Mr. Speaker, the motion we are debating today reads: "That this House take note of the opinions expressed by Canadians on the budgetary policy of the government". The reason we are having this debate is because of the foresight of the Minister of Finance who in his February 1994 budget launched the most extensive prebudget consultations in the history of the country for the 1995 budget.
In unveiling a new economic framework for the government known as the purple book on October 17 the Minister of Finance has identified five key areas: improving skills; adjusting to change; making government more productive; providing economic leadership; and getting the nation's finances in order.
The finance minister also released a second paper known as the grey book on October 18. It outlines the current state of federal finances fulfilling a 1994 budget commitment. The finance minister has made available to all Canadians through the offices of their MPs copies of a workbook prepared by the Canadian Foundation for Economic Education. This is a national non-partisan, non-profit organization with a history of efforts to promote economic understanding among Canadians.
According to the preface of the booklet the goal of the workbook is: "to provide you with background information that might be useful as you consider the issues and options that face Canada. We have tried to clarify the government's views so that you can decide whether you agree or disagree with the government".
The workbook poses questions such as: what should be priority areas for cuts; which government services should direct users pay a larger share; how can we deal with potential effects on other levels of government; and what is the right balance between cutting spending and raising more revenues.
The finance minister will not be able to read all the responses submitted but he will read a representative sample and a summary report of all the responses. As well, all responses will be reviewed by a team of officials in the department that will pass on to the minister any that are exceptional or unique. I encourage all Canadians to take the time to work through the book.
To support the minister's efforts the House of Commons finance committee has also travelled across Canada to listen to Canadians' proposals. In my riding I held a prebudget consultation meeting in order that the views of the constituents of Essex-Windsor could be submitted to the finance committee. I will be holding a second prebudget consultation meeting on Tuesday, January 17 in Essex, Ontario at 7 p.m. in the county council chambers to allow my constituents another opportunity to participate in the prebudget consultations and to respond to the finance committee's report.
In my opinion there are basically four things that can be done to address the national debt when considering a national budget. First, total government revenues can increase as a result of economic growth. Growth in sales and in income generate more tax revenues. Second, total government expenses can decrease due to economic growth. For example if more people are working and fewer people are collecting unemployment insurance or welfare then government expenses decrease. Third, total government revenues can be increased by changes in tax policy. Tax rates can be increased and more items can be taxed. Fourth, total government expenses can be reduced by cutting government spending.
Two years ago the current finance minister, then the finance critic for the Liberal Party, addressed these four points by arguing that there are only two tracks that can be followed to
tackle the national debt. The first track is to stimulate economic growth which increases revenues and decreases expenditures. The second track is to reduce government spending and/or increase taxes.
The minister correctly argued that to deal with the national debt government would have to address both tracks. The reason the former government's fiscal plan did not work is that it concentrated on the second track, increasing taxes and cutting programs while economic policies pushed the country into a recession which led to a reduction in economic growth. The end result was that the deficit remained relatively untouched.
In order to prepare for this debate I held a prebudget consultation session in LaSalle, Ontario. As well I have received hundreds of letters on the budget. I would like to report to the House the views expressed. I want my constituents to know I may not agree with all the suggestions but nevertheless I think it is important that they be reported. The proposals put forward by the constituents of Essex-Windsor at that meeting fall into the four categories outlined above and they do address both tracks.
To increase revenues and decrease expenditures through economic growth my constituents suggested that money needs to be spent in research and development to ensure growth in jobs and to ensure current jobs. They also suggested that eliminating RRSPs will hurt Canadian businesses as investments in stocks and mutual funds will be made offshore. This in turn will lead to slower economic growth.
They thought that taxing health benefits may be counterproductive. If people opt out of health plans then they will be sicker when they seek treatment. This will increase the cost of health care as more people are hospitalized and hospitalized longer. They also thought that cutbacks on health care can lead to increased health care costs in the long run. For example, in funding on education and research for AIDS, every person in which AIDS is prevented by education saves $100,000 in health care costs.
They also thought that we should be negotiating with the civil service. Federal employees account for only a small part of the government's budget. A result of the cuts has been poor morale which has not led to more efficient service. An efficient public service is also required to produce economic growth.
To tackle the national debt through changes in tax policy, constituents had a considerable number of suggestions. They suggested that RRSPs should not be eliminated as not only do they shelter income but they are responsible ways for planning for retirement. Responsible retirement planning will save the government money in the long run.
They also thought the government should eliminate the business entertainment tax deduction and that it should focus more on the underground economy as a source of revenue.
They thought that banks should pay higher taxes and that the GST problem should be fixed. They believed and were told when it was introduced that it was supposed to generate revenues to pay down the national debt. They also want the government to collect outstanding taxes. They believe that Canada's tax system should be reformed.
Most of the recommendations made dealt with the fourth option, when drawing up a budget in the face of such a large government debt: where and where not to cut. The constituents of Essex-Windsor made the following suggestions. We could reform MPs pensions, eliminate double dipping in the public service, reduce government overlap, allow legislation of whistle blowing so the waste of public resources can be reported, and eliminate the Federal Business Development Bank. A federal employee suggested looking at reducing the civil servant forced benefit package instead of reducing the number of federal employees. They want to reform Canada's social security programs.
Many of the items my constituents raised are ones this government is addressing. I would like to take a moment to address those. I started off my statement today by noting that the finance minister believes that we follow both tracks to tackle the problem of the deficit and the national debt. The minister's first budget demonstrates that belief and as a result of that the economy is growing.
Canada's economic performance in recent months has been very encouraging. I will repeat what I stated earlier today. There is real growth at 6.4 per cent in the second quarter, far outstripping the performance of any other G-7 country. Retail sales are up in the third quarter and up 7.8 per cent over last year. Real exports are up 5.6 per cent in the third quarter which is a record level and the fastest growth since 1983.
Employment is up by 307,000 jobs since January and these are all full time jobs. Employment growth in recent months has been the most rapid in almost six years. The unemployment rate has fallen from 11.4 per cent in January to 10 per cent in October. The help wanted index is up 2.1 per cent in October and stands 16.5 per cent above the pre-election level.
This economic growth pays dividends and has helped reduce the deficit. Over April to August the deficit is $4.5 billion lower than in the same period in 1993-94. Furthermore, it is results like these that lead the IMF to project that Canada will have the strongest growth in output and the highest rate of growth in employment in all the G-7 economies in both 1994 and 1995.
Another suggestion made at my LaSalle meeting was that the business entertainment tax deduction should be eliminated. It should be noted that the government's last budget reduced this
deduction from 80 per cent to 50 per cent. It also suggested that government revenues should be increased by clamping down on the underground economy.
In terms of the underground economy it is important to note that 95 per cent of all taxes are paid voluntarily. However, enforcement activities are also expected to add $3.8 billion to tax assessed in the fiscal year 1994-95. Revenue Canada's underground economy initiative alone will result in $750 million in additional taxes assessed before the fiscal year is over.
Another point raised by constituents dealt with the question of uncollected taxes. It should be noted that this money does not represent an untapped source of funds for the government to apply against the deficit.
As I told the Canadian Tax Foundation's annual meeting on November 23, 1994, these moneys will be collected with interest except where there are legitimate reasons to adjust the assessment such as additional information provided by the taxpayer or an error in the original assessment.
As I noted above, constituents suggested reducing government duplication and reforming social security as two means of addressing the deficit. The government is currently reviewing both social security and all government programs to ensure the most productive and efficient services for Canadians.
In addition to holding a consultation meeting, I also receive hundreds of letters from constituents in my riding offering their suggestions and comments. Two resounding themes were heard over and over ahead: first, that governments must cut spending; second, that painful measures that are implemented must be fair, equitable and not betray former trusts or commitments that governments made to Canadians.
On the first theme, there is recognition and an understanding that the debt and deficit must be reduced. Canadians understand that our total provincial and federal debt is approximately $700 billion. Furthermore, they recognize that if we want to pay off all our debt, both federal and provincial today, we would need more than $24,000 for every man, woman and child in Canada.
This figure is ominous, as well it should be. To further put it into perspective, they realize that interest costs on our federal debt alone are rising by $85,000 per minute. Last year, more Canadian tax dollars were used to pay interest on the debt than were spent on any other area, more than was spent on health care, welfare or programs for seniors, far more than was spent to run the entire federal government.
We spent $38 billion in interest payments on the debt. In comparison, we spent and paid $7.6 billion in UI transfers and $19.9 billion in transfers for seniors. Furthermore, our net foreign indebtedness is 44 per cent of our gross domestic product. It is the highest of all the G-7 countries. Italy comes second at 11.6 per cent and United States foreign debt is 8.7 per cent of GDP.
The workbook released by the Canadian Foundation for Economic Education states our problems best. In 1993-94, our deficit was virtually all interest payments, $38 billion of a $42 billion deficit. In 1994-95, this current fiscal year, our entire deficit will be due to interest payments on a debt. If things persist we will leave the next generation and future generations an extraordinary burden, a burden that would likely guarantee they experience a lower standard of living than those who preceded them and incurred the debt. It will be like leaving a mortgage still to be paid but no house to show for it.
A resounding theme that permeated from the numerous letters I received from my constituents was a plea to reduce government spending. So grave is the problem that many in their letters wrote: "I have never written a letter to any member of Parliament before but I feel it is necessary that representatives in government realize that we have had enough taxes and ask that spending be reduced co-operatively with the provinces".
One of my constituents could not have expressed the problem clearer. He wrote: "I am pleading with you to understand that new taxes are not the solution. Please reduce government spending drastically. If I am not making enough money to live the way I want to, it is up to me to come up with more money or change my lifestyle. That is my responsibility. I expect the government to change its spending style".
Another constituents wrote: "In hard times we do not have to give money away so freely. We should not give interest groups handouts at the drop of a hat. If all this nonsense was cut off we could probably do away with the GST. That money was supposed to pay off the debt and nobody seems to know where this money goes".
The second theme was the belief that painful measures that are implemented must be fair, equitable and not betray former trusts or commitments that governments made to Canadians. Along this line I received hundreds of letters on the issue of RRSPs. The message was: "When RRSPs were introduced, the government promised us that we would be taxed in the future when we used that money. Now I am shocked that you are considering breaking this commitment we both made to our combined future".
Further expanding on this theme the president of the Windsor-Essex County chapter of the Canadian Association of Retired Persons, known as CARP, stated: "Historically governments have encouraged Canadians to save for their retirement by investing in RRSPs. This has not only provided a tax deferral on earned income but has also allowed these contributions to grow tax free until such time as the funds were withdrawn. Now that millions of Canadians are using this investment strategy it would be a serious breach of trust to now start taxing RRSP contributions and earned interest prior to withdrawal".
The possible taxation of dental plans was also expressed as a matter of treating all people fairly. One constituent wrote: "Dental plans definitely assist individuals and families to visit dental offices on a regular basis for preventive dental procedures and dental treatment when required. To tax dental plan benefits would result in less net income for my family and myself because I have a dental insurance plan. I think that is unfair. I am sure that many people like myself will have to consider whether to continue their dental plan and be taxed or discontinue their dental plan and not be taxed. Without my dental plan I know my dental health will suffer but I remain unconvinced that this tax will provide the economic impact that the government is banking on. Don't betray a trust. Don't tax health".
Sustainable economic growth can only be achieved through solid planning and real productivity and growth. In the purple book the minister stated that productivity growth is the foundation of economic progress and must therefore be the primary focus of economic policy. A more productive economy is the only dependable route to more and better jobs for Canadians.
Research and development can assist in this goal. Between 1974 and 1993 employment in industries which use high technology grew almost three times as fast as in those that use low technology. It is estimated that almost half of the new jobs that are likely to be created during this decade will require more than 16 years of formal education and training combined. Government must maintain research and development in all areas.
Especially in my area one area of concern that has been brought to my attention is agricultural research and development. Without the agricultural research and development in my area, for example, Essex county would not have several flourishing wineries as it does today. It is important that we continue to promote such research and development.
In conclusion, these prebudget consultations have offered my constituents a forum for expressing their opinions and concerns. In summarizing their statements today the two recurring themes are that we need balance and we need fairness in the cuts which we make. That in my opinion is the answer. The 1995 budget must be fair for all Canadians. Only then will it be accepted.