Mr. Speaker, I want to say to the leader of the third party with humour, not anything else, that if he wants to speak without props I suggest he look around here, then look around behind himself where he came to this debate fully propped for his presentation.
It gives me a great pleasure to join in the debate today, which perhaps is one of the most important times of our history, the discussion of the 1995 budget presented yesterday here in the House by the Minister of Finance.
I do not have to tell the House that it not only deals with the questions of cutbacks, with the question of some of the nitty gritty and the program review. In a fundamental way the Minister of Finance has laid out for this government and for the people of Canada how we are going to go about getting government right.
This philosophy is clear. In order to fulfil the ambitions of this government-I hope of the whole House-our job here is to provide an environment for economic growth, for creating jobs for Canadians and to see that there will be new economic wealth shared by all Canadians. In this context that we have set out the first step we must take is to make sure we get government right and we do things properly here in Ottawa.
This budget will result in considerable savings so that we can meet our red book commitment to reduce the deficit. Furthermore, if the economy does better than forecast in our extremely prudent estimates, the deficit could go down even faster.
This will pay off not only this year, not only next year, but because we are getting it right this time, it will pay off long into the future.
As an aside, everyone in this House should be heartened by the tremendous positive reaction. This budget has been accepted by Canadians from coast to coast, by people who are concerned about our deficit but on the other hand wanted to be given hope that the government was not going to hurt their lives unnecessarily. Yes, the price is being paid by many people in many ways in many walks of life. On the other hand, it is also gratifying that Canadians have come to a point in this development where they can say this is the right step, that we are doing the right things for Canada. International observers who do have an influence on our success have also seen that the Minister of Finance has taken the right steps and is going about putting our house in order.
This budget is different, very different from the previous Tory budgets. People ask me that question all the time. We are not just making rhetorical flourishes. We are doing very precise things. We are going to be successful. It is not a budget of promises. It is a budget of commitment. We proved last year that we can fulfil our commitments. We will prove it next year, the year after and the year after that.
Most important for people on this side of the House, this is not a Conservative budget in a fundamental way. It adheres to the Liberal legacy of nation building. It is clearly rooted in the principles of economic leadership, compassion and increased
fairness. We will not leave Canadians with another decade of disappointments in the development of the budget and the development of their government.
Today's budget is a call for action. It is a time for opportunity and challenge. As our Prime Minister has said on many occasions, if we have to make cutbacks in government, make them while the economy is growing. The economy is growing now and now is the time for firm action.
We have seen in the past year, not because of our actions but because of the collective wisdom of Canadians and their increased confidence, over 443,000 permanent jobs created in this economy. We have seen a growth rate that far outstrips all of our fellow countries in the G-7. We have shown the way among western industrial nations about how to grow an economy.
We do not take credit for that. We understand that it is not us but we hope that we are helping to provide the environment which makes businesses and individuals confident of the future because that is the way that this economy will continue to grow.
We also have an opportunity at the political level. Canadians clearly indicated that they wanted vigorous measures to reduce the public debt so that we can get rid of the crushing burden of high taxes and resulting interest rates.
The challenge we face is just as clear. Canada's economic future is in real danger because of the $500 billion debt which makes us extremely vulnerable to the brutal impact of interest rates.
These interest rates have continued to rise under pressure from the U.S. and Canada. Since October, short-term rates have risen by about 2.5 percentage points.
It is very important to emphasize this point. I want to say to all parliamentarians here today that sometimes during the course of our committee work we wonder if it has an influence, do the ministers listen, does the Prime Minister listen, do opposition members have an influence. I think the finance committee stands out in its work as a great example of how parliamentarians contribute to the development of policy.
We went through long hearings. We heard from over 650 witnesses in the fall. We came to the conclusion that the government must be prudent, that the government must pay attention to increasing interest rates, that we must take dramatic and deliberate actions to reduce the deficit. The Minister of Finance heeded those words.
Although we seemed to be on the drastic side when we made our recommendations our warnings bore out the truth, that interest rates have gone up and made the job of this government much more difficult.
To the credit of the Prime Minister and the Minister of Finance and other colleagues in the ministry, they responded and produced a budget which showed our own willingness to reach our targets. This caution will be what propels this government to do the right thing in the years to come.
Let us stop and think. What would have happened if we had done nothing? There are voices in the country and voices on the lawn in front of Parliament which say this is really an okay situation, all this talk about deficits is some right wing plot to destroy our social programs. If we had not done anything we would have been $5 billion higher in our deficit this year and we would have missed the mark by $10.6 billion next year. In other words, we would be further behind than when we formed the government on the commitment to reduce the deficit to 3 per cent of GDP. The actions are necessary and we are in the process now of taking the necessary steps to rectify the situation.
In order to reach our budget targets as the Minister of Finance explained yesterday we are implementing cumulative savings over the next two years of $15.6 billion. Over $13 billion of these savings will be in spending cuts and there will be no increase in personal income tax rates.
As the leader of the third party said a few minutes ago, this is great news for Canada. We have to realize that we have attacked the problem of government debt while at the same time recognizing the legitimacy of middle class families, that the tax burden has shifted over the past 15 years far to much to them and therefore to their children and their ability to have economic security.
This government has listened to that message and listened very carefully and responded with prudence, responded in such a way that Canadians understand that we are putting this government in order and are calling upon them as a last resort to lend assistance.
We are also taking firm action to make the tax system fairer, close loopholes and increase the contribution of big business to the fight against the deficit.
Taking the next three years together, the budget delivers almost $7 in spending cuts for every $1 in revenues. These actions are changing the size and shape of the government by hard choices on priorities. By 1996-97 program spending will fall from $120 billion down to $108 billion. This is the most dramatic action seen in any government for decades.
The most important point of all, in 1996-97 the debt will no longer be growing faster than the economy. When the Minister of Finance says on public occasions that we are going to break the back of this, we are going to get off this treadmill, this is the key point. The debt to GDP ratio will begin to decline. That is the key for the fiscal sustainability and that will put us on a permanent downward track.
There are going to be payoffs. We want Canadians to appreciate this. This is the first step. Budgets are not made or broken on one night's announcement, they are made by Canadians adjusting themselves and departments adjusting themselves. There will be a payoff. The payoff is that we will make sure we reach our targets.
We set up substantial contingency funds: $2.5 billion this year, $3 billion the year after. Even if interest rates go another full percentage point higher we will still be able to reach our targets.
It is this type of caution in the pasture which has caused us to reach our target, to do better than we told Canadians we were doing, and that is what is contributing to the confidence of Canadians in their national government. We are saying things that we can do. We are not setting targets five years down the line or ten years down the line so that when a crisis occurs like Mexico everybody says do not worry about this particular short term problem, we can put it off and look after it in the future.
What we are saying in this House is that as a crisis occurs we adjust, we reduce our spending, we reach our target year after year. That is the confidence builder, not having some vague target in the future which says we can reduce the deficit to zero in three or four years. That does not help anybody. That just frustrates people. That leaves a bad taste in the mouths of the politicians who are over promising.
It is very important that every member in this House understand the responsibility that we have in the debate, that Canadians understand that we are going to reach targets and that those targets will be reached in such a way that it is done fairly and consistently. When people look back at the period of the mid-nineties it will not be like it was in the mid-eighties, there will be real accomplishment by their national government.
Our contingency reserves could play a dual role in the future. Not only will they ensure that we will meet our objectives, but, if they are not needed they will not be spent and will allow us to further reduce the deficit.
This is yet another dividend to be reaped through prudent economic forecasting.
If interest rates and growth do better than our forecast and conform to the private sector average the 1996-97 deficit could drop dramatically. It could be much less than projected in the budget. We could have a deficit under 2.5 per cent instead of 3 per cent of GDP.
The government is being very careful on this point. We want people to understand that our targets are realistic and if we do better it is through good luck. We are being prudent in each of our particular projections because we do not want to fall short. We think that the credibility, not of this government but of the nation, is based on targets reached year after year.
The heart of the process to achieve these goals was not done in the hurried up fashion of a Minister of Finance sitting around a table with a few officials. In my first year the minister would call me in from time to time and we were trying to figure out what could be done. We had only been in office for a few months and it was very much a learning process.
What the minister decided quite appropriately, which was supported by his cabinet colleagues, was to have a program review which in some respects sounds esoteric. A program review gave a group of ministers an opportunity to talk with each other about what they wanted to see reshaped in government, a new strategy within government. It was not to throw around programs and say, cut here and cut there. It was to say department by department, what is it that we have to get out of and what is it that we have to emphasize? How do we redevelop an industrial strategy? My colleague from Don Mills is involved with that. How do we develop a strategy on science? How do we reduce subsidies in the agricultural field? How do we make the transportation system more effective? These are not catch as catch can questions, these are hard to answer; nor are our answers this year the final answers.
We will find this will be a progression of innovation. We will be back again and again suggesting new ways to do things. This budget is going to energize our colleagues on this side to do the right thing and to find new ways for the government to operate. I hope the opposition parties will make suggestions that we can incorporate so that we can develop a stronger and stronger national government.
Of course, we did not wait for the budget to take concrete action. Our review of agencies, offices, councils, boards and commissions-which ended in early February-will lead to the abolition of 73 of these 120 organizations. The 47 remaining entities will be restructured and rationalized. This will allow us to eliminate 665 positions held by governor-in-council appointees and save $10 million a year.
We could mention a lot of examples that have proven to be really fruitful in this process. Spending by fisheries and oceans will fall $210 million over three years. We have found that there are more officials than there are active fishers. Transport will move from being an operator of the transport system to a role of regulator and policy maker.
There has been a large question raised in the minds of the public about subsidies to business.
In fact, business subsidies will be cut in every department. The reduction will affect agricultural and transportation subsidies that were established decades ago.
Overall the budget will cut subsidies in half, from $3.8 billion to $1.5 billion by 1997-98.
We will also do other measures on cost recovery, for example in dealing with immigration issues.
On the question of provincial transfers, we are taking action to reform the provincial transfer system. We think that our innovations will create a system that is more sustainable and more responsive to community needs.
In the last budget, to set the stage to show ourselves to be supportive of each of the provinces, we renewed equalization for five years. There is no change in that commitment in this budget.
For 1996-97, the other major programs, established programs financing for health and education and the Canada assistance plan, will be converted into a single, consolidated block transfer called the Canada social transfer.
It is a matter of converting the Canada Assistance Plan to the block funding system already used for EPF, thus allowing the provinces to innovate according to their priorities.
However, the budget also makes it clear that the principles in the Canada Health Act must be adhered to. And there is no change to the principle that the provinces must provide social assistance services without minimum residency requirements.
The introduction of the CST will see total provincial transfers reduced by $2.5 billion next year and the year after that by $4.5 billion. This means that the total of all major transfers to provinces in cash and tax points will be 4.4 per cent lower next year than it is today.
By comparison, the drop in federal spending will be 7.3 per cent. To put it in another perspective, the reduction by the second year will equal only about 3 per cent of all provincial aggregate revenues. We have hit ourselves harder than we are hitting anybody else.
There are two other issues which are still outstanding: unemployment insurance and support for the elderly. I will touch on them very briefly.
Sometime this year, the Minister of Human Resources Development will be tabling legislative proposals to put in place, based on the best features of the UI program, a reformed program the emphasis of which will be on assistance rather than dependence.
This reform will take place in 1996 and will reduce the size of the program by a minimum of 10 per cent. For 1996-97 this means the reform will secure savings of $700 million. I will choose another time to speak about the payments to the elderly.
This may be a difficult budget in some ways but the optimism with which Canadians received it last night and today shows that we are on the right track and that we have the support of the country.