Debates of Feb. 1st, 1994

Pre-Budget Consultations

[Stephen Harper, Reform, Calgary West, AB]

Mr. Speaker, I am rising today to participate in the debate in advance of the upcoming budget. In so doing I want to concentrate my remarks on the overall financial objectives of this organization which must decide these things for the Government of Canada.

The Government of Canada is the largest organization in the country. Like any other board or management we are well advised to keep in mind our central function of overall planning of our financial objectives. Historically that is one of the most important roles of this Parliament and recently it has been one of the most neglected. In my comments I want to take some time to review these objectives from the perspective of the Reform Party.

During the course of the election campaign our party campaigned on the necessity of setting the following financial objectives. In the life of this Parliament we would work toward the elimination of the current budgetary deficit without resorting to significant tax increases. That was called the zero in three plan. On that basis we went from being a relatively minor party to being the effective opposition today for most of Canada.

I want to review why it is an appropriate financial objective and especially ask government members to consider my comments. In light of the financial developments we will also be considering these things.

I am not going into the very good reasons that exist for stopping the growth of debt, for eliminating annual deficits, for not raising taxes or for not raising general price levels. My colleagues in the party have covered those topics very competently. I want to look at the timeframe proposed for our particular financial targets.

Why deal with the fiscal problems of Canada in the life of this Parliament? First, it is a modest objective because it is necessary to deal with far more important objectives in terms of our economic development. We cannot hope to deal with the problems of debt or significantly lower the tax burden until we eliminate the significant problem of annual structural deficits.

Second, the problem is political. We are all elected. We all know it is politically difficult to undertake the steps necessary to reduce this particular problem. The political will necessary for that will not sustain itself for very long and certainly will not sustain itself beyond the life of one Parliament. The previous government had two mandates to deal with this problem and was unable to do so. Third, there is a very good fiscal reason. Today the problem of the deficit is largely driven by the past sins of governments. We have accumulated an enormous debt on which we generate a huge amount of interest payments. Those interest payments are really today the essential problem in the annual deficit.

Every year that we fail to deal with this we add to the debt burden and by implication we add to the future stream of interest payments. If we deal with this problem only gradually we will find that our actions year by year are offset by the very tax burden that we create.

Fiscal gradualism does not work. This was the policy of the former PC government and it illustrated it in spades. Year after year we had nine budgets with incremental measures to deal with rising debt. Every year the pattern of debt and interest payments served to offset those actions and to offset the deficit targets and we find ourselves more or less in the situation we were 10 years ago.

Of course the former government complicated that situation by resorting to other measures. Once it recognized fiscal gradualism was not working it got into a pattern of systematic overstatement of growth projections and eventually into the fiasco we had in the election which was deliberately misleading people as to the financial state of our country.

We know that today the Minister of Finance has spoken very eloquently about this. We are looking at a deficit this year of between $44 billion and $46 billion. That is $13 billion above the $32.6 billion that would have been indicated to us less than a year ago. That is more than just an off-shoot in projections.

On top of that we have the largely unprecedented situation where we have actually had to go back and revise the deficit from the year before, the year that ended over six months ago. Now we find we were $5 billion higher not on this year but on the year before this year when we were talking about the deficit during the federal election campaign.

I do not want to focus just on the last government. This is a pattern in the historical record of the failure of fiscal gradualism. If we look at the deficit from 1867 to 1992, and I refer members to chapter 5 of the Auditor General's report at the end of 1992, we had accumulated net public debt of $423 billion. Yet only $37 billion of that or less than 10 per cent was due to annual shortfalls. The rest was due to interest and compound interest generated by those mistakes.

This government has initially in its rhetoric recognized that we have a significant structural deficit program. It has switched from some of its campaign rhetoric to some of the rhetoric we heard from just about every government and every party that has been elected afterwards to recognize that this is a problem. Nevertheless the government continues to opt for a policy of fiscal gradualism.

The Minister of Finance repeated today in this House his target of 3 per cent deficit to GDP by the end of this Parliament.

I cannot understand the clear rationale for that. I can tell the House that even if that objective were achieved by this government that is a target above the annual trend growth rate of this country. In other words even achieving that target we will continue to see our debt burden and the relative burden of our interest payments continue to climb. We are already at dangerously high levels here. We all know the impact.

A previous speaker said that if interest rates were to go up one percentage point we would add $5 billion to the deficit. If they go up one percentage point we will be adding $10 billion to the deficit within five years as a consequence of the compounding of that error.

Fudging numbers and putting out false projections are not the way to go. I hope the government is not beginning to slip into that pattern.

Let me raise a point of concern. Today the minister made reference to financial projections for the next fiscal year. We in our party are trying to do an analysis of our situation to make the best proposals possible. In spite of those figures provided by the Minister of Finance, as late as this morning both his department and his ministry refused to provide my office with complete information as to the nature of those projections or the assumptions on which they are based.

I wanted to elaborate a little on that problem. Before the election we were projecting that we are at a level of spending in terms of current programs in this country that is about 15 per cent above the level we can sustain in the long run. This is why I am so interested in these projections. We know from the data we are getting that this situation could not possibly have improved. We are concerned about this.

In concluding the point I would like to make is that we can all rant and rave and rhetorically wave our hands-we are all politicians-about this situation being a problem, but if we cut a little fat, close a few loopholes, wait for growth or announce some strategic initiatives this problem will solve itself or it will not be as difficult.

This has not been the experience of the past. It is not true. It is going to happen. We know the experience in other countries with these kinds of deficit situations. If we do not deal with it, if we do not do something about it, something will be done about it for us.

I urge members on the other side to consider very carefully their objectives in this matter. I notice the minister has delayed. He is now saying that it will be next year's budget that deals with this. We do not have these kinds of timeframes or this luxury.

If this government fails to deal with this problem it will not only fail our country but the government itself will fail. It will fail not only economically but politically as well. I ask the government to give very careful consideration to these matters.

[Jesse Flis, Liberal, Parliamentary Secretary to Minister of Foreign Affairs]

Mr. Speaker, I want to compliment the Reform Party speakers in their philosophy of bringing the views of their constituents on to the floor of the House.

We saw them try to do this in question period. I wish they would do more of this in their debates. I have been using that practice for the 10 years that I have been representing Parkdale-High Park.

To begin input into this debate to help the Minister of Finance and the government reduce our public debt and deficit, I sent a questionnaire out to each household in Parkdale-High Park with a preamble about how Ottawa spends its money, where it gets its revenues and so on. I asked: "Do you agree that deficit reduction is one of the top priorities for the federal government?" The results are preliminary but already 88 per cent said yes. They agree that deficit reduction is one of the top priorities for the federal government in addition to job creation.

The second question I asked was: "Which of the following approaches would you support to help solve the deficit problem?" I asked them to check: increased personal income taxes; decreased government spending; or, a combination. Eighty-one per cent said that they support decreasing government spending to help solve the deficit problem. If they agreed to a decrease in government spending, I asked: "Are you willing to accept fewer government services in order to reduce the deficit?" I am pleased to say that 84 per cent of my constituents said yes, that they are willing to accept fewer government services in order to reduce the deficit.

I would like to ask the hon. member this. In his constituency which kinds of services would his constituents be willing to either eliminate or reduce? If we can do this in every riding, then we can help bring down the deficit and the public debt.

[Stephen Harper, Reform, Calgary West, AB]

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

We too went through similar exercises not only in the party but in our constituency. I held very similar public meetings on this subject. The process was very similar to that outlined by the hon. member before I was being paid to be the member of Parliament. I am familiar with the process. The outcome of that which the hon. member had outlined was very similar to the kinds of results that I saw in my riding.

At some of the public meetings we had I took the additional step of working through with the constituents who attended a line item review of the budget. We went over about 100 spending categories. Because I have done some study in this area I was somewhat familiar with some of this information. It would be very difficult for me to go over the whole program in the short time that I have but let me just elaborate in general terms.

Obviously we all know that the constituents expect there to be significant reductions at the top of government, led by ourselves. We have advocated some of these things on the floor of this House. Our caucus has advocated reducing some of the expenses around here. To some degree the Liberal Party has responded on these particular items and will be discussing this later today in the Board of Internal Economy.

My constituents outlined a number of areas of administration of government services and programs where they would expect there to be a reduction in the whole area of bureaucratic costs. That is an area that the Bloc Quebecois is, of course, prone to talk about quite frequently. Obviously we are going to be looking at the Auditor General's reports. We are hoping that the government will look at the Auditor General's reports in implementing those kinds of considerations.

The third major area where I think my constituents are prepared to see a large reduction and even elimination is the entire area of government involvement in business, both through direct expenditure as well as some of the tax concession programs. In our zero in three plan we had laid out a number of areas where we believe there should be the elimination of that kind of spending.

Finally, in the area of social policy it has been my experience that when one lays the facts before the people, that nearly two-thirds of our current spending is in the area of social policy, they do anticipate there will be some reductions. The key is that the benefits be retained in the programs that are most valued by Canadians, like health care; that people who contribute to programs are able to receive those kinds of programs, like unemployment insurance; and, also that people who need those programs the most are able to receive money from those kinds of programs.

I think if you take those three things into account, Mr. Speaker, you will see that even after those criteria there is room for reduction in the social policy area.

I see that you want me to wind up and I apologize to the hon. member that I have not been able to explain in any more detail.

[Jane Stewart, Liberal, Brant, ON]

I wish to congratulate the Minister of Finance for recognizing that the success of our next federal budget will be as dependent on the quality of the process that we use to identify and implement our budgetary measures as it will on the substance of those budgetary measures themselves.

Our Minister of Finance understands quite well that over the last number of years Canadians have come to feel very uncomfortable with the ways and means of government, and in fact this has translated into the inability of the previous government to implement effective and efficient government initiatives. Consider, for example, the GST.

We all know that if we are going to bring our financial situation into an acceptable state of control, we are going to need the combined and national commitment of all Canadians. It is not going to be good enough just for 176 Liberal members to say: "We can make a difference". We have to ensure that every single Canadian is committed to helping us bring down a $45 billion deficit and rein in a $500 billion debt.

This debate today provides us with a good opportunity to ensure that we get the commitment of Canadians to manage our deficit and our debt in a humane and acceptable way that is consistent with getting them back to work.

I applaud our Minister of Finance for his original speech, given on November 29 to the students at the Universities of Montreal and McGill where he committed himself and his ministry to an open and transparent process with no more private delegations. He wanted to hear what Canadians have to say. I congratulate him on the completion of four very good cross-country townhall meetings.

The minister in doing this gave each and every one of us as members of Parliament an opening to do the same thing in our constituencies. I challenged the minister on that and asked him if he would not send a member of his ministry into my riding to hear what the people of Brant have to say on this very topic of budget management. I was not surprised and was very pleased that he responded very quickly in the affirmative. On January 6, 1994, Mr. Karl Littler, a member of the minister's office, came to the riding of Brant and listened for three hours to what my constituents had to say on this topic. It is that information I would like to share with the House today.

First of all, and it was not surprising, my constituents said we have to restore integrity in government. Otherwise meetings like the one I held and debates like this mean nothing. Fortunately, Mr. Littler's attendance at the meeting indicated to my constituents that this government does intend to do business differently and so we carried on with our agenda.

My constituents said they wanted a clearer and a more understandable way of keeping on top of how the government spends its money and collects its revenues over the course of the year. They were extremely uncomfortable with the previous Prime Minister's response, or lack of response, to the now Leader of the Opposition's question during the leadership debate on the state of the nation and what the size of the deficit really was.

We talked at length about the GST, about its failure and about possible solutions to it. By and large my constituents felt that a melding of the federal and provincial retail sales tax would make sense but small business warned us against implementing procedures that would negate the money, the time and the effort they had already put into accommodating the goods and services tax to date.

Other small business owners and the farmers in my riding indicated the importance of capital gains exemptions and RRSPs to them. For them they are the main tools, in fact, in many cases the only tools they have to provide and plan for their retirement. They understand changes may be necessary but they want them done in a fair and equitable fashion.

Other members of my constituency, some who work in the real estate business, others who build homes and others who are looking to buy their first house asked that the minister consider continuing the home buyer's plan. At the point of our conversations they understood that plan was a no cost plan to the government and had in fact encouraged economic development in our community.

I was interested by other constituents who spoke in support of arts and culture. One constituent in particular stated he believed that for every dollar spent on the arts $7 more were generated in spin-off purchases. It was suggested that a tax break for Canadians who choose to donate to the arts be created, something like what we have for Canadians who choose to contribute to political parties.

We talked about a number of other things. There was support, for example, for a national debt reduction fund. There was support for an interesting idea where we might provide tax breaks to businesses that offer new, permanent and long-term jobs to the community.

There were a number of very interesting ideas but the one which received the most debate, most conversation and the most support was one which was presented by an individual. He called it GAMI, a guaranteed annual minimum income.

We have talked about guaranteed annual incomes for a number of years, since the 1960s in fact. Every time we take a look at our income support systems we think about a guaranteed income. The Croll Senate report on poverty talked about a basic income, as did the Castonguay-Neveu report in Quebec and later on the Manitoba basic annual income experiment. In the 1980s the Macdonald commission and the Forget commission all talked about and gave real consideration to a guaranteed annual income.

There are those who will say that this kind of negative tax strategy will not work, it will instil poverty across our nation. I believe there are strategies to avoid that and some of them are mentioned in the Macdonald commission report.

There are others that say we cannot offer a guaranteed income to able-bodied Canadians because they will not work. I submit that Canadians will work. We found over the course of this election that Canadians want the dignity of work and a guaranteed income will not stop them from going to work.

In fact data we are now analyzing from the Mincome experiment in Manitoba suggests there is not a really strong relationship between a guaranteed income and a refusal to work. It does not exist.

Others will say we cannot afford that approach. Interestingly enough the gentleman who proposed the GAMI at our meeting was to my mind probably more a part of the right wing of the political spectrum than the left wing. He saw real opportunity to streamline the number of programs we have now to support Canadians and their income. He saw an opportunity to reduce the bureaucracies we have built up around unemployment insurance, old age security, WCB, some provincial programs as well.

What I am seeing is that we may have a window here where the left and the right and where all provinces across this country may now be able to come together.

I started my comments by congratulating the Minister of Finance on a step change in process toward budget consultation. I now ask him to consider a step change in the substance of what many of our programs might look at, the one that we spend a majority of our money on, income security.

It will take some work and we will not be able to do it in the 1994 budget but I believe as Liberals we have a mandate for a number of years and we do have to seriously consider the notion of a guaranteed annual minimum income.

I have given you some highlights of the meeting I held in my constituency on January 6. In closing I would like to recognize that the citizens of Brant know that the minister has a difficult task ahead. They appreciated the opportunity to share their ideas, provide advice and direction.

They hope and expect that he will listen to a number of their ideas and they also expect that those ideas which are not incorporated are talked about after the process and the reasons why they were not considered will also be shared. The process must continue. It must go on.

This is the kind of process to which our government is committed. Certainly our minister has indicated that is the way it will be. I wish him well on the tough road ahead and would like him to know that the people of Brant appreciate his continued support and openness.

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

Mr. Speaker, I wish to congratulate the member for Brant for presenting some interesting ideas, particularly concerning some form of the guaranteed income. I think she will find that notion has wide support in this House. I hope that the Minister of Human Resources Development will look at the option as he reviews social policy as well.

My question for the hon. member concerns the government and the Liberal Party's promise of solving the problem of the deficit through more employment. It is an argument I totally accept.

Statistics Canada did a study as to the cause of the debt. I believe that study was done last summer. Statistics Canada said that of our accumulated debt, 50 per cent was due to interest payments, i.e. the high interest rate policies of the former Liberal government that the Conservative government continued. I believe 44 per cent was due to loss of income. The loss of income is due to the tax breaks of the former Liberal government that the Conservative government continued and only 6 per cent was due to increased government expenditures of which only 2 per cent was due to increased social spending. This is a study by Statistics Canada on the cause of the debt.

We have to increase our revenues. In other words we have to plug some of the tax loopholes. I encourage the government to continue to look at that but also we have to get people back to work.

The free trade agreement killed over 400,000 jobs. NAFTA is going to kill more jobs. Since coming into power the government has increased the tax on employment, discouraging employment by increasing the UI premiums. Second, it has ratified the NAFTA which is going to create more unemployment. How can the government in fairness state that creating more employment and therefore more revenues is its central concern when in fact the record so far indicates it has taken the opposite direction?

[Jane Stewart, Liberal, Brant, ON]

Mr. Speaker, I would like to comment particularly on the unemployment insurance issue. I believe that the Minister of Human Resources Development has taken a very responsible approach to the UI increases. We have a debt in that bank. He took a minimum increase and froze it for two years. Hopefully our businesses can use that stability to help plan for the future.

With regard to NAFTA, I think we can compete. In my community we are currently working very hard to develop new economic clusters we believe will revitalize our economy.

I am certainly very much a part of the Liberal strategy that says debt and deficit management come from three areas, spending cuts, increased revenues, but most importantly economic growth.

[Jean Charest, Progressive Conservative, Sherbrooke, QC]

Mr. Speaker, I also want to make a comment and ask a question of the member for Brant. First I want to offer her my congratulations on her election to this place and for her speech and comments.

I want to get the reaction of the member for Brant on some information released yesterday by the Canadian Life and Health Insurances Association of Canada, which voiced some concern about federal taxation of group health and dental insurance.

The information put forward yesterday was to the effect that the government is seriously considering taxing group health insurance and dental insurance. This insurance is paid by employers in a lot of instances for about nine million working Canadians. It benefits about 20 million Canadians, I understand, according to the information, families across this country who receive these benefits.

My understanding is that this would be a pretty important tax grab. The association has offered some numbers from its research. It indicates that for a worker who has no dependents earning $25,000 per year the impact of this tax measure would be about $275 a year in additional income tax. It goes on to say that a family with one bread winner who earns about $40,000 a year would pay $425 in additional income tax on the same taxable benefit.

I will just finish the quote: "For a two income household with $80,000 a year it would be $700 more in additional taxes a year". That is a pretty big increase, even for retired people.

My question for the member for Brant is the following. If there is going to be a debate in this country about health insurance and how we apply it, and I understand that is what the government intends to do, would it not make more sense to have the people and employers involved in the industry participate in that debate before such a dramatic tax grab takes place that will affect 20 million people and nine million working men and women?

[Jane Stewart, Liberal, Brant, ON]

Mr. Speaker, I do not pretend to speak on behalf of the Minister of Finance. I cannot say that is going to be part of the budget. I will only reiterate his comments that he will develop a fair and equitable budget. I have every confidence in his ability and his commitment to do that.

Motion To Extend Hours Of Sitting

[Peter Milliken, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, I am sorry to interrupt the proceedings, but I think you will find there is unanimous consent of the House for the following motion:

That the ordinary hour of daily adjournment be extended to 10 p.m. this day and that during the extended sitting no quorum calls or dilatory motions shall be received by the Chair.

(Motion agreed to.)

The House resumed consideration of the motion.

Pre-Budget Consultations

[Pat O'Brien, Liberal, London—Middlesex, ON]

Mr. Speaker, before I begin my first speech as a member of Parliament, may I first congratulate you on attaining your important position of responsibility. I assure you of my full support and co-operation as we strive to do the people's business in a more orderly and decorous manner.

No doubt everyone will understand that my first thoughts are of my wife, Evelyn and our three children, Mark, Laura and Carl. During my 13 years of service as an elected representative in the municipal government of London, Ontario and now as the member of Parliament for London-Middlesex, I have always enjoyed their full love and support. I wish to thank them most sincerely.

As you well know, Mr. Speaker, the adventure of democratic politics is never a solo flight for no one achieves public office without the help of many people: family, friends and acquaintances alike. I wish to thank publicly in this House the army of dedicated volunteers who worked so indefatigably on my campaign and whose efforts produced the most decisive victory ever in the history of the riding of London-Middlesex.

To all of the people of our riding, to the 54 per cent who did support me and to those who did not: I pledge to you my very best efforts to represent you at all times with honesty, integrity and hard work. I am indeed honoured to be your member of Parliament in this the 35th Parliament of Canada.

My riding is most definitely a challenge to represent given its geographic size and the diverse heritage of its peoples. Indeed, in many respects it is almost a microcosm of Canada itself. Eighty per cent of our people live in the urban areas of east and south London, while the remaining 20 per cent make their homes in the very productive rural and agricultural settings of the four townships of Biddulph, London, West Nissouri and North Dorchester.

Demographically, London-Middlesex is an interesting riding encompassing peoples of many cultures, languages and religions. Although primarily of a sturdy Anglo-Saxon character, it is home to such fascinating peoples as the many descendants of the historic Irish pioneers. After World War II many Dutch, Italian and Portuguese immigrants came to our area and worked very hard for a better life. Most recently, significant numbers of Arabs and Poles, as well as Croats, Caribbeans, Southeast Asians, East Indians and Chinese have all made their important contributions to our communities.

As is fitting in this great nation we call Canada, some of our people are French Canadians who, though not many in number, are both proud to be francophone Canadians and are determined that this blessed land must stay united.

Economically, the range of activities in my riding includes many different types of farming on some of Canada's richest soil, a plethora of small businesses of every type imaginable, several major industries such as General Motors Diesel and 3M, and such important institutions as Parkwood Hospital, Fanshawe College and London's airport.

It is in juxtaposition to this description of my riding that I now offer my synthesis of the opinions and concerns of my constituents as well as my personal views on the state of the economy and possible budgetary decisions to deal with the crisis.

Having consulted widely with my constituents of London-Middlesex, which included a public pre-budget roundtable forum held in London last week along with my colleagues, the hon. member for London West and the hon. member for London East, I have received a very clear message that our government must do its utmost to encourage the creation of jobs while at the same time taking difficult decisions necessary to reduce the national deficit and debt. A balanced approach is the key to a true economic recovery.

In the field of taxation, it is readily apparent to middle income Canadians that they bear an unjust share of the tax burden in this country. The majority of my constituents favour the elimination of tax loopholes for wealthy individuals and corporations in order to create a more equitable tax structure. Across the board tax increases however would be beyond comprehension at this time.

It is a real concern to many that severe restrictions on RRSP contributions and the elimination in one fell swoop of the capital gains exemption could be unduly punitive and could actually slow our economic recovery.

I have heard the clarion call to establish better priorities for government funding as part of the overdue effort to reduce the national deficit and debt. Surely no priority can be more urgent than the need to invest our tax dollars wisely in the children and youth of Canada. To sell young Canadians short is to condemn this nation to a future of mediocrity, to a future in which Canada would experience horrendous social problems.

It is my personal view that one enormous problem dominates the economic landscape. That is the devastating unemployment crisis and the desperate need for new jobs. Yes, we must slash the deficit and the debt. Yes, we must make our system of taxation more equitable. But any so-called economic recovery which discards hundreds of thousands of Canadians onto the scrap heap of indefinite idleness is no recovery at all.

A Liberal government true to its principles can never accept the economics of indifference which preaches that 5 to 7 per cent unemployment constitutes full employment. We must never write off even one of our fellow Canadians as a faceless statistic for whom we offer no hope. Like many of my hon. colleagues in this House I have seen the human face of these unemployment statistics day after day in my constituency office. It is a face etched with fear and despair. Women and men, young and old, the highly educated and the unskilled, too many Canadians are crying out for the dignity of daily work and a chance to earn a decent living for themselves and their families.

Unfortunately, the cruel reality of our unemployment crisis offers no quick fixes, no easy solutions and no panaceas waiting to be discovered. But let us at least begin.

As a Liberal, one of my fundamental beliefs is that government must play a role in partnership with the private sector if Canada is to pull out of this economic nightmare. To deny that is to deny the lessons of history. And so let us with heroic hearts and strong in will strive, seek and find a better economic course for all Canadians.

In closing, as the member of Parliament for London-Middlesex, I pledge my best efforts to join in the fight to help create a new and better Canada.

[Ghislain Lebel, Bloc, Chambly, QC]

Mr. Speaker, I heard the speech made by the hon. member opposite and I basically agree with him, except that I am about to turn 50 and all previous governments have invoked tax fairness to impose new taxes again and again to all taxpayers, always in the name of tax fairness.

My question is twofold: first, tax fairness and, second, the creation of steady jobs. I remember that from 1982 to 1987, in Quebec, and the situation was probably the same elsewhere in Canada, we did not wait for the chicken to lay the egg: we went and got that egg while it was still inside the chicken. In other words, we found all kinds of incentives to stimulate the creation of temporary jobs. So much so in fact that recovery in the construction sector in Quebec is currently at an all-time high.

Does the hon. member have a suggestion to promote the creation of steady jobs, and can he give us his views on tax fairness? I am particularly curious about lowering the ceilings for registered retirement savings plans, as well as eliminating the capital gains exemption. I wonder if the hon. member could answer that question.

[Pat O'Brien, Liberal, London—Middlesex, ON]

I thank the hon. member for his two-part question.

Dealing with the job creation situation, obviously he is aware of the infrastructure program of the new government. We hear criticisms of it. I heard criticism of it during the campaign and still hear it, but not from many of the unemployed I might add. Frankly, I can say that having come from 13 years in municipal government it is applauded coast to coast to coast in this country by municipal leaders of every political stripe. So that is a major step in the right direction.

Obviously we recognize that the private sector will and should create most employment in this country. The infrastructure seeks to look for a partnership with the private sector to help do that.

In terms of the second part of the question dealing with tax loopholes, quite frankly the statistics will show that since 1984 under the previous government those earning high incomes, in the top 3 per cent in this country, paid less in income tax. To me that is fundamentally unfair and immoral. It must stop. I am confident the Minister of Finance will do everything possible to address that what has to be the ultimate inequity.

[Audrey McLaughlin, NDP, Yukon, YT]

Mr. Speaker, I would like to congratulate the member for London-Middlesex on his remarks, particularly to show this House that perhaps we are not going to hear the nonsense and clap-trap of the previous government about a jobless recovery because there is no recovery unless there are jobs for people and unless we can really have people back working again. I congratulate him on addressing that very profound question of jobs in our community and in our country.

Would the member go beyond just simply saying that we do need jobs and really put that into action by having his government put forward specific targets for the reduction of unemployment which we could debate in this House? I would like to see this.

I would like to know the member's reaction to having the government come forward and being accountable to the people by saying: "Here is our target not just for the reduction of the deficit"-and I agree the deficit is a problem-"but here is our target to reduce unemployment. We are going to put it before the House, we are going to defend that target and we are going to have a debate on it". Does the hon. member think that would be a useful thing for his government to do?

[Pat O'Brien, Liberal, London—Middlesex, ON]

Mr. Speaker, I thank the member for Yukon for her kind good wishes, her remarks and for her question.

I think that small l liberals, the two of us, are probably of very like minds on this very question. Sure, the deficit is important and has to be slashed. I fully agree that any so-called recovery which leaves hundreds of thousands of Canadians unemployed is simply not a recovery by my definition of the word.

I fully support the idea that one ought to have specific targets to try to reduce that unemployment level just as our party has laid out specific targets in wanting to reduce the deficit. It is a logical suggestion and a good one. I will pass it on to the Minister of Finance.

[Madeleine Dalphond-Guiral, Bloc, Laval Centre, QC]

Mr. Speaker, I rise on a point of order.

[The Acting Speaker (Mr. Kilger)]

The hon. member for Laval Centre on a point of order.

[Madeleine Dalphond-Guiral, Bloc, Laval Centre, QC]

Mr. Speaker, I want to inform the Chair that, from now on, members of the Official Opposition will make 10-minute speeches, followed by a 5-minute period of questions and comments.

[The Acting Speaker (Mr. Kilger)]

Thank you. Resuming debate. The hon. member for La Prairie.

[Richard Bélisle, Bloc, La Prairie, QC]

Mr. Speaker, this debate on government finances is extremely important for all Quebecers and Canadians. I am particularly pleased to participate in this exercise and I want to take this opportunity to thank the Minister of Finance for having made this debate possible today.

As the member for La Prairie, I have the honour of representing in this House the citizens of Brossard, Candiac, La Prairie and Saint-Lambert. These people are middle-class workers. They have worked very hard to get what they have and they often find it revolting to see political leaders and elected politicians unable to control the public debt and the budget. They are annoyed because, in many cases, they have saved every dollar by not going over their weekly budget and, more importantly by not relying on other people's money, money which is not theirs and which leads to debt and dependency, as is the case for Canada right now.

The lack of control over government finance is reflected by the fact that from 1960 to 1994, the debt-to-GDP ratio in Canada went from 34.6 per cent to 71.8 per cent. This means that the debt increases faster than the government revenues which could be used to pay off that debt. While the debt-to-GDP ratio is an indication of the scope of the problem inherited, the evolution of the deficit versus the GDP enables us to find out when, over a period of time, the federal debt simply grew exponentially.

Between 1970 and 1984, the deficit as a percentage of GDP rose from a negative balance of-0.3 per cent-in this case, a minus sign means a budget surplus so in Canada, in 1970, we had a budget surplus-to 8.1 per cent, which was exceeded only in 1985. So in 1984, this percentage peaked at 8.1 per cent. Subsequently, the ratio gradually declined to 4.5 per cent and then rose to 6.2 per cent in 1994, under the new government. In other words, the Liberals have been mainly responsible for the deterioration of public finances in Canada. The Liberals are

responsible for the ensuing expansion of the public debt, and they mismanaged the impact of the oil crises in 1973 and 1980.

The Bloc Quebecois is aware of the need to revamp public finances. We must stabilize the debt/GDP ratio over time. However, we cannot increase the tax burden on a middle class that has already been severely affected by the recession and is particularly vulnerable during this period of slow and painful economic recovery.

According to the Bloc Quebecois, to put the government's financial house in order means, first of all, introducing tax reforms that aim for greater fairness by eliminating tax loopholes enjoyed by taxpayers with high incomes. The hon. member for Saint-Hyacinthe-Bagot spoke at length on the subject earlier today. Second, we must reduce government spending. We believe such measures would generate greater flexibility and a potential savings of $10 billion for the government. The aim of this budget policy is to avoid shifting the burden of federal deficit reduction to the provinces. Its aim is also to protect the neediest in our society and prevent any cuts in the budget envelope for social programs.

The Bloc's budget policy wants to strike a balance between two priorities: job creation and revamping public finances. That is why we intend to allocate the $10 billion saved by cutting gross expenditures and tax spending as follows: $5 billion would be allocated to job creation and $5 billion to reducing the deficit.

Our plan to reduce spending consists of two parts: first, a $3 billion cut in the defence budget. The budget of the Department of National Defence for 1993-94 totals nearly $12 billion. The budget breaks down as follows: $9.1 billion for operating expenditures, $2.9 billion for capital expenditures and $356 million in transfer payments. Our proposed spending cut represents 25 per cent of the current budget of the Department of National Defence.

The remainder of our expenditure reduction policy is about eliminating waste and poor management. The hon. member for Joliette discussed this at some length this afternoon. Eliminating duplication of services by provincial and federal governments would, we believe, generate a potential savings of $2 to $3 billion, while duplication among various federal departments would also be a prime target. Operating expenditures of departments and federal agencies would be cut as well.

Incidentally the government's gross operating expenditures totalled nearly $35 billion, or 27 per cent of gross program spending, in the 1993-94 Estimates. Some departments have relatively high operating expenditures: Public Works, 10 per cent; Transport, 6 per cent; National Revenue, 6.5 per cent; RCMP, nearly 5 per cent; Supply and Services, 3 per cent.

Our policy for reducing operating expenditures also aims to increase the relative size of government capital spending in relation to operating expenditures. Capital expenditures help generate income for several years because these are investments. No more borrowing money to pay the groceries. We also have to change the nature of the government's capital expenditures.

In the 1993-94 Estimates, more than 53 per cent of gross capital spending was for the Department of National Defence, mainly to purchase warships and weaponry. The Bloc Quebecois feels this kind of investment is not very productive.

With respect to managing public expenditures, the Bloc Quebecois also advocates a thorough evaluation of government spending programs. Program evaluations address three needs. The information gathered is used, among other things, to help make decisions about resource allocation, to help Quebecers determine the value obtained from their tax dollars and to enable public servants to take responsibility for results rather than process.

I would also like to point out that departments spent only $28.5 million of the overall government budget on the program evaluation function in 1991-92. The central branch reporting to the Office of the Comptroller General spent only $2.9 million on evaluation.

It should also be noted that two major problems, one quantitative and the other qualitative, are associated with the evaluation of government programs. As for the quantitative problem, it is worth noting that in 1989-90 and 1991-92, expenditures related to program evaluation fell by 28 per cent. In fact, the number of program evaluations has been declining for the past seven years, that is since 1987-88. Since that time, 99 program evaluation reports have been produced, whereas in 1991-92, only 90 evaluation studies were produced. That is very few indeed and the number is steadily declining.

Government expenditures for 16 programs totalled $124.5 billion in 1991-92. Only two of these programs were the subject of a thorough evaluation. Not enough attention is paid to major programs. Evaluation studies conducted over a seven-year period covered approximately 24 per cent of the government's program expenditures in 1991-92.

Thus, if we take into account expenditures on servicing the national debt, only 18 per cent of expenditures were in fact covered in the last seven years. Evaluations did not focus on the most expensive programs. It is estimated that the rate of coverage of programs with expenditures of over $250 million is less than half that of programs spending $250 million or less. In short, the number of evaluations is steadily decreasing. Very few have been conducted and those that have been cover programs with smaller expenditures.

As for the qualitative problem I referred to earlier, by locating the evaluation units in the departments, the immediate needs of managers take precedence over the needs of government and the interests of the general public. When questioned by the Auditor General, those responsible in the departments for the program evaluation function responded that in their view, the main purpose of an evaluation was to help management solve operational problems. Thus, they are overlooking the essential purpose of program evaluation which is to assess the efficiency of programs and call them into question if necessary, all in the interest of ensuring optimal resource allocation.

It should be noted that this kind of information would be most useful to Parliament in helping it decide how best to allocate resources and to the public in helping it rate the government's performance. The fact of the matter is that evaluations cover only operational matters, not those aspects relating to the relevance or cost-effectiveness of programs.

Evaluations cover only portions of programs or small-scale programs. There is no systematic process in place for evaluating programs affecting more than one department. We in the Bloc Quebecois find the situation within the federal government with respect to program evaluation totally unacceptable. The President of the Treasury Board and the Minister of Finance must take action as soon as possible to remedy the problem.

The information that could be culled from well-produced program evaluations would be very useful to parliamentarians. Indeed, it would make it possible to identify successful programs which no longer produce the desired results and which could be replaced by more efficient ones.

Given the size of the deficit and the to say the least anemic economic recovery, it is critically important that existing resources be allocated and utilized as efficiently as possible. Program evaluation becomes an essential exercise under the circumstances. Without effective program evaluation, the government is simply not in a position to allocate in the best possible way the financial resources it receives from the taxpayers. Parliamentarians are being asked to work in the dark and to allocate resources without knowing all the facts.

According to a study made by the Auditor General, proper program evaluation can result in significant savings. For example, in 1990, the Department of Finance carried out an evaluation on the effects of the Cape Breton Investment Tax Credit. Since the study indicated that the program was not doing what was expected of it, it was abandoned. This tax measure involved more than $500 million in tax revenue foregone during the period it was in effect. The loss in revenue would have continued to accrue while this inefficient program was allowed to go on, which is why it was abandoned.

The people would benefit from better program evaluation and would also be able to assess the performance of their elected representatives, which would help to improve democracy.

In conclusion, I would like to say that, in order to avoid waste and to optimize the allocation of tax resources, the Bloc wants all programs to be subject to an evaluation process and the civil servants in charge of program evaluation to report directly to a Standing Parliamentary Committee on Program Evaluation. The officials in charge of these programs have to be accountable to Parliament and justify the allocation and use of public resources on their programs.

[Jean Charest, Progressive Conservative, Sherbrooke, QC]

Mr. Speaker, allow me to congratulate the hon. member for La Prairie on his comments and on his election. This is the first time I have the opportunity to do so since he became a member of this House.

His comments on program evaluation are interesting. I urge him to pursue these issues with the chairpersons of the various committees, because these people can undertake program evaluations and they do so in a larger context than is possible for the Auditor General, and even with the departments themselves, as I and other members opposite have seen in the past; indeed, there are numerous opportunities to do so.

In any case, I have a question for the hon. member and I would like to know the position of the Bloc Quebecois on a statement made yesterday by the Canadian Life and Health Insurance Association, which suggests that the federal government is considering taxing group insurance benefits, as well as health and dental insurance benefits. Such a measure would have an impact on some 20 million Canadians and would directly affect nine million workers across the country.

Using its own data, the Association indicated that a person with no dependent and an annual salary of around $25,000 would have to pay $275 more per year in taxes. A family earning about $40,000 a year would face a tax increase of $425. Similarly, a family with two salaries totalling $80,000 a year would have to pay $700 more in taxes if, in its next budget, the federal government decides to introduce this measure.

I want to put this in the appropriate context, so that the hon. member for La Prairie can give me the Bloc Quebecois position on this issue. This measure would be introduced while we anticipate a very comprehensive debate on health care in Canada and, I suppose, on the role of the federal and provincial governments, the private sector, the taxpayers, and so on and so forth.

Does the member not find it alarming that this measure could have such serious consequences on the budget of every individual and family? Does he not find it even more alarming that the government is proposing a comprehensive debate on health care but would introduce such a measure before even holding that debate?

[Richard Bélisle, Bloc, La Prairie, QC]

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

The position of the Bloc Quebecois on this matter is that poorer Canadians are protected by universal social programs. People who want more protection can contribute to a private supplementary plan, and that is what they do. As I was saying earlier, my constituents are mostly middle-class people and they already are the most heavily taxed. By taxing those insurance premiums, the Liberal government would be increasing, in a covert way, the tax burden of middle-class Canadians.

We, in the Bloc Quebecois, are totally opposed to this covert way of taxing even more heavily middle-class taxpayers who already carry most of the tax burden. There has been a lot of talk about tax shelters. Canadians with high incomes can use tax shelters to avoid paying thousands of dollars in taxes.

The disadvantaged are protected by a series of social programs and, often, it is the middle-class people who find themselves in the middle of the social or economic pyramid and who have to shoulder all the burden. As I said earlier, we, in the Bloc Quebecois, are totally opposed to this covert way of taxing even more heavily those who already pay most of the taxes.

[Pierre Brien, Bloc, Témiscamingue, QC]

First of all, Mr. Speaker, let me say that the subject we are debating today is one of great concern to me. The present state of Canadian public finances threatens certain established social programs and affects individuals as well as businesses.

One of the main reasons for this debate is the urgent need for action in that area. New policy directions must to be laid on the table. I would like to say that the decisions we will be making in the next couple of years will determine our future, especially for the people of my generation. In spite of the fact that, in some regards, we have enjoyed many services and a relatively comfortable life, what we have inherited has all the appearances of a heavy burden that does not make the future look very bright for us.

When you combine this cumbersome debt with a tight job market for young people, you can easily understand part of the reason for their despair.

I want the members of this House to know that it is through the eyes of the young generation that I will judge the actions of this government over the next few years. Its decisions will have to reflect a real concern for the long term.

Pre-budget consultations have often given Ministers of Finance an opportunity to put forward, concerning their forthcoming Budget, ideas about which they had already made up their minds. Take the idea of eliminating the $100,000 capital gains tax shelter. Several people were able to take advantage of this shelter and have already reached the limit. So, they will not be the ones affected in the future, but rather it will be the young generation. Either this shelter will not be available to them or they will not be able to take advantage of it in the future.

I simply want to make it clear who will in fact be affected by the proposed measures. We will be called upon to contribute significantly to solving the public finance problem in the future and we are prepared to do our share starting now, but there is a need to identify-and rightly so-who will be affected by the measures put forward.

Moving to the main thrust of my remarks, three approaches can be contemplated to solve the public finance problem: expenditure reduction, higher revenues or lower refinancing of the debt. Of course, the best course of action would be a combination of these approaches. I will only deal with revenues.

The Liberals, in their famous red book, and the Conservatives before them, based their deficit reduction estimates on the expectation that the economy would grow in the years to come. The Prime Minister referred to this during question period today.

We are all looking forward to a recovery in the not too distant future, but it is far from certain that governments will be able to raise as much money as they expected during this growth period. Let me explain.

In the past, a 1 per cent growth in the economy used to produce a 1.5 per cent increase in government revenues. Today, a 1 per cent growth in the economy or its leading indicator, the Gross Domestic Product, produces a mere .5 per cent increase in revenues.

We can clearly see a big problem looming on the horizon. Let us take the current year. The Minister of Finance estimates that the current year deficit will be $12.4 billion higher than was forecast in the March 1993 Budget. It must be noted that 72 per cent of this deficit is due to an unexpected shortfall in revenue. An analysis of the first seven months of the year provides valuable insight. During this period, government revenues fell 5.7 per cent, as compared to the same period last year. And there is cause for concern due to the fact that this drop occurred as the Canadian economy was recording a slight growth.

Also, the 1993 Budget forecast that the growth in revenues was going to keep pace with the increase in the Gross Domestic Product over the following five years. I guess I do not need to tell you that much will have to be done to readjust these forecasts.

How can such a situation be explained?

Obviously, the first explanation that comes to mind is the extent of the underground economy. The Minister of National Revenue himself said soon after the election that he estimated this underground economy at $56 billion, a conservative estimate according to some analysts. The underground economy accounts for close to 15 per cent of economic activity and comes a lot closer to $100 billion.

To illustrate how dramatic this is, last November Gallup asked Quebecers and Canadians whether they had participated in the underground economy in the last 12 months. In response, 33 per cent of Canadians and 42 per cent of Quebecers admitted having paid cash to avoid paying taxes. Two words explain this reaction: fairness and equity. People feel that the way the government collects revenues is unfair and inequitable.

Let us look at personal income tax: this year's receipts from personal income taxes are $1.1 to $1.5 billion lower than forecast in the 1993 Budget. People feel overtaxed. In the last few years, we have gone beyond tax effectiveness, especially for the middle class.

The GST was the last straw. It is clear that government revenues can only increase through higher income tax levels for the middle class, directly or indirectly.

The dissatisfaction of the middle class is understandable when we look at a few figures. In 1991, 368,000 people reported revenues of $60 billion, for an average personal income of $163,000, on which they only paid 18 per cent federal tax while the basic taxation level in this category is 29 per cent. On this point, the Bloc intends to press the government to eliminate tax shelters benefiting high-income taxpayers.

Let us move on to the taxes on corporate profits. Revenues from corporate taxes are very sensitive to economic activity since corporate profits are less stable than personal incomes. This year's corporate tax revenues are about $850 million lower than forecast in the 1993 Budget. The Finance Minister told us during today's question period that the next few years will not be easy in this regard, since many businesses will be allowed to carry forward the losses incurred in the last few years.

Individuals often complain that many companies in Quebec and Canada do not pay taxes on their profits. Let us look at 1987, a year of strong economic growth, when 90,000 Canadian and Quebec businesses made $27 billion in profits without paying a single cent in tax. That is one reason why Canadians are unhappy.

To prevent such unfairness in the future, the government should impose a minimum tax on corporations. It would then be able to collect a minimum level of taxes from profitable businesses even if they try to avoid paying taxes through tax shelter strategies. A global solution to the debt problem calls for involving businesses in this collective effort.

A few words on auditing. Auditing is one element of revenue collection that should be improved. A significant part of the economy avoids taxes because of fraud or of errors made by taxpayers in their tax returns. In fact, in a 1990 study the Department of National Revenue estimates at $1.2 billion the potential supplementary contributions. Additional audit measures taken in the past produced promising results. We should think about doing more in this respect in the future. We must not only reinforce auditing but also simplify taxation, which has become so complex that its effectiveness is affected.

In conclusion, Mr. Speaker, to help the government avoid losing significant revenues due to incorrect or fraudulent returns, the Bloc Quebecois thinks that the Department of National Revenue should have better resources available to audit returns, as the Auditor General has been proposing in his reports for the last few years.

I would like to say a few words on the infamous GST. The revenues from this source will be almost $1 billion lower than forecast in the 1993 Budget. Moreover, this tax is so complex that arrears will amount to between $800 and $900 million in 1994 according to the data in the Auditor General's last report.

The GST replaced another tax. Its advantage is that it is a value added tax. From an economic standpoint, this type of tax is more efficient as it does not affect the relative costs of resources to the same extent. Nevertheless, administering it is very complex, both for the government and for businesses, especially small ones. The fact that 576,000 registered GST collectors have not produced all their returns illustrates this point well.

The Prime Minister promised to replace it with another tax by 1996, but that target date is too far off. We must start to work now to replace it much sooner. People are expecting results on it quickly and we will have to act much more speedily. People are expecting results soon and the whole administrative aspect of this goods and services tax will have to be improved. We definitely intend to press the government to keep its election commitments and to keep them sooner.

One final point on sources of revenue, namely excise taxes other than energy taxes. Of course, this means taxes on tobacco, alcoholic beverages and jewels. Everyone now knows the extent of smuggling. Although taxes on products which affect health are justified, cigarettes taxes and the whole tax system have contributed to creating a monster in our society today.

A fast way to end smuggling must be put forward and this solution must involve lower taxes. Control must also be tightened and the same standard of justice must apply to all. Nothing prevents the government from pursuing a plan to fight tobacco consumption and to discourage tobacco use especially among young people and even including this plan in its strategy. We must realize that the smuggling problem is very serious and does much to undermine the confidence people have in our institutions.

In conclusion, the recovery will not do as much as believed to improve the government's finances. The reason is simple: the underground economy and people's lack of confidence in the whole system, the whole Canadian tax system. This underground economy is growing out of this lack of confidence and especially because of two words that I mentioned previously: justice and equity, on which a lot of work needs to be done in the future.

The balance between individual and corporate taxation and between the middle and wealthier classes must be restored by abolishing unfair tax shelters which are often unproductive. Audit controls must be increased and tax returns simplified. The administrative difficulties with the GST must also be resolved quickly. Finally, the problem of cigarette smuggling must be ended once and for all.

Our future and our social contract are at stake in the way the government collects revenue. Much of the mistrust of institutions, parliamentarians and people in authority and power is due to the unjust, unfair tax system. It is time to move and the government must improve efficiency in the management of public funds.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, I listened carefully to the comments made by the member opposite, and even though I seldom agree with the Bloc Quebecois members, I must say that I share his feelings regarding the need to put a stop to smuggling. Needless to say that, as the member representing the riding of Glengarry-Prescott-Russell, which includes Akwesasne, I will fully support any measure which might be taken, and which I hope the federal government will take soon to eliminate contraband. I do hope we will convince those stubborn members of the Ontario Legislature that the problem is not one which exists exclusively in Quebec, or in a region of Canada called Quebec, to use the words of Fred Laughren, the Treasurer of Ontario.

Two other comments were made by the hon. member and I want to ask him a question on those. The member referred to the issue of streamlining income tax returns. It just so happens that today I contacted Revenue Canada about something currently allowed in the tax return, namely the possibility of contributing or overcontributing to a registered retirement savings plan. As the hon. members know, we and our constituents all have the option of making an overcontribution of up to $8,000 to an RRSP. However, Revenue Canada has currently no way of keeping tab of these overcontributions, unlike, for example, in the case of the capital gain exemption, for which a cumulative total is calculated, thus enabling Revenue Canada to know whether a taxpayer has used $25,000, $30,000, $35,000, $40,000 or more of the total tax-free capital gain. However, such control does not exist for overcontributions made to a registered retirement savings plan, and I wanted to point this out to the members of this House. As for simplifying tax returns, I think that rather than being an area requiring streamlining, it is one where we need to keep data which are not currently being kept.

Finally, the hon. member opposite tells us that we cannot replace the GST in two years because it will be too late. Are we then to conclude that when this House asks its members to refer the GST issue to the Finance Committee, we can expect a quick and even a unanimous approval from the Bloc Quebecois, so that this review can be completed and a recommendation can be made as quickly as possible to the House?

[Pierre Brien, Bloc, Témiscamingue, QC]

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

I would like to mention, first of all, that he said he agreed with me on the smuggling issue; I hope he agrees with me on the other points of my speech, particularly as regards tax breaks.

The member said we should consider another very special measure, that is to keep a record of overpayments or overcontributions to RRSPs. As you know, it is for such reasons we have, for a long time, requested the creation of parliamentary committees who would study public expenditures, including tax expenditures. It would be a pleasure to hear such comments through these committees and to participate in the proceedings.

The last point in the member's question dealt with GST. Naturally, we will be happy to proceed diligently, provided, and I want to stress this point, provided we work towards replacing this tax with one that will be more efficient, that will respect this and that will not be, contrary to what we heard during the campaign, a hidden tax which could be much higher.

I ask the member, in that context, to convince his prime minister not to implement a hidden tax, but a visible one so that people can trust our tax system; if that is the case, the opposition will be happy to co-operate.