Debates of Feb. 1st, 1994

Pre-Budget Consultations

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I want to thank the Minister of Finance for this opportunity to outline our expectations with regard to the forthcoming budget, away from the media scrums we saw during the past month and certainly a change from Question Period, where the minister has made a habit of leaving questions unanswered.

In this debate, the Bloc Quebecois maintains that to carry out a tax reform that is fair, effective and sustainable and to avoid drastic cuts in public spending and, especially, in social programs, the Minister of Finance will have to do very shortly what we have been asking him to do all along, and that is set up a special parliamentary committee to examine federal spending and the federal tax system.

It is really too bad that so far, the minister has failed to respond to requests in this respect from the Bloc Quebecois. In this House, the words transparency, democracy, co-operation and responsibility are often mentioned, but acting according to these principles is another story altogether.

Everyone here is aware of the pitiful state of our public finances. Everyone is convinced that appropriate steps must be taken to turn the situation around.

The federal debt, as a number of colleagues mentioned earlier, recently rose to a record $507 billion.

The situation has deteriorated since the recession. The deficit has risen from $31 billion in 1991 to $45 billion in 1994. The Canadian government's operating deficit is now 6.2 per cent of GDP or, according to the OECD, twice that of the United States.

The government's performance in terms of the deficit and the state of its finances in general is mainly due to an unexpected drop in tax revenue.

This drop is very disturbing, because it occurred despite a measure of economic growth. There is necessarily a connection between lower tax revenues and the growth of the so-called underground economy.

The disastrous state of our public finances cannot be allowed to continue, because generally speaking, it restricts the government's ability to deal with the real problems, and especially unemployment. The deficit alone drains domestic savings and increases Canadian borrowing abroad. In fact, between 1983 and 1992, the proportion of the federal debt owed to non-residents more than doubled. Of all G-7 countries, Canada has the highest foreign debt. The state of its finances undermines Canada's credibility and is harmful to investment, because of the risk premium which is a factor in raising Canada's interest rates.

The prime cause of the disastrous state of our finances is the state of the economy. We are just coming out of a very long recession, one of the longest and worst since the depression in 1929. Economic recovery is slow to get off the ground and is in fact much slower than in 1982.

This recession which we all deplore is due, first and foremost, to the dogmatic policies of the Bank of Canada, which caused a substantial spread between short-term real interest rates in Canada and those prevailing in the United States at the time. Mr. Speaker, when will the members on the other side of this House understand that the real rate in Canada, the only one that matters to investors, has slipped by more than 6 per cent compared to the US rate. Under the circumstances, how are we supposed to

attract investors and keep our Canadian investors on the domestic market? The situation is unacceptable!

Because of this policy, and primarily because of the previous government's policy, we entered into the recession during the first quarter of 1990, that is before everyone else. The ensuing downturn in the world economy exacerbated the situation in Quebec and in Canada.

When we examine the situation, we note that since April 1992, Quebec has recovered a scant 25 per cent of the jobs lost during the recession, whereas in the rest of Canada, the figure is considerably higher, namely 60 per cent. The unemployment rate remains unacceptably high. It hovers at roughly 13 per cent, and at 11.2 per cent for Canada. These unacceptable levels hide the real tragedy faced by hundreds of thousands of Quebecers and Canadians.

We have been waiting a long time for the recovery, the one which according to economists' figures, has been under way for nearly two years now. The recession and the slow recovery, coupled with the underutilization of Canada's output potential, have contributed to a decline in government revenues. According to a study by the International Monetary Fund, of all G-7 countries, Canada's deficit is the most sensitive to the state of the economy. Furthermore, as the leader of the Opposition mentioned this morning in his excellent speech, still according to an International Monetary Fund study, even if the Canadian economy had achieved its full potential in 1993, we would still continue to rack up in the coming years deficits in the order of 3.5 per cent of GDP. Therefore, what we are also facing is a structural problem in Canada.

This problem is related to the nature of the federal system, and to its chronic, historic inability to adjust to new social and economic realities. I can give several examples of how the nature of the system is responsible for the anemic recovery. First, in view of the poor distribution of powers and federal encroachment upon provincial areas of jurisdiction, the system leads to program duplication and overlap, resulting in an inability to achieve the very aims for which the programs were created. It is estimated that duplication costs Quebec roughly $2 to 3 billion per year.

Here is a second example of how the system contributes to an anemic recovery. Because of the nature of the system and the natural tendency to centralize everything, the two levels of government compete with each other to see who can provide the most, not the best, services. We have seen this happen in many areas such as manpower training, regional development and transportation, a field with which I was associated in the past.

Under this system, the rule never changes. The federal government must have the highest profile, the Canadian flag must nudge out all provincial flags, including Quebec's. The result is inefficiency, duplication and encroachment on areas of provincial jurisdiction.

My hon. colleagues opposite persist in brandishing their red book each time we raise a concern or point to economic inertia. However, the facts speak for themselves. Our system is outmoded and in decline.

Third, the federal system results in a lack of cohesion and policy integration, thus impeding a healthy recovery with respect to jobs, economic growth and consequently, tax revenues. We cannot emphasize too strongly the problem of integrating the various components of income security, manpower training and labour market integration or the need to decentralize for the sake of efficiency and subsidiarity, needs which are very clearly understood in Europe, particularly with Maastricht.

Not only is this system inflexible and inadequate in terms of generating a steady economic recovery and adequate fiscal revenues, it has lost any sense of priority, thanks to those who have kept it running for decades, often the same people who today sit in this Liberal government. In a world in constant upheaval, certain priorities are inescapable.

The legacy of federalism in the area of R and D funding and training is one good example.

Canada spends the least on research and development, 1.4 per cent of GDP, compared to 3.1 per cent in Japan and 2.8 per cent in the United States. It is outrageous that we have not made a priority, historically, of such a key sector as research and development.

The federal R and D legacy for Quebec is even worse, since over the past 30 years Quebec has only received between 12 and 18 per cent of R and D spending, while Ontario got over 50 per cent. It is not surprising, then, that Quebec is not getting its share in the economic recovery. Historically, Quebec has been weakened because the structural benefits related to R and D have not taken place there, and the federal government has contributed to that problem.

At the same time, Canada has turned in a notably poor performance in training and business training. Nevertheless,R and D and manpower training are the keys to meeting the challenges of globalization, to a sustainable recovery, jobs, and adequate tax revenues. That is self-evident. It is not surprising, given the poor performance of the system, that in only two years Canada had slipped from fifth to eleventh place among industrialized countries on the competitiveness scale of the World Competitiveness Report in 1992.

It is not surprising either that according to the same report for 1993, Canada's future prospects ranked 20th out of 22. We see Quebecers and Canadians losing faith in political institutions. In a world of constant change, we cannot simply mark time indefinitely.

Faced with all that, this whole mess, and faced with a government that gives people no hope, except constitutional conferences, now economic conferences, conferences on human resources, conferences that will drag on and on with no solution, we have a better idea of why those who have been left behind and those who have been crushed and strangled by Canada's tax system, namely the middle-income people, are cynical about politicians.

We had better understand their feeling of revolt, their feeling of powerlessness and their frustration at not being able to make a real choice except once every four years and at having the wool pulled over their eyes in the meantime. We have a better understanding, even if we do not agree with them, of the reasons many of them are forced to turn to the underground economy, to the black market, thus cutting into government revenues and worsening the state of the government's finances.

The problem of contraband cigarettes is only an expression of a much more serious situation than those who claim to govern us would admit. It is simply an expression of a widespread disillusionment and even disregard felt by Quebecers and Canadians.

Quebecers will soon choose what they think will be a more promising way to the future than what the present system offers. When Quebec becomes sovereign, of course it will take charge of its destiny and Quebecers will be accountable to themselves and to History; it will also be an ideal opportunity for Canadians to redefine themselves, to create institutions that reflect who they are, with a strong central government if they so wish and wall-to-wall national standards if that is what they want. In short, Canadians will have every opportunity to develop on the basis of models that suit them and that we respect but no longer share as Quebecers.

Meanwhile, to get into the subject before us today, and so that I will have time to get my whole message across, I would like to tackle head-on the issue of public finances. Since the Minister of Finance began consultations, many have said that it is not possible to put the public finances back in order without cuts in social programs, because transfers to individuals and provinces account for more than half of program spending. The way the government's consultations, led by the Minister of Finance, are going, we are inclined to think that he and his colleague, the Minister of Human Resources, are tempted by that solution.

If not, how do you explain that in his department's own booklet on Canada's economic challenges, it is said that our social security and health systems are too generous? How do you explain that the member for Hull-Aylmer, who loves to travel by Challenger jet at $170,000 per speech, could talk about cutting the health budget by 20 per cent? How do you explain that every time I asked him in this House to deny the rumours about it, the Minister of Finance never did?

The statistics that were quoted in this House yesterday on underemployment and on the poverty of women and children should have convinced us and convinced this government that social programs must not be tampered with, that the less fortunate members of our society must not be targeted, as the previous government has been criticized for doing.

These figures should have convinced the government to stop hounding those who are hard up, as we would say, and to try instead to improve their well-being and prospects by putting into place adequate economic policies and taking corrective action such as restoring funding to social housing which was shamefully cut by the previous government.

The second option, one apparently favoured by the Minister of Finance, is to draw on middle-income taxpayers. We, from the Bloc Quebecois, do not think this is appropriate either. Sound management of public finances is required. The middle-income taxpayers, who have borne most the 68 per cent increase in federal taxes since 1984, are not able to contribute additional tax revenues. They are overburdened.

They should not be the ones affected by the broadening of the tax base this government is considering because, as I said, the 68 per cent increase in federal taxes was borne mostly by those taxpayers. Again, the Minister of Finance is tempted to adopt this course of action.

On January 28, the headline in La Presse read-and I will have to use the name of the minister-``Martin has his eye on seniors and social programs''. The article went on to say that the minister intended to tax health care and insurance plans that employers contribute to and was contemplating measures affecting certain exemptions benefiting middle-income seniors as well as the capital gains exemption and the limit on RRSPs. The Bloc Quebecois believes that the middle-income taxpayers deserve a break.

As part of the public finance review process, it was suggested that, to put finances back on a healthy footing, transfer payments to the provinces should be cut. The solution does not lay there either. In the end, the same people end up footing the bill, except that the provinces, Quebec in particular, bear the brunt of the cuts and the fiscal restraints, while the federal government is washing its hands of the matter.

The provinces have done more than enough in that respect since 1984. Let us just say that, from 1984 to 1993, the rate of federal transfer payments to Quebec-I am taking the case of Quebec because it is the one I am most familiar with, but this probably applies throughout Canada-has dropped from 29 to 18 per cent.

During the same period, the federal government share in the financing of health and post-secondary education programs fell from 45 per cent to 32 per cent.

These drops in federal contributions to Quebec resulted from several measures taken by the federal government to pass on its public finance management problem to the provinces.

Just for established programs financing, the Quebec Minister of Finance estimated that, for fiscal year 1992-93 alone, federal cuts cost the Government of Quebec nearly $2 billion in lost revenues. Who paid for that? The taxpayers, the same taxpayers on whom the former Minister of Finance levied a special tax.

That is not where the money should come from. The tax base needs to be broadened, but by eliminating tax loopholes benefitting high-income taxpayers and big corporations. I see that I have only two minutes left. So, I will just quote a few more facts.

In preparing his Budget, the Minister of Finance should think of the richer Canadian taxpayers. According to Yves Séguin, an eminent Quebec tax specialist and former Quebec Minister of Revenue, in 1991, 368,000 of them reported $68 billion in income on which they were taxed at an actual rate of 18 per cent, while the basic tax rate was 29 per cent.

By adding just three percentage points to their actual tax rate, the government would have recovered $2 billion in new tax revenue that year, but chose not to.

I would suggest that the Deputy Minister of Finance get money from the thousands of corporations that did not pay a single penny in taxes. It is obvious that all the numbers are not out in the open. The Department of Finance has been compiling data since 1987, but according to Léopold Lauzon, another well-known Quebec tax accountant, 90,000 companies made $27 billion in profits that same year without paying any taxes.

A minimum tax of say 10 per cent on these profits would have allowed us to collect almost $3 billion more in new tax revenues. Why are we not doing it? The Bloc Quebecois is urging the Minister of Finance to impose on corporations a minimum tax of up to 10 per cent for instance. That is where we must look for the billions of dollars missing from the federal coffers.

It is the same for family trusts. We have talked about it but there are not enough truly comprehensive studies in this regard. A figure of $350 million in annual tax losses was put forward by Claude Picher of La Presse and confirmed by other analysts elsewhere. But we know that there is probably more money in these family trusts. In 1982, the most recent year on record, total assets in trust amounted to $87.7 billion although this amount includes other things besides family trusts. We do not know the true extent but we do know that we can add hundreds of millions of dollars to the federal Treasury by putting our foot down.

So we are reiterating another request of the Bloc Quebecois: to set up a parliamentary committee. I heard the Finance Minister say this morning that we had to wait until 1995 and follow the process leading to the preparation of the 1995-96 budget. We cannot wait until 1995-96. The Minister must immediately set up this special parliamentary committee to fully review the federal government's overall budget and fiscal spending in order to implement a lasting and equitable reform and especially to close loopholes and eliminate tax inequities I pointed out to you earlier, Mr. Speaker.

My colleague, the hon. member for Joliette, will speak further about the Auditor General's new revelations as there are hundreds of millions of dollars to be collected there. In conclusion, I would like to convey through you to the finance minister the following message: I hoped before the holiday season that the finance minister would not renew the Canadian monetary policy pursued by the former Governor of the Bank of Canada.

Instead, he appointed the right-hand man of the former Governor of the Bank of Canada with essentially the same mandate, namely monetary and price stability regardless of economic growth. I am asking him through you to review this monetary policy to strike a balance, as many economists, and not only the 90 per cent of economists here in Ottawa but people such as Pierre Fortin, are asking him to strike a new balance between his objective of long-term price stability on the one hand with short-term employment growth and economic development on the other.

[Nick Discepola, Liberal, Vaudreuil, QC]

Mr. Speaker, I would like first of all to congratulate our colleague, the member for Saint-Hyacinthe-Bagot, on his speech. I agree with many of his concerns, some of which I also mentioned in my own presentation.

I feel the member for Saint-Hyacinthe-Bagot missed a great opportunity. Since he is the critic for finance, I listened carefully to what he had to say but his statement remained very general; I would have hoped for something more precise. I share his views, particularly in the areas of research and development and small businesses.

As I said before, he had the perfect opportunity to make his point and I would have hoped for more concrete and precise statements.

As regards my riding and my beautiful province, I get frustrated when I hear day after day the B.Q. and the P.Q. say that the problem with the economy of Canada and of Quebec is that the federal system no longer works, that the problem with the rate of unemployment in Quebec is that the federal system no longer works.

Today for the first time in the history of our Parliament, we had a perfect opportunity to say something concrete.

I repeat my question to the member for Saint-Hyacinthe-Bagot: If ever Quebec were to become independent, what percentage of the tax burden, and especially the debt, and what percentage of unemployment insurance and other social systems would it be just for Quebec to take on, according to him? Is it not better for all Quebecers and all Canadians to work together towards building a better country and a better province?

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I want to thank my colleague for his remarks. If I was not clear enough, let me add a couple of words to make myself perfectly clear this time.

My message to the Minister of Finance is as follows. First, he must not target those members of our society who are having the worst possible time right now, I mean the unemployed actively looking for a job; and the majority, the vast majority of them are actively looking for a job.

Second, he must not target the people on welfare, through cuts to the Canada Assistance Plan, and other transfer and equalization payments aimed at improving the fiscal situation of the provinces.

Also, I ask him not to cut those transfer payments to the provinces, as a whole, since, in the end, there is only one taxpayer.

Furthermore, I am ask him to spare those who have been paying taxes, carrying an ever increasing burden since 1984, and who are fed up; I mean the middle-income earners. That is essentially the first message I wanted to convey.

The second one is that he should tackle the real problems, the tax loopholes. I mentioned a whole series of them, I could have added more to the list; in fact, there are many studies, albeit incomplete, to back me up. The studies are there but the extent of the problem regarding tax loopholes, especially family trusts, is not fully known.

It has been said, and this is not out of line, that a minimum of $350 million is involved here. It might require the House to unanimously give the Auditor General a mandate, well within his authority, to conduct an in-depth study of tax havens, family trusts and the like. That would be the only way. That study should be an integral part of the proceedings of the ad hoc parliamentary committee the Minister of Finance has been asked to set up. He would then combine that study with the Auditor General's report and the committee's democratic proceedings. That is the first part of my message.

The second one, Mr. Speaker, is that the ball-I am referring to sovereignty versus federalism-the ball is going to be in my colleague's court and in his federalist colleagues'court, during the next provincial election, but most of all, during the ensuing referendum debate. In the last five years, there has been no proof, on the contrary, that the system can be changed to respond to Quebec's aspirations.

So, I will ask my colleague to conserve his energy because in the upcoming debate he will need all of it to demonstrate that the system can meet Quebec's expectations and that it can foster economic development and take up the many challenges we face in a global economy.

[Mary Clancy, Liberal, Parliamentary Secretary to Minister of Citizenship and Immigration]

Mr. Speaker, I am delighted to be here and to congratulate you on your appointment. I am delighted to be taking part in this debate today with my first speech, while not my maiden speech, in this Parliament. May I also say that the view is different from this side of the House. I want to take this opportunity to thank the people of Halifax for letting me have this view. It is one which I hope to keep well into the future.

The election that we all came through last fall was a landmark in more ways than one for the people of Canada. Our country had been in difficulty and remains challenged by numerous problems for its people and for its government. There was a resounding message sent by the people of Canada to this place, to its members, to the government and to all of us. That is that the overwhelming concern of Canadians is the concern for jobs.

I remember hearing a commentator once talking about the way citizens watch the news. They watch the news and ask if it affects them, their family, their neighbourhood, their city, their province, and their country.

If the answer is no to all of those, then the next thing is how much entertainment value is there in the item.

The late great speaker of the American House of Representatives, `Tip' O'Neil, said it very well when he said that all politics are local. The most local of those issues for Canadians is the question of a job, job security and providing for their families.

I am delighted to be on this side of the House, led by the Prime Minister, the Minister of Finance and other members of the cabinet who have put the highest priority on job creation and economic growth.

It is time that the compassionate side, the understanding side of government was foremost in the eyes of Canadians. It is time that the people of this country know that those people they have put in positions of power are determined to see that life improves, that this country, the most favoured one on earth, lives up to its potential and ensures for each of its citizens the kind of life that our birthright should be giving to us.

I look at the specific programs that were promised in our much vaunted red book and again I am reassured because we are keeping our promises. As members of Parliament, as the governing party, as all members of this House, whether in Her Majesty's Loyal Opposition or on the government side or sitting as independents, we know that the people of this country have said to us that there is much to be proven.

Those of us who were fortunate enough to receive a second or in some cases a third or a fourth election from our own electors cannot rest on our laurels because we too have much to prove to the people of this country. It is absolutely essential that the question of trust be restored between those of us who sit in this chamber and the people who put us here. It is absolutely essential that the profession to which each one of us belongs, the profession of politics, be allowed to earn back some of the much lost lustre that we saw go down the drain over the past number of years.

I believe that this can be accomplished, not easily, not quickly, not overnight, but it can be accomplished.

I am delighted, for example, that the infrastructure project that was much talked about during the campaign is underway and beginning in all parts of this country. I am further delighted that programs such as the residential rehabilitation assistance program and the youth service corps will be initiated to create jobs and to restore perhaps the most important element, the element of hope for Canadians of all ages.

We know what the job is before us. We know that we must invest in Canada's businesses. We must work with small and medium sized businesses which are certainly in my much beleaguered region of the Atlantic the backbone of the economy.

For five years on the other side I railed at a government that did not listen and seemed to have a search and destroy policy with regard to the Atlantic. Atlantic Canada does not deserve to be the stepchild of Confederation nor will it remain so under the policies of this government.

Small business is the way to go in Atlantic Canada. The infrastructure projects that are being worked on there right now will be the jump start. In the long term it will absolutely be the change in policy toward small business, the unfettering of small business that will bring us into our proper place.

I have said for five years and I hope for a further five years I will say we do not like to come cap in hand. We are a very proud region. We are a region that has sent to other parts of this country educators, lawyers, politicians, community activists, bankers, you name it. We will continue to do so.

Governments must understand that those of us who come from the Atlantic region are really disjointed and cut off if we have to stay somewhere else for too long. We live in a very special part of the country. It is a part of country that we want our children to be able to inherit from us and to be able to make their place in the greater Canadian society.

We are very fond of our brothers and sisters in central, western and northern Canada. We like to visit. We like them to visit us. However we do not want to see the four small provinces clinging to the Atlantic Ocean become have not provinces but provinces that stand as equals in Confederation.

We believe that this will happen because of the policies outlined in the red book. We believe that this will happen because of the commitment of the Prime Minister. We believe that this will happen most definitely because of the determination of the people of those four provinces.

The federal government understands full well its responsibility to the people of this region and indeed to the people across the country. It is important that we keep the promises we made and we will do so. It is even more important that the country as a whole sees the results of these promises in the programs that the federal government will put forward.

It is important, for example, that the Canadian government provide capital to attract high tech business such as the Red Cross blood fractionation facility scheduled to be built in Halifax. This facility alone will create up to 400 permanent high tech jobs and $11 billion in economic spinoffs in the metropolitan area and the province of Nova Scotia.

This would be an amazing project for almost any centre in the country. In Atlantic Canada, it is the kind of thing that we have been seeking and attempting to attract for a long time. I must compliment the provincial government in Nova Scotia, most particularly the minister of development, for the work done to bring that plant to the metropolitan area.

Our government also must take advantage of the fact that Canada is a trading nation. Jobs and prosperity depend on our ability to sell products abroad.

On that note I speak again of the city of Halifax and the great port of Halifax which, until last week, was the largest ice free port in the world. We had a little bit of ice last week. No doubt it was the cold air coming from central Canada. It was a great shock for Haligonians to wake up and see icebreakers working in their harbour. Tied up in the harbour and sailing in and out is one thing but having to break the ice in our harbour is a great shock to our systems. We hope that it will not happen again. Unfortunately, I do not believe there is anyone in this Chamber that can actually control that.

[An hon. member]

It is questionable.

[Mary Clancy, Liberal, Halifax, NS]

Yes, it is questionable.

The port of Halifax is perhaps the greatest single asset in the industrial sense in the province of Nova Scotia. I can go back to the quotations of the days of wooden ships and if you will pardon my paraphrase or my editing, Mr. Speaker, wooden ships and iron persons. In the province of Nova Scotia, our port is again ready to be a major player in the industrial development of Canada, in particular with regard to our enhanced trading capacities.

We have frequently been accused of seeing only in Atlantic Canada the north-south aspects but we also see the east-west. The port and the transportation links out of the port of Halifax can be of tremendous benefit to all Canadians. We in the port of Halifax invite hon. members who sit in this Chamber to come to see the facilities we have and to see what a tremendous asset this is and can be to the people of Canada.

Along with our developments in business, trade and job creation we also have to ensure, as I said earlier, that Canada remains the compassionate country the rest of the world believes us to be.

I compliment the Minister of Human Resources Development on his announcement yesterday and on the initiative that he will take to ensure that compassion and common sense remain the keystones and the key notes of a Liberal government.

Mr. Speaker, I thank you for the opportunity to take part in this debate and I look forward to further debates in this House.

[Ian McClelland, Reform, Edmonton Southwest, AB]

Mr. Speaker, I want to assure the hon. member that the view from this side of the House has improved considerably as well. Although I am new here, I think that is probably the case.

I spent some of the best years of my life, from 17 to 20 years of age, in the maritimes. I wonder if the member could think back to what caused the diminution of the prospects of the maritimes in the first place. After all, the first settlements in Canada took place in Nova Scotia in Annapolis Royal and the Bay of Fundy. What happened in the maritimes to cause the diminution of the prospects in the first place?

[Mary Clancy, Liberal, Halifax, NS]

Mr. Speaker, I thank the member for Edmonton Southwest for his question. Actually when I heard the direction of the question I was thinking that as a child growing up in a very political household I heard the answer to that question a lot.

Let me begin by saying that maritimers are very committed Canadians. Indeed we have been tried. That is why it can be said we are passionately committed to this country, to its future and to its prospering.

There are many things. First, the sort of downhill slide did begin at Confederation because of the emphasis on east-west as opposed to north-south. We always had close ties to New England, to the Caribbean. To a great extent until probably the first war that continued.

There were questions-heaven forbid that I should bring this up-about buying Alberta oil. Nobody would buy Cape Breton coal nor could our apples be shipped to Ontario. There were a number of questions with regard to trade within the country, questions that still remain to be answered. I hope, as all of us in Atlantic Canada hope, they will be answered over the next term by this government.

The other thing was migration. No question. We have been staffing the universities, courts and the public services of the other nine provinces for a long time. While people come back they tend not to come back until their careers are over. That has been a problem as well.

Mainly the major problem has been a lack of an industrial policy that truly fits the Atlantic region. It is my belief that the emphasis on small business as mentioned in the red book and as the hon. Minister of Finance has been talking about in his pre-budgetary consultations are the kinds of policies and programs that will flow from the ideas that will specifically assist Atlantic Canada.

We do not have the population or I suppose to a degree the inclination for megaprojects. Megaprojects were tried. Everyone who lives in Nova Scotia can tell horror stories about Clairtone, heavy water and that sort of thing.

However we do have both the inclination and the ability to succeed in small business. If small business is given its head, as I think it will be by this government, then we will see a new prosperity in Atlantic Canada in which a number of my colleagues are looking forward to taking part. We invite the hon. member and you, Mr. Speaker, to visit us at any time because of course one of the most successful small businesses in Atlantic Canada is tourism.

[Ian Murray, Liberal, Lanark—Carleton, ON]

Mr. Speaker, may I first congratulate you on your appointment. This is also my first opportunity in the House of Commons to thank the people of Lanark-Carleton for putting their trust in me as their member of Parliament.

I want to thank the Minister of Finance for convening this special pre-budget debate. This is a worthwhile extension of the cross-country consultations the minister has held during the past 10 days.

The most important consultation with the people of Canada took place late last year when each of us during an intensive 47-day election campaign heard first hand from Canadians how they felt about their country and their governments.

The economy of my riding which is just west of Ottawa includes small businesses, farms, manufacturers and the centre of Canada's high technology industry. The people of Lanark-Carleton have felt the full impact of the recession and the realignment of international trade. I have been impressed by the tenacity and the resilience demonstrated by many small business owners.

I am sure all hon. members listened during the election campaign to countless individual examples of economic hardship, personal bankruptcies, jobs lost or families squeezed by ever-increasing taxes demanded by every level of government.

On October 25 Canadians voted for change. They demanded a change from a system that fostered dependency to one that rewarded initiative; a change from a climate of worry to a climate of hope; and, a change from a system of privilege to a system of fairness.

When the first budget of this government is presented it will be judged by the men and women of Lanark-Carleton on how we live up to our commitment to change. There is no shortage of ideas available to the minister as he prepares the budget. There are only difficult choices. Therefore we need a set of principles to guide us as we make those choices. In particular, we need to reward individual initiatives and those who create jobs for other Canadians. We must be fair. We must agree that taxes are too high. People have said "enough".

In the short time I have today I want to mention a few specific items. Whether we like it or not each federal budget influences the behaviour of Canadians. There will always be trade-offs but the issues of fairness as perceived by taxpayers must be addressed. Though we try to make the tax system neutral society is too complex for the tax system to accommodate all of our differences.

Personal taxation has been based on the traditional family unit. We must come to grips with the realities of change in the family unit, whether it be single parents, working couples or stay-at-home dads. Like many Canadians, I am wrestling with how we can make the system fairer by allowing for these differences.

Several residents of Lanark-Carleton have suggested we look at the income of the family unit as a whole. There is a sense that families which decide to have one parent remain at home while raising children are penalized by the tax system. One suggestion which I personally support would allow income splitting between spouses while they have dependent children.

I have also heard from many people who are very concerned that the budget may target RRSP contributions. It is easy to portray this tax expenditure as a benefit for the rich. However for many self-employed people and others who do not have the security of a company or government pension plan RRSPs represent their best opportunity to save for their retirement.

The government should also continue to encourage people to take personal responsibility for their future.

During the election campaign all parties spoke of the importance of small business to our economy. In fact we are looking to small business to be the primary engine for economic growth and job creation in Canada.

If it is the role of government to create an environment to stimulate private enterprise what can we do to show entrepreneurs that we mean business? We must allow them to operate free from the growing burden of taxation, required contributions and paperwork they now face. Our priority should be to make it easier for them to hire new employees. Government must change its attitude and realize that the vast majority of business people are honest, law-abiding citizens who do not need bureaucrats and government auditors looking over their shoulders.

Let us address the question of financing for small business through the innovative use of the tax system. Just as we should encourage those who create jobs we should use the tax system aggressively to reward individuals who invest in Canadian start-up companies.

For example, the real problem we face as we move further into the information age is how to finance small software companies with few if any capital assets. Their main asset is brain power. Though a high percentage of new high-tech companies fail, those which succeed more than compensate for that risk. This has been proven many times in my riding. The well-known success stories inevitably spin off new companies. This may be an opportunity to put the capital gains tax exemption to good use by rewarding risk takers. Low risk investments do not need support from other taxpayers.

Business associations have been saying for years that government handouts to large businesses should end. Let us take those groups at their word and channel money from existing grant programs toward funding tax incentives for job creation. Grants would remain available to small businesses as their more stringent cash-flow requirements make it difficult for them to take advantage of tax incentives.

One government-funded program that has received far too little credit comes under the community futures program of the Department of Human Resources Development. Local business development centres provide loans as well as technical advice to new or existing companies.

Over the past six years the Business Development Centre in Lanark-Carleton has been responsible for the creation of several hundred jobs at little cost to the taxpayer. As we look for expenditures to cut I hope ministers will recognize the importance of maintaining this community based program.

The first budget of this new government is only one step along the road toward renewed prosperity and job creation. The coming months will see the development of complementary programs that were outlined in the Liberal election platform "Creating Opportunity".

As a responsible and caring government we must never lose sight of Canadians who are the casualties of global economic forces. As Canadians we are in this together. We do need to ensure that scarce financial resources are directed where they will be most effective.

I wish the Minister of Finance well as he and his colleagues continue to work on dismantling interprovincial trade barriers and the sooner the better.

I also believe we should keep in mind that real job creation comes from the creation of wealth, not its redistribution. The minister is faced with making exceedingly difficult choices in the certain knowledge that he will not please everyone.

The people of Lanark-Carleton will be looking for a budget that rewards initiative, inspires hope and restores a sense of fairness in the way that government operates.

[Ian McClelland, Reform, Edmonton Southwest, AB]

Mr. Speaker, my intervention is more to my hon. colleague by way of an observation than a question. As I listened to my colleague's presentation I was struck by the common sense embedded in virtually everything that I heard. I want him to know that there are some very strong parallels on both sides of this House.

If the hon. member could in a couple of minutes expand on the notion of income splitting for families.

This is a question that has come up time and time again, the inequities in our tax system between working parents where two parents are working and where the sacrifice is made with a stay at home family.

[Ian Murray, Liberal, Lanark—Carleton, ON]

Mr. Speaker, this has been of particular interest to me personally over the years. I have not pursued it primarily for the reason that in my previous job I enjoyed a high income and it was always my sense that if someone talked about the problems that high income earners face with the tax system they should be dismissed as perhaps those who do not deserve to be complaining.

However, when one looks at the burden of taxes on upper and middle income earners and if we consider that a family could be five or six people getting by on the income of one person one starts to realize that there is quite a bit of unfairness embedded in the tax system.

I really had my suspicions confirmed during the election campaign when I would go door to door. During the daytime I would meet women who were at home raising their children and very much feeling the pinch from high taxes.

It is only fair that the government make this change partly to recognize that people who do stay home to look after their children are providing a real benefit to society. Most of us would agree that it is in the interest of the children and the interest of society if they are able to be raised by their parents.

I have not looked into the intricacies of such a change. I am sure it has been suggested in the past. I am sure the Department of Finance must have looked at this as an option. It is one that I intend to explore in the coming days. I thank the hon. member for his comments.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Mr. Speaker, as an economist I know most of the jokes about my profession. If you laid all of us end to end there would be no agreement. We never seem to hold the same opinion on anything.

Given the reputation it is amazing, however, how much agreement there was among the 42 economists whom the hon. Minister of Finance had assembled for some pre-budget advice in the middle of December. Of the 42 about 36 agreed on a number of points that I think are important to recall on the occasion of this House debate.

First, the budget deficit has three highly undesirable consequences that make lowering it one of the most important tasks facing this Parliament. Other speakers in this debate have presented or will present projections of recent trends and I will not repeat them here. Suffice it to note that since I started speaking about a minute ago the federal debt has increased by another $75,000.

One of the points made by the economy experts was that continuing deficits threaten the viability of our social programs. Under some reasonable assumptions by the fiscal year 2000 the interest on the then existing debt will take up 50 per cent of total government revenues as compared with the 31 per cent it will in 1993 and only 21 per cent it did in 1983.

As the hon. members of this House know, program spending has already been cut so much that future cuts will result in serious inefficiencies and public resentment. Therefore if the deficits continue, required increases in interest payments will have to come at the expense of social programs. It is precisely because of this threat to social programs that Reform continues to put so much emphasis on the need to eliminate the deficit.

The experts also noted that deficits raise the interest rate and therefore lower investment, economic growth and home construction. These effects are due to the fact that every year there is only a limited amount of savings generated by the economy. Lenders who use their money to buy government bonds cannot lend it to firms that want to build factories or to Canadians who want a mortgage to buy homes.

Future generations of Canadians will be hit by a double whammy: lower capital stocks and productivity, as well as tax burdens to pay the interest on the debt.

One of the most serious concerns expressed by the experts was that continuing deficits raise the probability of a financial crisis. We have all heard about the problems which face New Zealand, Sweden, Britain and Italy when international investors lost confidence in the ability of their governments to restrain deficits.

No one can predict what might set off such a crisis in Canada. The Minister of Finance's economic experts were almost unanimous in their judgment that the probability of such an event is increased the longer the deficit persists.

The second major point on which there was overwhelming agreement among the economic experts was that it will be impossible to eliminate the deficit without substantial spending cuts. An economic recovery cannot generate enough revenue to reduce a deficit to 3 per cent of GDP, no less eliminate it. The rate of economic growth required to achieve this goal simply is without historic precedent and virtually unachievable.

At the same time, it is clear that the deficit cannot be eliminated by higher taxation, either through higher rates or a broadening of the base. Any such attempt would further stimulate the growth of the underground economy or tax evasion and therefore is unlikely to raise sufficient revenue.

The third point of major agreement among the experts was that the deficit could not be eliminated by inflation. Until the 1970s, perhaps inflation could be used to depreciate the real value of government debt. However, in today's world of integrated and highly sophisticated capital markets neither national and especially not international lenders will buy Canadian bonds whose purchasing power is depreciated by inflation unless they are compensated by a corresponding increase in the interest rate.

It is easy to see what the public demand for such higher interest rates will do to the size of the deficit. Every one percentage point increase in the interest rate quickly translates into an increase of $5 billion in debt payments and therefore the deficit.

For this reason I hope that Gordon Thiessen, the new Governor of the Bank of Canada, will continue to pursue price stability in the tradition established by his predecessor, John Crow.

I should further note here that inflation also cannot be used to decrease unemployment and raise economic growth. The idea that this is possible represents a theory that was found invalid as a result of the experiences of the 1970s and later in Canada and elsewhere.

As the last point in my contribution today I would like to note that the economic experts assembled by the Minister of Finance offered a wide range of suggestions for spending cuts. However, none had so many supporters in principle as did the suggestion that spending cuts should be achieved through the so-called restructuring of social programs. To the best of my memory, only Michael Walker of the Fraser Institute elaborated on the term restructuring. Mr. Walker's suggestion was based, much like that of the Reform Party during the election campaign, on the realisation that vast amounts of government transfers go to families with high incomes.

Without further elaboration let me just note here that in 1992 families in the upper decile with incomes over $100,000 per year received $2.5 billion and $1.5 billion in UIC and old age security benefits, respectively. Similar large amounts were received by families with high incomes by any other standard.

From these facts follows a clear and precise definition of restructuring of social programs. It means the elimination of transfers to those who do not need them. Would the hon. members of this House please note this important point that needs repeating. In the Reform lexicon, restructuring of social programs does not mean reduction to payments to the poor. It means eliminating payments to those families that by a wide consensus do not need them.

During my election campaign the vast majority of high income earners I met expressed their willingness to forego their receipt of these benefits if other Canadians made similar sacrifices to balance the budget.

In summary, I remind the members of this House that finance minister's economic experts urge the government to take prompt action in eliminating the deficit with spending cuts, not tax increases or inflation, and that the spending cuts be achieved predominantly through a restructuring of social programs.

[Bill Blaikie, NDP, Winnipeg—Transcona, MB]

Mr. Speaker, I have just a couple of comments to make on some of the things the hon. member had to say.

It is appropriate that the member pointed out in part of his speech the role that interest rates play in increasing the deficit. He was counselling against the strategy of higher interest rates because it would have the effect on the deficit that he pointed out. However, I think it would be useful not just to apply that insight in terms of how not to deal with the deficit now, but also how the deficit was created in the first place.

Much of the deficit that we have before us today was created not by the social spending that the Reform Party wants to criticize, but by the high interest rate years in the early eighties. I think that is one of the holes, if you like, in the Reform analysis.

We cannot go back and change those interest rates. We cannot go back and eliminate the debt that was created by those interest rates. I realize that, but there is a kind of implicit blaming of social spending for the deficit when studies have shown, particularly a Statistics Canada study, that it was the high interest rates in combination with tax expenditures that were largely responsible for the deficit and not social spending.

The member's argument would be much more credible if that were at least acknowledged. It may be that there might be some restructuring of social programs in order, but I do not agree with the member that the way to do it is to eliminate universality. If high income Canadians who are receiving these benefits are so willing to contribute to the deficit then why can we not do that, if they are that willing, through a more progressive income tax system whereby they would pay for these universal programs they receive through the income tax system?

What would be the member's objection to that? Why do we have to accept that the only way that high income Canadians can do this is by foregoing these certain benefits and paying for them item for item instead of accepting that for once we could have a fair tax system in this country and high income earners could pay the share that they have paid less and less of in the last nine years thanks to the tax reforms of the Conservative government?

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Mr. Speaker, I appreciate the rhetoric that I received from the distinguished member who just spoke.

The Governor of the Bank of Canada did not very happily raise the interest rate. He was forced into raising the interest rate because of developments in the world and because of pending inflation.

There is simply no way in which a government or a private corporation can sell its obligations in an environment of inflation and charge a low interest rate. It is now a well established fact among those who are economically literate that if we have inflation we will have high interest rates, otherwise nobody will lend money.

I think we should see the episode of high interest rates in the early 1980s as part of that process.

I would like to respond to the member's notion that high marginal tax rates would be an equitable thing to do and that there is no distinction between taking back or not paying out in the first place social program spending transfers. High marginal tax rates throughout the world have been shown to generate disincentives which feed back on the welfare of the entire society. That is why universally throughout the world high marginal tax rates were removed. In fact, in many countries when the marginal tax rates were lowered total revenue was increased because effort and attempts to hide income disappeared.

When I asked a student who came to me the other day what he would do after he graduated, he said: "I will move to the tax haven, Seattle". This is what our distinguished member will have to remember, unless he is prepared to close the borders from Canada, if he imposes very high marginal tax rates on Canadian citizens. They, especially those who are productive, original and entrepreneurial, will go to where they do not have to pay these high taxes. One might say good riddance, but I can tell the hon. member it will not be in the interests of Canadians that these young entrepreneurs, the originators of small business stimulation, the innovators will go to where the tax rates are lower.

[Ian McClelland, Reform, Edmonton Southwest, AB]

Mr. Speaker, the other day the Prime Minister suggested in Question Period that each member present had a bill of about $3 million for his or her part of the overhead. I hope the Prime Minister pays close attention because I am just about to pay mine off as my contribution to this debate.

This really is the speech I was elected to give. This is why I got into politics in the first place. I hope that over the next couple of years I will be able to make a continuing contribution through the caucus and through the House to our national debate on the economy. I want to thank the government very much for making this possible so early in this 35th Parliament. It is going to be an evolutionary process as we go from this budget to the next budget.

I am one of those real live entrepreneurs that one hears so many people talking about. I went to Edmonton in 1975 with absolutely nothing. I was living in a basement apartment at my sister's. I was paying maintenance to my ex-wife who lived in Vancouver.

I started with absolutely nothing and built a business that 20 years later at its peak does about $7.5 million a year with 130 employees. Today, this very day, I am proud to tell everyone that our employees are one-third share owners in the company. As of

today, the ink is dry and we have gone one-third to our employees, one-third to me and one-third to my partner. I am very proud of that.

Over these 19 or so years that we have been in business I am embarrassed to say that we have been the recipients of one grant from the government. We got $16,000 through western diversification. I am in the photo finishing business. I think somehow the $16,000 grant from the federal government came from the Western Grain Transportation Act. Figure that one out. How did my photo finishing business end up getting about $16,000 from the Western Grain Transportation Act through western diversification?

The real question here is that we qualified for the grant because a person came knocking on our door and asked: "Are you doing any expansion? If you are, I can get money from the federal government for you. You do not have to do a thing. All you have to do is open your books. I will go through them and I get 25 per cent of anything you can get". I thought long and hard about this because we had gotten this far without a nickel from the government and would it not be nice to get everywhere without a nickel. But then I thought that we were paying the taxes and if we did not take advantage of these bonehead programs our competitors would, leaving us at a disadvantage. Therefore we did.

We received that particular grant because we were getting involved in another aspect of the business. Our investment was $300,000. Does anyone in this House reasonably think that any business person would make a business decision of whether or not they should make an investment of $300,000 because they can get $16,000 from the government? Absolutely not. And any business person who would, should probably not be in business in the first place.

Over Christmas I was having coffee with one of our employees in the lunchroom. I said: "Joan, if you have a word to say, here is a chance to say it. What would you like me to say?" She replied: "Tell them to stop having the government take money from me to give it to somebody else. I am barely getting by on $10 an hour. Tell them I am sick and tired of the government and other people wasting my hard-earned money".

When was the magical mystical moment that we as members of this government or elected members of any order of government suddenly went through a magic laying on of hands and became venture capitalists? It did not happen. We as government take a dollar in taxes from business or individuals. We take it into government, we chew it up and spit it out as 20 cents. We give that 20 cents to someone else to go into competition with the very people who gave us the dollar in the first place. It just does not make any sense.

One can see in any newspaper the government grants and government loans, government money for nothing. There are over 600 grants through the various government agencies that people can get. Peat Marwick Thorne has a book on how to get money out of the government. Large businesses have people on staff that do nothing but get money from government.

If we had a Klondike today it would not be out west or in the north. It would be right here in Ottawa where there are people mining for gold whose business it is to get money out of the government. Well that money people get is money which is earned by individual taxpayers, $10 and $20 at a time and we have to think about it in that context.

It must have been over 20 years ago that an hon. member of Parliament coined the phrase of corporate welfare bums. Well it has not changed.

[Bill Blaikie, NDP, Winnipeg—Transcona, MB]

David Lewis.

[Ian McClelland, Reform, Edmonton Southwest, AB]

That is right. It was David Lewis. It has not changed. It is not the role of the federal government or any government to take from individuals and decide who are going to be the economic winners and losers in society. That is the role of private entrepreneurs.

We would go a long way in reducing this tax burden on Canadians if we were to stop this insane practice of government grants and handouts to business. If a business does not have what it takes to run on its own, it should not be in business in the first place. If a business has to have money from the government to be established you can bet it is going to have to have money from the government to continue.

The government's role then in business, at least in my opinion, is to have an infrastructure program that allows for consistent high quality education in the country so that we have a resource pool of people to get into business. Roads, sewers and other infrastructure, consistency from orders of government and environmental standards, that sort of thing. But most of all there should be a tax environment that rewards investment and entrepreneurial risk by allowing those who actually do something to keep some it.

A final and important point is that we should elevate the status of innovators and entrepreneurs in our society to a level commensurate with the commitment in what entrepreneurs, investors and risk takers actually give to our society.

[Dennis Mills, Liberal, Parliamentary Secretary to Minister of Industry]

Mr. Speaker, I would like to begin by congratulating the member on his address. Having come from an entrepreneurial background myself I share many of his feelings and views.

However there is something I have learned over the last four or five years about government grants, or government handouts to use the hon. member's expression. I have learned that the largest number of grants given to corporations, whether they be small, medium or large, through the Government of Canada do not come from the various line departments whether it is industry or western diversification as the member cited. In fact

the real grants that are given to corporations are buried in the Tax Act of Canada, that 15,000 pages of rules and regulations, all those special preferences. Of course those preferences which have been put into that act over a number of years by Liberal and Conservative governments, many of them no longer meet their original policy objectives.

Would the hon. member be willing to take the same passionate view about eliminating those tax grants as he does on the direct handouts?

[Ian McClelland, Reform, Edmonton Southwest, AB]

Yes, Mr. Speaker, I definitely would. As a matter of fact the faster we can get to a flat tax system the happier I will be. This whole notion of write offs for this, write offs for that, you have to be a Philadelphia lawyer, you have to have 14 tax accountants to figure out where Tuesday was, is absolutely insane.

We will have a revolt but the revolt will be all the tax lawyers and tax accountants who will be looking for work if we only simplified it and made it fair.

[Bill Blaikie, NDP, Winnipeg—Transcona, MB]

Mr. Speaker, I know that what the member just said is music to the ears of the member for Broadview-Greenwood, except he did not actually come out and say that he was in favour of a single tax-

[Dennis Mills, Liberal, Broadview—Greenwood, ON]

I was waiting for you to do it.

[Bill Blaikie, NDP, Winnipeg—Transcona, MB]

-and the member will still wait awhile before he hears me say it, although I would have to say that the point made about the complexity of the tax system and the way in which what is supposed to be a progressive tax system turns out to be a non-progressive tax system because the higher up the income bracket you are, the more you are able to hire people to figure out how not to pay taxes is a point that is well taken. That is why I continue to be open to the member's proposal, if not convinced at this point.

I just want to say to the member, I was going to bring up David Lewis if he had not. He could not remember the name, so I had to help him along. David Lewis, former leader of the NDP in this Parliament was the one who coined the phrase of corporate welfare bums and I am glad to hear a Reform Party member talking about that.

I know there was some talk of that in the Reform Party platform, but their tendency has been to concentrate and to have Canadians concentrate on what people at the lower end of the income scale are allegedly getting for nothing in the form of welfare, social programs or whatever. I think the distinction that exists between certain groups in the House is that I find the welfare that exists at the top of the system much more offensive.

If there is a single mother on welfare getting more than she should, maybe that should be corrected, but that does not drive me wild. What drives me wild are the tax expenditures that are claimed and created by government and exploited by business which sees many large profitable corporations in this country paying absolutely no taxes at all.

I have certainly done my best while I have been here-and I think the member will vouch for this-to call attention to that. I am glad to hear someone from the Reform Party calling attention to that as well. If he is serious about that he is going to have to take on some very strong powers and principalities, to use a Biblical term, because they have got their claws right into the public trough through the tax system.

When I was first elected here along with you, Mr. Speaker, in 1979, the deficit was $14 billion and tax expenditures for that year were $32 billion, twice the deficit. We could have paid the deficit off and had $18 billion left over if we had been smart about tax expenditures. However we have not been and it is time that we did get smart about tax expenditures.

[Ian McClelland, Reform, Edmonton Southwest, AB]

Mr. Speaker, I will be very quick and very brief. The essential basis of anything we do as far as taxes are concerned or concessions to anybody, business or people, is that we have to have a foundation of fairness in everything we do.

It must not only be seen to be fair, it has to be fair. That is what this great debate is on when we talk about whether or not people should have deductibility of a business expense, lunches and that sort of thing.

What we have to do is to inculcate a sense of fairness in everything we do and set a direction and leadership from this House so that when people in Canada say: "Well, we have to tighten up our belts and live within our means", they can look to the Parliament of Canada and say: "Look, they are setting the example and that is where the leadership has to come from".

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, Canada has too often taken a shortcut to economic prosperity. We have been living on natural resources while neglecting the true revenue enhancing areas of secondary manufacturing and technological innovation. The branch plant economy is in disarray. Most research and development occurs south of our border and has crippled our ability to learn from a changing economy and environment.

I would like to ask my colleagues to ponder this as they drive home tonight in their American-built cars and turn on their Japanese television sets.

We are drowning in a sea of debt. This debt is not only at the federal level but involves all levels of government. It is in excess of $650 billion. If we include the unfunded portion of the Canada pension plan, it is over a trillion dollars. This amounts to over $35,000 for every man, woman and child in this country.

A change is sweeping the industrialized world, a change that discards the old smokestack economy for a new knowledge driven society. This is our chance to get our public sector debt under control and at the same time get our economy growing. The easier and least painful way to solve problems is to have the economy grow at a faster rate than government spending; indeed, we should reduce government spending and at the same time get our economy growing.

This is our chance to regain control of our economy and our country for all Canadians, a chance to make the 21st century truly Canada's century.

I will be using two terms in my presentation; one is investment and the other is consumption. I take a rather wide ranging view of the term investment. It is not only building and equipment but also research and development and training and education. In a sense, it is an investment in brains. Consumption, of course, is the simple consumption of goods and services.

We must create and foster more investment and considerably less consumption in order to get our economic house in order, as well as driving our economy on to success as we approach the 21st century.

The two facets of the budget are revenue and expenditure. I will touch only briefly on the revenue side and only with respect to the concept of investment.

The infrastructure spending program is to create investment and thus jobs. Similarly the capital gains tax exemptions are exemptions in support of private sector investment. So to deny these exemptions would be counter productive to stated government objectives. Furthermore, capital gains taxes tend to be inflationary. Without these exceptions it will be a real temptation to government to inflate the economy, and I am sure none of us want to see the days of 21 per cent interest rates again.

Some will argue that these exemptions are for the rich. I would like to point out that the rich most likely have already taken full advantage of these deductions. It is only the middle class that has been unable to utilize these tax advantages.

Specifically I would like to speak in support of the retention of the $500,000 exemption for farmers. Most farmers live a difficult financial life. The constant requirement for capital investment in machinery, equipment and buildings, as well as the low return on these investments, puts a constant hole in their pockets leaving them unable to invest in registered retirement savings plans, or to save. As a result, most farmers regard the farm as a retirement nest egg. So I believe it is very important to retain this deduction.

I note that had the deduction not been available for 1991 this would have only accounted for $235 million. I note that the quantum of revenue from this source has also been declining by 3.3 per cent between 1989 and 1990, and 19 per cent between 1990 and 1991. So you can see, Mr. Speaker, this is not a very significant area of government revenue in any case.

Having argued in defence of capital gains tax exemptions generally, I would like to narrow the focus of this exemption. It should be available only in support of small and medium sized Canadian owned businesses. It should only revolve around trading in small and medium sized shares. I suggest that we eliminate the $100,000 general exemption but expand the $500,000 exemption now allowed privately held small businesses so that this deduction would include minority interests in small and medium sized firms.

I have other ideas for creating secondary markets in these shares so that small and medium sized businesses can get access to the capital they need in order for them to create new businesses and to modernize older ones. Only in this way can they take full advantage of Canada's march to the 21st century.

I would also like to mention in passing that the foreign component of registered retirement savings plans should be eliminated as this deduction is inconsistent with our needs for domestic capital formation.

I would now like to talk about the expenditure side of the budget. This is what appears to the public as the seemingly endless sinkhole of taxpayers' dollars. I have here a statement of federal government expenditures presented by the Department of Finance; old age pensions here, agricultural subsidies there, job creations elsewhere, in short no rhyme or reason, no statement of government purpose.

I come back to my original definition of investment and consumption. I propose that the government prepare its accounts with a view to these two terms. I have briefly attempted to do this. This has been made very difficult for me since no department of government seems to think in this terminology. In any case I have roughly calculated that less than 20 per cent of spending revolves around investment and that the rest of expenditure is in support of consumption.

It seems to me that the government's approach to deficit reduction must have two objectives with respect to consumption spending. First we need to define the core area of consumption spending. Here I think of the genuine need for old age pensions and support for those unable to care for themselves due to physical or mental impairment and so forth. The balance must then be discretionary consumption spending. The overall approach must be a degree of absolute elimination of discretion-

ary consumption spending, and second, for those who remain a conversion to investment spending.

What does this mean? It means we can no longer afford simply to pay people because they do not have a job. We cannot afford to pay mothers a total of half a year's unemployment insurance benefits regardless of the merits or wants for this type of program. We cannot afford to transfer moneys to the provinces that they transfer to the municipalities. In turn they can support youth from the ages 15 to 21 so that they can leave the responsibilities of family life and be unproductive members of society.

Of course we will continue to support the concept of universality for social services in our medical system but we must question whether treating the common cold is an essential service.

The elimination of services or a degree of them is obvious. The conversion from consumption to investment is somewhat more complex. It seems clear that if people are not going to be engaged in work, they should ultimately be trained or retrained in order to regain entry at a higher level than when they left. If for some reason this is not possible these people should be supported based on the degree of their commitment to undertake work directed at the improvements to their communities.

I suggest this will encourage the dignity and self-respect that all humans are entitled to embrace. This commitment of government to upgrade the skills of our labour force will allow all of us to participate in the march to prosperity in the 21st century.

In conclusion the road for Canada is in front of us. It involves a change in attitude by government as it approaches investment and consumption in government finances. Indeed it embraces a change in attitude of all the people in Canada. It recognizes that we can no longer drive our consumption spending based on want but rather it must be based on genuine need. It must recognize in its legislative agenda the need to support investment not only in the small and medium sized Canadian owned business sector but also in the grey matter of all the people in Canada.

The chance to build a greater nation is in front of us. Now is the time to take bold steps to claim Canada's destiny.

[Grant Hill, Reform, Macleod, AB]

Mr. Speaker, I would like to congratulate the member on the comments. I presume that he is a new member in the House. I believe he has not suffered with some of the atherosclerotic disease that seems to be prevalent with some aged members in this House.

I would like to know from the member if it would be possible for him to infuse this fresh enthusiasm into some of those aged members.