Mr. Speaker, I am pleased to rise in the House today on this important issue. It is very important that Canadians have access to the facts and to the issues that face us. We are going to be forced in the next budget to make some of the most difficult budgetary decisions that have been made in this Parliament's history, probably the most difficult decisions that we have had to make outside wartime.
As Canadians know, the government inherited a national debt of $500 billion and an annual deficit that had gone up to over $45 billion. As much as we politicians wish we could spend money on people and help people, we can no longer continue at this rate.
If we do not get the deficits down and start to eventually reduce our national debt, we will continue to be even more hostage to the international capital markets whose investors are demanding higher and higher interest rates in order to fund our debt. It is a debt which is so enormous we can no longer fund it out of the pockets and the savings of Canadians alone.
If we do not get the deficit down we will no longer be able to have the economic climate in which we can get lower interest rates, have more investment and create more jobs. Unless we are able to meet the deficit targets that have been set, every one of our social programs will be in jeopardy. We will not much longer be able to go on spending way beyond our means and yet create the type of Canada that all of us want.
It is going to be a difficult task as we go about, over the next two years, of taking maybe $10 billion, $12 billion or even $14 billion in budgetary actions, that is spending and/or tax increases.
One of the things that we must continually bear in mind as we make these difficult decisions and choices is that when social programs are cut, programs designed to protect the most vulner-
able in our nation, it must be done with caution, with compassion and with care. For so many Canadians these programs are the only means to security, dignity and opportunity.
In making the difficult decisions that we are called on to make and that we shall make, let us not only remember those who are most in need, but let us also remember that the burden should, to the extent possible, be shared fairly by all Canadians.
We know and the finance committee in its report recognized that Canadians are just about at the ceiling of taxation. Personal income tax rates are very high. When they are combined with the taxes on commodities, the payroll taxes and municipal taxes, Canadians are saying: "We want less. We are prepared to do with less. We cannot afford vastly higher taxes in order to continue the lifestyle to which we have become used".
However, they are also saying to us that when these cuts are made, please be fair. We will be judged, first of all on whether we meet those deficit targets, and we had better meet them, but we will be judged on whether we have done it fairly.
When we cut social programs are we really asking the wealthy in our society to contribute? How are they bearing their fair share when all we are doing is cutting programs? We have $3.1 billion in business subsidies. We want to get rid of all of those as quickly as we can. However realistically our committee looked at these, we said that we probably could not cut more than 36 per cent of those subsidies over the next two years. That will contribute slightly over a billion dollars to deficit reduction. It is not going to be enough.
We may just have to suggest that the very well-off in our society contribute their share to the deficit reduction targets through a few added tax measures. This is why we suggested in our report that we could perhaps ask the large corporations, corporations with capital over $10 million who do not pay taxes because they have losses carried forward or they have capital cost allowances expenditures, to pay just a little bit more. Maybe we could ask Canadians who have huge winnings on lotteries to put 10 per cent or 15 per cent of the winnings toward the deficit reduction. Is it fair to say to wage earners that they will be taxed at 53 per cent or 54 per cent on their wages but that they can make a million dollars in a lottery and not pay any taxes at all?
We recognize our marginal tax rates over the past nine or ten years of Tory government have become less and less progressive. The wealthy in Canada are paying less tax proportionately than the poor and middle income Canadian have been asked to pay.
We suggested that low and middle income Canadians should have their surtax reduced by one percentage point. We think this would introduce an element of fairness. In the overall package that we called for, recognizing that budget cuts must be the prime factor, we said that for about every $9 billion in expenditure cuts we might need about $1 billion in tax increases over the next two years. I do not believe Canadians are going to be reluctant to accept some of the proposed measures, particularly when they are expressed in terms of the fairness we must go about practising when all Canadians are asked to contribute to helping us get out of the mess we are in.
The principle of fairness applies not only to the most disadvantaged of Canadians who need our programs in many cases. This does not mean that we should not reform our programs to help people get off welfare more quickly or to help them rely less on unemployment insurance. After all, we want Canadians want to be working and not be on the dole.
In setting these difficult courses we have to start with ourselves in Parliament. We cannot ask Canadians to make greater sacrifices than we are prepared to make ourselves. This is why the first item of business must be the pensions of members of Parliament before we ask other Canadians to make their sacrifices. This is why we have called in our report for major areas to be cut, namely the $20 billion out of $120 billion in program spending. This $20 billion applies to our government operations, how we conduct our business and how we conduct our affairs. We have said that over two years it should be cut by 12 per cent. In terms of parliamentarians in our own little niche, we have called for a cut of 15 per cent.
I have mentioned business subsidies. We believe we can get rid of most of them over time. There are outstanding commitments that we just cannot break. Therefore we concluded that we had to be practical. About the most we can hope to get rid of over the next two years is 36 per cent. I believe the total amount would be slightly over $1 billion.
We have to bring a new philosophy to how government deals with the private sector. If the only way a private sector enterprise can exist is through government handouts and government grants, it will not be long before we can no longer afford the grants and handouts. Not only that, it is not fair to legitimate operators who do not rely on the dole or do not rely on the deep pockets of government but compete with industries that get these breaks. Not only that. With the new trading regime, the GATT and the NAFTA, we have less and less ability to interfere in this way because subsidies will be subject to countervail.
We are in a new world. We are in a world that many Canadians would not have believed 10 years ago that we would be facing today. The levers of control we had as a national government are no longer there. Whether we like it or not we have to live with the new reality of global competitiveness, international capital flows and international investment.
This will impose upon us new challenges. However one of the challenges cannot be grants to business. That is why we suggested abolishing all outright grants to business. We cannot give business a leg up by way of a loan because our capital markets are not working adequately to supply all small businesses and entrepreneurs with the startup capital they need.
However, if we are to do it, let us do it only on a loan basis. We will lend the money but let us make sure that we have equity in the company. We do not want a one-way street for the public sector such that if the business goes under we lose it. We want to ensure that if the business profits from the investment we make by way of a loan there is an upside for us so that we have money to fund programs and to make them self-funding and self-liquidating.
There are other areas where we have called for cuts. One such area is subsidies. We have about $7.7 billion in subsidies for various crown corporations and others like that. Let us start weaning them from subsidies. Here we have called for a 10 per cent cut. The lowest cut we called for was within the overall package of social programs worth about $40 billion at which the human resources development committee was looking. Because many of these programs go to the most vulnerable in our society we called for cuts of 7 per cent over two years.
There is a number of areas in which the committee did not feel there could be cuts, such as Canada's native people, the Inuit and veterans, people who have a lot of catching up to do because our programs may not be working adequately to bring about the type of social justice they need.
We were also very concerned about the aging population. Many Canadians have not provided for their own retirement needs. Too few Canadians are taking advantage of the very generous tax breaks available to provide for their own retirement. The ideal would be as our population ages that fewer Canadians have to rely on government.
This is a major issue and none of us pretends to have the answer. That is why we suggested before changes were made to retirement provisions, pension plans and RRSPs that we had to take into consideration a number of principles. One is parity between public sector and private sector pensions. Another is the need of those who are self-employed and have to provide for their own retirement through registered retirement savings plans. They need to be able to build a pension fund comparable to those who have been in the private sector and have had long years of contributions to private pension plans.
We also have to look at our public responsibility. Right now we are spending about $15 billion in forgone tax revenues-we can call them tax expenditures or whatever we want-to encourage self-sufficiency during retirement. Before we change this regime we should do so in the context of how we help more and more Canadians provide for a secure and dignified retirement. We are becoming more and more an aging population.
The challenge before us is not an easy one. We have called for getting our deficit down over a two-year period from about $40 billion to about $25 billion. That is about 3 per cent of gross domestic product.
Why is that 3 per cent level important? It is important because with the current growth that is the level where our economy will be growing more quickly than our national debt. That will be the turning point. It will only be one turning point. We will have to go much further in subsequent years. We will have to start at some point paying down a huge national debt that will absorb one-quarter of our national expenditures this year. It takes one-third of every tax dollar paid to the federal government.
I hope we might be able to go slightly beyond the targets. Why? It is because we never know what the economic circumstances will be a few months down the road. We have seen the volatility of interest rates over the last three or four months that make the moderate projections in the papers tabled by the finance minister now seem passé. We are on to a new scenario. We do not know whether it will happen in the future but we must be prepared for it because our credibility depends on at least meeting those targets.
We need a cushion. It is fundamental to have a cushion for an additional reason. Let us admit that we might make mistakes when making cuts that we are not used to doing and we are probably not going to be extremely good at doing. We might unduly prejudice individuals we did not intend to hurt. We might cause pain where it is not deserved. I know we will bring to these people a Liberal spirit of generosity in attempting to undo any harm that was not intended.
Let us approach this tremendous challenge with the spirit of fairness and with the spirit that every Canadian must be called upon to contribute his or her fair share to getting our national resources and our financial picture in shape. Let us not achieve it on the backs of those who are most vulnerable in the country. Let us do it in a spirit of humility that we cannot be right 100 per cent of the time, that we will make mistakes and that we want to hear from Canadians as to where we have made those errors. If that is the case on reflection, let us freely admit that we have made a mistake and rectify it quickly.
By following these principles we can go into the next decades with a much healthier Canada and with a much stronger Canada. We will be able to pass on to succeeding generations what our mothers and fathers have given us: a strong and united Canada.