Mr. Speaker, I welcome the opportunity to speak on third reading of Bill C-14, the borrowing authority bill.
The bill has been approved by the House finance committee and it is vitally important that the House proceed with it as quickly as possible. Without borrowing authority in the new fiscal year severe constraints will be placed on the government's financial program, constraints that could prove costly to the government and to Canadian taxpayers. The federal government would be restricted to short term funds. This would expose the government to an additional rate risk and could disrupt the capital market, potentially resulting in higher debt and servicing charges.
We do not put forward this request for borrowing authority lightly. We know there are real costs involved in adding to the country's debt burden. The amount of borrowing authority requested in the bill is directly connected to the financial requirements set out in the 1994 budget. The budget takes concrete responsible action to bring the nation's finances under control.
Our ultimate goal is to eliminate the deficit. Our interim target is to reduce it to 3 per cent of GDP by 1996-97. The budget puts us on a course to meet that target. We will reduce the deficit to $39.7 billion in the coming fiscal year, to $32.7 billion in 1995-96, and, with only a moderate growth, to $25 billion in 1996-97. Our financial requirements are lower: $30.2 billion in 1994-95 and $22.7 billion in 1995-96.
Let me be very clear. No future action is required for us to meet our three-year deficit target. This will happen as a direct result of the actions contained in the 1994 budget in and of themselves.
To achieve this we have proposed the most substantial saving reductions by a government in the last 10 years. Debt expenditure cuts will total $17 billion over the next three years. Over that period there are $5 in spending cuts for every $1 in new revenue.
Some people have expressed disappointment that the deficit for the first year is not lower. The government shares that disappointment. However the reasons for this are quite straightforward.
First, there is a lag time before the full effects of spending cuts show up in the nation's books, for example with unemployment insurance a change in legislation is required.
Second, we have carried through on all of our election commitments including a major national infrastructure program, and they are paid for up front.
There is a third reason the deficit is not lower for the first year. We have scrapped many of the practices of the past. In previous years, governments would set targets based on rosy economic projections. Our budget is based on very prudent assumptions.
First, there is a lag time before the full effects of spending cuts show up in the nation's books; for example, with unemployment insurance where a change in legislation is required.
Second, we have carried through on all of our election commitments, including a major national infrastructure program, and they are paid up front.
There is a third reason why the deficit is not lower for the first year. We have scrapped many of the practices of the past. In previous years, governments would set targets based on rosy economic projections. Our budget is based on very prudent assumptions.
Moreover the budget provides full accounting for all new program costs. Nothing is hidden. We have built in substantial reserves so that we can respond to unforeseen contingencies without altering our fiscal targets.
Finally, we have not offloaded the federal deficit on to Canada's provinces. We firmly believe that the two levels of government must approach their respective challenges through co-operation.
Now let me return to Bill C-14. Like borrowing bills in previous years the bill contains three basic elements. I would like to touch briefly on each one of these elements.
First, the bill provides for $30.2 billion of authority to cover anticipated borrowing requirements to meet the net financial requirements set out in the budget.
Second, there is provision in the bill to cover $1.1 billion of exchange fund account earnings. These earnings give rise to additional borrowing requirements because these earnings, although reported as budgetary revenues, are retained in the exchange fund account. They are not available to finance ongoing government expenditures.
Third, there is a $3 billion borrowing reserve, the same amount requested in borrowing bills in the last six years. This reserve provides for unforeseen contingencies such as foreign exchange transactions, seasonal swings and borrowing requirements, and delays in passing the future year borrowing authority legislation.
The bill also contains a provision for an additional borrowing authority of $3 billion to provide for borrowing conducted in the fiscal year under section 47 of the Financial Administration Act.
In summary borrowing authority is a normal part of government operations and the bill contains no unusual provisions. All the information needed to deal with it is before the House in the budget, the main estimates and related documents.
I therefore urge the House to proceed today with the legislation so that the government's regular borrowing program can proceed as the fiscal year begins and the risk of hard debt servicing charges can be avoided.