Mr. Speaker, I appreciate the opportunity to participate in this debate.
I would like to start by thanking the third party for giving us yet another opportunity to crystallize for the Canadian people the differences that exist between the Liberal philosophy toward the role and responsibilities of government and the Reform philosophy in that same regard.
It was a year ago exactly today that the Canadian people elected 177 Liberal members to this House. I believe they did so because they believed and had confidence in our philosophy; one that said that it is important and necessary for the government to take fiscal management responsibilities seriously, that we must reduce the debt and the deficit. The Canadian people also agreed that there is more to the role of the Canadian government. They agreed with us that part of the role is to help create jobs and develop economic growth.
Contrast that with the Reform Party members who, as I saw them today in question period, were very happy to elect 52 members from one region of the country, a very important region but one region. Their strategy is very telescopic, very single-minded, and says that the role of government is really to
get into power, slash and burn, cut the debt and deficit, fold up the tents and get on with it, get out of town.
Every once in a while I wonder what it must be like to be a constituent in a Reform member's riding. I think of the young people who come to see me in my constituency, young people who have graduated from university and have been unable to get that important first job. They cannot get unemployment insurance and the alternative is welfare. They come to my office and we talk about the Canadian Youth Services. We talk about wage subsidies. We talk about different strategies whereby the government can impact and assist the young people in their search and their finding of a job.
I do not know what it must be like to be a Reform member and be unable to talk about these strategies, to talk about a government providing these kinds of opportunities and actions that do in fact help get Canadians into the workforce, contributing and productive in our economy.
We are here talking about the deficit and it is important. I have a few words I want to share in that regard. Many suggestions have been made about eliminating the deficit. Unfortunately, a significant number of those suggestions, including some made by hon. members in this House, are not based on a sound grasp of the facts.
This afternoon I would like to discuss some of these misconceptions. Let me begin with a remedy much favoured by certain members of the opposition, eliminating social benefits for higher income Canadians. Of course there are some potential savings here but they are much smaller than is often claimed. Why? To begin with, many social programs already target benefits on the basis of need or income. The guaranteed income supplement is an example. So are spousal allowances, the child tax benefit and the GST credit. Other social benefits are reduced or recovered as income rises. Old age security, for instance, starts being recovered at about $53,000. Unemployment insurance is recovered at about $58,000 and the age credit at about $26,000.
There is also an unfortunate truth faced by anyone who wants drastic cuts to elderly benefits. The fact is most elderly Canadians are at the lower end of the income scale. Almost three-quarters of our elderly have annual household incomes below $30,000. About half of all elderly benefits go to those who receive the guaranteed income supplement. That means individuals with incomes under $15,700 and couples under $23,800. In short, the notion that rich Canadians collect huge sums in social benefits is simply a myth and a mistake.
Another common belief about our social programs is that much of the social security spending goes to cheats but that too is a myth. Cheating is not the culprit behind the high cost of social programs. Chronic dependency is.
The rules for governing unemployment insurance for example have unwittingly encouraged chronic use, fostering dependency on certain industries and regions. This is precisely the kind of problem that calls for a careful rethinking of the way we structure our spending. What will be achieved by a draconian slash and burn approach? Does Reform believe that thousands of jobs will immediately appear for workers in depressed regions once they are forced off their UI dependency?
Another silver bullet solution held out by Reform members is to slash government operating costs. They see Ottawa as a fat city and the public service as an easy target for the resentment of heavily taxed Canadians. Yes of course the reduction of operating costs is an important goal, one to which our government has demonstrated a commitment, but it can never be the principal source of the savings needed to address the deficit problem.
The net cost of running the government and delivering programs represents only about 12 per cent of the total federal budgetary spending, about $20 billion. That is a lot of money but it is less than half the 1993-94 deficit. Even the most drastic cuts, even the absurd extreme of laying off every public servant would come nowhere close to solving our deficit problems.
Other facts speak loudly too. The cost of government has been repeatedly restrained in recent years including restraint measures in the last budget. In fact we have implemented 16 specific expenditure reduction exercises over the past decade of which 12 had a direct impact on operating budgets of the government departments but operating costs exist for a reason whether the mythmakers want to believe it or not. It is futile to repeatedly cut back operating costs in isolation from the programs that give rise to those costs.
There are other suggestions for eliminating the deficit that do not entail spending cuts at all. Some of these too are based on mistaken notions. For example we are often told that the government should sell off crown corporations. There may be good reasons for privatizing crown corporations but reducing the deficit is really not one of them.
The impact of privatization on deficit is extremely limited. That is because crown corporations are already recorded as government assets. As a result the only situations in which the deficit would be reduced by privatization are those where the assets could be sold for more than their current book value. I doubt whether there are many such cases at this time.
We also hear that the government could drastically reduce the deficit by lowering interest rates. People who hold this view forget that interest rates are not set by the government but by investors. The Bank of Canada can influence short term interest
rates but it cannot dictate long term rates or the cost of borrowing in international markets. Who would buy our bonds if we offered uncompetitive rates?
Occasionally the argument is still made that the government should increase the money supplied to finance the debt but history has shown time after time that this is a bogus and a bankrupt solution. Printing money to pay down the debt failed miserably. That is because it ultimately fuels inflation because people realize that their money is worth less. The ultimate result is that printing more money to solve your fiscal problems leads directly to higher interest rates and higher debt servicing costs. In the end the problem has not been solved. It has been worsened.
So far I have focused on a number of proposals for deficit cutting that are based on what we might call myths. My purpose in doing this is not to accept a defeatist attitude because the deficit must be wrestled to the ground and this government has and will do just that. But you cannot defeat the deficit with shallow snake oil solutions founded on illusion. What we need as I said earlier is a careful rethinking of the role of government and the way we spend. It is precisely what the government is doing.
As the finance minister has said the time of nibbling away at the margins is over. The government's comprehensive strategic approach is reflected in a new framework for economic policy that was released last week. It is also reflected in the comprehensive reform of our social security system that is already under way as well as the ongoing reviews of science and technology, defence and foreign policy, and small business policy.
I want to focus this afternoon on the federal program review. To my mind this is precisely the kind of meaningful selective approach to cost cutting that has been absent from deficit reduction exercises in recent years. It is precisely why earlier efforts have not succeeded.
What is program review? It refers to a fundamental review of all federal programs and activities besides the major statutory transfer payments to provinces and people which are being reviewed separately as I mentioned.
It includes examining grants and contributions, tax expenditures, cost recovery and overhead. The goal of this review is a more effective, smaller and affordable government, one that concentrates on its core roles and responsibility.
Each government department and agency has been asked to review and assess its activities against six guidelines. These guidelines are as follows: First, does a program area or activity continue to serve the public interest? Second, is there a legitimate and necessary role for government in this program area or activity? Is it really ours to control? Third, is the current role of the federal government appropriate or should the program be transferred to the provinces?
What activities or program should or could be transferred in whole or part to the private or voluntary sector? If a program continues how can its efficiency be improved? Finally, is the program affordable in light of the current fiscal situation?
As a result of this review some programs and services will be streamlined and some may be eliminated, particularly those that can be provided more efficiently by the private sector or that overlap with services provided by other levels of government.
Some of the changes resulting from the review will be announced in the 1995 budget. Others will be implemented over several years. The end result will be a smaller and more affordable government, but that government will continue to protect the most vulnerable in our society.
The federal program review is only one facet of the government's efforts to put our fiscal house in order. I have spoken of it at some length because I believe it provides an excellent example of the kind of approach that must be taken to deficit reduction; an informed, thoughtful and efficient approach, one that contrasts sharply with the draconian knee-jerkism proposed today by some hon. members.
I have had the opportunity to utilize this kind of approach with the private sector and it has worked very effectively to improve productivity, to help companies focus on what they should focus on. The strategy that I am proud of is part of our Liberal philosophy. It suggests that we understand that there are things that we cannot deny and that is that straight across the board cuts do not recognize differences in individual needs of Canadians and our institutions.
I would like to make one final point. In his presentation last week before the Standing Committee on Finance, the Minister of Finance emphasized that the government has clear principles to guide it in making the decisions necessary to achieve its deficit target. The minister said, for example, the deficit reduction measures should weigh on the side of program spending cuts over revenue increases, that selective, strategic cuts are to be preferred over across the board cuts and that the most vulnerable in our society must not be left behind.
The minister also made it clear that the government would not be making its decisions alone, that it wanted to hear from Canadians. I believe that the open, democratic consultation process that the government has put in motion is exactly what is needed if we are to put an end to the glib solutions and nibbling away at the margins.
I have every confidence that Canadians will recognize the importance of and contribute significantly to the kind of thoughtful approach our fiscal problems in Canada need.