Mr. Speaker, I am happy to be able to say a few words today on this important legislative measure.
When this government came to office late last year, the economy was stagnant and the public purse was burdened by a deficit exceeding $40 billion. The government reacted, especially in the recent budget, by opting for a balanced solution to turn the economy around, reduce the deficit and introduce social reform.
Our goal is to substantially reduce the deficit in the current fiscal year while promoting an economic recovery.
The bill we are discussing today, the budget implementation act, 1994, represents some measures the government believes it must take if we are to remain optimistic about the economic future of Canada.
We believe immediate measures are necessary to reduce the deficit. It imposes severe constraints on economic recovery and growth. It imposes severe threats to programs that are important to all of us as Canadians: unemployment insurance, social programs and health services among others.
It is fair to say that all Canadians realize we cannot blindly spend our way out of the financial problems facing us but rather we must do better with what we have. They and we realize that government leadership to create the climate for job generation is an important factor in balancing our books.
With that in mind, I would like to focus particularly on measures affecting Canadians who work for the Public Service of Canada, the RCMP or the Department of National Defence.
Bill C-17 extends the public service wage freeze currently in effect for a further two years. It suspends pay increment increases for a two-year period and enables payments to be made to full time employees of national defence who are retiring under a civilian reduction program.
Solving our fiscal problem required taking more restraint measures in operating budgets. Public service salaries account for a major portion of federal expenditures. The total compensation cost of the government including the military and the RCMP amounts to some $19 billion. Any measure to control the deficit must therefore take these costs into account. Freezing salaries and pay increments will contribute $1.5 billion in savings over the next three years.
We know the debt and deficit problem will not be solved only by cuts to the public service. The entire cost of operating the Government of Canada is $20 billion out of total government expenditures of approximately $168 billion. The compensation cost of the public service employees who run that government is $12 billion, considerably less than 10 per cent of the budget of Canada.
Given this morning's clippings, I would like to comment on the report of the C.D. Howe Institute. It has identified further cuts to public service wages and government operating costs as a major candidate for government reductions. I must admit I am confused. Not long ago the Conference Board of Canada was telling Canadians that a freeze on public sector wages at the federal level would have a dampening effect of 1.5 per cent on economic recovery that would be even further intensified if the example was followed by provincial governments and the sectors at other levels.
As I said, we realize the debt and deficit problem cannot be resolved only by cuts to the public service. Therefore we have implemented many other cuts in an attempt to achieve the deficit target we have set for ourselves.
Many have questioned why pay increments were suspended in addition to the wage freeze. The answer quite simply is fairness. Increments were frozen because it is important that all public service employees be treated equally in this difficult time. It did not seem to us to be fair that some people working for the public service were seeing their salaries rise while others were not.
I know very well that some consider these measures to be severe, but it is important to place them in their proper context. The government is committedto maintaining job security for its employees. In its opinion, extending the salary freeze and suspending pay increments are better ways to control public spending that forced leave, wage reductions and layoffs. In addition, this approach will minimize the impact on our ability to offer quality services to Canadians.
I recognize there is concern over potential job losses. While there have been layoffs and wage rollbacks in the private sector and in other public areas, our government is committed to maintaining a high level of job security in the public service. Despite these measures, our government is taking a number of steps to rebuild a positive and constructive relationship with the public service.
We believe that our best allies in controlling government expenditures while maintaining the delivery of quality services to the people of Canada are the people who work for the Government of Canada. That is why in the budget we committed to undertake an efficiency review in co-operation with the unions. Any efficiency savings in government operations identified through this process will be used to shorten the period of the wage and increment freeze.
These discussions have begun and are addressing longstanding concerns of our employees, such as contracting for service and the use of temporary employees from outside the government. Already we have been able to show that under the previous government while departments were being downsized, while Canadians were being told that costs were being reduced in this manner, the cost of contracting actually increased at a rate 43 per cent higher than other government expenditures.
The efficiency review is not limited to these two areas, although they are certainly a prime concern to our employees. We are prepared to consider any area of government spending that the unions, our employees, our managers, or indeed members of this House of Commons believe should be looked at in terms of their efficiency in delivering quality services to Canadians.
This is a new process and naturally enough, there is some apprehension on both sides as to how successful it will be. A great deal of time and effort is needed on both sides to ensure that a relationship of trust is built up so that we can work together on this.
In addition to a close examination of contracting as part of the efficiency review, the President of the Treasury Board has asked a committee of Parliament to undertake a full review of contracting and to prepare a report to the House. Throughout government as well, deputy ministers have been asked to work closely with the unions representing their employees and indeed with their employees at all levels to find the necessary means of meeting their operating cost reductions.
I believe that by working together we will be able to identify those savings that will not affect the delivery of services to Canadians but will allow the period of the wage and increment freeze to be shortened. It will allow us to assure Canadians that we are working to get the best possible value for the dollars they pay in taxes.
This is the first opportunity employee representatives have had to work with the government, to work with their employer, to help manage the difficult economic situation we face and the changes it necessarily entails.
The unions have correctly made the point that the pay increment freeze will affect proportionately more women than men employees. At the same time I should indicate that for our lowest paid employees earning under $30,000 proportionately more women than men have benefited from reclassifications and promotions which have improved their earnings, even during the period of the wage freeze. Nonetheless it is the case that approximately two-thirds of employees at the lowest salary
levels are women. It is of course at these levels that a wage freeze has the greatest impact.
That is one reason I am proud to say the President of the Treasury Board has already initiated discussions with the two largest unions representing those employees in female dominated categories of work to explore ways of resolving the pay equity issue. For many years outstanding pay equity complaints have been making only slow and painful progress through the human rights tribunal process. We would like, if at all possible, to work with the representatives of the employees to settle these complaints by negotiation, thereby improving the economic status of more than 60,000 employees in female dominated groups in the public service.
For the first time, public service unions were involved in prebudget consultations, as were many other Canadians. We realize the period of time for these consultations was short. We realize the amount of impact they could have on the budget was limited because of that. We will in fact be conducting those consultations much earlier in the process for the 1995-96 budget.
Many proposals made to us in these consultations by the public service unions and by others were implemented in this budget or are being reviewed for possible implementation in the 1995-96 budget. It is worth mentioning a few.
Corporate profits transferred out of Canada that were not previously subject to taxation will now be subject to taxation in Canada. The capital gains tax exemption is being removed. Tax deductions for business meals and entertainment have been cut to 50 per cent. Operating budgets were reduced to reflect our government's red book commitment to reduce spending on contracting for professional services.
As far as items proposed by our unions and by others to be reviewed for possible inclusion in the next budget, among them I include such things as RRSPs and their role in providing for the future of Canadians, and the taxation of family trusts.
The other message we got very loudly and clearly from the unions representing government employees was do not roll back wages, do not enforce unpaid leave, do not lay off. That is why this government has renewed its commitment to the workforce adjustment policy.
This policy was negotiated with the unions and has been in effect. The previous government threatened to legislate this policy out of existence. We have said quite clearly that we are committed to the workforce adjustment policy. Changes we might want and changes the unions might want are now being negotiated. Any changes will be subject to agreement at the bargaining table.
This government recognizes and values the important role members of the public service play in the governance of the nation. Without them, no law, no policy, no program we approve in this Parliament can be implemented. They keep our food, our skies and our borders safe. They perform needed research, provide rescue operations at sea and deliver pension cheques to millions of Canadian seniors.
Our government intends to restore the relationship of mutual trust with the public service. Both unions and managers will be involved in the broadest possible dialogue on matters of concern to them as our employees and as our partners in delivering quality, efficient and cost-effective services to Canadians.
In closing, I would like to emphasize that this government recognizes these measures are difficult but are necessary as part of a number of measures to control public spending. They are necessary to maintain both employment security for our employees and quality service for Canadians.
Recovery must start somewhere and these measures are only part of that recovery. If we are to meet our objective of a deficit which is no more than 3 per cent of GDP by 1996-97 then all Canadians, public service employees and ourselves included will have to realize that our future prosperity depends on the action we take today.