Finance Committee on Nov. 23rd, 2006

[Dean Del Mastro, Conservative, Peterborough, ON]

Great.

Secondly, you mentioned, under the five Canadian advantages, the entrepreneurial advantage. As a person who comes from small business, I can certainly see what you're talking about. We really do need to get the reins off business, allow our entrepreneurs—and there is a real, positive, entrepreneurial spirit in Canada—certainly by consolidating taxes. If you can accomplish that, it would be a tremendous advantage for Canada's entrepreneurs.

Have you had consultations with groups such as the CFIB about eliminating red tape, and if so, have they given you some kind of direction on it?

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

I've certainly spoken to them over time. I used to be a member of the CFIB, as a small-business person, too. As you know, they survey their members, and I think feedback has been fairly consistent over the years about the burden. There are some statistics in the report here about the number of people who end up having to be employed by small business just to address this paper burden that's imposed by government.

We took a step recently that was very good, a good cooperative step with the Province of Ontario, entering into a corporate collection tax agreement. It was the case that Ontario was collecting their own tax and Canada collecting theirs. It meant two sets of forms for businesses in Ontario. Now there will only be one. And also, when they are audited, if they get audited, there won't be two sets of auditors coming in and taking up business time and so on.

We have to free business people to work in their businesses, and invest, and not spend so much time filling in forms for government.

[The Chair, Conservative, Brian Pallister]

Thank you very much.

We'll move on to Mr. Savage now, for five minutes.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Thank you, Chair.

And thank you, Minister. It's always nice to see you at committee.

I would like to talk a bit about education. We talked about that when you were here before. I think improving Canadian productivity is a big issue for everybody. It has certainly been the focus of our pre-budget consultations. We've been going around the country and chatting with people, and everybody agrees we need to do that.

One of the ways, of course, to do that is to invest in post-secondary education. You've indicated in this book you gave us today that there are a number of mechanisms by which students are assisted through the federal and provincial governments. What we hear and what we've seen in the last number of years is that there are groups of students who are not accessing post-secondary education because of financial means. Obviously these are low-income families, persons with disabilities, aboriginal Canadians.

Last year the economic update spoke to that, to the tune of some $4 billion, including $2 billion to improve student financial assistance, $550 million to expand the Canada access grants, as well as a $1 billion post-secondary innovation fund, which you turned into the infrastructure fund. Infrastructure is important, but the issue I want to ask you about is access. Does the federal government have a responsibility to help students who are unable to afford post-secondary education, be it university or community college, to get there?

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

There is a role. As you know, it's primarily a provincial responsibility. But we did take a step in the budget this year to help middle-class families make post-secondary education for their children more affordable. This is important, particularly for the groups you mentioned. And it's important for the economy. We want more skilled workers, more educated workers, and more people who can contribute to the workforce. I agree with the comments you're making.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

You specifically said middle-income families. I'm talking about low-income families: Canadians who are facing a challenge and can't get to university and post-secondary....

Last year the economic update had billions of dollars for assistance. Can we expect something like that from the federal government in the years to come--hopefully, in the budget?

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

Well, I'm looking for the billions of dollars in assistance from the update last year. I don't see it on my list. I see a lot of motherhood comments coming from last year--

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Well, $2.191 billion for student financial assistance, loans and grants: $550 million for the Canada access grant to be expanded, $150 million for assistance for persons with disabilities--

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

Oh, this is the one that, last November, before the election, had the $14 billion wish list in it, isn't it?

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Correct. If you want to go back before that, you can go to Bill C-48, which had $1.5 billion directly for access. That is now gone and has been replaced by the $1 billion you brought in for infrastructure. Is that correct?

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

I think the federal focus in post-secondary education should not interfere unnecessarily with provincial jurisdiction. The primary obligation of the federal government is with respect to research and development, and certainly in encouraging graduate students in Canada in science and engineering and business. We're not graduating enough students in Canada with MBAs, with master's degrees in the sciences, including the life sciences, and in engineering. The federal government has a significant role to play there.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

You correctly point out that Canada leads the G-7 in publicly funded research. We've done that since 1998, since we eliminated the Conservative deficit. In that time, we have escalated at a big rate. The research granting agencies say you can't slow down. We slowed down in the spring. Can we expect, for example, CIHR, for which everybody who came before us, universities, researchers, students, applauded the--

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Savage. Thank you, sir.

We move on now to Mr. Wallace, five minutes.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

Thank you, Minister, for coming today.

I have a few questions.

One thing that confused Canadians with the Liberal government was that they had the three budgets, maybe an update.... I couldn't figure out what they were talking about and when they were talking about it. I'd like you to identify to us, and to those who may be tuning in, the difference between a budget, this fiscal update, and this long-term plan, compared to what Canadians have experienced in the past.

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

Maybe I'll start with Advantage Canada, the long-term plan, because we actually haven't had a long-term plan for Canada, with specifics and deliverables in it based on principles, in a long time—in fact, since the last Conservative government, when Michael Wilson was the Minister of Finance, in the 1980s.

Our view was that it was necessary to do that; that governments, like families or like businesses, need to have a plan so that they can look at how they're doing and measure how they're doing. It's a bit dangerous for governments to do this, because we can be measured, and people can say you're not accomplishing what you said you would accomplish. We're not afraid of that challenge, and that's why we've tried to lay out clearly, with deliverables, what we think needs to be done over the next ten years or so in Canada.

And this is a generational thing. This is for our children. This is saying: if we accomplish this, we will have a higher standard of living and a higher quality of life in this country. That's why we're going to do this. We're going to hold ourselves to this plan and we're going to act in accordance with the plan.

When we act—that is, when we implement—then we're budgeting. That happens every spring, and we would have the actual items, where we take this tax measure or that tax reduction or this fiscal policy and say we're going to implement it.

That happens every spring. The fall update is a photo in time of where we are in the fiscal situation about halfway through the fiscal year. That's why I talked about our being a little ahead on the surplus side, and our not spending as much as was planned, and so on. The people in Canada have the right to know—they're the taxpayers, after all—where we stand in the middle of the fiscal year.

[Mike Wallace, Conservative, Burlington, ON]

I appreciate that clarification.

I have another question for you, which I don't think you had a proper opportunity to answer, because the former revenue minister went on and on, on his own. Could you explain to us what the OECD definition of total net government debt actually is, and how it will work?

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

I can. I was actually looking for the reference for it, because then people would be able to look it up when they look on the website. I will find it in a moment.

It's the internationally accepted gold standard for measuring government debt. For example, it's the measure that was used by the Government of Australia when they decided several years ago they were going to eliminate their net debt, which is what they've accomplished, because they set out with purpose, as we are doing, to accomplish a goal.

It takes into account government assets and liabilities. We're looking at the entire country—all the governments in Canada; we're asking all governments to participate in this. Fortunately, eight of the ten provincial governments have balanced budget legislation, so we can have confidence that at least eight out of ten of them will have balanced budgets and will be able to participate in this reduction.

On the assets side, the most significant asset, of course, is the joint asset with the provinces, which is the CPP-QPP, which has assets of about $110 billion.

[Mike Wallace, Conservative, Burlington, ON]

Before we leave, maybe you'll be able to find where people can look on the website. But my final question, if I still have some time, is on the Advantage Canada plan.

One thing I talked to the forecasters about this morning was that I've always been in favour of reviewing programs that are in place or that government is putting forward, and if they're not working, we either change them, shut them down, or move them.

What is Advantage Canada's long-term plan? What is your view of what government should be doing in terms of program spending and evaluation of programs?

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

I think we have to be very focused, because this is a competitive world. It's a global economy now; people and capital can move. To keep the best and brightest in Canada and to attract skilled workers in Canada, we need to have intelligent spending, quite frankly, which means we have to spend on infrastructure, because it has a direct economic impact, and we need to spend on post-secondary education—including research and development—where our innovation will come from. Those will drive productivity increases in Canada.

We need to be reasonable on the business side also, in terms of capital cost allowances and those types of issues, so that we'll see more investment in modern technology, which will also increase productivity.

Productivity isn't about people working harder. Productivity is about more efficiencies in businesses, so that with the same amount of effort people can produce more in a given period of time.

It's like General Motors in Oshawa. There aren't more people, but there are more cars and they're of better quality because of technological advances—plus good workers.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Wallace.

We move on to Mr. Pacetti.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you Mr. Chair. I would like to ask my first question in French.

Mr. Minister, I would like to clarify your new definition that we learned today, of what the net debt is of the federal government. You just admitted that you are responsible for the debt for all the provinces.

If this is true, since you decided to not respect the agreements signed with the provinces, such as the agreements on daycares, the Kelowna Accord, additional transfers for health and transfers for post-secondary education, will the provinces' debt be paid by the federal government from the amounts that were not transferred to the provinces?

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

I was not unclear, I hope.

The point is that we need all governments to cooperate in reducing their debts in Canada. The greatest debt is clearly the federal debt, which is much more substantial than the accumulated provincial debts. We encourage and we're setting a goal for our country. We hope the provinces will join us in reducing the net debts of the governments of Canada over the course of the next generation, to make up for what went on in the past generation of excessive spending and running up debts, so that we can be fair to the next generation of Canadians.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I understand that, but if we don't work along with the provinces in terms of having a 15-year time horizon, if this is something that's going to be dictated solely by the federal government, the 15 years is not going to be attainable. I don't understand where that comes from.

I have other questions, and time is limited.

Where we see the income tax reductions going to come down by $0.7 billion a year, is that the correct number?

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

It's $700 million, yes.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

It's $700 million, yes, $0.7 billion. How much does it represent in terms of a percentage? Does that mean income tax at the lower rate will go from 16% to 15.9% or 15.8%?