Mr. Speaker, in February, the Minister of Finance set the course of deficit reduction and economic growth. The budget focused on national priorities and set goals of fairness and credibility, goals we have met.
In 1993-94 there was a 5.9 per cent ratio of deficit to GDP. This year it will be 4.2 per cent and we are almost certain to meet our target of 3 per cent deficit to GDP by the year 1996-97. This is good news for Canadians, as we are on course and have achieved our goals.
This week the finance minister set a new two-year rolling target, the goal of a 2 per cent deficit to GDP ratio by the 1997-98 fiscal year. This means the deficit for that year will be approximately $17 billion. The borrowing requirement will be at its lowest level since 1969. This is credible reality of a finance minister of the government of today.
There are those who say we should go further and faster with cuts like this slash and burn approach but I say the deficit and debt were not created overnight and we cannot change them overnight. We are on a steady course showing results. With an anticipated growth rate of no more than 2.5 per cent next year and with inflation and wages under control we must continue the path we are on to reduce the deficit while stimulating the job creation strategy equation.
We have spent the past few months in committee listening to Canadians. They want us to be fair and show equity in all changes and cuts we make. We will earn our nation's affection and the respect of all Canadians if we as a government remain true to our own Liberal values. Those values of honesty, hard work, fairness, tolerance and compassion must prevail as we look at how to fight Canada's deficit and debt.
Liberals are a political party of the middle road. We will avoid the slash and burn policies of the extreme right wing and balance with compassion those policies of the extreme left. Margaret Thatcher once observed that staying in the middle of the road is very dangerous, as one gets knocked down by the traffic on Both sides.
The government is not afraid of being knocked down by either side. We will listen to Canadians; we have listened. We will uphold the value of a one level health care system, the values of tolerance and compassion, the values Canadians want and respect, the values of eliminating poverty among our children. Difficult choices were made last year. Unemployment is being reformed this year and our workforce is more competitive. We have had the co-operation of Canadians and I thank them for that.
I share some concerns Canadians expressed to our committee. Many asked why we do not force the Bank of Canada to lower interest rates and manipulate the money supply. Past governments have tried it and it does not work. If we reduce this strangling deficit and the debt we will have a healthy financial picture and interest rates will fall on their own, mortgage rates will fall and the economy will expand.
Economists tell us a 2 per cent reduction in interest rates over four years allows the economy to grow by approximately $13 billion. Canadians have asked us why we do not set a longer strategy to look at the debt to GDP ratio. We know we must do this, since 20 years ago the total federal debt was 19 per cent of gross domestic product; 10 years ago it was 50 per cent. It was growing even in good times. Today is close to 75 per cent. We know this ratio must be reduced if we are to compete globally and to remain the best country in the world in which to live. We know our generation must set an attainable strategy for reduction of debt to GDP.
Some recommendations by Canadians deal with the construction industry. It needs a boost. One idea is to renew the RAP, the residential assistance program we brought in last year. This helps low income earners to maintain adequate housing. It helps seniors on fixed income to stay in their home where they remain healthier and happier and it has helped the construction industry. Another suggestion was the use of the RRSP to extend to new construction by extended family members. As an example, a father could use his RRSP without penalty to construct the first new home for his son or daughter. Also, it has been suggested that if we remove the tax incentives that go along with demotion of buildings we would then indirectly encourage retrofitting and remodelling of older buildings and our heritage properties. This has two benefits. It restores and maintains heritage properties and in most cases it creates twice as many jobs. Renovating creates two jobs for every one of new construction. It does have the job creation factor.
Each one of us elected to this hon. House knows how closely literacy is tied to the economy. Without strong literary skills we cannot read the work manuals or the directions on a piece of equipment, nor can we comprehend the orders of our bosses. Adult literacy is closely linked to employment and income levels. Since literary requirements are forever on the increase it is important to promote reading.
One way this budget can do this is by removing the GST on books and magazines. It may be necessary to work co-operatively provinces. However, I believe it can be done. The provinces would participate. The marginal lost revenue would be regenerated in more sales. There would be a greater stimulation to Canadian writers and composers. Above all, a society that reads more becomes more knowledgeable and more competitive in a global society.
In last year's budget we taxed the chartered banks some $100 million over two years. What we saw as a result was an increase in service charges passed on to the consumer. At the same time the banks enjoyed billion dollar profits. It is my recommendation that we take a new strategy. That strategy in simple terms would be for us, the federal government, to establish a community investment strategy and permit it to be funded by the banks in the communities. This forces the banks to do more for small business, more for community economic development, and it forces them to leave some of those profits in local communities.
In addition, we have some responsibility to see that the banks lower those service charges. The charges have a negative impact on small business and a negative impact on the consumer. We are constantly told by economists we must adapt to an increasingly competitive world market.
Global competition means something entirely different to workers in small rural communities than it does to the workers at large corporations like Ford. This is where the banks can assist in those small communities often adversely affected by those global market forces.
I want to address labour sponsored venture capital funds. These are fairly new in the Canadian government's portfolio. They have been in existence less than five years and their mandate was to link investment opportunities to small and medium size businesses for the purposes of job creation. These are heavily tax subsidized dollars with about $2 billion in venture capital available in Canada today. Very little is earmarked for small companies requiring less than $250,000 in capital, and still a large portion is invested in secure treasury bills, not helping small business at all.
The individual who invests in these funds get a 40 per cent tax credit in addition to the usual tax deduction if the fund is placed in an RRSP. The time has come to insist these funds be used in job creation or remove the tax credit incentive. This budget can clearly look closely at this area for new revenue.
There is an opportunity since 1991 to carry forward any unused deduction in the RRSP, and StatsCanada shows that Canadians could pump up to $154 billion this year-not likely to happen because Canadians do not save that much money. There is an opportunity in the 1997-98 fiscal period to look at setting a ceiling
on RRSPs, somewhere around the $8,000 to $10,000 mark for individuals, and we can look at the opportunity in changing it from a deduction on the income tax page to a tax credit.
By changing it to a tax credit, we would give a greater incentive for low income earners to invest in an RRSP because a tax credit would give them more dollars in their pockets rather than a deduction at that low level. We would seal it for high income earners so the advantage was more equal in the incentive process.
There are many more things I could talk about in the budget process such as our training programs, our education facilities, needs such as the national highway strategy, and on and on.
We have heard Canadians speak and they have told us clearly their needs and wants. With political stability in the country we can create a dynamic federalism wherein we have sustainable financial resources, sustainable economies and a sustainable environment. What more can we give our youth but a country in which they can live and fulfil their dreams?