Debates of Feb. 1st, 1994

Interparliamentary Delegations

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

Mr. Speaker, in accordance with Standing Order 34, I have the honour to present, in both official languages, the report from the Canadian Branch of the International Association of French-Speaking Parliamentarians concerning the 10th session of the Assemblée régionale for America meeting held in Lafayette, Louisiana, from September 15 to 19, 1993.

Committees Of The House

[Peter Milliken, Liberal, Parliamentary Secretary to Government House Leader]

Mr. Speaker, I have the honour to present, in accordance with Standing Orders 104 and 114, the first report of the Standing Committee on Procedure and House Affairs concerning the Standing Committees' membership list.

I should advise the House that this report is of the permanent members of the committees and not of associate members as required by the standing orders.

If the House gives its consent I intend to move concurrence in the report later this day.

[The Speaker]

Is there unanimous consent?

[Some hon. members]

Agreed.

Consumer Packaging And Labelling Act

[Tom Wappel, Liberal, Scarborough West, ON]

moved for leave to introduce Bill C-204, an act to amend the Consumer Packaging and Labelling Act (nutritional value of food).

Mr. Speaker, the purpose of this bill is to amend the Consumer Packaging and Labelling Act to provide that foods sold to consumers across Canada have certain nutritional information stated on the label, including the vitamin content, carbohydrate content, the fat content and the caloric amount per portion. This information is very common in the United States but is voluntary in Canada. This bill would make it mandatory.

(Motions deemed adopted, bill read the first time and printed.)

Criminal Code

[Tom Wappel, Liberal, Scarborough West, ON]

moved for leave to introduce Bill C-205, an act to amend the Criminal Code (human being).

Mr. Speaker, the purpose of this bill is to add a definition of the term human being to the Criminal Code. The purpose of that definition is to focus the debate on the vexing issue of abortion and the question that has heretofore not been addressed, whether society wishes to extend protection to the unborn child.

(Motions deemed adopted, bill read the first time and printed.)

Witness Protection Act

[Tom Wappel, Liberal, Scarborough West, ON]

moved for leave to introduce Bill C-206, an act to provide for the relocation and protection of witnesses.

Mr. Speaker, thousands upon thousands of people have signed petitions asking this House to set up a witness protection program that has been mandated and is the responsibility of this House through the minister in charge. That currently is not the practice.

There are ad hoc witness protection plans across the country run by various police forces, including the RCMP. This bill proposes to formalize the arrangement and have it administered by the federal government.

I urge the Solicitor General and the Minister of Justice to proceed with the witness relocation plan immediately.

(Motions deemed adopted, bill read the first time and printed.)

Auditor General Act

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

moved for leave to introduce Bill C-207, an act to amend the Auditor General Act (reports).

Mr. Speaker, the purpose of this bill is to allow the Auditor General to table reports of his work regularly so that parliamentarians and the people of Canada will have knowledge of what he is looking at in terms of the efficiencies and effectiveness of programs of government.

Currently the government gets one report a year because the law forbids the Auditor General from tabling more than one report. It is a huge brick and becomes a media event for about a day and a half and then everybody forgets about it.

It would be in the interest of good administration to allow the Auditor General to table reports whenever he or she feels they are appropriate.

(Motions deemed adopted, bill read the first time and printed.)

Committees Of The House

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

Mr. Speaker, if the House gives its consent, and I believe that consent is forthcoming, I move that the first report of the Standing Committee on Procedure and House Affairs presented to the House earlier this day be concurred in.

I might add, Mr. Speaker, that I think you might find consent to dispense with the reading of the report.

[The Speaker]

Is there agreement to dispense with the reading of the report?

[Some hon. members]

Agreed.

(Motion agreed to.)

Petitions

[Rex Crawford, Liberal, Kent, ON]

I rise under Standing Order 36 to present a petition on behalf of my constituents. It is signed by 16,516 people calling for dramatic changes to the current Young Offenders Act.

An 18-year-old resident, Roy Asselstine Jr., was the victim of gang violence by young offenders. When they appeared in court they showed no respect for the judge or any remorse for what they had done to this innocent young chap.

This petition calls on Parliament to revise the Young Offenders Act by lowering the age limit to allow prosecution to fit the seriousness of the crime. I am proud to add my name to it.

The petitioners did this under duress. They should be congratulated because there are several young gangs in the city of Chatham and they were threatened. Almost single-handedly they collected over 16,000 names on the petition. I am hoping members will call our office and I will send the petition to them if they care to circulate it in their ridings.

The Young Offenders Act must be amended. In its present form it is a joke.

[Val Meredith, Reform, Surrey—White Rock—South Langley, BC]

Mr. Speaker, I have been requested to present this petition on behalf of signatories from B.C. to Manitoba, requesting that the government hold a referendum on the question of accepting or rejecting two official languages.

Questions On The Order Paper

[Peter Milliken, Liberal, Parliamentary Secretary to Government House Leader]

Mr. Speaker, I move that all questions stand.

[Ray Speaker, Reform, Lethbridge, AB]

Does the House agree?

[Some hon. members]

Agreed.

Pre-Budget Consultations

[Paul Martin, Liberal, Minister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec]

moved:

That this House take note of ideas and suggestions expressed in the House, at pre-Budget regional conferences and elsewhere with regard to the forthcoming Budget, especially with respect to increased economic growth, the creation of jobs and the reduction of the deficit.

Mr. Speaker, the purpose of today's debate is to give members of this House the opportunity to express their opinion on the Budget.

This is an historic day. This debate is the first of its kind. In the past members of Parliament were not part of the budget making process. Budgets were tabled here. They were debated upon here and they were voted upon here, but there was little opportunity for members of Parliament to influence the content of those budgets. On all sides of the House the focus was on scoring points for the party, not for the country.

We believe that process was deeply flawed. Wisdom-and I know this will come as a great surprise to the House-is not confined to finance ministers. The issue before us is clear. How can we expect Canadians to understand or to accept hard choices if they are not part of the process of choice?

How can we in the House as parliamentarians expect Canadians to trust us if we do not trust ourselves? The people of Canada deserve to be brought into the budget making process and the Parliament of Canada must begin to play a larger role.

Unfortunately, there was not enough time to have the House Standing Committee on Finance take part in this year's budget preparation. Things will be different next year when House committees will have a central role and very real influence.

Today's debate, the first of its kind in Canadian history, is proof of the government's intentions. It follows a process started in last November, at the University of Montreal. Since then, we have held a public meeting with 38 of Canada's most distinguished economists. Critics for the Bloc and the Reform Party were present, I may add.

We have published several new documents informing Canadians on this country's economic state. Four independent research institutes organized conferences in Halifax, Montreal, Toronto and Calgary where representatives from all sectors of society studied the issues to which we, as members of this House, will be confronted in this year's and next year's budgets. The public process will be broadened for the 1995 budget preparation.

There are several conclusions that we can draw on from the consultation process this country has begun. First, one has to have been heartened by the degree to which Canadians were willing to put self-interest aside and discuss issues together to look for practical, real solutions to the challenges we face.

Second, it is clear that the priorities of Canadians are jobs and economic growth, that they want the deficit brought down but not as an end in itself. They believe that as long as deficits are too high unemployment will remain too high.

Third, there is a profound sense that the status quo simply will not do and that if we continue on our current path then that would be a road to nowhere.

Fourth, there is a desire on the part of Canadians for a budget that embodies a game plan, a strategic outlook in which the various budgetary measures that are to be taken can be judged as to their effectiveness.

Fifth, there is a clear sense that the choice we face as a country is not between jobs or the deficit but that there is an urgent need to focus on both. There is a belief that we will never solve the deficit until we develop sustained and strong growth. At the same time Canadians understand that the growing debt itself is an impediment to that growth. To attack the deficit without encouraging growth would be foolish. To attempt to spur growth and jobs as if the debt and deficit did not matter would simply be futile.

Mr. Speaker, the stakes are much higher than mere details of the budget. We aim not only to trim government but to rethink its entire role. Today, we have a golden opportunity to change our way of doing things, not for financial reasons but for reasons of common sense.

As a government we have already begun a variety of processes designed to bring deep and dramatic reform to government, to the way we operate, and to our policies and programs in a wide range of areas. The actions that were taken by the whip in terms of cutting down the costs of this place are a beginning and simply a kernel in the approach we want to take to the frugality of the way in which we generate taxpayers' money.

Yesterday in the House the minister of human resources laid before the people of Canada the beginnings of deep-seated reform in areas within his jurisdiction. If today was an historic day then surely yesterday was one as well. I congratulate my colleague because he really does bespeak for modern liberalism.

There will be more initiatives in the weeks and months ahead. That is why we have made it clear from the very beginning that the 1994 budget should be seen as a first step, the first stage in a two-stage process culminating in the 1995 budget.

Unfortunately the deficit outlook for 1993-94 remains as was set out in my November speech, that is to say in the $44 billion to $46 billion range. A view exists in some quarters that the deficit for the following year, that is the year for which we are budgeting, 1994-95, could fall below $40 billion by itself without any direct fiscal action. That view unfortunately is not valid.

It is true that part of the increase in the deficit for this year is due to one-time influences.

However, according to a number of factors, it is also clear that the reduction of the deficit will evidently be limited in 1994-95 if no direct fiscal measures are taken.

First, in 1994, the growth of the economy will probably come in large part from better corporate profits. There is little chance however of this growth translating into an equivalent growth of federal revenues.

The low earnings registered by corporations during the last few years have allowed them to accumulate considerable losses which they will be able to apply to their income tax payable this year.

Secondly, the erosion of some tax bases is continuing, especially in the area of tobacco for example.

Third, the growth in personal income taxes for this year is likely to be weak. This is due to the unacceptably high level of unemployment and slow income growth.

Fourth, the effect of disinflation on the government's revenues is substantial.

Fifth, many of the savings assumed in the 1993 April budget were never secured through legislation.

Finally many cost pressures must be faced, such as the support for the east coast fisheries, that were never provided for in the last Conservative budget. This is very important because the fisheries is only one example. Not only were the revenue projections in that April budget wrong, but the expenditure projections which any government must have a handle on were unrealistic as well.

For members on this side of the House-and I know members on the other side of the House feel the same way because I heard the leader of the Reform Party and the leader of the Bloc Quebecois talk about it-it is crucial if as parliamentarians we are to regain the confidence of the Canadian people that, whether we are in government or in opposition, we not be afraid to lay in front of the Canadian people the facts and be judged by them. The days of phoney accounting, of illusion, must be over. I know it is something all members on this side of the House support.

I will be clear. Without further action the deficit for 1994-95 will be significantly above $40 billion. To get the deficit on track so that it will drop to a level of 3 per cent of GDP by 1996-97 immediate action is necessary. That action must not consist of overly optimistic growth projections or accounting sleight of hand as was done too many times in the past.

For the purposes of forecasting, we will follow the advice of our main economic experts. We will be conservative in our estimates and will not indulge in wishful thinking.

We have clear priorities: to create jobs, to increase economic growth, and to help those who are truly in need. The debt and deficit problems of our country present severe difficulties and severe obstacles in the way of meeting these priorities. They keep interest rates too high. They drain off our country's income to foreigners and they force us to keep our tax rates up.

The question is: How do we get the deficit down? Let me frame the challenge. There are those who blame the public service. They are wrong. We could let every public servant go. We could discharge every soldier. We could board up every government building. We could shut the whole show down and we would still have a deficit.

There are those who blame the poor. They are wrong. We could abandon all the major programs we have in place to help the elderly, to help those who are unemployed, to help those who are in need, and the deficit would still be with us.

I would hope no one in the House today would argue that the deficit should be brought down on the backs of those who are most in need. If they did I would simply point out, as my colleague the Minister of Human Resources Development pointed out yesterday, that not only is slash and burn morally wrong economically it will not work.

What this country needs is something that it has been deprived of for too long. We need a long term solid growth strategy to bring the deficit down, to put Canadians back to work, to restructure our industrial base so that we can face the competition that lies outside our borders. What we need is a growth strategy that is creative, compassionate and constructive. As a government that is what we intend to put in place.

The budget this year will have real cuts but it will also set in train important processes to reform the most fundamental programs of the federal government. That takes time and requires consultation but make no mistake, that reform will take place.

I am sure all members of this House agree with our objectives of economic growth, job creation, compassion and deficit reduction. What we need today is an in-depth debate to help us determine the manner in which, together, we can attain these goals.

In the debate today the easiest priority for any one of us on either side of the House to put forward is one's own. The most obvious area in which to ask for more spending is one's own. The most obvious area to ask for cuts is in somebody else's backyard.

This debate is about a national budget, not a personal budget. It is about tradeoffs and the balance that we need as a nation. If today there are ideas for more spending then we need to hear today where that money is going to come from. If there are proposals for cuts then we need to know the effect of those on jobs and on Canadians most in need.

If there are those who argue against changes in taxation then we need to know from them if they feel that the existing list of tax exemptions is fair. We have asked Canadians across the land to consider the tradeoffs. It is now up to this House to do that very thing as well.

This country needs a budget that speaks to the needs of all Canadians. This government intends to provide that and I know that the debate we are about to have in this House will contribute a great deal to that effort.

[The Deputy Speaker]

Under our rules there are no questions or comments after the Minister of Finance's speech.

[Lucien Bouchard, Bloc, Leader of the Opposition]

Mr. Speaker, here we are in the last phase just before the tabling of the federal budget for the 1994-95 fiscal year which, as everyone knows, begins on April 1.

Few budgets have been as eagerly awaited as this one. The new government has had a chance to distinguish itself from the government that the voters judged so harshly in the last elections. It is the new government's responsibility to tackle with conviction and fairness the complex problems facing Canada that can be seen in our poor economic situation and the crisis situation in government finances.

The number of real jobs that have been created is still negligible. There are not even enough new jobs to absorb the newcomers onto the job market, and 40 per cent of the jobs lost through the recession have not been made up. The Canadian economy is still performing well below its potential.

The indications of the crisis in government funds are now so well known there is no point in dwelling on them further. Suffice it to say that the federal debt has reached a critical point. The federal government has been borrowing money for a long time to pay its grocery bills, and then to pay the interest on those loans.

From 1985 to 1993, when the ratio of the debt to GDP in Canada increased by 82 per cent, that ratio increased by only 21 per cent on average in OECD countries. The net federal debt is increasing so quickly that it has now surpassed 70 per cent of GDP, up from 46.4 per cent in 1985.

What is more, every year one third of federal revenue goes to paying the interest on the debt. The situation would be less critical if the government was going into debt in order to invest in capital projects. According to the 1993-94 Main Estimates, the government's capital expenditures represent only 4.16 per cent of total gross program expenditures.

In addition, 53 per cent of that amount goes to the Department of National Defence alone. A burden of this size weighs heavily on the strength of the economic recovery, primarily by exerting undue influence on medium- and long-term interest rates. We must quickly reduce this burden by a considerable amount, and at the same time we must be careful not to shatter this fragile recovery.

According to the Prime Minister, the size of the federal debt is not so spectacular when compared with the debts in European countries. Perhaps he should take a second look, and not compare apples with oranges. Canada's total public debt is the highest debt of all G-7 countries, after Italy's. And the federal debt is the largest part of Canada's total debt.

Therefore, the government cannot choose to solve only one of these two problems, either the debt or the sluggish recovery, and leave the other issue unresolved. The two issues have to be tackled at the same time, or any success that comes about will be only short-lived.

Since last October 25, speculation has been rife about the government's plans for public finances, that they will reduce spending, or go even more deeply into taxpayers' pockets. Nothing has yet been decided and uncertainty prevails.

Although the throne speech gave nothing away in this regard, it does appear that reducing the deficit through taxation is at the very top of the government's list of priorities. Job creation seems to have been relegated to second place, along with the elimination of useless expenditures, the ones that inspired the Liberal leader to such impassioned and repetitive speeches during the election campaign.

Yes, there is still the infrastructure works program, the one that is clearly inadequate. Let's look more closely at this program. The federal government's contribution will amount to $2 billion over two years.

The increase in unemployment insurance premiums that came into effect at the beginning of 1994 raised an additional amount of $800 million per year. Anyone can rob Peter to pay Paul. It is not necessary to have a government that says it has experience to do it.

All analysts are unanimous in making objections to increasing taxes on the payroll. This is just what the government has decided to do with unemployment insurance. One can ask whether the government really wants to see this recovery that everyone is waiting for. Everything points to the fact that, apart from its program to repair municipal infrastructures, this government has decided to do nothing but gaze in open-eyed wonder at its little red book. The government is making a religion out of its electoral creed, to which it believes it owes its

election. Propaganda has never been so effective, since even the government, the author of the red book, believes in it.

Recycled as the throne speech, the red book is still providing fodder for the Prime Minister's speeches, and the Minister of Finance is still taking delight in it. Again yesterday, I saw a government minister religiously brandishing the booklet in this very House. The worst is yet to come, since in a few weeks we are very likely to see it reappear sumptuously adorned as a budget speech. In other words, the government's job creation program is the same as the one we saw from the Liberal Party during the election campaign: nothing but words and the incantation: jobs, jobs, jobs. And as for the rest, they are counting on a hypothetical recovery that is likely to happen of its own accord. This is an irresponsible gamble on a better future, as well as being an ominous memory lapse about the causes of the deficit.

It is not necessary to remind hon. members that boosting the economy means less unemployment, less welfare and higher tax revenues. Thus it contributes in two ways to lowering the burden related to the public deficit.

For example, if we had the same number of jobs we had before the last recession, the expected deficit for 1993-94 would be well below the figure announced by the Minister of Finance, which is artificially inflated for obvious reasons. That target is quite modest.

With normal expansion in the number of jobs over the past three years, we could have avoided the sudden deterioration in the budgetary situation of the federal government and the provinces.

When the recession began, the federal deficit was $29 billion; today the Minister of Finance puts it at $45 billion. The main cause of the increase is an unexpected drop in revenue.

During the first seven months of the current fiscal year, revenues were down 5.7 per cent from the same period the previous year. This drop is disturbing, because it occurred despite a slight improvement in the economy.

The deficit now represents 6.2 per cent of GDP, a proportion twice that of the American debt, which is 3 per cent of GDP according to the OECD. A 1993 study by the IMF says that even if the economy were performing at full capacity, Canada's governments would have a deficit on the order of 3.5 per cent of GDP, with forecasts of 2 per cent for 1998. So there is also a very serious structural problem here.

Three years after the recession technically ended, the deficit has reached, according to our calculations, about $41 billion-that is, if one eschews accounting fictions (which are so dear to the Minister) and includes the impact of lower interest rates on debt-servicing charges. The Minister of Finance has not done either of these things, despite his commitment to greater transparency in setting out budgetary parameters. He obviously finds it more appealing to announce a reduction of the deficit from $45 billion to-say-$37 billion rather than a much less dramatic reduction from $41 billion to $37 billion. It is a numbers game.

I want to ask the Minister today if he stands by the projected deficit for the current fiscal year that he announced at the end of last November.

Debt servicing constitutes the largest budget item: $39.5 billion in 1992-93. Given the wide gap between short-term and long-term interest rates-almost 3.5 percentage points-is there a strategy at work? One may well wonder. Does the Department of Finance have a strategy for taking advantage of falling short-term interest rates by continually shortening the average term of government securities? Since at the present time there are no inflationary pressures in Canada or the United States, where the most recent data demonstrates a further drop in inflation rates, the question is worth asking.

Last year in Canada the domestic inflation rate-which does not include imported products-was not even 1 per cent. Under the circumstances, is it reasonable to continue, for example, paying 7.1 per cent on 30-year borrowings? When you have a debt of $507 billion, the difference between a borrowing cost of 5 per cost and a borrowing cost of 6 per cent represents more than $5 billion. How many home owners are there in Canada just now who would opt for a 10-year mortgage at 8.5 per cent? Very few.

Fiscal equity demands that certain tax shelters be closed, but the Minister of Finance is now trying to give this idea a broader meaning, so that it can include the notion of expanding the tax base. But eliminating this or that deduction used by a significant proportion of the population means by definition increasing the tax burden on those taxpayers, who belong very largely to the middle class. In other words, it amounts to increasing their taxes. The Minister of Finance talks about transparency, but he does not want to call a spade a spade. He would be happier if nobody noticed his little manoeuvre and he could pull a fast one on us, as they say.

The Minister should be warned against two temptations: that of retroactive measures and that of unequal treatment of taxpayers according to their conditions of employment.

The very notion of a retroactive measure strikes at the heart of a society governed by the rule of law, and we are such a society. Citizens are rightly outraged by the arbitrariness of power when the government changes the rules in mid-game to suit itself. Outrage was certainly the reaction in Quebec when the government brought in a retroactive surtax in its last budget.

As far as RRSPs are concerned, and they are very much at issue just now, workers who do not have the advantage of benefitting from a pension fund must be treated on the same footing as those who do.

It is really rather odd that the government is contemplating additional taxes affecting large numbers of people while at the same time complaining about the growing scale of the underground economy, which is causing tax losses for it. And at a time when the Canadian and Quebec governments finally seem to have seen sense as far as tobacco taxes are concerned, we must hope, as I said two weeks ago in this House, to see a rapid and energetic decision. Let us face facts: our governments have let the situation fester.

Deciding to lower tobacco taxes will not prevent governments in the slightest from continuing and even stepping up their fight against tobacco use. In the medium term, tobacco consumption depends on more than price. The proof is there: American taxes on tobacco are much lower than ours and yet Americans smoke less than Canadians. Moreover, when they buy smuggled cigarettes smokers cease to contribute to paying for the health-care costs than tobacco taxes help to underwrite.

There is a simple way to achieve greater fiscal equity. It consists of putting into effect the recommendations contained in the latest report of the Auditor General. We have to attack the level of expenditures and we have to do it with determination.

First of all, we have to deal with the most widespread problem causing the greatest unfairness, the problem of fiscal expenditure.

In 1987, as the economist Léo-Paul Lauzon reminds us, 90,000 companies made profits without paying a cent in taxes. According to the Auditor General, Canadian companies invested $90 billion abroad of which $16.1 billion went to tax havens. In such cases the revenues are only taxed abroad at the accommodating rates prevailing in those countries. The amounts mentioned only reflect the investments which are declared because many of those companies are not obliged to produce information statements. In this way, each year hundreds of millions of dollars escape taxes.

It is obviously quite essential that all corporations must be subject to a minimum level of taxation.

But, in the field of tax inequity, I repeat, the prize goes to family trusts. Analyst Claude Picher of La Presse writes about them in a recent article describing the formula, which-and I quote-allows taxpayers to set up a trust and include in it securities whose yield is tax-exempt as long as it remains in the trust, which, under present provisions, can be practically indefinitely''. As we know, this system was set up by the Liberals, and prolonged by the Conservatives. They have been passing the buck, from one government to the next. I continue the quotation:The trust must be set up according to a complex and costly procedure, which makes such trusts much less affordable, unless you happen to have a fortune''. A trust, then, of course, intended for rich families. I have inserted a few personal comments into the quotation. I feel that people will be able to distinguish between the cold comments by analyst Picher and the ones I have added.

In an article in the January 29, 1994 issue of La Presse , the same economist considers, and I quote: ``that it is credible that the tax provisions for family trusts represent a shortfall of $340 million annually''. And these are conservative figures, since it is the government's responsibility to unveil the true dimensions of this flagrant injustice and eliminate this unseemly shelter once and for all. The Minister, who has access to information about this issue, knows this: he knows the exact extent of this scandal. As a result, he is under considerable pressure: his knowledge of this issue is certainly strengthening his desire to right a wrong and put back into the public coffers hundreds of millions of dollars each year that would provide relief for the taxes he is preparing to impose on the middle class.

We must also expect substantial reductions in federal expenditures, traditional expenditures. But-not so fast!-not by charging ahead and arbitrarily slashing 5% across the board. Because of its role as initiator of the budget crisis, the federal government must first set an example; it must clean up its own act. Since this government was elected, the federal government has been preparing to take shots at easy targets: social programs, people who have no lobby, no union, no representation, no party, no voice. They are easy targets; they are the ones at whom the government has been taking shots since yesterday. And, a year from now, we shall see the results. It is also easy to target transfers to the provinces; from the federal point of view, the provinces are like chicks surrounding a mother hen. But there is no announcement about its own waste or its own ponderous bureaucracy.

We have not heard any speeches about that. We have not heard one Minister admit guilt or declare an intention to cut the bureaucratic machinery down to size. Nothing. Once again, we are bracing for the culpable connivance that made the federal government one of the causes of our present deficit.

The evidence is accumulating. Yesterday, it was the Minister of Human Resources Development putting forward his fantasy plan for improving the quality and range of health and social services by cutting related expenditures. A vicious circle. We shall see how he manages.

Where transfers to the provinces are concerned, aside from the equalization payments, the federal government's decision will be made public in three weeks, as part of the budget. But where federal government expenditures are concerned, nothing. No announced speech, only vague phrases for media consumption. And any reference to federal timetables is cloaked in confusion.

For example, the Minister of Finance repeated several times that his first budget, the actual budget, the one that is coming up, apparently would not be the real thing. What is this upcoming budget going to be? The budget of another country? The budget of another organization? No, apparently it is not going to be the real budget. The 1995-96 budget, next year's budget, is going to be the real thing; that is where a reform of social programs could be included. That is where we could see how these programs would be delivered by the two levels of government.

We cannot see any need for such lengthy delays in a field like labour and occupational issues, occupational training. These issues have been dragging on for years, and what Quebec is asking for is both known and endorsed by all players from all sectors in society in Quebec.

But, according to the Minister for Human Resources Development and his colleague responsible for federal-provincial relations, we must wait not one year, but two, to ascertain what the federal government will deign to bestow. At least that is what he was saying until yesterday morning; then he presented us with a timetable covering approximately 12 months. Perhaps he realized the confusion his former statement had created.

Does this mean that the Minister of Finance is locked into an unrealistic timetable? Or does it mean that the right hand does not know what the left hand is doing? Or, instead, a rather clumsy plan to postpone any meaningful streamlining of the federal bureaucracy, and not give English-speaking Canada the unpleasant impression that the Quebec sovereigntists were right to point to fat in the federal bureaucracy?

Any old excuse seems valid to put off the time when they will have to look in the mirror.

But we all know that there is fat in the vast federal body. Exactly how much? That is a carefully guarded secret that we cannot rely on people inside to reveal. There must be a careful, detailed examination of all internal expenditures by the various departments. An in-house operation would not be credible. We have only to watch what the Auditor General says about, for example, one very specific expenditure to see the gaps between the federal bureaucracy's perceptions and outside analyses.

I quote a passage from page 25 of the 1993 Main Points; the Auditor General writes: "For 1990-91, we estimate that the total cost of operating the Administrative Flight Service-that is, the VIP Fleet-was about $54 million." Fifty-four million dollars. In Part III of its Estimates, the Department disclosed total costs of approximately $27.5 million. Outside estimate: $54 million; in-house estimate: $27.5 million. One single item, twice as expensive.

We therefore repeat our demand that a multi-party parliamentary committee of the House of Commons be created, whose mandate would be to go through all the government's operating budgets. If the government party is serious in wanting to reduce the deficit in a way that is meaningful but fair, it must immediately attack pointless government expenditures and the many overlapping areas of responsibility that result from systematic intrusion by the federal government into areas of provincial jurisdiction. The Official Opposition is prepared to co-operate in this job of cleaning up federal finances.

In the field of labour, the Government of Quebec estimates at $250 million the annual waste inherent in overlapping areas of federal and Quebec responsibilities in Quebec. Against all common sense, the government is resigning itself to letting this overlap last at least another two years, thus entailing an additional loss of $500 million. Can we still afford such inertia?

The federal government's attitude in this matter looks a lot like the attitude the Soviets had during the Cold War in their negotiations with the Americans. What we have we keep; what you have is negotiable.

The Prime Minister made us smile the other day when he said that Quebec would lose out if the federal government withdrew from this sector. Since Quebec receives as a whole from the federal government barely the equivalent of what it contributes to it, every time the government withdraws from a sector, there must be, in all logic and in all fairness, a compensation or even a transfer of tax points equivalent to the federal expenses in question.

If this were not the case, it would just be another way for the federal government to unload a part of its deficit on the provinces. And one wonders if this reaction on the part of the Prime Minister does not in fact foreshadow unilateral withdrawals by the federal government from certain sectors that it now considers less important, leaving it up to the provinces to pick up the pieces and make up for the loss.

It would be as if the provinces were to tell their hospitals: "We are withdrawing from the health sector. You will just have to find the money elsewhere". It would be an outrageous move on the part of the federal government, but quite in keeping with the system. In this system, there is a senior government and all the others have to adapt to its moods and priorities. In the last budget speech, for example, Ottawa unilaterally ended its financial contribution to the development of new social housing.

Therefore the impact the next budget will have on provincial finances is not necessarily limited to the issue of transfer payments. There are three major federal transfer payment programs: Established Programs Financing, equalization and the Canada Assistance Plan. The three programs do not necessarily evolve in the same way.

Moreover, the federal government includes in these transfers not only payments in cash, but also the proceeds of the tax points transferred to the provinces through agreements on shared-cost programs. It is a way for the federal government to look better. But it has no direct control on what these taxes yield and it cannot take back unilaterally the tax points. It only controls the cash transfers, whose evolution constitutes the real test of federal equity in this matter.

In the case of Quebec, this test is blindingly clear. In the past decade, the federal government's program expenses increased by 53 per cent while the transfers to Quebec went from 6,250 to 7,624 million dollars, which represents an increase of 22 per cent, the lowest of all the provinces. But one must go beyond these absolute, raw figures to see what all this represents in constant dollars and per capita. When inflation and population growth in Quebec are factored in, you get a greater than 20 per cent decrease for the decade 1983-1993. Such is the true picture of federal transfers to Quebec, a greater than 20 per cent decrease in the past decade.

A portion of these transfers goes to health care, a sector where needs are closely linked with age. Because of the rapidly-growing population of seniors, the needs increase automatically year after year and the provincial finances must cover them entirely. And there are people who claim in all earnestness that certain provinces, including Quebec, have not sufficiently contributed to solving the federal government's fiscal problems. In fact, Quebec has already contributed more than its share.

Therefore Quebec has already paid a heavy price on the expenditure slashing fronts. It is time now for the feds to leave most of the provinces alone and to start taking the medicare they have been prescribing to some of the provinces, particularly Quebec.

At the bare minimum transfer payments to the provinces should hold steady in constant dollars on a per capita basis. Provinces that have been singled out in recent years should regain a little of what they have lost.

For some time now the Minister of Finance has been hinting that it will be necessary to cast the fiscal net in a wider fashion. If the minister wants to close tax shelters that benefit the happy few, so much the better. However if he is looking for some convenient way of raising new taxes on the middle class he should not count on our co-operation. Taxes are already high enough.

The Minister of Human Resources Development has been hinting at the necessity of curtailing the safety net, as if those who need it were to blame for the economic mess we are in.

If they are looking for wasteful spending they should be looking at home. There is still a lot of fat in the federal government, not only at the higher levels with all those useless trips, those public relations contracts and so forth, but also in the inner workings of all the departments, especially those that duplicate what other ones are already doing either in Ottawa or in the provincial capitals.

Oh yes, the federal government agrees on paper that these parallel bureaucracies should be streamlined. But where is the agenda, the strategic plan, the incontrovertible proof that something is going to happen soon that will put the federal government on the same diet as the ordinary citizen or business person? Now is the time to act. But it seems that anything is a pretext for procrastinating.

As a matter of fact, overlapping between federal and provincial departments is embedded in the system to an astonishing degree. The Bélanger-Campeau commission in Quebec has arrived at the conclusion that the overlapping costs Quebecers a couple of billion dollars a year-only Quebecers. How about the rest of Canada? This being the case it is very difficult to believe that one could not trim a couple of billion dollars rather rapidly off the imposing coast to coast federal machinery of government. The same could be said of definitive efforts.

Although the economic upturn is quite tepid it should still be a couple of billion dollars in additional federal revenues. Retail sales are on the move and the housing sector should do better this year than last year.

If the federal deficit is really heading south it will bode well for interest rates. We must not forget that a single percentage point drop in interest rates, and long term rates are still too high,

means $8 billion more annually in the pockets and in the cash register of the country. This will have a substantially more significant impact than the government's infrastructure program.

However one cannot rely exclusively on the consumer. One must address the structural crisis in the economy. If we want to stiffen the backbone of our industrial firms we must invest more in research and development. We must also help the conversion of the defence industry to civilian uses.

In short, the next federal budget should provide sensible answers to real questions and not repeat the mistakes of past projects.

In closing, we are well aware of the difficulty of the task assigned to the Minister of Finance. His budget must attack on several fronts: it must provide incentives to create jobs, reduce public expenditures, bring about tax equity, and eliminate overlap. Many battles loom, and we recognize that not one of them is easy. But there must be action on all these fronts simultaneously, and such action must be properly balanced. That is the only way of giving people hope again and giving rise to a spirit of solidarity; only these things can make recovery possible.

Aside from these thoughts that we submit for the consideration of the Minister, kindly allow me to express one pressing concern: concern about the plan to reform the present system of social programs. I come back to this point again today in order to call for vigilance over the reductions this exercise will not fail to have on the social programs we have acquired since 1928.

The government says it has no intention of tearing the social safety net. But in order to reassure its objective ally, the Reform Party, on this issue, it has not neglected to state that one of the purposes of this operation is to reduce the costs of social services. How can we believe that a reduction in resources allocated to this sector will not automatically bring about a reduction in services? Whatever the case, if the Minister of Finance wants to give as many reassurances as possible about the government's real intentions, he must at least give a clear signal in his budget. Not another flight of oratory, not another promise, cross his heart and hope to die! No, Mr. Speaker. He must maintain at its present level in constant dollars, and taking changing needs into account, the federal government's contributions to funding provincial health and social programs, by means of transfer payments to the provinces.

I have a great mistrust of cosmetic expressions that claim to maintain. Sure, the level of transfers to the provinces will be maintained. I can already hear a budget speech: "Mr. Speaker, I announce to the nation that we shall maintain the level of transfers to the provinces," when what is meant is really a freeze. That would be hypocrisy. That is why it must be clear, that is why the signal to come from the Minister of Finance-if he is serious when he suggests that he may maintain transfers to the provinces-must be very clear that the transfers to the provinces are being maintained at their present level in constant dollars, and taking rising needs into account. That is what we mean by a clear signal from the Minister.

We want the government to know, right now, that no one will fall for magic tricks that would consist in reducing its contributions and, like Pontius Pilate, forcing the provinces to do its dirty work.

We shall blame the federal government just as much for hitting the disadvantaged indirectly, using the provinces as intermediaries, as if it did the job directly.

[Some hon. members]

Hear, hear.

[The Speaker]

According to our rules, there are no questions or comments after these remarks.

I will recognize the leader of the Reform Party, but beforehand the member for Calgary North has a point of order.

[Diane Ablonczy, Reform, Calgary North, AB]

Mr. Speaker, I would like to advise that following the debate on this motion by the leader of the Reform Party, the hon. member for Calgary Southwest, speakers for the Reform Party will be dividing their speaking time into 10 minutes for speaking and five minutes for questions and comments.

[Preston Manning, Reform, Calgary Southwest, AB]

Mr. Speaker, I first of all wish to thank the Prime Minister and the finance minister for providing this opportunity for the pre-budget debate in the House.

Second, I want to underscore the importance of this first budget of the new administration to the overall economic, social and political well-being of the country. As all hon. members know, the federal debt is in excess of $500 billion. The projected deficit for 1994-95 is in the vicinity of $44 billion to $46 billion.

The single most important thing that this government can do in its first term of office is to bring federal spending under control. Of course the primary instrument for doing that is going to be the budget which the minister brings to this House in a couple of weeks.

Reformers have a number of specific suggestions to make with respect to controlling federal spending, suggestions which have been market tested in the public arena, including in the federal election. However there are three additional contributions that I would like to bring to this pre-budget discussion.

The first is an overview of our consultations with the public on the issue of public spending, consultations which have been going on since March of last year and which have involved thousands more people than have been involved in the minister's pre-budget consultations.

The second is a summary of conclusions drawn from these consultations, conclusions which we believe will be useful to the minister in preparing his budget and in endeavouring to determine what the spending priorities should be of the 35th Parliament.

The third contribution I want to make is a brief commentary on the prospects of a full-blown tax revolt in this country if the government seeks to solve its fiscal problems by tax increases rather than spending cuts.

In making these remarks I will endeavour to be brief, it having been my experience that politicians who cannot practise economy in speech are rarely able to practise economy in anything else.

Early in 1993 Reformers engaged in an extensive consultation with our members, with knowledgeable resource persons and with the public on the subject of federal spending.

We asked over 100,000 Canadians by way of a mail survey whether they believed the federal government should deal with the deficit and debt problem through spending cuts or tax increases. We asked them to give us their views on what the spending priorities of the next Parliament should be. In particular, we asked in what areas the federal government should maintain or increase its current level of spending and we asked in what areas the federal government should reduce or eliminate spending in order to preserve financial support for higher priority items.

With this background data we developed a list of about $20 billion worth of spending reductions which we felt could be implemented in a three-year period if the federal government sought and obtained a mandate from the public to do so.

This deficit reduction program was unveiled to the media and the public in three stages in the spring of 1993. On March 29 in Toronto we unveiled proposals for saving between $9 billion and $10 billion through the reform of federal transfers to individuals and provinces with the emphasis on reform of transfers to individuals. On April 13, 1993 in Vancouver we unveiled further proposals for achieving savings of $4 billion to $5 billion through reductions in transfers and subsidies to the private sector. On April 22 here in Ottawa we unveiled proposals for achieving savings of between $5 billion to $6 billion through the reform of the operations programs and structures of the federal government itself.

I would be pleased to table these papers describing these proposals for the consideration of the finance minister and hon. members, even though some of the figures are slightly dated. All of these papers, I might add, were made available to the previous government, although I am not sure that they survived the great shredding which occurred after October 25.

We organized all these proposals into a 45-minute slide show suitable for presentation to public audiences and town hall meetings. The first public showing of this presentation was made on budget day, April 26, 1993 to an audience of over 1,000 people in Calgary. We subsequently made this presentation, the whole theme on how you come to grips with federal spending, available to almost 200 Reform spokespersons across the country. As a result, it was shown to thousands more people across the country at dozens and dozens of town hall meetings, followed in most cases by a question and answer period.

In addition, we prepared a broad sheet containing the same information on proposals to cut federal spending and distributed over 2.5 million copies door to door prior to the federal election.

This is a description of what a populist party calls intensive and sustained public consultation on an important issue.

Now for the conclusions relevant to the minister. What conclusions did we arrive at through this public consultation that would be of relevance to the minister in preparing his current budget? Let me list four:

First, there is an enormous interest in the subject of federal spending and taxation at the grassroots level in this country. There is a great thirst for relevant information and a genuine desire on the part of ordinary people to contribute to a solution to this problem.

Second, it is false in our judgment to say that the public is only interested in spending cuts if they are made at someone else's expense. Time and time again we have heard Canadians say, and many of these are Canadians in dire circumstances, that they are still personally prepared to make some sacrifices. All they ask is that the sacrifices be distributed fairly, in particular that those with political or economic clout do not manage to get themselves exempted.

Third, it is possible to generate in our judgment substantial informed sustainable public support for spending reductions, if one goes after it and if one can hold out genuine tax relief as the light at the end of the tunnel.

Fourth and finally, these in our judgment are the spending priorities the Canadian people want this Parliament and the minister to pursue in 1994-95.

First, maintain federal transfers in support of health care at present levels or better. Second, maintain or even increase federal support for higher education and labour force training. Third, preserve federal support at current levels for the heart of the pension system, the veteran's pension, the guaranteed income supplement and old age security for households below the national average household income. Leave RRSP contribution levels alone.

Fourth, maintain or increase federal support for environmental conservation, although many people feel that the effectiveness of federal spending in this area could be vastly improved. Fifth, maintain or increase federal support for the administration of justice.

If these really are the spending priorities of the Canadian people, and we remain open to suggestions from other members concerning this whole subject of priorities, spending on virtually everything else the federal government does should be decreased in order to reduce the deficit and to maintain the ability of the federal government to finance its activities in these high priority areas.

Just to comment on my third contribution on the prospects of a tax revolt, what prospects does the federal government face if it does not respond to the public desire to cut spending but instead chooses to raise even higher the total tax load carried by Canadians? The fiscal and economic consequences of such an action are many and well known. Increasing the tax burden will contribute to the growth of the underground economy, the exodus of job creating private capital in entrepreneurs, the further erosion of social services as more and more dollars go to servicing the debt and the reduction of international competitiveness.

What this House must also consider are the political consequences of increased taxation. In particular, the prospects of unleashing a full blown, bottom up tax revolt, the like of which this country has never seen. Let me speak particularly of the potential for a tax revolt in British Columbia and Alberta, where the majority of our Reform MPs come from and where we have a vast network of grassroots context. Let other MPs from other provinces give the finance minister their frank and honest assessment of the prospects of a tax revolt among their own constituents if his budget imposes a higher tax load upon those constituents.

On Vancouver Island, for example, there are probably more retired Canadians and more RRSP participants per capita than anywhere else in Canada. All the MPs on that island with the exception of the Minister of National Revenue from Victoria are Reform MPs who campaigned hard on the spending reduction program that I have outlined.

Many of their constituents are people who have provided their own retirement safety nets through RRSPs, in many cases because they did not have access to public sector or company plans and in many cases because of their declining faith in the Canada Pension Plan and the government's capacity to finance OAS in the future.

If the finance minister's budget contains even a hint of reducing the capacity of these people and their children to care for their own retirement needs, the minister will unleash a torrent of protest from these RRSP contributors and recipients focused on the Minister of National Revenue's office in Victoria which will reverberate across the country and make the GST protest of the 1980s look like a Sunday school picnic.

In the province of Alberta, as the minister well knows, there remains a deep mistrust of Liberal taxation policy, particularly among people in the energy sector. The four government MPs from Edmonton won their seats by a combined plurality of less than 3,500 votes, three of them by less than 300 votes, the Minister of Natural Resources by a plurality of less than a dozen votes.

Their capacities to represent their constituent's interests are very much still in the balance and on trial.

Rumours have persisted for weeks, to the point at which they are now considered more than rumours, that the finance minister is considering imposing a carbon tax on the producers and consumers of fossil fuels. This tax would no doubt be presented as an environmental measure, but since it will not apply to the nuclear waste outputs of Ontario Hydro nuclear plants or to hectares flooded by hydro electric companies like Quebec Hydro, it will have a particularly onerous and discriminatory effect on Alberta's petroleum, coal and utility sectors. It will be seen in Alberta, rightly or wrongly, as the present government's equivalent of the hated petroleum and gas revenue tax that was the cornerstone of the national energy program.

If the minister's budget were to contain such a measure it would completely undermine the position of the minister of natural resources in his home province. It will provoke an ugly confrontation with the Government of Alberta at a time when the Prime Minister says he wants a new era of federal-provincial co-operation and it will damage the economy of one of only two remaining provinces that are still making net positive contributions to equalization.

It has been said that this administration has rarely met an interest group it did not like, but there is emerging in this country an interest group which none of us can afford to disregard. It is the forgotten interest of the last 30 years, the interest that pays the bills. It is the interest of the long suffering Canadian taxpayer whose motto has become enough is enough. It is an interest that is finding its voice and its capacity for action through dozens of organizations, conferences and publications dedicated to protecting that interest from merciless, continuous, never ending exploitation by high spending governments.

In conclusion, to the taxpayers of this country, to whom all of us are ultimately accountable, we say that your voice has been heard by many of us in this House. If it takes a full blown tax revolt employing every legal means conceivable to convince the government that taxpayers have had enough, that tax revolt will find an ally and a command post within this House among Reform MPs and other MPs who came here to cut spending.

Our advice to the finance minister and the government as they finalize their 1994-95 budget is eight words: cut spending, do it fairly, do it now.

As our substantive contribution to restoring the financial health of the federal government and the financial health of the Canadian economy, we will lay on the table the $20 billion in proposed spending cuts which we have discussed extensively with the public. Take them, modify them and improve them but do not ignore them.

[The Deputy Speaker]

Members will be aware that under the present rules of the House it would strongly appear that the member who just spoke is subject to 10 minutes questions and comments if members are inclined to raise them. However, perhaps they do not wish to speak after the leader of a party has just spoken. I take it the member for Yukon would like to make questions or comments.

[Audrey McLaughlin, NDP, Yukon, YT]

Mr. Speaker, I would like to thank the member for Calgary Southwest for his comments. While there are many comments I would like to make, I would like to focus on one aspect.

I think there is no question that all of us in this House agree that the debt and the deficit are a problem for Canadians. The question is how to address that in a fair and balanced way.

I am going to speak to one issue that the member for Calgary Southwest raised and that is the question of taxes. I agree that the middle class has been absolutely overburdened with taxes. We have a situation now in which individual Canadians are paying far more in taxes than they did in the past while corporations, for example, are paying far less.

The member for Calgary Southwest talks about a tax revolt. I find it revolting that while people cannot put food on the table we have the rich and privileged in this country who can shelter their money in a private trust. I find it revolting that while there are Canadians in this country who are working every day and all members of the family are working and cannot make ends meet that we have 90,000 corporations that are still not paying a cent of tax. I find it revolting that while there are people who cannot make ends meet for their children, while there is 18 to 20 per cent youth unemployment in this country that we still have many people in this country using tax shelters and they are the rich and they are the corporations and we must address that tax in equity.

No one is talking about putting a further tax on the already overburdened middle class but we have a group in this country not contributing its full share.

I want to ask the member for Calgary Southwest if he does not believe that we need to shift the burden from the individual, from the middle class, to make sure that those who are privileged and wealthy in our society are paying their fair share. I would like to ask the member if he agree for example that in RRSPs there should be a provision, as there is now, that allows that Canadians are having investment in foreign countries through those contributions rather than in this country where we need to develop business and jobs.