Thank you, Madam Chair and members of the committee, for having us.
We are here to give you an appraisal of the current situation from a more economic than constitutional standpoint and to propose solutions to reduce deficits, slow debt growth and grow the Canadian economy.
The current budgetary challenge is first and foremost a spending problem, and the solution lies in disciplined program spending, a systematic review of government missions, including spending in provincial jurisdictions and reforms that reward investment, entrepreneurship and productivity.
I have some data here that show the scope of the problem.
The deficit announced for this year is $78.3 billion, a $30 billion increase from the previous year. In addition, the amount of debt servicing currently stands at $55.6 billion, and it is projected to rise to $76.1 billion by 2030. In other words, the federal government's budgetary flexibility is shrinking before our very eyes.
A recent economic note from the Montreal Economic Institute, prepared by economist Trevor Tombe, reminds us of a simple reality: even without new initiatives, federal spending is growing faster than federal revenues. Over the next few years, federal revenues are expected to increase by about 3.8% per year, while several spending items will increase at a larger rate. Without corrective measures, we're looking at a $117 billion deficit by 2035.
Some of the pressures going forward are already known. We can think of military defence spending, which is expected to increase to 3.5% of GDP by 2035, which will require a very rapid increase. The same is true for benefits paid to seniors, which are increasing rapidly as a result of the aging population.
At the same time, there are budget concerns associated with costly federal programs that encroach on provincial jurisdictions. We can think of the Canadian dental care regime, which is expected to cost $13 billion over five years, and $4.4 billion after that, as well as federal pharmacare, with additional public costs estimated over time to be $13.4 billion. The idea is not to deny the need, but to avoid duplicating structures and funding the same thing twice. In short, it's a matter of respecting provincial jurisdictions.
A review of the federal government's approach to spending in areas of provincial jurisdiction would be advisable, since more needs to be done to properly fund areas that fall under the federal government's primary missions, such as defence.
I'll just conclude by saying that if we want to preserve essential public services and the government's ability to act, we need to get spending under control, review the size and efficiency of the federal government and remove barriers to investment and productivity.
Thank you very much.