Mr. Speaker, just over a year ago I was privileged
to lead off the last take note debate on the possible measures for the 1995 budget. Today it is a pleasure to replay that role for the 1996 budget. It allows me to renew the heartfelt challenge to all hon. members of the House.
I also take the opportunity to thank on behalf of the Minister of Finance the finance committee for its work not only on prebudget consultations but on many other issues. I see both of my colleagues from two opposition parties here and I extend my thanks to them.
The chair of the finance committee who was here earlier to present a report told us yesterday that the finance committee has met over 200 times since the government was formed. It has a considerable workload. The attendance has always been first class. There is continuity in what has been said in debate in the committee. The collegiality we have in the organization of our work is greatly appreciated. We know that in a partisan House there are natural divisions, some very heartfelt divisions, but it is also reassuring to those of us to enjoy Parliament to see a committee work so well. On behalf of the minister I say thank you and wish everyone season's greetings and I look forward to continuing the work in the new year.
Today's debate is an accumulation of the work done by the committee as well as individual members of Parliament. Since September we have been meeting with Canadians in Ottawa and across the country. The committee split itself in half. Half went west and half went to Atlantic Canada and Montreal. We have heard hundred of witnesses in a series of round table discussions. We have also heard individual presentations. The interested public as well as members of the committee are getting more familiar with the process. We have had some very good debate.
I would highlight the work by charitable organizations. They have given us some new ideas. I would also highlight the work by health coalitions. They have given us some suggestions to what the budget response should be on health care. We have also heard from several business organizations talked about their optimism with the economy and at the same time their desire to see some changes in the way we do business.
These suggestions are always considered. They are always taken in good faith. They are very much appreciated. The government has every intention to follow up on these many ideas. The government is awaiting the committee report which will tabled in the House during the Christmas recess. It will have more ideas and a semblance of what we think should be done.
The Minister of Finance was before the committee last week. He presented his idea of where we should be heading, the 2 per cent target for the deficit in two years. That was the new announcement for the second year of our rolling target. The committee wholeheartedly endorsed the suggestion, although there were two dissenting opinions. On the whole, the committee appreciated that the minister was very forthright about our new target. Parliamentarians, Canadians and people around the world watching the Canadian fiscal situation were very pleased with what the minister said.
One of the pledges which brought our government to office was to deliver genuine change in how the federal government manages its fiscal decision making; change that provided the public with more open access to information and a change which would give Canadians and their representatives, their members of Parliament, a real role in charting the course of action for the nation.
The latest economic and fiscal update, which the Minister of Finance submitted last week to the House Standing Committee on Finance, is a very concrete example of this commitment to account publicly for our actions and to make our decisions openly. The same thing can be said about this debate.
Again, I must challenge my hon. colleagues from all parties to seize this opportunity and provide the government with concrete, sensible, non-partisan advice. This is a chance to really make a difference in the interest of our constituents and of all Canadians.
The 1995 budget demonstrated clearly and convincingly that public and parliamentary input was valued and acted on by our government. This was confirmed by the substantial public acceptance of that budget.
It must be and will be the ideas and suggestions of all members that dominate this debate. Meaningful discussion occurs most easily when there is a clear and defined context for the issues involved. When it comes to budget planning, that context is nothing less than Canada's economy and the fiscal situation of this government.
I would like to spend a few minutes highlighting some of the key points that the finance minister made in his presentation to the finance committee last week. Let me start as the finance minister did by reiterating one fundamental point.
Our government's objective is not simply to provide a better balance sheet. It is to provide and work toward a better country, a fairer society. It is an economy that more than anything else is capable of producing the kinds of jobs and growth that will enable Canadians to have faith in their future. This is a compelling reason why our commitments to fiscal health will not falter.
There is simply no contradiction between deficit reduction and job creation. Continued deficit reduction is essential if we are to get our interest rates down, interest rates that stand in the way in the creation of jobs.
The federal fiscal situation is directly tied to the outlook for the economy as a whole. I want to touch on how our economy has evolved since the last budget.
Last February the budget projected an economic slowdown as high interest rates weakened the U.S. economy. Unfortunately that slowdown came much sooner than anyone anticipated. Today however we seem to be back on the right track. The U.S. economy is poised for a moderate expansion through 1996 and beyond, a growth that will contribute directly to Canada's growth.
Domestically, interest rates have been falling. They are almost down 2.5 percentage points from the early 1995 highs. This contributes not only to spurring consumer and business confidence and investment, but also eases the cost of our debt charges.
Another harbinger of renewed growth is the fact that our cost competitiveness continues to rebound strongly vis-à-vis the United States. It is now the best that it has ever been in the 45 years that we have kept data on this particular issue. In turn, our merchandise trade balance, exports over imports, stands at $34.6 billion, an all-time high in September.
As we can see, our economic fundamentals are strong but as the finance minister warned our committee and all of us, the challenge is to keep them strong, to take the further budgetary action that will translate those basic strengths into more jobs for Canadians. That takes us to the fiscal challenge and the relationship between public debt and the economy.
Twenty years ago for the federal government the debt to GDP ratio stood at 19 per cent; ten years ago it stood at 50 per cent; today it is close to 75 per cent. The issue is not simply excessive government spending. The very nature of the ratio is the relationship between two variables. The debt to GDP ratio reveals the two things on which we believe very strongly we must concentrate. One is to keep our spending under firm control. The other is the necessity to maximize the nation's potential, its productivity, its capacity to grow, its capacity to create jobs.
I agree with the Minister of Finance. Our strategy must be based on synergy. Neither growth nor deficit reduction is sufficient alone but pursued together they can do the job.
This brings me to the heart of our approach, the steady pace approach based on rolling two year targets that we have adopted. In my view, these do not undercut our commitment to ultimate deficit elimination. Instead, they are a credible strategy to make sure that we get to where we have to go without throwing the baby out with the bath water. Of course we could lighten our load further, just like we could lighten a car by throwing out the engine or removing the brakes, but that would not likely take us to where we want to go.
Our government knows where it wants to go: to the destination Canadians have set for us which is to bring down the deficit firmly and consistently but in ways that sustain and enhance economic growth. That is what we are doing.
By 1996-97 with our 3 per cent interim deficit target secured, we will have halted the growth of the debt to GDP ratio. But that simply sets the stage for the next challenge which is to ensure that this ratio continues to track downward, year after year, cycle after cycle.
Meeting that challenge means more jobs. It means enhanced economic sovereignty as we free ourselves from being beholden to foreign lenders. That is why our government has mounted the largest assault on the federal deficit in Canadian history.
In the 1994 budget we took action to deliver three year savings of $20 billion. In the 1995 budget we took even more dramatic action for a further $29 billion in budget turnaround. In both budgets the vast majority of our action items were spending cuts.
The results are already becoming clear. Last month the finance minister announced that the deficit for our first full year in office was $37.5 billion, $2.2 billion below the target set in our first budget and $4.5 billion lower than the previous year.
In 1993-94 the deficit stood at 5.9 per cent of GDP. It went down to 5 per cent last year. This year the deficit will continue to decline to 4.2 per cent of GDP, on its way to 3 per cent in 1996-97.
In order to maintain that progress, the finance minister announced last week that the deficit for 1997-98 will be brought down to 2 per cent of GDP. This is estimated to be approximately $17 billion. This means that we will have cut last year's deficit by more than half. It also means that the debt to GDP ratio will be on a downward track.
Furthermore, this means that the government's new borrowing requirements on credit markets in that year, which is the way that many other governments, including the United States, calculate their deficit, will be less than $7 billion, less than 1 per cent of GDP. This means that by 1997-98 new borrowing requirements in relationship to the size of our economy will be at their lowest level since 1969.
I have emphasized our action on the spending side of the fiscal equation but I want to reiterate that there is a second track, which is the redesign of government itself and its programs to play a better part in creating jobs and growth. It is jobs and growth and the revenue they bring to government which will also help us to ultimately eliminate the deficit.
That is why we have made improvements to the unemployment insurance program which have been the most profound in the last 25 years, bringing it into line with the labour market realities of the 1990s. It is why we are encouraging small businesses to invest and hire by lessening the regulatory burden and by improving their access to capital. It is why the government is emphasizing trade
missions around the world. Canada is a trading nation and new exports mean new jobs.
There is a companion priority to jobs for our national well-being that our budget planning must encompass. That is to sustain our social programs in the face of a changing global economy and domestic demographics.
This priority is reflected in our unequivocal support for Canada's health care system. It is also reflected in our commitment to ensure that Canadians are not discriminated against when they move from one part of the country to another and seek social assistance.
Let me add a few notes about the nature of Winnipeg and Winnipeg North Centre. I was first elected to represent that constituency in 1988. Many people have said to me: "You were the social policy critic of the Liberal Party in opposition and now you are working in finance. How do you resolve the two? Do you not feel as if you are doing harm to your own constituency?"
Let me state quite clearly to the House that the actions we are taking will help my constituents to have a strong province and a stronger country. It will increase the ability of governments to respond for years to come. The actions we are taking now will provide more opportunities for them than could be imagined under the present debtload.
The situation which has developed in the last 15 years has been an increase in child poverty, a high rate of high school dropouts, and the incidence of high unemployment in downtown Winnipeg. There is a feeling of helplessness, a feeling that governments cannot respond, that governments have neither the energy nor the ideas to develop a stronger economy.
I want to assure my constituents that uppermost in my mind as I carry on in the position as Parliamentary Secretary to the Minister of Finance, is the impact of these actions on their lives. I know that by the way we are gradually reducing the deficit we will not harm the ability of the federal or provincial governments to respond to their needs.
There is in the public debate a great deal of noise about the impact of cutbacks on the provinces, about the impact of social transfers. Let me again assure everyone that every thought was given to minimize the impact on provinces such as Manitoba, Saskatchewan and other poorer provinces across the country so that they could retain the fiscal capacity to respond and deliver appropriate health care and social policies to our people. As the government regains its strength it will be able to respond even more clearly and strongly to ensure that there are job opportunities, school opportunities and a lifestyle we can all be proud of.
Let me conclude on the same note as I did over a year ago. For many years when it came to decisions on the economy and our fiscal dilemma, the federal government too often took the easy way out leaving the hard choices to another day. That has not been our path. We have taken the hard choices and the role of leadership, real action to bring the deficit down sharply, but we have also taken measures to boost economic strength and a real commitment to sustain the social safety net Canadians from coast to coast to coast cherish.
The struggle is not over. We have more to do, further to go to complete our fiscal freedom. We must continue to set priorities for where the government can and must act to help growth and jobs.
This is where we came in today. On behalf of the government, I encourage hon. members to share the ideas and concerns that we can work together on to ensure a strong and prosperous Canada.