Finance Committee on Nov. 23rd, 2006

[Mark Carney]

That's the total federal net debt.

[The Chair, Conservative, Brian Pallister]

Federal net debt is $484 billion.

So the earlier observation about the $3 billion a year holds then, on the total elimination of net debt in the next fifteen years. At $3 billion a year, clearly that's highly unlikely in the next fifteen years.

[Mark Carney]

The total number I gave you is federal net debt, as the minister outlined in detail in his presentation. Total government net debt in Canada includes the assets of the CPP–QPP, which is a shared asset pool for all Canadians through the federal and provincial governments. Those assets are, at present, $110 billion as of today.

[The Chair, Conservative, Brian Pallister]

So the net, inclusive of the CPP, is $70 billion.

[Mark Carney]

It's $484 billion minus $110 billion—

[The Chair, Conservative, Brian Pallister]

It's $484 billion minus $110 billion.

[Mark Carney]

—which is shared. It is not federal. It's shared between the federal government and the provinces.

[The Chair, Conservative, Brian Pallister]

So the answer to my question is that $374 billion is the current net number.

[Mark Carney]

Yes, although I'll re-emphasize the caveat that the CPP–QPP is not federal money, it is shared money for all Canadians. In commonly accepted definitions of net financial liabilities of a government, though, it is included because it is discharging our intergenerational equity.

[The Chair, Conservative, Brian Pallister]

So we're going to pay off $374 billion over the next fifteen years?

[Mark Carney]

The combination of federal debt repayment—

[The Chair, Conservative, Brian Pallister]

Plus the size of the CPP—

[Mark Carney]

—plus the provincial balanced budgets and the growth in the size of the CPP will result in zero net debt by 2021.

[The Chair, Conservative, Brian Pallister]

Okay.

I appreciate the references that you make to our knowledge advantage and the flexible workforce. One of my concerns—and it's a concern our committee heard much about in our pre-budget consultation process—is the issue of labour force adjustment. The demographics are frightening, to be fair.

Specific to the subcategory of older workers, Minister, under a previous administration there was an introduction of serious clawback mechanisms for seniors on their benefits, and that may well act as a deterrent for them entering or in fact staying in the labour force and participating in it.

I wonder if you would like to make any specific reference to any intentions in that respect.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

We certainly are committed—and we've said so in this document—to moving ahead with the program with the lovely acronym WITB, which I'm quite fond of, my riding being Whitby—Oshawa, as you know. That addresses in part what you're describing.

The reality in Canada is that if someone is low-income or on social benefits or a combination of those, there is a disincentive to go to work. That's not what we want. We need people to enter the workforce, for the reasons that you've expressed, Chair. That initiative, which we'll outline in Budget 2007 and fund, will, we hope, reduce those relatively high marginal tax rates for persons who are right now marginally interested in working in the workforce, and will encourage them to join it.

[The Chair, Conservative, Brian Pallister]

Thank you, sir.

Mr. St-Cyr, you have five minutes.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Thank you Mr. Chair.

My first question to the Minister is on the limit on the federal spending power. It was mentioned a few times in your documents, but I did not see any specific explanation on the subject. In Quebec, generally, when there is talk of limiting the federal spending power, the possibility is mentioned of offering retirement with full financial compensation from a federal program that falls under the jurisdiction of Quebec and the provinces.

Is this what you are talking about when you talk about limiting the federal spending power? Would this apply retroactively, for example if the government of Quebec wanted to withdraw from the Universal Child Care Benefit and invest those amounts in Quebec's public child care service?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Well, you won't be surprised to hear me say that the economic plan, Advantage Canada, is forward-looking, not backward-looking. As a government we have consistently said, and as you mentioned said at least two or three times in the plan, that we believe in respecting the jurisdiction of other other orders of government in Canada and the provincial governments and that we intend to limit the federal spending power.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

You spoke of respecting the provinces' and Quebec's jurisdiction. You also spoke of open federalism. However, in your document, you speak of establishing a Canadian Securities Commission, when this is directly under the jurisdiction of the provinces and Quebec and when all the governments, all the premiers of Quebec had always objected to it.

Are we to understand the open federalism in the Conservative fashion means that the jurisdiction of the provinces and Quebec will be respected when you agree, but that you will interfere in the jurisdiction of Quebec when you do not?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I think all Canadians are anxious to have an effective economic union. I can tell you that it's awkward for the Government of Canada to be negotiating trade agreements, for example, outside of Canada when we have substantial trade barriers within our own country.

One of the weaknesses we have economically as a country, and this affects Quebec and every other province, is that we have 13 securities commissions. Someone wanting to do an initial public offering, for example, in Canada oftentimes will turn away from Canada because of this incredible burden of registration and government that we have for investing in this country. We want to encourage investment in this country, and it does mean...

I know there's the Montreal Exchange. Mr. Crawford's report on this subject includes protections for the Montreal Exchange. We're not talking about the federal government intruding. We're not even talking about a federal regulator. We're talking about a common national regulator, with representation from all governments in Canada.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

A passport mechanism already exists between various regulatory authorities to simply that, but I think you are finally answering my question. You say that in this case, you have to interfere in the province's jurisdiction to respond to a certain national need.

Third, I wanted to talk about cuts, savings you want to make or efficiencies you want to achieve. At the Bloc Québécois, we know they have them. Recently, we looked at the Lénoard Committee report again, in which there was a demonstration that we could easily recover 15.9 billion dollars over the next three years.

However, what concerns me, in the approach taken by the Conservative government so far, is that things are being done backwards. First we cut because we think a program might not be effective, and then we try to see if we will reinvest another way. We have strong examples in the arts, concerning performing groups that are touring around the world. There is the unbelievable example of literacy: first we cut and then we say that we might reinvest in the field later.

Do you, in the future, plan on doing the opposite, namely first assess the programs before creating a commotion and, if needed, make the necessary corrections later?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I'm happy to work with you any time on making more efficient and effective government. In the arts we actually increase funding this year by $50 million, in Budget 2006. But we're interested always in more efficient government and making sure we get value for money for taxpayers' hard-earned money.

[The Chair, Conservative, Brian Pallister]

Merci, monsieur.

Mr. Del Mastro, you'll have five minutes.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

Minister Flaherty, I would describe this as a very exciting day for Canadians. I think today's economic update and Advantage Canada is something people will be very excited about, because it gives a road map, a fairly clear road map, for the road ahead, and it's very promising, very positive.

One of the things I think Canadians look at a lot when we're talking about paying down the debt is, “What's in it for us? How is this going to help me? How is it going to help our community? How is it going to help Canada?” And one of the things you've unveiled is the tax-back guarantee, which I think is very important. We know in our personal lives that if we're responsible financially, there is a benefit from it, but very often responsible government doesn't necessarily mean there's a benefit people can tangibly see in their own finances.

Indeed, they didn't necessarily understand that the reckless increase in spending—as you indicated, some 14.4% for 2004-05 alone, which is about seven times inflation—was bad, because they weren't getting a reduction in their taxes. But with this tax-back guarantee, they're actually going to see that by being responsible, there are savings.

Mr. McCallum said $1.4 billion isn't a lot of money. Well, it starts out at $800 million annually and works its way up to $1.4 billion. We're talking about more than $5 billion in savings. I think Canadians are going to be pretty excited about saving that kind of income tax burden.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I thank you for the question.

I think what Canadians are witnessing is something we haven't had in Canada in a long time, and that is a government that will reduce taxes. There's some cynicism abroad in Canada, which is probably justifiable, about governments being capable of actually reducing taxes. There are lots of election promises and so on, but we did it.

We said we'd reduce the GST by one percentage point; we did it this year. We also reduced other taxes, so that the tax savings, 90% of which are for individuals, were $20 billion in Budget 2006 over two years, and in this status report another $22 billion over six years. Those are very substantial tax reductions for people, which they will see—which they see already, of course, in the case of the GST, but they'll see the other tax reductions as we go forward.

We also have new spending. We have spending such as the $100 a month for children under six—$1,200 a year—and the additional investments I was talking about today as part of Advantage Canada, in post-secondary education and research and development in Canada. These are all important priorities that we are and will be funding.