Madam Speaker, today we are discussing a motion by the Reform Party whose purpose is, basically, to make the government reduce its spending so as to improve the state of public finances. There is nothing wrong with the principle as such. The motion also wants the government to avoid raising taxes and to downsize government. The Bloc Quebecois certainly has no trouble accepting these three principles.
However, the position behind this motion is not necessarily one we can embrace. Our position on the economy is certainly not that of the Reform Party, certainly not the position of the right, which says that economic growth depends largely on what the wealthiest in our society contribute to the economy.
This is often the group they try to defend, either by proposing a single tax or other measures to avoid any form of progressive taxation or redistribution. There are certainly major differences in how the role of government is viewed with respect to redistribution of income. In any case, since it came to power, this government has done very little to improve public finances.
A few weeks from now, we will be told that by the end of the fiscal year, we will have a deficit of about 38 or 39 billion dollars, in addition to a debt of over $500 billion, accumulated during the past twenty years. This is hardly a reason to celebrate.
However, I know some members will celebrate, because the deficit will be one or two billion dollars less than the original forecast. However, whether the deficit is on target is irrelevant. We have to consider the facts.
The facts are that we will still have a very substantial deficit of 37 or 38 billion dollars, as I said earlier, and perhaps even 39 billion, if the government tries to include some of next year's
spending in this year's budget to reduce the pressure on the next fiscal year. We must get back to basics. Forget about objectives. What we want is results.
Since the government failed to make certain cuts last year, this has put a lot of pressure on Canadian interest rates. Since February, interest rates have gone up by about 300 base points. Everyone who has to borrow money is feeling the impact on the economy. The Minister of Finance likes to say that increases in the interest rate are like increases in income tax. If he believes what he says, why did he not do something earlier in the year, instead of adding this pressure to the interest rates?
Of course, our friends like to say that the state of the economy is a destabilizing factor. I, however, contend that the greatest destabilizing factor is the state of public finances. Foreign investors recognize this, and this is what they look at first.
There is also no vision for society. It is unfortunate to find that, after a year and a half in office, the present government is taking the same approach as its predecessor. According to this approach, cuts are the only way to improve public finances-a view shared by the Reform Party.
I can remember during the elections speeches about giving priority to jobs and trying to generate growth as ways to improve public finances. So much for those speeches. No vision of society has been put forward in an effort to find a way to revitalize the economy, to everyone's benefit.
You are aware that economic indicators measure growth with traditional indicators such as production levels. We must not forget, however, what we learned in the 1980s-that increased does not necessarily mean increased employment.
The two are linked, of course. If there is an increase in total production, or in the gross domestic product, the number of jobs will certainly increase also, but these two trends are separate. Production may increase significantly faster than the level of employment.
The gross domestic product is therefore not the only yardstick for the economy. We have to focus on the people who are increasingly excluded from society, the unemployed living on unemployment insurance or welfare or who have returned to school because they cannot find a job. Many people are waiting to enter the labour market. The present government has no vision, in this regard.
I would like to speak a bit about the approach which consists of saying that the deficit problem will be resolved by making cuts across the board. We agree that certain cuts can readily be made, for example in the government machine. Later on, I will return to the Bloc Quebecois' suggestions which we have repeated time and again.
We have a major difference of opinion with the Reform Party: in our opinion, some expenditures are tax expenditures. We must look beyond budget expenditures, transfers to individuals and to the provinces.
We should also look at whether they are tax expenditures, lost revenues. We could get into a real philosophical debate on this issue: Is it a tax hike? Is it a spending cut? It seems clear to us that it is a question of spending.
It has always been difficult to discuss the issue of tax expenditures in an effective way, even during the finance committee's hearings, because the figures are derived from data that is only partly revealed. Expenditures that the government plans to make are revealed, but no roll-up of these expenditures is ever given, even though that information is available.
Therefore, I want to talk about this right leaning philosophy that only wants to see across-the-board cuts, blind indiscriminate cuts, a philosophy that often ferments such ideas as a single tax rate, the same rate for everyone. It tempts even the people who would be affected the most. They say "use one tax rate". Currently, we use a progressive tax rate system; the higher the income, the higher the tax rate. Of course, the tax system, however, sometimes reverses trends, but that is another problem which can be looked at in a different way.
Therefore, the principle of redistribution, which is desirable in society, would be severely compromised under a system with one tax rate. I said to someone who was explaining the concept to me that I would give the matter more thought if that person could explain to me how income would be redistributed with just one tax rate for everyone. As long as the proposal cannot be linked with redistribution, how the state redistributes wealth, the concept will not get any support from me.
I would now like to return to what can be expected in the next budget and rumours on this subject. It is becoming clearer that the government will increase its revenues in the next budget. An increase in the surtax for individuals or in income tax rates, traditional taxes or certain consumption taxes is planned, or pension funds may even be hit. There is obviously a lot of money there, and the government is looking for revenue. It is much easier to get a quick revenue fix than to cut spending; it takes more courage to cut spending, especially when friends are among those affected. The Liberals have always had trouble cutting their friends's spending so this may be very difficult to do.
Now why does the government want to do that? Because of the two additional years, and the Conservatives and Liberals are equally at fault. For the past two years, there have been no major changes in budget policy, and we have just had two consecutive
deficits of $40 billion, record amounts in Canadian history. This is a country that is supposed to have the best quality of life in the world. This is the country they are trying to sell us, especially to Quebecers. Perhaps we should check the size of the mortgage.
My point is that this government has only itself to blame, because it failed to take action during the second year.
I will give an example of tax expenditures that were introduced and then withdrawn, to show the lack of vision and judgment we see so often in our tax system. That is why we favour a genuine review of the tax system, not a quick fix to please friends who contribute to the party coffers but something that will reflect our social values, our principles and our objectives. Look at the way the government treats capital gains, for instance.
What was the procedure in recent years? First, the government introduced the principle of allowing a $500,000 exemption; the first $500,000 of capital gains were not taxable. After a while, the exemption was reduced to $100,000. Once taxpayers in the highest bracket had taken advantage of this exemption-not everyone can declare a capital gain of $500,000-the government said: "Well, this is costing the government a pretty penny. We will reduce the exemption to $100,000", and so they did. Now that the others had managed to take advantage of this exemption, they said: "Well, this might be too costly for the government after all, so let us cut the exemption to zero", which they did.
If it does not make sense to treat capital gains differently today, why did they do it in the past? How much money did the government lose in the process? How much did it have to borrow to compensate? How much did it cost society? Now, they claim social programs are too expensive, that they are putting us into debt, and the government has all kinds of names for those people.
Actually, if we look at the operating budget, although it does show a deficit, it is practically negligible, which means that if we had not accumulated all this debt over the years, we would not be having this discussion today.
What caused these problems? Is it our social programs? I am not so sure.
This certainly requires some adjustment and a serious look. I come back to the approach advocating only cuts and not fiscal spending. What does this mean? Forty billion dollars spread among 20 million taxpayers. That means about $2,000 per person. We resolve the deficit problem by cutting $2,000 per individual, cuts in expenditures related to individuals.
Can everyone handle $2,000 in cuts? We here in this House can do it easily, with no problem. However, what about people on social assistance, single parent families and older people? Can they handle a $2,000 cut per person? Can they really? It is not a sure thing.
This is why we need to have another way of looking at the approach to public finances as well. There has to be a way to put a stop to the present inefficiencies and straighten out the job market with different and new ideas. We could use our imaginations, we could be creative. There is no end to technological innovation these days. When it comes to public finances, we are stuck for ideas. We want to copy other formulae and other approaches.
We hear more and more talk about New Zealand in Canada these days. People are trying to convince us that we will share the same fate. Why do we not try a different formula? Why not do things differently?
Over the next year, debate will be vigorous, because two visions of society are on a collision course, particularly in Quebec with the discussions on the referendum. I hope there are Canadians who also share a different vision from what we are hearing conveyed at present.
I would like to speak about reviewing the taxation system in connection with current statistics on income. Sixty per cent of people, 60 per cent of the population, have incomes of $25,000 or less. Returning to my earlier idea of cutting expenditures by $2,000, for people with a $25,000 income, that is going to hurt. We must target the cuts where the money is and where it will hurt much less.
Of course, I mentioned redistribution. Also, when we put forward budget policies, specific taxation policies, we must evaluate them before developing them, while they are being developed and after they have been developed. Given the veritable army of civil servants, this could be done and it would be a more productive use of their time. Perhaps cutting 45,000 employees would not be contemplated if this type of useful analysis were conducted. It is certainly possible to re-think the work of the public service in regards to such an approach.
I took part in prebudget consultations. I must say that I was rather disappointed. Earlier, I heard a Liberal member say that all departmental programs were undergoing a review. It is a shame that, in politics, we lack the courage to lay working hypotheses out on the table when people are being consulted. These public consultations were very difficult because the discussion became almost philosophical at one point. It was hard to say that there was nothing concrete, only partial information. It was difficult for people to judge, even for members of the committee.
If that review had been conducted a little quicker, put out on the table to be debated, but it was not, and the government does not want to be transparent, it wants to give itself as much leeway
as possible. It does not want to resolve the public finances issue effectively, publicly. Never. This will be done in the backrooms.
Therefore, in my opinion, the exercise will be relatively ineffective. Anyway, most of the report was written by the Department of Finance, which does not want to be affected by the recommendations, so it is making sure it has some leeway.
I would like to use the remaining three or four minutes to talk about the rumour going around regarding a form of flexible federalism which will be introduced in the next budget by decentralizing some powers. What a laugh. The Axworthy reforms were strongly contested and implementing his reforms is proving very difficult; the proposal is obviously lacking vision; people are not rallying around it, they are divided on the issue.
The government had to put these reforms on the back burner because of the referendum campaign. But the underlying idea was to cut social program spending. How can this be done now, and in a more positive way? That must be the challenge that Cabinet is facing now, and a decision on the issue has probably already been reached, since the budget has to go to the printer any day now.
Therefore, it is probably already a done deal and the Minister of Finance is probably now in the process of announcing to his provincial counterparts how he intends to reduce the amount of money they receive, and trying to have them believe that he is telling them good news.
What the government is essentially trying to do is to regroup certain transfer payments. Education, health and Canada Assistance Plan transfer payments will be grouped together and added up. What the government will be doing is an addition of sorts. The government will add up the amounts and say to Quebec or another province: "This was what you received in the past, and now we will give it to you in one block payment. However, you will get a lot less, because we have to improve public finances. The rest is up to you. You must decide where to cut, make unpopular choices, tell students their tuition fees will go up. You will bear the responsibility». That is essentially the message they want to convey, while trying to pass it off as decentralized federalism.
Will they cut the workforce which administers these programs here? I doubt it. Will they abolish national standards if they stop contributing financially? If they no longer make a financial contribution, will they forget about national standards? On what logical basis would we maintain national standards, although we know full well that the Liberal Party has this vision of national standards, centralized here and equal across the country, a single country, a single nation in their opinion?
It would be very surprising for them to really decentralize, but they try to convince people that this is flexible federalism. I said yesterday, and I still think today, that this type of federalism is so flexible that we are broke.
In conclusion, I will say a word about transfer payments to the provinces. If I remember correctly, transfer payments to the provinces have been cut by $48 billion since 1982, including $12 billion for Quebec alone, but that did not improve the government's financial situation. So we must not fall into the trap of thinking that this will do much to improve government finances. First of all, it is shifting the burden to the provinces. This will be hard on several provinces whose credit ratings are substantially lower than that of the federal government. The federal government's financial situation is worse, except that it is easy for them to generate revenue by collecting more taxes, but in theory only because people would not stand for it in practice.
This did not put government finances on a healthier footing and it is not a good approach. We must also look at job creation, an issue on which the government is very silent. It lacks a vision. In summary, yes to selective cutbacks, first in the administrative machinery, at the Department of National Defence. We must also collect unpaid taxes. We can achieve a real reduction in overlap, which provides much more effective ways to create a better climate and improve the economic situation. However, I doubt very much that this is the approach contemplated by the government and that concerns me a great deal. In any case, people will have to make choices soon and we will see which vision of society they prefer, especially in Quebec.
