House of Commons Hansard #155 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was budget.
Gilles Duceppe Bloc Laurier—Sainte-Marie, QC
Mr. Speaker, after the dollar's wild ride last month and the recent rise in interest rates, yesterday, the renowned rating agency Moody's put Canada's credit rating under review.
My question is for the Minister of Finance. Since Moody's explained that its warning was due to the unacceptable levels of the federal and provincial deficits, does the Minister of Finance admit that his strategy to shovel his deficit into the provinces' backyards is making financial markets even more nervous?
Paul Martin LiberalMinister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec
On the contrary, Mr. Speaker. We indicated very clearly to the provinces that our intention was not to shovel anything into their backyards but to work in close co-operation with them to really solve our common problems by putting our fiscal house in order at the federal and provincial levels. I must say that, at our meeting with the provincial finance ministers, they understood that very well.
Gilles Duceppe Bloc Laurier—Sainte-Marie, QC
Mr. Speaker, around this time last year, the Minister of Finance announced that he would show his true colours in his 1995 budget. We learned this week that the real Martin budget will be the 1996 budget.
Does the minister admit that Moody's warning is based on the financial markets' fear of having to defer the real decisions for another year?
Paul Martin LiberalMinister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec
Mr. Speaker, in our last budget, we took more measures to solve Canada's financial problem than in any other budget in the last decade.
We said that last year's budget was the first phase and that the second phase would be this year's budget. And that is still our strategy.
Now, am I to understand from the hon. member's comments that he is against our intention to notify the provinces in order not to cause any surprises and that he is trying to promote the Conservative policy of causing surprises and offloading responsibilities onto the provinces? Well, that is not our intention.
Gilles Duceppe Bloc Laurier—Sainte-Marie, QC
Mr. Speaker, as you know, the road to hell is paved with good intentions.
Since the finance minister's performance aimed at shaping public opinion has gone on for too long and cost hundreds of millions of dollars because of the rise in interest rates, can the minister finally act responsibly and announce today the date of his next budget in order to end speculations hurting the Canadian economy?
Paul Martin LiberalMinister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec
Mr. Speaker, again, I indicated very clearly that we were following a timetable that was set a long time ago. There is a budget every year and we intend to table our budget in due course. At that time, I will be pleased to respond to the hon. member's question regarding the date.
Michel Bellehumeur Bloc Berthier—Montcalm, QC
Mr. Speaker, my question is also for the Minister of Finance.
In putting Canada's credit rating under review, the New York firm Moody's based its decision partly on concerns that the next budget will increase taxes.
Will the minister admit that his inability to target tax iniquities as well as his refusal to pledge not to increase taxes in the next budget are additional sources of concern for financial markets?
Paul Martin LiberalMinister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec
Mr. Speaker, I am very sorry to contradict the hon. member, but if you heard Moody's announcement, you know that the decision has absolutely nothing to do with the
budget, nor with any assumptions regarding taxes. That decision was prompted by a review of federal and provincial finances.
Michel Bellehumeur Bloc Berthier—Montcalm, QC
Mr. Speaker, I have a supplementary. When the minister says that he wants to target the tax shelters available to the rich, something which we heard before in this House, is he thinking of people who earn $26,000 a year, as was the case in the 1994 budget, when he went after the tax credit for the elderly? Are these people the rich Canadians to whom the minister is referring?
Paul Martin LiberalMinister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec
Mr. Speaker, in the last budget, we eliminated many tax loopholes, including butterfly transactions, the $100,000 exemption on capital gains and the benefits enjoyed by corporations with subsidiaries and affiliates abroad.
I do not know how the hon. member defines the rich, but let me tell you one thing: We, Liberal members, do not consider that a person with an annual income of $26,000 is wealthy.
Stephen Harper Reform Calgary West, AB
Mr. Speaker, my question is for the Minister of Finance.
He will know that despite his assurances, which are widely believed, that the government will meet its short term targets, a downgrade of Canada's credit rating now appears to be inevitable. This will lead to higher interest rates, higher borrowing rates and higher mortgage rates for all Canadians, rates that have risen considerably since the government took office.
Will the minister admit that his targets, whether or not they are met, are totally inadequate? That is what the markets are saying.
Paul Martin LiberalMinister of Finance and Minister responsible for the Federal Office of Regional Development -Quebec
Mr. Speaker, I am sure that on reflection, the member would want to think about what he has just said.
I am sure that he does not want to stand in the House and express to the world that the credit rating of this country will be downgraded. I hope that in his supplementary question he will pick up on that point.
A reading of the Moody's press release does not lead to the conclusion that the member has just drawn. Let me reaffirm that the 3 per cent target is an interim target. We are going to hit it and that is a very substantial accomplishment. Our ultimate goal is to eliminate the deficit.
Let me assure the member that we are going to hit our interim target and we are also going to hit our ultimate target.
Stephen Harper Reform Calgary West, AB
Mr. Speaker, the money markets are judging the performance of the government and they are not judging that performance favourably.
The minister must admit the 3 per cent target will add at least $100 billion in debt over the short term. At best with current growth rates and interest rates, the markets are discovering that this means a likely continued deterioration in the debt-GDP ratio.
Will the minister admit that the 3 per cent target is inadequate and must be revised on more fundamentally sound economic grounds?
Paul Martin LiberalMinister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec
Mr. Speaker, the hon. member will admit that the reason for the increase in the debt is not the target we have set but is the accumulation of the debt that we have inherited.
Whether it is this target or whether it is a target set by the Reform Party, a tail would exist. We have said very clearly that the 3 per cent target is an interim target.
Interim means interim. We have set a series of short term goals to make sure that we do not make the mistake of the previous government, which was to have longer term goals and allow people to postpone the day of decision.
We have set short term mileposts and we are going to hit them. We are going to continue to hit them until the finances of the country are put in a healthy state.
Stephen Harper Reform Calgary West, AB
Mr. Speaker, it was the government's decision to ignore that advice and to lose the valuable first year in office. It is irrelevant to the money market whether the government hits a target of nearly $40 billion.
To help restore credibility to his fiscal policy in the budget, will the minister set definite targets beyond 1996-97 and specify the tough actions necessary to reach them?
Paul Martin LiberalMinister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec
Mr. Speaker, we have made it very clear that we are going to operate on a set of rolling two-year targets, that we are going to deal with the profound structural changes of this economy and the government spending needs.
As a result of the actions taken in this budget, and the actions taken in the last budget, which was the most substantive in the last 10 years, we are going to do what we have always said we would do, put the country's finances in a sound state.
I understand his advice. It is well taken. I have great respect for the question. The only question I ask is: Why did he not give the same advice when he was working for the Conservative government and it allowed this debt?
Laurent Lavigne Bloc Beauharnois—Salaberry, QC
Mr. Speaker, Canada is now defending its tariff on agricultural products. The agriculture and international trade ministers have repeatedly suggested that Canada's legal position would not be strong enough to save its tariffs on yogurt and ice cream, most of which is produced in Quebec, where producers stand to lose more than $100 million if the government does not support them.
My question is for the Minister of International Trade. Since the GATT agreement provides that tariffs will replace all other measures at the border to protect agricultural products, how can the minister be so dubious about the strength of the Canadian position on yogurt and ice cream?
Roy MacLaren LiberalMinister for International Trade
Mr. Speaker, I am not sure that I fully understood the question. The Canadian government intends to defend the dairy and poultry industries vigorously, as I said the other day. That of course includes yogurt and ice cream.
Laurent Lavigne Bloc Beauharnois—Salaberry, QC
Mr. Speaker, this is all very well, but the fact remains that Canada's legal position is more or less supported by GATT and NAFTA. So why is the minister negotiating another agreement, outside GATT and NAFTA, with respect to ice cream and yogurt?
Roy MacLaren LiberalMinister for International Trade
Mr. Speaker, there is no question of negotiating another agreement, if I understood the question. Our position is fundamentally, and has continued to be, that the protection afforded the dairy and poultry industry under the new World Trade Organization is the policy we are pursuing.
The United States has taken another view, that there is a commitment under the NAFTA to go to zero tariffs on those products. That is not our position. It may be the American position. Our position is clear. It is entirely defensible. We intend to pursue it vigorously, in the consultations which the United States has requested.
Herb Grubel Reform Capilano—Howe Sound, BC
Mr. Speaker, my questions are for the Minister of Finance.
Everyone knows that social spending, broadly defined, takes up about 70 per cent of all program spending. Therefore, budget balancing requires social spending cuts, not as a matter of Ideology but of simple arithmetic, to use the words of the Minister of Finance.
Does the Minister of Finance agree that yesterday's announcement by Moody's was caused by the absence of a clear commitment to substantial social spending cuts?
Paul Martin LiberalMinister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec
Mr. Speaker, the answer is no.
If you read Moody's press release, it did not assign a cause for blame in terms of social spending. It looked at the overall financial condition of the federal government and the provinces.
There is no doubt as we approach the budget that it is going to be important that we cut government spending. It is going to be important that we cut government spending in each part of its operation.
I would remind the hon. member that most studies in this area have also indicated that short term cutting of social spending hurts people's health, their ability to be trained and their ability to get work in the long run. As a leading economist I am sure the hon. member would agree that would add to the deficit. That is the balance that we have to bring to this particular exercise.
Herb Grubel Reform Capilano—Howe Sound, BC
Mr. Speaker, I am very sorry to have that answer because I think the capital markets will not like it.
A revenue increase in tax measures announced for the next budget will drive more Canadian investment abroad. The way he talks, the Minister of Finance will have a good shot at becoming the man of the year for job creation in the United States.
Does the minister not agree that it is time to stop the tired Liberal rhetoric about tax fairness, do what is right for Canada and rule out tax increases in the next budget?
Paul Martin LiberalMinister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec
Mr. Speaker, we are in the next budget going to deal with all levels of government spending in all areas. There should be no doubt about this government's determination to break the back of the deficit. We are going to do that. We are going to do it fairly because fairness is the essence of Canadians
supporting a government's action in facing up to this burden. We are going to do it that way. Taxation may or may not be part of it.
The debate that I continue to have with hon. members opposite is the supposition that the current system is perfect, that there is no need for further fairness to be built in, that there is no need for further efficiency. That is wrong. The tax system must evolve. The tax system must be improved. We intend to make it happen.
In terms of job creation, 460,000-odd jobs have been created in this country. It is the best job creation record of any country in the G-7. I am damned proud of what we are doing.
Jean-Guy Chrétien Bloc Frontenac, QC
Mr. Speaker, my question is for the agriculture minister. Milk producers in Canada should be able to count on the government standing up for their interests in respect of the Canadian customs tariffs disputed by the United States. If its past record is any indication of what is to come, one might fear that the government may give in to pressure once again.
Are we to understand from the remarks of his colleague for international trade that Canada is preparing to drop yogurt and ice cream, thereby creating a significant gap in the supply management system?