Debates of Feb. 1st, 1994

Pre-Budget Consultations

[Audrey McLaughlin, NDP, Yukon, YT]

Mr. Speaker, I am pleased to speak in this very important debate today. I have over the past couple of years had a number of meetings with my constituents in the Yukon during which we have discussed details of a budget and what kind of society and what kind of Canada we want to live in.

I want to make the point at the outset that a budget is more than simply figures. It indicates whether we will have the hallmarks of prosperity or whether we will have the seeds of economic stagnation.

I have been here for pretty well all of the debate today and I remind members of this House that I have not heard anyone refer to the fact that we have to look at this budget in terms of being able to accomplish the tasks that are outstanding in Canada as well.

Regarding the resolution this House took unanimously in 1989 to eliminate poverty by the year 2000, I hope the House will rededicate itself to that goal and this budget will be the beginning of that. Also, to accomplish the goals to which we as Canadians and the New Democratic Party are committed which are to ensure that Canada's First Nations are truly and fairly dealt with and that there is funding available because it does cost money to complete the very important land claims and self-government negotiations which must take place in this country.

On the specific areas of the budget there are three that I want to briefly touch on in the time that I have; namely, taxation, debt and deficit and employment creation.

The first is a fair taxation system. The middle class is overburdened. We certainly do not need to see a whole raft of new taxes to cause further cynicism in our population about our tax system. To deal with that cynicism we also have to deal with the inequities and the fact that individual Canadians are now paying a far greater proportion of the tax revenue than corporations and that many wealthy individuals have the opportunity to avoid paying taxes.

We urge the Minister of Finance to bring in a fair and equitable tax system. I want to give several examples of how that could be done. The first is in terms of closing costly tax loopholes and making the system fair.

The government can look at such things as the business entertainment deduction which costs hundreds of thousands of dollars to Canadian taxpayers. While some people cannot even afford a lunch, I am not sure that people should be privileged to be deducting their high cost lunches at taxpayers expense.

[Len Taylor, NDP, The Battlefords—Meadow Lake, SK]

A very good idea.

[John Solomon, NDP, Regina—Lumsden, SK]

Two martinis.

[Audrey McLaughlin, NDP, Yukon, YT]

There are other such things that the government can do in terms of the family trusts, those trusts that allow the rich to shelter their income from the tax revenues. Clearly a fair tax system does not allow this.

I must say in the last Parliament the members opposite in the Liberal government were not outspoken against the previous government's attempts and legislation to even extend the period of time that these family trusts would be exempt from taxes.

I challenge the Minister of Finance to show a new path and to show that we are really prepared to deal with this element of tax fairness.

[Len Taylor, NDP, The Battlefords—Meadow Lake, SK]

Hear, hear.

[John Solomon, NDP, Regina—Lumsden, SK]

Hear, hear.

[Audrey McLaughlin, NDP, Yukon, YT]

Certainly the area of tax expenditure that is not helping the majority of Canadians is that we should reduce the upper limits on the RRSP contributions. We feel the RRSP program is important but if we reduce the upper limitations which right now are basically directed to those making $90,000 a year we would bring more fairness into that particular area.

A minimum corporate tax is absolutely essential. We still have over 63,000 profitable corporations not paying one cent of tax. We cannot ask individuals to do more and continue to allow those profit making corporations to do nothing.

[Some hon. members]

Hear, hear.

[Audrey McLaughlin, NDP, Yukon, YT]

On the debt and deficit question I think we must take a minute to look at how we got in this mess in the first place. As was said, we are doomed to repeat history if we do not pay attention to what has happened. It is true that in the 1970s many of the tax measures of the previous Liberal government did begin to create the inequities that we see and lead to this gap which meant that we began seeing an ever increasing debt.

In the following years subsequent governments and the previous government over the last nine years implemented monetary policies which dealt only with controlling inflation, ignoring the effect on rising unemployment.

They brought in a North American free trade deal and the free trade agreement with the United States which cost Canadians hundreds of thousands of jobs leading again to decreased revenues.

Look at the monetary policy of the past government, the effect of bad trade deals on employment and decreased generation of revenue. It was disappointing that the Liberal government decided once coming into power that it would continue those two regressive monetary and trade solutions.

[An hon. member]

It embraced Mulroney.

[Audrey McLaughlin, NDP, Yukon, YT]

At the same time after the Liberal government embraced the policies of the previous Conservative government in terms of trade and monetary policy, I want to remind the government that one of the things that lead again to increasing debt and deficit was the implementation of the goods and

services tax at a time when we saw decreasing revenues from employment and high interest rates devastating the agricultural sectors, small business and on top of that they got the GST.

We in this party have fought long and hard for tax fairness. We believe that the goods and services tax is certainly a tax measure which has not only not worked but has increased the economic recession that we are in at this time.

Finally, on the whole issue of employment, without an employment strategy, without a clear industrial strategy we will never deal with the structural problems of debt and deficit. The fact that we see decreasing revenues is directly related to increasing unemployment statistics. Every unemployed person in this country costs the federal revenue $17,500 a year. If you take 1.5 million people unemployed that is something like $26 or $27 billion a year that we are losing in revenue because of unemployment.

It is time for parliamentarians and this government to say that Canada cannot afford unemployment. That is what we cannot afford. The social and human costs are far too great and the economic costs are devastating this country.

[John Solomon, NDP, Regina—Lumsden, SK]

Right on.

[Audrey McLaughlin, NDP, Yukon, YT]

I therefore want to urge the government to implement programs that will be an investment in our future such as research and development, the education of our young people, retraining for those who are displaced in the work place.

I would also say that we in our own job creation plan have supported an infrastructure program and think it is very important but there are two kinds of infrastructure. There is the physical infrastructure of highways, roads, municipal services and information technology, and there is also the social infrastructure. If we ignore the fact that the social infrastructure is a part of our economic system we will have missed the point.

I urge the government to ensure that the social infrastructure of education and health care is maintained at a level which will be important for our country. On that point, I would like to specifically mention the need to go forward once and for all with a national child care program so that parents can work and the children will have an opportunity for the responsible care that is in the interest of our future citizens.

[Len Taylor, NDP, The Battlefords—Meadow Lake, SK]

Hear, hear.

[Audrey McLaughlin, NDP, Yukon, YT]

There are many things that the government can do in this budget. We all must be cognizant of the reduction of expenditures. When it comes to following the Auditor General's report, I hope this government will do better than the previous one which seemed to simply ignore it. I urge the government to look at the recommendations in this report. They are very clear and can be acted upon now without further major study.

We must look at expenditures. We have to be prudent in our expenditures. However, we must also balance that in a fair and equitable way for all Canadians. This government has an opportunity in this budget to lead a new way, not simply to follow the regressive ways of the previous government. I urge it to do so to give Canadians hope and to get Canadians back to work.

[Elsie Wayne, Progressive Conservative, Saint John, NB]

Mr. Speaker, I thank the leader of the NDP for her comments.

I have great concerns because in the city of Saint John I have 3,500 people who work at our shipyard building Canadian frigates for the government. That program will be winding down at the end of this year, 1994. On two occasions in the House I have heard my colleagues from the Bloc question the Minister of Transport, my friend from the province of New Brunswick, about the Lucy Maud Montgomery ferry and whether he was going to give that contract to the Davie shipyard which also needs work.

I do not have a problem with this if the contract is going to that shipyard because its workers need jobs, but I have a great problem if there is not going to be a contract for the city of Saint John shipyard. If that is the case, then I would like to know from the Minister of Transport if the Lucy Maud Montgomery ferry will go out to tender so that our shipyard will be able to bid on it or if there is a special contract for the shipyard for the city of Saint John. If not, I have 3,500 people at the end of this year who will be looking for work and that is a major concern.

[Audrey McLaughlin, NDP, Yukon, YT]

Mr. Speaker, I would be happy to answer for the Minister of Transport. We used to sit very close together on this side of the House.

I would like to address the very serious comments made by the previous speaker. While I will not answer directly the specifics that she raised, which is obviously for the government to answer, I would like to raise in part what she is referring to and has something to do with her issue and that is the whole issue of economic equity in this country and the fact that we are a large and diverse country with large rural populations as well as urban populations. It must be indicated to Canadians in the budget that the government has a true concern for every region of this country. We in the north often feel we have been left out. I know many areas of the country feel that way, that there is a lot of attention on central Canada and not so much on other parts of the country. It will be extremely important that the minister show through this budget that the government wants to see fairness and equity in economic development in every part of this country, rural and urban.

[Jim Gouk, Reform, Kootenay West—Revelstoke, BC]

Mr. Speaker, I found myself strangely agreeing with some of the comments made by the hon. member for Yukon, which did surprise me.

However, there are a couple of points I would like to make. First of all, it was mentioned by the hon. member that it cost $17,500 to have someone unemployed. I would hasten to point out we know by statistics that it costs $60,000 for the government to create a job that will employ that same person.

With regard to national child care, I would like to ask the hon. member if she is suggesting a multi-tiered system which she abhors so much in the medical system in child care or, conversely, is she suggesting that we should have a national system which will allow the people she is concerned about not paying their fair share, the rich, and allow them to drop their children off so that those who really need help can have theirs free instead of helping only those who need it.

[Audrey McLaughlin, NDP, Yukon, YT]

Mr. Speaker, I presume the member is referring to a child care system that is universal and accessible. Those two hallmarks are extremely important in any kind of child care system.

We have proposed a national child care system that would be participatory between the federal government, the provinces and territories and those using child care service. I think that is a fair and equitable way to do it.

The hon. member who said he finds himself surprised to agree with me will want to also agree that the children of this country deserve a chance from this House.

[Jean-Robert Gauthier, Liberal, Ottawa—Vanier, ON]

Mr. Speaker, in the few minutes I have, I would like to talk about efficiency and effectiveness in public administration.

I tabled today, as hon. members know, a Bill which would allow the Auditor general of Canada to prepare ad hoc reports on audits conducted by his office. At the present time, the Auditor general can only table an annual report. We know that it usually is a substantial tome which captures the interest of the media for about 24 hours, 48 hours at the most, and is then forgotten. Very few people are following up on the recommendations made with respect to the management of public spending.

Yet, those reports contain many recommendations to improve public administration and save substantial amounts of money for Canadian taxpayers. If Bill C-207 tabled today is passed by this House, it could strengthen government administration. It will be more efficient and more effective if the House of Commons and the general public are better informed, on a timely basis, on the problems encountered by a large and complex administration like the federal government.

This pre-budget debate provides us with an opportunity to talk about economic recovery, job creation and deficit reduction. Some argue that in order to reduce the deficit, we have to cut spending drastically. The Reform Party wants a 6 per cent cut, an amount which would have, in my opinion, a serious and negative impact on the poor, the elderly and the less well-off.

Others believe that a reduction of the deficit can only be achieved by increasing revenues and creating jobs. I will talk in a moment about solutions which seem appropriate to me in order to reduce the deficit.

I am among those who believe that in the present situation, we must increase revenues to create jobs and ease our financial problems.

If we want to get rid of the deficit and the debt, without compromising existing benefits and disappointing Canadians, we must act quickly.

As we all know, the federal debt now exceeds $500 billion; it represents 70 per cent of the GDP. This year only, servicing the public debt will probably cost more than $40 billion or 6 per cent of the GDP. The debt management program, the largest the government administers, costs $40 billion. The amount of taxpayers'money used to pay off what we borrow drains the economy, there is no doubt about that. Because of the debt, we cannot afford to take advantage of many opportunities for growth. The billions of dollars we spend on the debt could be put to a much more productive use. Hence, the urgency to balance our budget.

I believe we can grow out of our deficit. We can get out of our financial and fiscal difficulties through growth. Tough decisions will be needed. We have to be more efficient so we can be more competitive.

We are re-evaluating some existing programs at this time. Social programs are under scrutiny. Our defence and foreign policy programs will each be under public review soon. Why not evaluate some of our fiscal programs? Why not look at all government programs to ensure that they are efficiently provided and just as importantly they are effectively reaching the goals that were set by Parliament when we adopted those programs?

Our debt management program, the largest program this government administers, has never been evaluated as to its efficiency or effectiveness. This huge program should be critically examined by Parliament as soon as possible.

I can speak with some knowledge of the subject because I chaired the public accounts committee for about three years. We continually came back to the House and said it was absolutely essential that a program the size of the debt be managed as efficiently and effectively as possible. We recommended the program be subjected to that kind of program evaluation. It has

not been and I ask the government to listen attentively to this recommendation.

We should examine the type of instruments we use to borrow; Canadian funds versus foreign funds, long term versus short term. We dipped into the employee pension funds last year to the tune of $75 billion. This year we borrowed $7.2 billion to pay off our deficit.

Is it the appropriate thing to do? Is it efficient? Is it effective? I do not know. I know we are doing it. I would like to have the House look at this program and evaluate it as to its efficiency and effectiveness.

We must review the government's fiscal expenditures, all of them, and assess how appropriate they are. Some of them have become tax loopholes costing the federal government several billions of dollars. Due to such shortfall in tax revenues and public mismanagement, honest taxpayers are paying increasingly higher taxes and receiving decreasing services.

I hold federal public servants in high esteem. I have a lot of respect for the loyalty and commitment of federal public servants who, as we know, were mistreated by the previous government for several years.

To increase the productivity of public servants we must empower them with authority, give them clear objectives, effective policies, which will then give us an efficient administration. We must insist on program evaluation in an aggressive manner, to identify and eliminate or improve programs that are less than efficient and do not respond to the needs of Canadians.

There are two ways of reducing public expenditures. On the one hand, the government could cut expenditures by a certain percentage across the board, regardless of consequences, as the Reform Party is asking. Personally, I call that the easy but stupid way out.

On the other hand, the government could and must evaluate the appropriateness of its programs and activities.

For a long time I have supported the principle of program evaluation. It makes it possible to know whether the raison d'être, the goals, anticipated and actual results and program designs are satisfactory.

If one does not do this then we are a bunch of navel gazers and will not succeed in bringing better administration to this country. When such evaluations are made public they increase the accountability of this House with the people of Canada, with government officials, by allowing the Auditor General to publish regular reports as he should to give all of us more information as to the administration of public funds.

It is essential in the context of budgetary restraint that we have in place a good program evaluation of our administrative practices. It is one of the best ways to improve the allocation of ever scarce resources. I am not the only one who is saying this. It is in the report of the Auditor General, and I invite members to read it. That may be difficult because it is a lengthy document but it is worth while for any new member of Parliament at least to try. The report will tell you where we are going and how the administration of this government or the past government has been lacking in certain areas. It is not always easy. It requires time but I would recommend that members do read the report.

Managing the debt presents specific problems. As a percentage of the GDP, government revenues dropped from 18.1 per cent, in 1991-92, to 17.6 per cent, in 1992-93. Such a downturn is due in part to a decrease in revenues from personal and corporate income taxes.

Personal income tax accounted for 48 per cent of all revenues in 1992-93, compared to 50.2 per cent in 1991-92.

Instead of cutting public expenditures blindly, the government should protect its tax base by evaluating the efficiency, appropriateness and raison d'être of all tax expenditures and eliminating tax loopholes.

Before assessing how pertinent tax expenditures are, we must first ascertain whether or not they are having the desired effect. For example, in 1992, the Auditor General reported that multinationals were abusing the rules allowing them to take home profits tax-free thanks to tax havens. Hundreds of millions of dollars were lost from corporations operating abroad and bringing back non-taxable dividends. We said then that this loophole should be eliminated. I hope it will be.

In its twelfth report, published last year, the Public Accounts Committee, which I chaired, recommended that the Finance Department review the list of designated countries. It also asked that we examine if it would be appropriate to transfer home, tax free, any income of subsidiaries or divisions operating in these tax havens.

The list is very long. Some 25 countries are identified as tax havens. When we asked them to define a tax haven, they said it was a developing country. Two former committee members will be my witness on this. Do you know what a tax haven is? Any developing country. Switzerland a developing country? Sure! Bermuda a developing country? Why not? This is total nonsense. Mr. Speaker; we must examine this list, we must tighten up our practices. We must be serious in the evaluation of government programs.

I know my time is almost up, but do I have a few minutes left?

[The Acting Speaker (Mr. Kilger)]

You will have a few minutes left for questions and comments provided you end your speech.

[Jean-Robert Gauthier, Liberal, Ottawa—Vanier, ON]

I have so much to say. The Department of Finance should explain what constitutes income from active business carried on by a corporation. I wish someone would give us a clear and precise definition of what the Department of Finance means by a tax loophole, of what they mean when they talk about income from active business carried on by a corporation as opposed to "passive business". I know this is complex, but these are all food for thought if we want to really understand our duty as politicians, as members of Parliament who must manage public affairs.

[Simon de Jong, NDP, Regina—Qu'Appelle, SK]

Mr. Speaker, I listened attentively to the remarks of the hon. member for Ottawa-Vanier. I know the member well and I appreciate the work he has done in the House.

I would like to put forward a notion and wish to have the reaction of the hon. member. This House has passed legislation on environmental review assessment. Before the government undertakes any major piece of construction there is an environmental review so that we know the impact it has on the environment.

I have maintained in the past that before we present the budget or any changes in social policy that we have a human assessment review. Modern social statistics indicate that if poverty goes up and unemployment goes up, so do suicides, so does crime, so does alcohol dependency, et cetera. Therefore we could figure out the human costs. Before there are changes in social programs by a budget, should there not also be a human social assessment that would clearly lay out that if that measure produced so many more unemployed we would have so many suicides, so many more people in jail? In other words, lay out what the social costs will be before government undertakes any measure such as a budget.

[Jean-Robert Gauthier, Liberal, Ottawa—Vanier, ON]

Mr. Speaker, I appreciate the question which is an interesting one. We are dealing with a budget which in all honesty must be seen under current constraints. The government must protect its taxpayers. I understand that. However, there is value in what the member has just said, that there are social costs. Everybody must pay their fair share. What I was trying to address when talking about efficiency and effectiveness deals with the problem he just raised, that is, if everybody paid their fair share we would have no problems putting forth good, solid social programs, health care programs and good day care programs.

What is happening right now is that too many people are getting away with not paying their fair share of taxes. That is causing the rest of the population which is honest and pays its fair share a lot of problems. That is why we have a large deficit.

The underground economy is a problem we should address. The way they get away with not paying any taxes by using all kinds of loopholes must also be looked at seriously and these loopholes must be closed.

The House resumed from January 28, consideration of the motion for an address to His Excellency the Governor General in reply to his Speech at the opening of the session.