Finance Committee on May 30th, 2006

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

In your budget, you're clear about what you think the surplus will be and that you don't expect that surplus to be exceeded, but it's a pretty small amount. There have been some concerns, I guess, in some quarters that our government may not, and that you may not, be careful enough not to fall into deficit. There are also questions about paying down Canada's rather large debt and your commitment to doing that.

I wonder if you could just inform the committee and Canadians about your attitude about slipping into deficit and about your attitude toward paying down the debt.

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

Certainly we feel that we have been sufficiently cautious in terms of budget planning to allow for a balanced budget. We did budget for a $3 billion surplus, of course, to pay down public debt. There are some additional items in the budget that are there by way of surplus.

What we're not doing is the old game of pretending that there isn't going to be some kind of large surplus, and then at the end of the year the people of Canada are told, “Oh, there is an extra $10 billion or $12 billion, and guess what, the government of the day has spent it on this project, or that idea, or whatever, that didn't go through Parliament." We're not going to do that, but we are committed. We have a firm commitment to balancing the budget. We think we've been quite prudent in accepting a reasonable range for likely economic growth, based on private sector forecasters with whom I met, of course, in preparation for the budget. But we are not budgeting with the kind of largesse that our predecessors budgeted.

[The Chair, Conservative, Brian Pallister]

Thank you, Madam Ablonczy.

You've assured us that you can remain till 4:30. Would you be willing to take perhaps a couple more questions prior to your departure?

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

Yes, Mr. Chair.

[The Chair, Conservative, Brian Pallister]

Thank you, sir.

Mr. Savage, would you continue?

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

Thank you, Mr. Chair.

Thank you, Minister, for taking the time to be with us today and for agreeing to extend your visit by a few minutes.

I'd like to ask a little bit about the Atlantic accord. A month or so after the election--actually, on March 10--a report indicated that you said the equalization situation today is a mess and doesn't make a lot of sense. Then the article went on to suggest that you were saying the Atlantic accord has upset the equalization formula.

Now there have been some denials and things like that, so people in Nova Scotia and Newfoundland and Labrador were somewhat mollified by that, but they were concerned to see it appear in the budget documents, in this book--the reference to the 2005 agreements to provide Nova Scotia and Newfoundland the Atlantic accords that suggested they were “widely criticized as undermining the principles on which the Equalization program is based”.

I'm not asking if the Atlantic accord is going to be scrapped, because I know the political price on that would be too high, but I want to get a sense from you, as a key person in the government, of how you see Atlantic Canadian issues. Do you believe that Prime Minister Paul Martin did the right thing in committing to, and fulfilling his commitment to, Nova Scotia and Newfoundland and Labrador by signing the Atlantic accords?

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

I stand by the statement in the fiscal balance book to which you made reference.

The substance of the accords is one thing, just like the substance of the Canada-Ontario agreement is one thing. The concern is more the process; in a federation like this, to make our economic federation make sense, it's less desirable to have one-off agreements than it is to have everyone in the room and to work together toward a common agreement with respect to equalization.

As I say, it's more of a process concern than it is a substantive concern. You're fully aware of the differing views among provinces about what should or should not be included in the equalization formula.

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

I had these discussions with Paul Martin and Ralph Goodale before the Atlantic accord. They had the concerns you had. At the end of the day they decided that the needs of Nova Scotia and Newfoundland and Labrador were significant enough to make a strong enough case for them to sign the Atlantic accords. Would you have signed the Atlantic accords?

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

I don't speculate about what could have been or what might have been. I don't have an answer for you on that.

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

Okay.

Let me go to Bill C-48. Where is the Bill C-48 money right now? What happened to the money from Bill C-48? I don't mean specifically--I don't expect you have it with you--but what happened to the money from Bill C-48?

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

The Bill C-48 money is, as you know, contingent on the government's having a surplus for the past fiscal year of at least $2 billion, and that won't be confirmed until August or September. After that is confirmed--not that there's any significant doubt about it--then the money would flow.

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

In Bill C-48 there were only 22 words that addressed post-secondary education, and they were, “for supporting training programs and enhancing access to post-secondary education, to benefit, among others, aboriginal Canadians, an amount not exceeding $1.5 billion”.

This is specific to student access; it's not to post-secondary infrastructure, the universities, or transfers to provinces to trickle down to students. Will there be $1.5 billion for student access coming out of Bill C-48?

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

I'm told the number was $1 billion. I don't know it off the top of my head.

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

No, it was $1.5 billion. We went through this the last time.

[Paul-Henri Lapointe, Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance]

Bill C-48 gave the government authority to provide up to $1.5 billion. The government has now provided $1 billion.

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

So Bill C-48 was up to $1.5 billion, but that $1 billion is for direct student assistance, not for post-secondary infrastructure?

[Paul-Henri Lapointe]

It is for post-secondary education infrastructure, yes.

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

Infrastructure, not...but infrastructure is not in this; this is access. We've already got lots of money...well, we need it. I'm not saying we shouldn't; we should have money for post-secondary infrastructure. We are leading the G-7, as you point out in your lovely books, with all the great investments the Liberal government made.

The issue is access. My question is, was Bill C-48 a sham?

I'm not blaming the government. The New Democrats, as well, could have passed over $2 billion in direct student assistance in the economic update. I am asking if Bill C-48 is actually going to make its way to students.

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

I don't want to quibble about words, but access.... Clearly, by creating more infrastructure, one creates more access for students to post-secondary education across Canada.

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

I don't think that's the case.

[The Chair, Conservative, Brian Pallister]

Sorry to cut you off, but with the cooperation of my colleagues on the committee, I have three others who wish to ask questions.

If I could give you two minutes each, we could accommodate my colleagues today.

I'll ask Mr. Dykstra to proceed.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you, Mr. Chair.

Mr. McCallum and I have been trading shots on how the budget should actually be interpreted, and I was wondering if you could give some clarification—I know Finance officials did—on the reduction from 16% to 15% that didn't actually take place in legislation. I know Mr. McCallum claims that Canadians don't care; I happen to think they may care if the reduction was never actually passed into legislation. Would it or would it not have to be rescinded?

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

Well, yes, as we're still a parliamentary democracy, thank goodness, Parliament does have to pass bills, as I hope Parliament decides to pass Bill C-13. But the ways and means motion from last fall was not followed through legislatively, so at the end of the day that proposed change would not have occurred. The legislation in Bill C-13 will reduce the rate from 16% to 15.5%.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thanks.

The other positive aspect that I know was tied into the reduction in tax was the employee tax credit. I wonder if you wouldn't mind just taking us through the process of how that will be implemented.

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

The employee tax credit will start at $500 on July 1 of this year and move to $1,000 January 1 next year, or 2007. Part of the rationale for that is what we've all heard as elected folks over the years, how people who are employed, or at least some who are employed, feel they are hard done by vis-à-vis people who are self-employed in terms of what they can deduct. So this was one way of giving some standard deductions to persons who are employed, rather than self-employed.