 per cent that would achieve the objective.

More important, it would retain the principle of equalization which is not only something we support but which is embedded in the Constitution Act, 1982, which our party recognizes and which other parties do not necessarily recognize. Under our proposal one would retain inflation protection in the growth of formulas over the long term.

I would also suggest that other elements of the equalization formula and calculation should be examined both on grounds of fairness as well as some of the incentive issues in these various programs.

We will be voting on this later this afternoon. We will be voting on looking at fairness and incentive issues in the structure of transfer programs, largely the transfers to individuals such as welfare and unemployment insurance. We will be looking at those kinds of programs.

I would suggest a similar study is warranted in this area. My colleagues will be commenting at greater length later today on some of these problems. Let me give a couple of examples.

The formula used now assigns Alberta, which is not a recipient province, a 25 per cent higher fiscal capacity than the province of Ontario. While this obviously is not going to have a direct impact this year as neither are recipient provinces, I would suggest it clearly indicates some bizarre functioning in the calculations. Alberta does not have a 25 per cent higher fiscal capacity than the province of Ontario.

I would also note that the way this program has increasingly operated, the costs are now linked to economic growth. In other words there is a tendency for the payments under this formula to be limited at precisely the time that provinces are having difficulty with their revenues.

During boom times the ceiling operates in a way that would allow provinces to collect greater revenue in federal transfers. That would seem to me to be something that should be examined in terms of the efficacy of the equalization program.

Maybe I could spend a few minutes commenting on the bill in a little more detail in light of the Liberal position. I have found it somewhat strange that the Minister of Finance would announce he is going ahead with a guarantee on this program and these sets of funds when he has indicated he is reviewing other major transfer programs to the provinces and there is no necessary guarantee at this moment they would be renewed in their current form. That is a series of priorities I have trouble understanding. It is obviously not consistent with our party's priorities. It seems particularly inconsistent with the fact that we are waiting for a budget and most of these issues are soon to be addressed. I do not understand why this particular program has been guaranteed in advance before the budget consultations have been completed.

I can say some things on the positive side, though, in terms of the specific elements. I would like to commend some of the smaller changes, in particular the excessive tax back provision element of this bill. That at least conceptually will move us toward a somewhat fairer system, even if the dollars involved immediately are not terribly significant.

I also would like to urge the government to continue what the previous government did in 1982, that is retain the GDP ceiling. Obviously we would like to see stronger reductions in that, but it is necessary for the federal government to protect itself against a situation in which it would be liable for open ended transfers.

Maybe I could also take a minute to comment briefly on the position of the Bloc Quebecois and on some of the comments that were made by the critic from that party. It is important that we say these things. I do not want to get into these regional kinds of debate at great lengths, but we should be really clear here. I am sure members of the government will agree with me. We are discussing here a very major transfer program of Confederation, and one that is mandated under the Constitution Act, 1982.

Regardless of our differences with the government on the cost, what we are talking about is a program that is going to cost $8.4 billion in the upcoming fiscal year. Of that $8.4 billion, $3.7 billion or 45 per cent of those funds is targeted for the province of Quebec.

My constituents pay into this and our provincial government receives nothing. Surely the appropriate response is not to say it is not enough, but we have serious problems in the country, not just with our annual deficit but with the $500 billion of debt that we have accumulated. Whether we have a major constitutional reform or even the sovereignty of Quebec as the Bloc Quebecois would like, surely we recognize we are going to be stuck managing this debt for decades to come. I would anticipate that

at some point we will get some realistic discussion of how to deal with that and the impact of that from all the parties in this House.

I am floored by some of the comments that I have heard. I would urge the government to consider something that we asked for in the previous Parliament. Our caucus had asked that the government publish regularly the regional and provincial distributions of its tax expenditure and transfer policies so that those things are on paper and clear, so that we can see the impact of changes on provinces and so that we can have this kind of discussion in a rational atmosphere rather than it becoming simply a matter of scoring points in a particular province.

We have done considerable work in this area to get a greater understanding of these kinds of considerations. Let us be clear about it once again. To assist in the running of the government in the province of Quebec $3.7 billion is being voted here. It is a principle we share, an equalization payment, because there is a lower fiscal capacity in that province. Let us be clear that this is what this bill does. I am also looking for some realistic discussion of this in the next couple of years. Let us be clear that the option the Bloc Quebecois is proposing to deal with this, the sovereignty of Quebec, would result in the province of Quebec receiving zero.

I am really looking forward to the day we begin to discuss both sides of the argument and, in a much more realistic fashion, these kinds of considerations.

In concluding my remarks I would urge the House to reconsider Bill C-3 and to reconsider at this point committing to a growth in our financial commitments that will amount to $2 billion over the next five years before we have even had presented a financial framework.

I am under no particular illusion that our colleagues on either side of the House are going to support such reduction proposals. I do not think the time has come yet when all parties are willing to bite the bullet. I would at least suggest that the Liberals give this some consideration as in the upcoming months and year they have to grapple more seriously with the financial mess of the country.

We will be discussing the bill in committee and at third reading. In the meantime there will be a budget. We also will be examining our position on this matter in light of the budget, in light of the data we get out of that, and in light of proposals we have and we are expecting in areas of other fiscal transfers.

Once again, we will examine this in light of our deteriorating financial situation. In the meantime I believe my colleagues will be opposing this extended financial commitment.

[Pre-Budget Consultations, February 1st, 1994]

Mr. Speaker, I thank the hon. member for his question.

We too went through similar exercises not only in the party but in our constituency. I held very similar public meetings on this subject. The process was very similar to that outlined by the hon. member before I was being paid to be the member of Parliament. I am familiar with the process. The outcome of that which the hon. member had outlined was very similar to the kinds of results that I saw in my riding.

At some of the public meetings we had I took the additional step of working through with the constituents who attended a line item review of the budget. We went over about 100 spending categories. Because I have done some study in this area I was somewhat familiar with some of this information. It would be very difficult for me to go over the whole program in the short time that I have but let me just elaborate in general terms.

Obviously we all know that the constituents expect there to be significant reductions at the top of government, led by ourselves. We have advocated some of these things on the floor of this House. Our caucus has advocated reducing some of the expenses around here. To some degree the Liberal Party has responded on these particular items and will be discussing this later today in the Board of Internal Economy.

My constituents outlined a number of areas of administration of government services and programs where they would expect there to be a reduction in the whole area of bureaucratic costs. That is an area that the Bloc Quebecois is, of course, prone to talk about quite frequently. Obviously we are going to be looking at the Auditor General's reports. We are hoping that the government will look at the Auditor General's reports in implementing those kinds of considerations.

The third major area where I think my constituents are prepared to see a large reduction and even elimination is the entire area of government involvement in business, both through direct expenditure as well as some of the tax concession programs. In our zero in three plan we had laid out a number of areas where we believe there should be the elimination of that kind of spending.

Finally, in the area of social policy it has been my experience that when one lays the facts before the people, that nearly two-thirds of our current spending is in the area of social policy, they do anticipate there will be some reductions. The key is that the benefits be retained in the programs that are most valued by Canadians, like health care; that people who contribute to programs are able to receive those kinds of programs, like unemployment insurance; and, also that people who need those programs the most are able to receive money from those kinds of programs.

I think if you take those three things into account, Mr. Speaker, you will see that even after those criteria there is room for reduction in the social policy area.

I see that you want me to wind up and I apologize to the hon. member that I have not been able to explain in any more detail.

[Pre-Budget Consultations, February 1st, 1994]

Mr. Speaker, I am rising today to participate in the debate in advance of the upcoming budget. In so doing I want to concentrate my remarks on the overall financial objectives of this organization which must decide these things for the Government of Canada.

The Government of Canada is the largest organization in the country. Like any other board or management we are well advised to keep in mind our central function of overall planning of our financial objectives. Historically that is one of the most important roles of this Parliament and recently it has been one of the most neglected. In my comments I want to take some time to review these objectives from the perspective of the Reform Party.

During the course of the election campaign our party campaigned on the necessity of setting the following financial objectives. In the life of this Parliament we would work toward the elimination of the current budgetary deficit without resorting to significant tax increases. That was called the zero in three plan. On that basis we went from being a relatively minor party to being the effective opposition today for most of Canada.

I want to review why it is an appropriate financial objective and especially ask government members to consider my comments. In light of the financial developments we will also be considering these things.

I am not going into the very good reasons that exist for stopping the growth of debt, for eliminating annual deficits, for not raising taxes or for not raising general price levels. My colleagues in the party have covered those topics very competently. I want to look at the timeframe proposed for our particular financial targets.

Why deal with the fiscal problems of Canada in the life of this Parliament? First, it is a modest objective because it is necessary to deal with far more important objectives in terms of our economic development. We cannot hope to deal with the problems of debt or significantly lower the tax burden until we eliminate the significant problem of annual structural deficits.

Second, the problem is political. We are all elected. We all know it is politically difficult to undertake the steps necessary to reduce this particular problem. The political will necessary for that will not sustain itself for very long and certainly will not sustain itself beyond the life of one Parliament. The previous government had two mandates to deal with this problem and was unable to do so. Third, there is a very good fiscal reason. Today the problem of the deficit is largely driven by the past sins of governments. We have accumulated an enormous debt on which we generate a huge amount of interest payments. Those interest payments are really today the essential problem in the annual deficit.

Every year that we fail to deal with this we add to the debt burden and by implication we add to the future stream of interest payments. If we deal with this problem only gradually we will find that our actions year by year are offset by the very tax burden that we create.

Fiscal gradualism does not work. This was the policy of the former PC government and it illustrated it in spades. Year after year we had nine budgets with incremental measures to deal with rising debt. Every year the pattern of debt and interest payments served to offset those actions and to offset the deficit targets and we find ourselves more or less in the situation we were 10 years ago.

Of course the former government complicated that situation by resorting to other measures. Once it recognized fiscal gradualism was not working it got into a pattern of systematic overstatement of growth projections and eventually into the fiasco we had in the election which was deliberately misleading people as to the financial state of our country.

We know that today the Minister of Finance has spoken very eloquently about this. We are looking at a deficit this year of between $44 billion and $46 billion. That is $13 billion above the $32.6 billion that would have been indicated to us less than a year ago. That is more than just an off-shoot in projections.

On top of that we have the largely unprecedented situation where we have actually had to go back and revise the deficit from the year before, the year that ended over six months ago. Now we find we were $5 billion higher not on this year but on the year before this year when we were talking about the deficit during the federal election campaign.

I do not want to focus just on the last government. This is a pattern in the historical record of the failure of fiscal gradualism. If we look at the deficit from 1867 to 1992, and I refer members to chapter 5 of the Auditor General's report at the end of 1992, we had accumulated net public debt of $423 billion. Yet only $37 billion of that or less than 10 per cent was due to annual shortfalls. The rest was due to interest and compound interest generated by those mistakes.

This government has initially in its rhetoric recognized that we have a significant structural deficit program. It has switched from some of its campaign rhetoric to some of the rhetoric we heard from just about every government and every party that has been elected afterwards to recognize that this is a problem. Nevertheless the government continues to opt for a policy of fiscal gradualism.

The Minister of Finance repeated today in this House his target of 3 per cent deficit to GDP by the end of this Parliament.

I cannot understand the clear rationale for that. I can tell the House that even if that objective were achieved by this government that is a target above the annual trend growth rate of this country. In other words even achieving that target we will continue to see our debt burden and the relative burden of our interest payments continue to climb. We are already at dangerously high levels here. We all know the impact.

A previous speaker said that if interest rates were to go up one percentage point we would add $5 billion to the deficit. If they go up one percentage point we will be adding $10 billion to the deficit within five years as a consequence of the compounding of that error.

Fudging numbers and putting out false projections are not the way to go. I hope the government is not beginning to slip into that pattern.

Let me raise a point of concern. Today the minister made reference to financial projections for the next fiscal year. We in our party are trying to do an analysis of our situation to make the best proposals possible. In spite of those figures provided by the Minister of Finance, as late as this morning both his department and his ministry refused to provide my office with complete information as to the nature of those projections or the assumptions on which they are based.

I wanted to elaborate a little on that problem. Before the election we were projecting that we are at a level of spending in terms of current programs in this country that is about 15 per cent above the level we can sustain in the long run. This is why I am so interested in these projections. We know from the data we are getting that this situation could not possibly have improved. We are concerned about this.

In concluding the point I would like to make is that we can all rant and rave and rhetorically wave our hands-we are all politicians-about this situation being a problem, but if we cut a little fat, close a few loopholes, wait for growth or announce some strategic initiatives this problem will solve itself or it will not be as difficult.

This has not been the experience of the past. It is not true. It is going to happen. We know the experience in other countries with these kinds of deficit situations. If we do not deal with it, if we do not do something about it, something will be done about it for us.

I urge members on the other side to consider very carefully their objectives in this matter. I notice the minister has delayed. He is now saying that it will be next year's budget that deals with this. We do not have these kinds of timeframes or this luxury.

If this government fails to deal with this problem it will not only fail our country but the government itself will fail. It will fail not only economically but politically as well. I ask the government to give very careful consideration to these matters.

[Auditor General's Report, January 28th, 1994]

Mr. Speaker, with all due respect to the Prime Minister I am asking about the confidence convention and not confidentiality.

My supplementary question is for the Prime Minister. In his report the Auditor General said that Canadians want to feel that members of Parliament may vote freely, and they expect more free votes. How does the government intend to respond to that feeling regarding free vote and streamline the budget process?

[Auditor General's Report, January 28th, 1994]

Mr. Speaker, my question is for the Prime Minister and also concerns democratic reform.

In his annual report, the Auditor General identified the confidence convention as a major stumbling block in the reform of the budgetary process.

In view of the government's commitment to carefully examine and consider the Auditor General's recommendations, will the Prime Minister inform the House that he will relax the confidence convention and allow free votes in the upcoming budget?

[Speech From The Throne, January 27th, 1994]

Mr. Speaker, I would like to thank the member for Laurier-Sainte-Marie for his speech. I met him over two years ago, after his first election, and so far we have had a good experience, I think, working together on the Board of Internal Economy.

The member is an important person in his party and he made a couple of references in his speech similar to things that were said by his leader.

I would like to ask him on behalf of his party to clarify for me a couple of questions. I wish I could put them to his leader but the rules of the House do not make that terribly easy.

First, the member as well as his leader has stated that the federal system does not work and of course this Parliament is part of the federal system. Although he may believe the federal system does not work, does he and his party see it see it as their obligation in their role as members of this Parliament to do their best to make this Parliament work and by implication to make the federal system work as long as they play this role?

Second, I would like to ask him about his position in the future constitutional debate that may take place in Quebec. He has categorized that debate as between independence and the status quo as represented by the current constitutional arrangements.

If a referendum like that was rejected by the people of Quebec, would he follow through on the consistency of that argument and see that rejection as an acceptance of Quebec's role in Canada and of the 1982 constitutional arrangements?

[Registered Retirement Savings Plan, January 21st, 1994]

I have a supplementary question, Mr. Speaker.

We appreciate the opportunity to express our views and hope that the Prime Minister will use this opportunity to express his own views on this subject.

Is it the government's policy to go in the direction that we increase the dependency of Canadians on the underfunded and overburdened old age security system while undercutting their ability to provide for their own retirement?

[Registered Retirement Savings Plan, January 21st, 1994]

Mr. Speaker, I would also like to put my question to the Prime Minister.

Yesterday during debate the government member for Davenport suggested that the government should consider further limiting RRSP contributions. When asked about the possible repeal of the clawback of old age security, a measure which his party opposed in opposition, he suggested that everyone who pays into seniors' programs like OAS should benefit from them.

Is this the policy position of the government or are those options that the government would be considering?

[Speech From The Throne, January 20th, 1994]

Mr. Speaker, I would like to thank the minister for his speech and congratulate him on his perennial re-election in his constituency of Winnipeg South Centre along with his appointment to cabinet in an important post which reflects a great deal of confidence in him on the part of his party and leader.

We welcome the attempts that the government will be making to create a comprehensive social security system and to encourage open discussion of this in Parliament.

Recently the Ministry of Finance released a document that showed our unemployment insurance program to be one of the

most generous in the world. This can create serious disincentives to upgrade skills, to work and to move to find work.

I would like the minister to comment on whether he agrees with that assessment of the unemployment insurance system. Assuming he does, would he share with Parliament his view on what features a new comprehensive social security program would have to combat those problems in the unemployment insurance system?

[Speech From The Throne, January 20th, 1994]

Mr. Speaker, I would also like to congratulate the hon. member for Davenport on his re-election. He was an accomplished opposition member in the old Parliament. Now he obviously plays a different role on the government side. In that position I would like him to clarify his remarks on a couple of items.

He spoke about the need to preserve programs for seniors and also his opposition to tax breaks. Would he support his government's musings about possibly cutting seniors programs by cutting the RRSP? This is one seniors program that is well funded and secure in this country. Does he support that examination?

Also on the old age security, now that he is a government member does he support the previous Parliament's actions introducing a clawback to old age security? Does he expect his government to bring a repeal of that in the upcoming budget? If the government does not, would he be prepared to vote against that budget?