Good morning.
The committee faces some new challenges at the moment.
Your first challenge: you don't know the state of the finances. As of budget 2006, the Harper government spent the great majority of all budget surpluses that we can expect in upcoming years, so there is precious little money to fund new tax cuts or spending. This was confirmed in a TD Bank report entitled “The Status Quo Federal Fiscal Outlook: Not Much Room Here”, which indicated there's very little fiscal capacity for several years into the future.
At the moment there's great speculation about whether there is a little more or a little less fiscal room than was projected, but we really just don't know. We don't have any up-to-date outlook from the finance department, and your committee is undergoing no independent forecasting exercise that would give you some independent perspective on this. So you have no choice but to assume there is very little money to work with.
Your second big challenge: the big pressure you will be under to institute more tax cuts. The Harper government promised one further point reduction in GST, which the government cannot afford without chopping something somewhere else. As well, there is intense lobbying for corporate or personal income tax cuts, which of course we can't afford either, so they will be trying to persuade you that tax cuts will enhance competitiveness. They will tell you that corporations will be more likely to invest in Canada if we reduce corporate taxes.
This is a huge leap of faith. Corporations invest for a host of reasons, only one of which is tax considerations. We have been cutting corporate taxes for some time now, and this has not produced any upswing in investment. In fact, fixed capital investment is virtually stagnant.
Corporations have been given tax cuts for some time now. They have been enjoying record corporate profitability. They have plenty of cash to invest if they wish to, but their investment record has been very poor for some time. Why would we cut taxes now based on no proof that it actually stimulates the investment that is supposed to increase our competitiveness? It is irresponsible to empty the treasury for a tax cut agenda that can't prove it will deliver the desired results.
If you give in to tax cut pressure, you are setting the stage for big spending cuts, or else the government will fall into deficit, quite likely, and as the Conservative election platform indicated, we should expect $22.5 billion in spending cuts over the next five years in order to pay for Harper's election promises. If government spending is cut on this scale, we won't be able to do the things that actually would help competitiveness--