Debates of Feb. 1st, 1994

Pre-Budget Consultations

[Preston Manning, Reform, Calgary Southwest, AB]

I thank the member for her question. The short answer to her general question is yes we believe in greater equity in the tax system and if the member would examine the middle part of the presentation which I discussed she will see that we are calling for a reduction of $4 billion to $5 billion in federal transfers to the private sector through subsidies and through tax concessions.

The only cautionary words that I would add to my answer to the member is that we do have to be conscious, because we are an exporting country, that if our total tax burden on our businesses exceeds that of their competitors then we simply drive them out of business, create higher unemployment and kill jobs.

The greatest illustration of this at the current time is in the province of Ontario if you stand at the border and interview these companies that are leaving southern Ontario for the United States, even for up state New York which used to be one of the highest cost areas of doing business in the world, and ask them why they are leaving they give you a very short answer. They show you their tax position in southern Ontario, they show you their tax position in up state New York and then they ask how they can continue to do business under those conditions.

My answer to the general question of the member is yes but with a cautionary note about driving business out by excessive taxation levels.

[Eugène Bellemare, Liberal, Carleton—Gloucester, ON]

Mr. Speaker, I would like to congratulate the Member for Calgary Southwest on his speech. I would like to ask him a question about RRSPs.

I personally feel that RRSPs allow us to prepare for our old age, and the better we are prepared for our old age, the less we will be a burden on Canadian society, when the time comes to pay annuities to senior citizens.

It is a program that I really like and that is really close to my heart, which I have not yet had the chance to use, however, but I

encourage Canadians to take advantage of it. I hope that the government will continue along this road, and I am not saying that I know any of the Finance Minister's secrets. We are allowed to use the RRSP program to purchase a home. I feel that, at our age, we should also be able to use our RRSPs to help our children buy a home.

I would like to hear the views of the hon. member for Calgary Southwest on this plan, which is called the RRSP Home Buyer's Plan. Do you think there is something positive in this idea, and do you think it should be renewed in the next budget?

[The Deputy Speaker]

Order! Before I recognize the member and he answers the question, I would like to ask the hon. member for Carleton-Gloucester to address his remarks to the Chair in future. I recognize the hon. member for Calgary Southwest, if he would like to reply.

[Preston Manning, Reform, Calgary Southwest, AB]

Mr. Speaker, I thank the member for his question.

My response is this. Like the hon. member I support the RRSP program in principle, partly because of the reasons the member gives and also because it has enabled many Canadians who have no other way of providing adequate retirement safety nets for themselves to do so.

Second, I believe that using RRSP funds to support the home buyer's program is useful and helpful and should be sustained, not be cut back. I would urge members to put that view before the Minister of Finance.

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

Mr. Speaker, I noticed in the answer of the leader of the Reform Party to another member that he thought preferences in the existing tax act that sheltered companies in the export business should be maintained. At least that is what I thought he said.

Does that mean he has shifted his campaign position? At that time the central thrust of the Reform Party was a tax design that basically eliminated most of the tax preferences in the act. If the member wants to have preferences for export companies that might take away from his notion of a flat tax.

[Preston Manning, Reform, Calgary Southwest, AB]

Mr. Speaker, I thank the member for his question.

I did not mean to imply that I was seeking special tax preference for exporting companies. I was just cautioning that if we put the total tax burden on Canadian companies, particularly exporters, at higher levels than that of the companies in countries we are competing with, we end up driving them out of business.

Our major recommendation in the materials we wish to table with respect to reducing special treatment for companies is mainly in reducing the use of tax concessions as a regional development tool. That is the argument we have used all along.

Before I sit down, may I formally table these documents? I ask permission to do so.

[The Deputy Speaker]

There have been discussions about that point. I believe the Reform Party leader realizes he has to get unanimous consent to table the documents.

Is there unanimous consent among the members that the leader be allowed to table his document?

[Some hon. members]

Agreed.

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

Mr. Speaker, I have a short supplementary.

I want to understand this clearly. The hon. member would maintain all preferences that exist for corporations within the act right now with what exceptions? Could the member please clarify that?

[Preston Manning, Reform, Calgary Southwest, AB]

Mr. Speaker, I would not maintain all preferences.

The details of our program call for reductions and tax concessions to business of about $1.5 billion over a three-year period. These are unspecified, although we have had discussions on what they might be. The number one candidate on our list would be to stop using tax concessions as a regional development tool under regional development programs. That is the only specific which is contained in that material.

[The Deputy Speaker]

A point of order, the Parliamentary Secretary to the Minister of Finance.

[David Walker, Liberal, Winnipeg North Centre, MB]

Mr. Speaker, I believe there is unanimous consent in the House for continuing the debate over the lunch hour from one o'clock until two o'clock.

[The Deputy Speaker]

Is that agreed?

[Some hon. members]

Agreed.

[David Walker, Liberal, Winnipeg North Centre, MB]

Mr. Speaker, on this side of the House we will now have speeches of 10 minutes and 5 minutes questions and comments.

[John Godfrey, Liberal, Don Valley West, ON]

Mr. Speaker, my first duty in this my first speech is to thank the people of Don Valley West in Toronto who put me here and to try to keep my faith with them. My second duty is to thank my family who helped me to be here as well.

Mr. Speaker, during the election campaign if you asked the people of Don Valley West what they wanted, they would give the same answer that all Canadians gave, which is two different things. They want these two things simultaneously. These two things can be found in our famous red book on page 111.

At the top of page 111 in Table 1 we talk about savings from cuts to Conservative programs, so Canadians do want spending cuts. At the bottom of page 111 we talk about economic growth and job creation. That is what I really want to talk about today.

When the Minister of Finance met late last year with various economists in Ottawa, when he talked to the various consultative groups across Canada, he heard a lot about the top of page 111, cuts to spending. As the leader of the Reform Party has just shown us, we are going to be hearing a lot more during this debate about cuts to government programs.

What the Minister of Finance has heard less about in his consultations with both the professionals and with ordinary Canadians is about the bottom of page 111: economic growth, primary wealth creation and jobs, jobs, jobs.

The Minister of Finance has a difficult role. He has to be both Dr. Jekyll and Mr. Hyde. He has to be nasty cop, but he also has to be nice cop. It is to his nicer nature that I wish to appeal today. That is why my remarks are going to focus on the bottom of page 111.

The most important single thing this budget can do is to create an atmosphere of hope, an atmosphere of experimentation, renewal and excitement for Canadians.

An economy is not simply a series of statistics and numbers. It is a psychological state. An economy will grow if people feel good about themselves and their country. If they feel good they will take risks; they will change jobs; they will start businesses; they will grow businesses; they will buy houses; they will buy cars; they will buy appliances.

The Conference Board of Canada last week noted the incredible boom in business and consumer confidence since the election. Business confidence went up 10 per cent; consumer confidence, 13 per cent in the last quarter of 1993. It is interesting to note that the same phenomenon took place in the United States after the election of President Clinton.

Thus it is crucial that our first budget keep that mood of confidence going. An optimistic mood will translate into economic growth and job creation. Too much emphasis on cuts to government spending will destroy consumer and business confidence. What the minister has to do with his split personality is to walk the narrow line between cutting spending and investing in the future.

I would ask the Minister of Finance to remember the spirit of another government which came in, in another era, in another country, the spirit of the new deal of Franklin Roosevelt in 1933. That spirit has been characterized as bold, persistent experimentation.

The red book mentions such experimentation under the headings of investing in people, equality under the law and culture. But the most challenging and economically stimulating and exciting experimentation must take place in the area of research and technology, specifically involving venture capital, increased research and development, the Canadian technology network and the engineering program.

Canada needs to create a national system of innovation or what the finance minister has called a long-term growth strategy. As the red book notes: "The crucial role of the federal government in such an innovation system is to work with the private sector to identify strategic opportunities for the future, then to redirect its existing resources toward fulfilment of those opportunities". This approach has been called in other jurisdictions the Quebec Incorporated approach or in our own, the Team Canada approach.

The point is that smaller societies like ours have to pull all their national resources off the shelf if they are going to compete as a team, if they are going to compete internationally. What happens when we do not? We have too many examples of where we have failed to do what we ought to have done: the case of Connaught Bio-sciences being bought by a French owned company, the case of Lumonics being bought by a Japanese company.

What happens when we get it right? History provides examples of that too. When Canada competed as an industrial team in World War II we built such extraordinary facilities as a major shipbuilding operation in Quebec, a major producer of artificial rubber at the Polymer plant in Sarnia.

The experiments we undertake will require new configurations of business and finance, new partnerships of the public and private sector. We need to create new business structures to realize these strategic opportunities. What some have called innovative business enterprises look perhaps to us more like Japanese Keiretsu or German banking groups or Swedish industrial groups than normal Canadian business organizations. Words like networks, consortia and virtual corporations can best describe these new entities.

What are some of these strategic opportunities? They abound. Their primary definition is that they are things which no one enterprise can undertake by itself and can only be undertaken collectively. In Ontario, for example, with our extraordinary base in auto production and auto parts, should we not be a leading jurisdiction in the production of green cars? Should we not corner part of that advanced environment market, whether it is in the fuel area or in the disposal area?

The previous Conservative government did something very good when it produced CANARIE, that extraordinary consortium to build the electronic highway, a consortium which defies all the rules of business. It includes traditional competitors like Unitel and Stentor and brings in provincial and federal governments, universities and research centres. CANARIE is a virtual corporation dedicated to a huge task which cannot be done by a single entity.

In health care we have the same opportunities. We have an enormous biomedical base and no receptor capacity in industry. In Alberta there is a consortium of small companies which is coming together to build housing in Japan. They are creating a new kind of business entity. That is the sort of experimentation we need.

In Quebec, 13 industrial clusters were established by the Minister of Industry, Gérald Tremblay. But one question must be asked: if an industrial cluster performs well, within Quebec, would it be possible for it to perform even better on the Canadian level? A cluster in the petrochemical industry, for example, or the aerospace industry. In summary, we need a social plan for the whole of Canada, using Quebec's model as a starting point.

In short, Canada needs a budget which shows that cutting spending, investing in experimentation and innovation must be simultaneous events, not sequential.

Canada's economic problems are as much a function of slow economic growth as they are of excessive government spending. Let us make sure that both the spending problem and the slow growth problem get equal attention in this budget.

[Benoît Tremblay, Bloc, Rosemont, QC]

Mr. Speaker, I appreciate greatly the interest shown by my colleague from Don Valley West for the Quebec model. I would like to elaborate a bit on what he said particularly on development strategies.

Because Quebec has a strategy in certain sectors, our colleague from Don Valley West says: "Listen, if a development strategy is good for Quebec, would it not be good for Canada as a whole?"

In some cases, I say yes. For example, for years we have had a proposal for a high-speed train between Quebec City and Windsor. We are anxious for the government to move on that because these technologies are important for the future and would benefit both Quebec and Ontario.

In other sectors, it is unfortunately not the case. That is not unfortunate, in a way, since the sectors we choose cannot always be the same. A good example is nuclear energy. The federal government has spent on nuclear energy hundreds of millions of dollars which have essentially benefitted Ontario.

Quebec has enough hydroelectricity for years to come and it has never really been interested in investing in nuclear energy. But, through the federal government, Quebec taxpayers have been forced to spend on nuclear research those hundreds of millions of dollars which now essentially benefit Ontario, which moreover competes with us on the New York market.

Then I say: "Listen, if it is true in an international context-in any case, Quebec like the rest of Canada is increasingly becoming an economic region of North America-we can no longer implement projects for Canada, with economic and competitive implications, without taking into consideration the whole of North America".

It is obvious that a region like Montreal is in direct competition as much with Boston and New York as with Toronto and other cities and can therefore also probably conclude joint ventures with them. The political structure is losing importance on the international scene. We must each invest in projects, in sectors that are important for our future.

We can have joint projects with Ontario because we have mutual interests. But we have diverging interests in other sectors, where both Quebec and Ontario will have to find other partners in the world.

[John Godfrey, Liberal, Don Valley West, ON]

Mr. Speaker, I want to thank the hon. member for his question.

It is extremely interesting, but in a way it is the paradox of Quebec, if I may quote the hon. member's leader. In other words, if it makes sense to have industrial clusters at the Quebec level, why not at the Canadian level? Because we control our own territory we can create a tax atmosphere that is not the same as that in New York but that could be the same everywhere in Canada.

What I have always admired most about Quebec over the past 30 years is the willingness to experiment that has found new funding formulas. The Caisse de dépôt et de placement, for example.

I agree that if the high-speed train makes transportation sense, if it is not just a luxury, then yes, it is exactly the type of joint experimental project we should be trying out. We have to take advantage of the fact that we are after all a common market.

Lastly, if we are going to create clusters, we have to concede that in some cases-atomic energy, for example-it makes sense to have the headquarters in Ontario. In the case of the aerospace industry, on the other hand, the headquarters should be in Montreal, with a branch plant, for instance De Havilland, in Ontario. The trick is to have networks all over the country that can benefit from all the resources. That's what we did not have during the unfortunate business of Connaught BioSciences Inc., where there were the resources, in Quebec as a matter of fact, both technical and financial, and we missed the boat.

[Audrey McLaughlin, NDP, Yukon, YT]

Mr. Speaker, I congratulate the member for Don Valley West on his maiden speech. I guess we all know that there are not many maidens left here. I would say that his comments were very perceptive and bear paying close attention to.

Certainly coming from a rural northern area one of the crucial problems we have is access to capital. During the election I know his party spoke about an investment fund for small and medium sized businesses. The New Democratic Party presented a very comprehensive proposal for a national investment fund wherein we could utilize both public pension funds and private funds to help entrepreneurs. There are many in the country and many young people who now want to start their own business. They may indeed be very small enterprises.

As well as the industrial strategy to which the member referred, could he give his views on the necessity to ensure that we can get capital to small businesses in all areas of the country, rural as well as urban?

[John Godfrey, Liberal, Don Valley West, ON]

Mr. Speaker, I thank the hon. member for Yukon.

We talk specifically in the red book about new kinds of funds called expert funds based on the model of MDS Capital, a health care outfit, and investing on the basis of its expertise. That is the kind of new model we need wherever businesses find themselves, whether they are in small or large communities.

What makes the difference is a fund that understands the nature of business and is prepared to put equity into it as well as lend money to it. That will also have an effect on the way banks conduct their businesses in the future.

[Nick Discepola, Liberal, Vaudreuil, QC]

Mr. Speaker, I congratulate the Minister of Finance on his initiative in making the budget preparation an open and consultative process that allows Canadians from coast to coast the opportunity to be heard and, more important, the opportunity to be consulted prior to the adoption of the budget. I hope it is reflective of the way future budgets will be prepared by all ministers of finance.

I was considering what I would do if I were minister of finance. I would ask myself the questions: How did we get into this mess in the first place and, more important, how are we going to get out of it? Canadians from every walk of life know full well that the state of the economic mess that has been collectively created must be addressed.

My first recommendation to the minister is to tell Canadians the exact state of the Canadian economy. Canadians have a right to know the state of their fiscal house.

The people of Canada and of Quebec know vigorous action is needed. Greater Montreal, which used to be a prosperous city, has been hard hit economically. Many plants have closed their doors. The unemployment rate, especially among young people, has reached unacceptable levels, and the percentage of families living below the poverty line is climbing steadily.

It is high time we got back to basics. We have to learn to live within our means, to respect every dollar that is earned and do more with much less.

Our government's aims and objectives are well known. We want to encourage economic growth and job creation, we want to protect those who cannot protect themselves and above all we want to reduce the deficit.

How to tackle the challenge? It is important not to go in for stop-gap, temporary solutions. On the contrary: our approach must be balanced, rapid and complete. And above all we must take care not to hurt the burgeoning economic recovery.

We must launch an unwavering attack on the deficit, all the while balancing our revenue sources, carefully reducing our expenditures and bolstering the economy so as to increase the growth now anticipated to reach 3 to 4 per cent.

Balancing these elements demands that Canadians undertake a thoughtful evaluation of the expectations of government. In turn government must be politically brave. We must be frugal and the mismanagement of public funds must be halted. We must go after every single dollar of savings, and duplications of services must be eliminated.

What must be the priority of the Minister of Finance? In my humble opinion the only priority is one of jobs, jobs, jobs. Government alone cannot create jobs. It must however generate and foster an environment under which the private sector can grow in order to better create those desperately needed jobs.

Government must develop a climate fostering competitive advantage. All the while it must maintain a healthy social environment.

I believe our government is on the right track with the recent signing of the NAFTA and the GATT. Canada is now well poised squarely within the new global marketplace, offering opportunities that will allow business and industry to take advantage of the new international markets.

These agreements are a good start, but I ask the Minister of Finance to live up to the government's commitment to assisting small and medium sized business. Time and time again small business has created 85 per cent of new jobs. The time has finally come to act. If the Minister of Finance wants those desperately needed jobs then the government must give those

900,000 entrepreneurs access to desperately needed capital. The requirement for personal guarantees for small business loans must be removed immediately.

The riding of Vaudreuil, which I have the privilege of representing, is composed of both rural and urban areas. The main activities of the rural part of my riding centre on corn, dairy farms and poultry breeding.

Grain producers in Vaudreuil have taken the initiative of setting up an ethanol fuel producing plant that will be financed by the business community as well as the producers themselves. Besides being a clean and environmentally friendly fuel, ethanol will assist in increasing corn production in the region, helping by the same token farmers in my riding who are in dire straits.

Such a factory would give direct full-time employment to 300 people, and its construction would create 600 jobs. The only impediment is the fuel tax, which would have to be eliminated if ethanol is to become an economical alternative to gas for automobiles.

It is very easy to increase the taxpayer's fiscal burden. But I would like to warn the Minister of Finance against the lure of easy money and urge him not to increase income tax for Canadian men and women, as they are already paying the highest taxes in the industrialized world. A report published in November 1993 by the OECD shows Canada's unenviable position among the Group of Seven; for the last three years, Canadian families have known the highest income tax increase as well as the sharpest decrease in net income.

The Minister of Finance must, therefore, look elsewhere for new revenues. Or else, and this is quite feasible, he could reduce expenditures in different fields, by restructuring the machinery of government and the way in which services are delivered.

In my opinion, the first thing to do is demand that each department justify its budget. A reward system evaluating the performance of administrators in each department should be set up. We could then estimate the savings and costs linked to the new guidelines, as well as the amount of red tape required.

We must put a stop immediately to the spending spree that several departments embark on when March 31 looms near, at the end of every fiscal year. However, let us reward thrifty administrators and penalize big spenders!

We must approach governmental services in a new way, which does not mean that government should relinquish its role or give up delivering services which Canadian men and women have come to expect from it.

Better co-operation between the three levels of government-federal, provincial and municipal-would eliminate all the waste caused by the duplication of services. The idea is not to take away any power, but to identify clearly the level of government best qualified to manage an area of jurisdiction in the most economically efficient way, with the full co-operation of the other levels of government.

By eliminating bureaucratic duplications and overlappings, we would save money at all levels. First, individuals and businesses would have to deal with less levels of government, thereby reducing their administrative costs. Second, doing away with some costly departments would mean immediate savings for taxpayers and governments alike. Third, co-operation between the federal and provincial levels of government would increase the efficiency of services provided and produce economies of scale which would entail enormous potential savings without jeopardizing the quality of those services.

Other areas I would urge the Minister of Finance to look at would be in the reassessment of all government assets: tracts of land, buildings, commercially competitive enterprises and other assets that are no longer central to the needs of restructured government.

I encourage the Minister of Finance to introduce debts bonds in which Canadians could participate, knowing that every dollar they invest would go directly to reducing the debt. With domestic borrowing interest payments will flow back into the Canadian economy thus allowing the government to reduce its external debt and retain better control of its own economy.

Another idea I would propose would be the tax lottery on gambling and winnings. I am sure every Canadian would be in agreement. Speaking of lottery, why not implement a Canadian debt lottery? It may encourage participation from Canadians who normally do not participate in lotteries. The proceeds thereof could be split between the Canadian and provincial debts based on an equitable formula.

In conclusion, economic and fiscal renewal in Canada will not be an easy task but it is far from impossible. Realistic options exist for new approaches to debt management, the administration of government and the framework it sets for economic growth. All we need is the political will and Canadians will follow.

[Jake Hoeppner, Reform, Lisgar—Marquette, MB]

Mr. Speaker, I congratulate the hon. member on his excellent speech. I share his concern in the farming industry.

I was wondering whether he would like to comment on what his thoughts would be in resolving some of the management-la-

bour problems we seem continually to have in the grain industry. This issue has bugged and hurt farmers for years. What are the member's feelings on that?

[Nick Discepola, Liberal, Vaudreuil, QC]

Mr. Speaker, as I mentioned before about 60 per cent of my riding is rural. During the campaign I had the opportunity to meet with many dairy producers as well as grain producers. I must admit it rarely surfaced during my campaign. Many dairy producers are quite satisfied with the supply management system and it works very well.

With regard to grain producers they are desperately in need of other sources of prospects for development products. The main project we have in mind, not only for the area of Vaudreuil, is a task force on ethanol development as was mentioned yesterday in the House. I think that would benefit Canadians, especially those in rural areas.

I have not experienced the management problem but I thank the hon. member for the question anyway. If he has any ideas I would not mind discussing them with him.

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

Mr. Speaker, I too compliment the member on his remarks, especially the portion of his speech that dealt with the necessity of us getting more access to capital for small business.

Would the member take the remaining minute or so to give us some of his ideas that we might consider implementing so that we could be much more aggressive in that area?

[Nick Discepola, Liberal, Vaudreuil, QC]

Mr. Speaker, I thank the member for his question. Being in small business myself, having founded a small business in 1976, I had the misfortune of having to deal with financial institutions.

I have talked to many small business people. Every single one of them without a doubt-and the majority has seven or eight employees or less-is prepared to hire one or two employees if given access to capital. Instead of investing and putting their hard earned life savings on the line, they would like to invest through proper access to business loans to introduce new projects they have in mind.

If we could encourage small businesses to take the initiative on their own to put forth projects they have had on the backburner for many years, we would go a long way toward creating the jobs desperately needed in the country.