In category after category we have set out a plan of action which opposition parties, not only in Canada but anywhere in a democratic society, would ask how these guys accomplished so much so quickly. I would say that it is through the hard work of the Prime Minister. He has set the standard for the rest of the caucus and we have proceeded to work on our plans.
The motion today asks us to move toward a balanced budget immediately. I would say to the Reform Party that everyone in the House, I think, and judging from what happened in the finance committee, is absolutely committed to making sure that we get our House in order. There should be no doubt about it. The Bloc has said the same. The Reform Party has said the same. Therefore, the question becomes one of how do we do it. What is the best topic? What is the best strategy? That is where I return to the organized strategy of the government.
We set out in our first budget certain objectives of how to manage the deficit. We are right on course. The Minister of Finance has said on several occasions that we will meet our target each and every year. The critical issue facing Canadians after the last 10 years of government has been the complete lack of credibility in the financing of the country. We have proceeded to deal with the issue of credibility.
I am very proud to be working with the Minister of Finance who has in every statement systematically re-established a credible framework for the governing of the country and putting our financial House in order. The strategy was reaffirmed last week in our economic and fiscal update. This important paper set the parameters for a public budget consultation that is both unprecedented and fundamental to fostering economic growth and jobs.
Let me remind the opposition that when the Minister of Finance spoke to the House committee on finance he zeroed in on our fiscal challenge. He said:
Facing up to the debt challenge is the keystone of responsible economic policy. If we fail at that, we fail at everything else. It is not a question of focusing on jobs or the debt. It is a question of focusing on both.
From time to time we hear the opposition party taunting. We have asked the opposition parties on several occasions to give us some ideas, to help us out with this very difficult process. There are going to be tremendous tradeoffs. There are going to be a lot of people hurt in the process. The purpose of government is not to hurt Canadians. It is not the fault of the poor that we are bankrupt. It is not the fault of the elderly that we are bankrupt. It is the fault of government after government which has refused to deal with the fiscal crisis.
It is a question of fair taxes. We set out that we would deal with fairer taxes. We started out by dealing with the $100,000 capital gains exemption. The corporate income tax deduction and the GST tax credit for meal and entertainment expenses were reduced from 80 per cent to 50 per cent. Large private corporations with capital over $15 million are no longer eligible for the small business deduction.
New measures will prevent Canadian based companies from using foreign affiliates to avoid paying Canadian taxes. We will ensure that the income from securities held by financial institutions is measured appropriately for tax purposes. Corporate tax rules relating to tax shelters, research and development incentives, debt forgiveness and asset sales are tightened.
The first $25,000 of life insurance benefits provided by employers will no longer be tax exempt. The threshold for the 29 per cent tax credit on charitable donations is lowered from $250 to $200. The age tax credit for hiring seniors will be progressively reduced over the next two years. The taxation of family trust, a very difficult issue in which I know the Bloc has a particular interest, has been reviewed by the House of Commons finance committee. We know there will be positive recommendations for change coming out of that.
The difference is that we have our facts and we have organized a program to achieve success. We are not just rambling on. We are not just using up the time of the House of Commons for polemics and rhetoric. There is a real job to be done.
At the time of the first anniversary of the last government-and the Parliamentary Secretary to the Minister of Industry was there-there was no reason to celebrate. It had not kept its promises from 1984, let alone the promises from 1988. It was met with dull silences. Its members wore little flowers to promote the Prime Minister, but what did that mean in terms of substance? It meant absolutely nothing.
There can be no doubt about our commitment to meeting the 3 per cent deficit target we have set out for 1996-97. There should be no question that this is a vital first step forward toward an ultimate goal: a balanced budget.
I am sure the House needs no reminder of the price Canadians are paying for decades of surging deficits and debt. It is measured in higher taxes, high interest rates, too few new jobs and too little growth. We have started out on the deficit reduction track to bring the deficit down to 3 per cent of GDP in three years. Canadians should understand why that 3 per cent target is so important. In the words of the Minister of Finance, we will reach that target come hell or high water.
Reaching that level will mark a turning point in the battle against the debt. It will mean that the economy will be growing faster than the debt. In other words the debt will finally begin to shrink in relation to Canada's economy. This will be happening only for the second time in more than two decades.
We can look at the issue in another way. The federal deficit currently near 6 per cent of GDP has not been as low as 3 per cent since 1974-75. There is another point that is just as important to emphasize. It underscores why it is better to move ahead by concrete steps than to issue wishful, long term plans for deficit elimination. Setting firm deficit targets for the near future represents a major change from the past.
Because Canadians have become cynics about federal deficits, because they have suffered too many years or rosy long term promises, we have set out realistic targets and will take the actions needed to deliver bottom line results. Our success will strengthen credibility for our long term objective: eliminating the deficit completely.
This strategy is based on fundamental, political and public reality. We believe it is best to set out short term targets, concrete milestones and hit them. With short term targets there is no excuse for delay and no acceptable grounds for not taking tough action to address the problem. When unrealistic long term goals are set, we can always find a reason to avoid tough action today, tomorrow and the tomorrow after. That was the Tory record and it is a legacy we refuse to accept.
I want to highlight another aspect of the political and public reality of deficit fighting. The previous government believed in imposed solutions that did not draw upon real national discussion and consensus. Now it is Reform that looks for instant slash and mash solutions.
Our government is a national government committed to democratic principles of openness, access and consultation. It is those principles at work that govern our approach to winning the deficit battle. The Minister of Finance made that point clear when he addressed the House of Commons finance committee. I quote the minister:
During our first round of prebudget consultations, Canadians told us they wanted clear targets to which they could hold the government accountable. We have provided those milestones.
Canadians can now judge if we keep our word. That is why our target is not cast ahead into the fog of some far off future. It is only two years away.
That is why we have set year by year milestones on the way to that target-so that we can be held to account. That is why we have used very prudent assumptions in determining how our targets can be met. And that is how we will restore confidence in the financial credibility of the Government of Canada.
These are not just words. It is a formal pledge. That is why we took several concrete actions in the last budget and that is why we have achieved our targets.
Several issues are still confronting the government. For example interest rates, triggered by the U.S. federal reserve fight against inflation and compounded by worries about Canada's fiscal burden and the Quebec situation, are much higher than anyone expected. Because of the size of our debt even small changes in interest rates have mammoth effects on our carrying costs.
The fiscal update sets out the dimension of the challenge we face under different and increasingly prudent interest rate assumptions. Based on the current outlook and the average of private sector forecasts we would still need an additional deficit action of $2.3 billion in 1995-96 and $5 billion the year after.
If we assume interest rates that are half a percentage point above the average private sector forecast without any new budget action, we risk falling short by $3.1 billion of our target next year and by $6.3 billion in 1996-97. The numbers are even worse if we assume interest rates a full percentage point above the average forecast and growth that is half a percentage point lower. Then the deficit could be $5 billion above our target next year and $9 billion off the target in 1996-97. The combination of high interest rates and a large debt poses a major challenge.
In the discussion in the finance committee last week the Minister of Finance indicated several principles. First, the deficit reduction must be part of a strategy to create jobs from growth. Second, the actions must be fair, making sure that the most vulnerable are not left behind. Third, deficit reduction measures must be selective and strategic reflecting clear priorities. Fourth, we must be frugal with taxpayers' dollars and, finally, budget action should weigh on the side of cuts and spending rather than increases in revenue.
As we seek these reductions we should keep another thing in mind, another lesson from the past. Under the previous government the problem was not the 10 or 15 per cent that was lopped off in each year's last minute frenzy. Rather the problem was that no one paid attention to doing better with the remaining funds. We will not make that mistake. Canadians do not expect smaller government. They demand smarter government. That is why the Minister of Finance went to the finance committee last week.
I want to take a minute to explain the significance of this action. Under Standing Order 83(1), accepted by all members of the House last spring, the government committed itself to the first prebudget review in the history of any western democracy, particularly in the parliamentary system. It has not been done in Britain. It has not been done in Germany. The American model
is much different. It has been tried in selective ways in the provinces of Ontario and Saskatchewan.
We want to have Canadians involved to understand how difficult some of the choices in front of us might be. There is the law of unintended consequences that we learn when studying history wherein we do one thing and have a number of side effects that we did not want. We want Canadians to get into active discussion with us about what those tradeoffs might be.
We have presented a two part plan for creating jobs, for the reorganization of the government and for the establishment of new priorities. When the Minister of Finance was before the committee he raised three questions he wanted the committee to look at. First, are the economic assumptions for growth and interest rates appropriate? Second, what should be the balance between cuts in spending and measures to raise revenues? Third, what specific actions should be recommended? We want to move away from the scenario of not in my backyard.
I am sure members of the House hear the reactions, for example to the social security review. People are saying that we should not touch a particular program, not even discuss it. When we move into financing the country we cannot have little cubbyholes or little special tax situations that we cannot talk about. We want everything on the table.
We want opposition members to participate in the round table discussions we are to have across Canada. We want to hear their suggestions. When we report back to the House in December we want all members of the House of Commons to have an opportunity to make their own contributions. In late December and in January when the serious work on the budget begins to take a shape the Minister of Finance can look at the report of the House of Commons finance committee, thank Canadians for their support and thank the House of Commons committee for organizing their comments in a constructive fashion.
It is not an easy process. I thank members of the Reform Party for bringing these issues to the attention of the House. I wish they would be able to contribute a little more positively. Perhaps other speakers during the afternoon will go back to their research bureau and say that the parliamentary secretary for finance was correct. We do need some more ideas. Let us sit down, maybe for the first time. I do not know how that party works but let us sit down, take a look at the problems facing the country, and use the time of the House of Commons effectively.
One of the great frustrations of Canadians watching the parliamentary channel is how many people are really contributing ideas. In our platform for the last year, the 43 areas in which we have taken initiative and the nine tax changes I think we provided a very specific idea. I see the lead critic for the Bloc Quebecois is beginning to warm up for his contribution. We will listen for his specific ideas.
We have in front of us an opportunity to debate and to present ideas on reduction. I know the Bloc has changed its views in the last couple of weeks and is now on the bandwagon. It is nice to have Bloc members aboard. We will look for specific suggestions. When it came to certain budget measures in the last budget-and it was difficult-Bloc members were on their feet in the House complaining about this cutback and that cutback. It would be good to have them understanding that in the overall framework everyone has to pay a price and everybody has to contribute in re-establishing the physical health of the country.
In conclusion I thank the House for the opportunity to participate today and for the opportunity to put forward some of the areas in which we have made major accomplishments. I look forward to the contributions of my colleagues on this side and my colleagues on the other side. Through questions and answers and good debate we will have a better idea of how to put the country back together.