Debates of March 2nd, 1995

Borrowing Authority Act, 1995-96

[Jim Silye, Reform, Calgary Centre, AB]

Mine and-If you have a personal problem and have to go somewhere, I think it should be respected.

The government is selling a lean, mean government but is increasing its size at a future cost to millions of taxpayers. It is sophistry, clever but misleading.

Despite the hype, the Liberal budget is not a great budget. It does not go deep enough, fast enough or is it compassionate. Liberals have not come clean with the Canadian public. They are trying to retain their popularity and are playing games with numbers.

The budget is merely acceptable compared to what we have seen in the past. It does not stop the digging fast enough. As Alberta treasurer Jim Dinning said the other day about the budget, it is like getting excited over a student that always comes home with Fs on his report card and one day brings home a C minus.

Will we consider the budget as our soft targets? Number one, soft targets. The Liberals are headed in the right direction. They have to make some cuts. They have addressed some cuts, but they have not made enough cuts.

No balanced budget is in sight. That is the target they have to set but will not set. This is why the leader of the Reform Party is going to be the next Prime Minister of Canada. Canadians are going to recognize that is where we should be and that is what will be in the best interest of saving the country.

The Canada social transfer that the government sneaked in is another example of sophistry. It is going to confuse the provinces. The Bloc Quebecois, rightly so, is screaming loudly and justifiably about how it will affect Quebec. The Liberals cannot answer. They will not answer.

The fourth problem is that the fiscal House is just not in order. The combined spending cuts in the budget and revenue increases will amount to $29 billion over the next two years. That sounds great. However, at the end of their term overall spending will have increased even higher than where they started. After four years of Liberal government overall spending will be up by about one-half billion to one billion dollars. Despite the cuts, it is not a balanced budget. Despite the cuts, the debt will grow. Despite the cuts we will be no further ahead as a nation. All that

pain just to pay the interest on the debt. Why can the Liberals not get it through their heads that we have to get to a zero deficit?

I propose that Parliament reject the budget for its failure to eliminate the deficit quickly and decisively within the life of this Parliament by asking further generations to bear the cost of our fiscal responsibilities.

I propose that the finance minister reintroduce a new budget in the fall that reflects Reform's suggestions to balance the budget over a three-year period.

We are continuing the cycle of treading water. Eventually our arms are going to get tired. We are going to sink, sink as fast as the Titanic when we hit the wall. Hit the wall we will if we do not eliminate the deficit. No country can allow its debt to continue to grow as we are in Canada and expect to survive.

That is why we presented our taxpayers' budget, a budget that gives Canadians real hope. It gives the Liberal government a plan to adopt. It shows them the vision Liberals lack.

[An hon. member]

Have you been at a golf club?

[Jim Silye, Reform, Calgary Centre, AB]

I have a problem with the comment about the tan I have. My wife was rushed off to hospital in sunny California. It was an emergency. That is why I have a tan. I do not appreciate it when members keep referring to that when I am trying to give a serious address on the budget. If they just make jokes about the tan, that is fine. But once they know what it is about I would appreciate a little more respect.

Our taxpayers' budget gives Canadians hope. It shows them a vision and defines a real problem, that of the debt and the interest costs to service that debt. It offers a solution of how to get to a zero deficit so that we can manage the country's finances. We have to get our fiscal house in order so we can start looking at the debt and at ways and means of reducing it. Our children and our grandchildren should not have to continue to carry this heavy, heavy load.

I repeat one more time. Our taxpayer's budget gives the Liberal government an opportunity to adopt that approach, to get to zero within the life of its term. Because if it does not, we will get elected and we will do it.

The debt and the rising interest costs to service that debt is the problem. I have tried to point it out. I have offered solutions. Our party has pointed it out. Our party has offered solutions. Despite all the wisecracks from the finance minister, despite all the rhetoric about how the Reform Party this and the Reform Party that, the Liberals are taking some of our agenda. Why not take all of it? Stop the digging.

[David Walker, Liberal, Parliamentary Secretary to Minister of Finance]

Madam Speaker, I welcome this opportunity to speak on second reading of Bill C-73, the borrowing authority bill.

Before I speak directly to the provisions of the bill, I would like to put this legislation in its proper context. The amount of borrowing authority requested in the bill is directly connected to the financial requirements set out in the budget. The information required to deal with the financial aspects of the bill is set out in the budget.

It is very important that this bill be passed as quickly as possible. If borrowing authority is not in place early in the new fiscal year, there will be severe constraints placed on the government's financing program. All remaining borrowing authority granted by the Borrowing Authority Act, 1994-95, will be cancelled at the end of this fiscal year except for a $3 billion non-lapsing amount.

Once this amount is depleted, the government would be limited to using section 47 of the Financial Administration Act which restricts borrowing to short-term funds.

In such a situation, no bonds could be issued except to fund maturing issues, of which there are two in the first quarter of 1995-96. Any delay in the passage of this important bill beyond the end of the current fiscal year, therefore, could be costly to the government and to Canadian taxpayers, and would expose the government to the additional interest rate risk implied by increased short-term funding.

Given the government's large financing program, delaying bond financing will also be potentially disruptive of the capital markets which could result in higher debt servicing charges. Therefore, it is critical that borrowing authority be secured as soon as possible.

The budget has been a topic of much discussion both in this House and elsewhere this week. And well it should be. As has been pointed out by my colleague the Minister of Finance, the budget he presented last Monday is an "historic response" to an "historic challenge".

The challenge is brought very much to our attention as we debate this bill. This country's economic future is put at risk by the $500 billion debt we have accumulated-a $500 billion debt that leaves us all too vulnerable to the harsh impact of interest rates.

And yes, we recognize that this legislation seeks to borrow even more money, adding to that debt. But in asking hon. members to support this legislation, I draw their attention to the fundamental reform of government spending set out in the budget and the commitment of this government to meet its deficit targets.

The ultimate goal of this government is a balanced budget. There should be no doubt that we will achieve it.

But we are not going to achieve this goal through the magic of long range projections as was attempted in the past. Nor will we achieve our goals by projecting overly optimistic increases in economic growth and cheerful interest rate forecasts.

Our approach has paid off in success in not just meeting the targets for 1994-95 but in fact doing better. Last year in our first budget we projected a deficit of $39.7 billion. We now estimate that the deficit will come in at about $37.9 billion, some $1.8 billion under target.

The underlying deficit, that is without the one time charges incurred in restructuring government, is $4.4 billion below target. Revenues of $1.2 billion are above the conservative estimates in program spending, a full $3 billion under our projections.

These positive effects on the deficit were only partly offset by the $1 billion in higher than expected interest rates, so the $2.4 billion contingency fund did not have to be touched.

I would like to go directly to some of the aspects of this legislation because in my short time I want to make sure that my colleagues understand exactly what the nature of this borrowing bill is.

With the measures we are taking in the budget announced on Monday there is no question we will achieve the target of $32.7 billion in the upcoming fiscal year and $24.3 billion or 3 per cent of GDP in 1996-97.

We are backing up our very prudent economic assumptions with a substantial contingency reserve, which next year will be $2.5 billion and the following year will be $3 billion. Looking ahead, our contingency reserve will do more than just protect our target. If it is not needed it will not be spent. It will go toward reducing the deficit even further.

This underscores one of the basic strengths of our planning assumptions. If interest rates and growth do better than our forecast-and remember that we have taken a very conservative forecast-and if we simply compare it to the private sector average, in 1996-97 the deficit could drop below $19 billion. That is $5.5 billion less than what was projected in the budget.

By that time our financial requirements, the new money we borrow from markets, will fall to $13.7 billion, a drop of more than $11 billion from the amount asked for in Bill C-73. That is substantial progress of which every Canadian should be proud. It will be just 1.7 per cent of GDP, down from 3.5 per cent of GDP in 1994-95 and a full 5 per cent in 1992-93. Based on the national budgets for 1996-97, Canada is projected to do better than the United States, Germany, Japan and every other major industrial nation.

The details of Bill C-73 contain three basic elements: authority to cover financial requirements for 1995-96, exchange fund account profits, and a non-lapsing amount. In total we are requesting authority to borrow $28.9 billion for the 1995-96 fiscal year.

First, there is a provision for $24.9 billion of authority to cover anticipated borrowing requirements to meet the net financial requirements set out in the budget.

Second, there is a provision to cover $1 billion of exchange fund account earnings, which gives rise to additional Canadian dollar borrowing requirements. These earnings, although reported as budgetary revenues, are retained in the exchange fund account. They are not available to finance ongoing operations of the government.

Third, there is the usual $3 billion non-lapsing amount, the same amount requested in borrowing authority in the past seven years. The non-lapsing amount can either be used during the course of the year to manage contingencies such as unexpected foreign exchange requirements or it can be carried forward to the next fiscal year.

There are some minor technical provisions in the bill that more clearly link fiscal year borrowing authority with fiscal year borrowing requirements. One provision provides that in 1995-96 the borrowing authority may only be used after the new fiscal year begins. Another provision stipulates that for the purpose of calculating borrowing authority usage the effective date is April 1.

Until the bill is passed the government may continue to use the $3 billion non-lapsing amount provided for in last year's Borrowing Authority Act. Any portion of the non-lapsing amount that is used will be deducted from the basic amount of borrowing authority being sought today. This prevents the non-lapsing amount from effectively adding to the borrowing authority next year. Also the bill will cancel all borrowing authority remaining from fiscal 1994-95 once it is passed.

As background information I would like to review the government's debt operation for the current fiscal year up to the end of January. So far this fiscal year in the domestic debt program the government has issued about $21.4 billion in marketable bonds, $1.5 billion in Canada savings bonds, and $1.4 billion in real return bonds. There are also net redemptions of $7.8 billion of treasury bills. This provides a total of $16.5 billion in net new market debt.

I also report to the House on last fall's Canada savings bond campaign. The government introduced two innovations aimed at revitalizing the Canada savings bond program. First, a new three-year price feature was introduced, aimed at making CSBs more attractive to retail investors. Second, the government expanded the sales window making CSBs available over a longer period of time. They were priced competitively with other products in the market, cost effective relative to other

sources of financing and produced sales of $7.5 billion or a 40 per cent increase over 1993. After accounting for redemptions during the year, the net increase in outstanding Canada savings bonds was $1.5 billion, as I indicated earlier.

Regarding foreign currency debt, outstanding Canada bills increased by U.S. $2.2 billion to $6.3 billion at the end of January. These are short term U.S. dollar denominated bills issued from time to time in the U.S. market to fund Canada's foreign exchange reserve.

In July 1994 the government launched a $2 billion five-year Euro bond issue. The issue was used to increase reserves and diversify the sources of U.S. dollar funding of Canada's exchange reserve.

In summary, the bill is straightforward and contains no unusual provisions. All the information needed to deal with it is before the House in the budget, the main estimates and related documents.

I therefore urge the House to proceed with this legislation as quickly as possible so that new borrowing authority will be in place at the beginning of the new fiscal year and the government's regular borrowing program can proceed as the fiscal year begins.

Borrowing authority is a normal part of the operations of government. I urge all members of the House to support the bill.

[Jim Silye, Reform, Calgary Centre, AB]

Madam Speaker, I would like to ask a question of the member for Winnipeg North Centre.

When talking about the budget elements in his speech he used words like would, could and should. Those are not good enough in these time. He also pointed out that his government was on track to meet its deficit target of $25 billion at the end of two more years. It is my contention and our contention that this will add to the problem. Our proposal for a deficit target is zero, not $25 billion. We believe that solves the problem. It does not add to it.

Would the member explain why a deficit target of $25 billion is better than a deficit target of zero?

[David Walker, Liberal, Winnipeg North Centre, MB]

Madam Speaker, I thank the hon. member for his question and for his speech. I was listening carefully to him. I know he is concerned about these issues. He brings a real passion to seeing our debt reduced.

I assure him that every member on the government side is equally committed to balancing the budget and to making sure that future generations of Canadians are not saddled with the debt as we currently are.

The major difference between the government and the third party is the quickness related to actually delivering the savings needed to produce a balanced budget.

If the hon. member reviews his speech, I caution him not to deal with the total expenditures but to look at the amount of money spent on programs. From the beginning of the government we have been in the process of reducing it from $120 billion to $108 billion. That is significant progress.

We would like to be optimistic and say that the economy will continue to perform as it did last year at 4.5 per cent growth, but we know that in the past many governments have disappointed Canadians by making high growth and revenue projections and in the end have come back to Canadians with increased debt. We refuse to do that.

We also know that politicians are politicians. If we set objectives far down the line and say that in five or six years we will have a balanced budget, and a crisis comes up such as the Mexican peso crisis in January, people say not to worry about it too much because we can adjust further down the line. We can hold their collective feet to the fire and say our objective this year is x billions of dollars in debt and we are going to reach it. We are not going to compensate in two or three years; we are going to look after it right now.

The Minister of Finance and the Prime Minister have been very effective in bringing a discipline to the government. Through the actions we are taking, we are setting an example for many other governments across the country. At the turn of the century we will see ourselves in a very fine position, one we can all be proud of.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, the member from the third party who previously spoke gave a speech of almost catharsis.

I was hoping the Parliamentary Secretary to the Minister of Finance could comment on the very important issue of revenue. The member from the third party had characterized the government's budget as being overly optimistic on the revenue side.

My recollection of the straw budget put together by the third party was that its revenue projections were $16 billion. They would reduce the deficit down to $25 billion, which is where the government is going. Basically that means all cuts the government is proposing would theoretically be on top of the third party's budget.

Could the parliamentary secretary clarify the situation with regard to the allegation that the revenue projections are overly optimistic?

[David Walker, Liberal, Winnipeg North Centre, MB]

If anything the revenue projections are very prudent. We are very cautious about 1996. The American economy has been growing very rapidly with increased interest rates. We are concerned that our export markets may be dampened somewhat because of a slowdown in the American economy. I know American economists and observers are very nervous about whether interest rates have gone up too high in the United States.

Since so much of our revenue on the corporate side is based on our export industries, to say nothing of the jobs in markets such as the automobile industry and so on, if we do not make prudent projections on the revenue side we will be caught with increased costs in UI and reduced corporate profits and will find ourselves without the revenue.

Therefore, as I said in response to an earlier question, the last thing we want to do collectively as parliamentarians-in this respect the whole House should be in agreement-is set up a situation where we disappoint Canadians again. I would much rather be in a position of surprising them with good news than coming back again with a budget that has to be redrawn based on faulty optimistic projections.

The Department of Finance, through the minister's instructions, has been very cautious in the way it has drawn up the projections. We have insisted that the more optimistic projections in the private sector be scaled down. We have been very cautious in the way we have set out the amount of money available to us in two years.

[Gérard Asselin, Bloc, Charlevoix, QC]

Madam Speaker, I have a comment and a question for the Parliamentary Secretary to the Minister of Finance. They are both related to the referendum campaign in Quebec. Is it possible that the real federal budget will be tabled in 1996, after the referendum?

The government's budget increased by $3 billion, in spite of cuts of $5 billion to programs. Moreover, the Minister of Human Resources Development intends to cut some $15 billion, over a five-year period, in social programs, a measure which has yet to be approved by this House. Again, the federal cuts in transfers to the provinces will result in higher provincial deficits.

The provinces will have no choice but to transfer their responsibilities to the municipalities without providing them with the necessary financial support. Consequently, ordinary Canadians will once again have to foot the bill.

Whether it is with the left or the right hand, low and middle income taxpayers end up having to pay. In the context of privatization, the federal government eliminated all subsidies to regional airports and ports or harbours. This has a major impact on every region in Quebec, whether the local economy is based on services, tourism or industrial activities.

I have a simple question for the parliamentary secretary. Is he prepared to admit in this House that the real budget will be tabled after the referendum campaign in Quebec?

[David Walker, Liberal, Winnipeg North Centre, MB]

Madam Speaker, the Minister of Finance tabled our budget for this year. There will not be another budget after the referendum. The message sent to the provinces is very clear. Many changes will occur, but we did inform provincial finance ministers, including the Quebec finance minister, of our strategy. We have an agreement with the provinces to postpone changes until next year-

-to provide an opportunity for governments across this country to change and to adjust. The federal government is losing 45,000 employees. It is with a great deal of sadness that we are making these changes and changing many of the programs. By definition, as we change programs it affects every single province equally. There is no doubt about that.

We expect that as the provinces go about their work they will have to make individual decisions as to the best way to improve the situations in their own province. It is not for me to guess whether it would include changes in programs, cutbacks or whatever. We will have to wait for provincial ministers of finance with their respective cabinets to make their own decisions and explain it to their individual populations.

[Jim Silye, Reform, Calgary Centre, AB]

Madam Speaker, in the member's answer to his own colleague about the operating budget of the government, he asked that we not look at the interest costs but just look at the operating budget and how the cuts are there.

I acknowledge the cuts in government operations. They are lower. There are some cuts there. However, the member is not recognizing that the interest cost to service the debt is going up faster or as fast as the cuts that are being made. That is why I will repeat the objective is to get to a zero deficit, not to one of $25 billion.

In the member's household budget, whether he has a mortgage now or if he ever had a mortgage, are the interest costs to service the mortgage on his home not a part of his expenses? Does he have a budget which includes his income and his expenses for food and clothing, but the expenses for shelter do not count? Does he keep that aside saying that he can borrow money indefinitely on that? No. A business cannot do it either. The debt servicing costs of a corporation are also included in its costs.

The hon. member should put the interest costs and the operating costs to government together as one. Do not make the same mistakes previous finance ministers have made. Separate the two and try to offer sophistic arguments. Get to the bottom of the overall spending and lower the overall spending so that we get to zero. Does that not make sense?

[David Walker, Liberal, Winnipeg North Centre, MB]

Madam Speaker, the member makes a lot of sense. If the member had included it in his original speech then my comments would not have come forward that way. I will say again that it is incumbent upon all of us to make sure the Canadian public understands that progress is being made on restructuring government.

We are as chagrined as the next person about the high cost each Canadian faces with the debt. When I stand in the House to ask permission to borrow $28.9 billion, it is not done with a lot of glee. This is a tremendous burden we are adding. We understand that.

Last year I believe we asked for $32.3 billion. It shows that we are making progress. Our demands on the international markets are becoming less each year. In this view, we are making real progress without causing widespread grief and harm.

I do not know if members have had a chance to look at the newspaper today, but looking at the public opinion polls, Canadians have been willing to accept a tough budget. We presented a tough budget and their reaction is very supportive.

The opposition parties should understand and appreciate the willingness of Canadians to participate in such an exercise, including the tax issues and so forth. I am very proud with the way the government is in sync with the Canadian population.

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Madam Speaker, you may have guessed that I am particularly interested in the budget's impact on agriculture.

However, I would like to start by commenting briefly on the underhanded way the provinces are being treated, the lack of job creation measures, unfair tax measures and the inequity of certain cuts. If I were to give my impression of the budget brought down by the Minister of Finance in a single sentence, I would call it next year's budget.

As usual, the budget we were supposed to set this year has apparently been postponed until next year, in other words, until after the referendum.

This budget is like a time bomb, and it will be a couple of years before we feel its full impact. Take, for instance, transfer payments to the provinces. In the budget brought down on Monday, transfers for health care, education and social assistance will be cut by $2.5 billion in 1996-97 and $4.5 billion in 1997-98. This is a cut of 40 per cent over three years.

This measure will very likely destabilize provincial budgets and force the provinces to make drastic cuts or even shift part of the burden to the municipalities, as Quebec Liberal Minister Claude Ryan did so neatly in 1992.

And on top of that, there is the obligation to meet so-called national standards. Once again, the provinces are sitting under a federal sword of Damocles.

In the last federal election, the Liberal government was elected on its promise to create jobs. However, after barely a year and a half in power, that same Liberal government decided to ignore its promise to create jobs. There is nothing in Monday's budget to create employment. Nothing but layoffs, as many as 45,000. There is nothing for 800,000 unemployed workers who are looking for work in Quebec. Nothing. The only program that has created some employment and so-called temporary jobs, the infrastructure program, will lose $200 million from its initial budget announced last year.

This is a three-way program, so that in the end, not $200 million but $600 million will be cut.

This budget is unfair because it maintains the preferential treatment of family trusts for another five years, which will give the parties concerned plenty of time to find other ways to evade taxes, and believe me, they will. It is unfair because it comes down relatively hard, but on the wrong people. In the short term, the public will feel the impact of tax hikes on tobacco and gasoline.

Furthermore, the Unemployment Insurance Program will be cut by 10 per cent. The government is going to take money from the unemployed to pay off our debt. This is obscene!

[Some hon. members]

Hear, hear.

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Meanwhile, the government has no plans for real tax reform. It will raise the corporate tax rate by 12.5 per cent or 1/8, but I used to teach math, and 1/8 of what is not much in any case barely adds up. So what it really means for the big corporations is that there will be an increase from 0.2 to 0.225 per cent of corporate capital in excess of $10 million. Let me tell you that a lot of people in my riding would be delighted to have that rate applied to their personal income tax.

That being said, as the official opposition critic for agriculture and being a farmer myself, I was particularly surprised and, in fact, appalled at the inequity of the budgetary measures concerning agriculture. Last week, the Minister of Agriculture said to anyone who would listen that his government would treat all Canada's regions on the same footing, and he said quite seriously that no agricultural sectors would be more equal than

others. Now we must face the fact that the government is saying one thing but doing another.

In this budget, the finance minister cuts the agriculture department's budget by 19 per cent, or one fifth. During a time of cutbacks, it is accepted that everyone has to do his share, but what really hurts is the way the cuts are distributed. It is one thing for agriculture to be hard hit, but quite another if it is unfairly affected. The injustice from one region to the next is simply absurd.

In short, to make up for eliminating the Crow's Nest rate for Western grain transportation, the government will give grain growers $2.9 billion. But dairy producers in Quebec will see their federal subsidies cut by 30 per cent over two years. That amounts to a $32 million cut without any compensation whatsoever.

The message is clear but unacceptable: the deficit is being tackled on the backs of Quebec and Ontario dairy producers. It can even be said that if the target price for milk were increased because of these cuts, the increase would be borne by consumers and processing industries. It is tantamount to a consumption tax.

Certain cuts are inevitable, I must agree. The agriculture minister was telling me last week that so much had been said about the Crow's Nest rate over the last 25 years. Even in the opinion of farmers and people involved in grain transportation and processing, there were serious shortcomings in the Western grain transportation system, such as the detour to Thunder Bay to be eligible for the subsidy.

For ages people have seen the waste and inefficiency in grain transportation. And the saga has continued since the Liberal Party sitting opposite us took office. They have consulted, gone around in circles, did some fancy footwork in the House and tried to arrive at a consensus with the people in the community. Nothing has worked.

The Minister of Finance finally decided to discontinue the transportation subsidy under the WGTA. To compensate Western grain producers for this loss, the finance minister announced a number of interim measures. For example, owners of agricultural land, in the Prairies only of course, will receive a single, non-taxable lump sum payment of $1.6 billion.

Add to this the $300 million, 5 year program to help producers adapt to the WGTA. On top of this, export credit guarantees totalling one billion dollars are being offered to help producers sell their grain and other foodstuffs. The sum of these three programs is $2.9 billion. The federal government will invest close to $3 billion to compensate grain producers in the three western provinces.

And just listen to how clear and praiseworthy the agriculture minister's goals are. First, to cut costs; second-listen up all of you producers in Quebec-to encourage farmers in the West to diversify; third, to encourage them to get involved in value-added activities. In contrast, dairy producers miss out. The Minister of Finance decided to reduce the subsidies for industrial milk producers by 30 per cent. How terrible.

For all intents and purposes, Quebec accounts for close to 50 per cent of Canada's industrial milk production, so do not kid yourselves or try to tell me that Quebec producers will not be harder hit than those elsewhere. In this case, the federal government is not offering any compensation. In Quebec alone, this cut will mean close to $32 million in losses. The Minister of Finance was off target when he reduced dairy subsidies by 30 per cent over the next two years.

The more than 12,000 industrial milk producers in Quebec will see a 15 per cent drop in their current subsidy of $1.50 per kilogram of milk fat in 1995 and another 15 per cent drop in 1996. For a farmer who produces 10,000 kilograms of fat, which is the average production in Quebec, that will translate into an income loss of $2,250 this year and of almost the same amount next year. That is over $4,000 in losses.

The government will compensate these farmers by reviewing the future of subsidies in collaboration with the provinces and the industry. It is all well and good to talk about it, but that is not going to put bread and butter on the table. Contrary to the cuts in the West, the dairy sector cuts will not be implemented in tandem with any transitional measures. Talk about a double standard.

If we examine this question more closely, we realize that, over the long term, this measure is even more disastrous for dairy producers than it appears. With the new international figures, all sectors are going to have to adjust. In the case of sectors with quotas, like dairy production, these changes are practically already in effect. This coming July, quotas will be replaced by tariffs.

I would like to digress a moment on the subject of tariffs. You no doubt know that the United States decided it wanted to test the tariffs adopted last year, in December 1993 that is, by the 120 members of the WTO at the Uruguay round of the GATT talks. Today, they are being contested. I am really looking forward to seeing how vigorously the government will protest, just how far it will go to defend the tariff structure for dairy products, eggs and poultry.

The tariffs themselves will gradually disappear. Instead of anticipating costs and investing to provide support for dairy producers wanting to develop new niches in the market or become more competitive in order to face the music once tariff barriers relax, what do they do? They cut, they cut and they cut some more.

A dairy producer friend of mine, whom I will identify, I am sure it would please him,-Laurent Saint-Laurent-told me, when he acquired his parents' farm in 1971, that subsidies represented 25 per cent of his income. Today, they represent barely 6 per cent.

However, in the West, farmers are being compensated for the loss of subsidies by being allowed to diversify their economy so they can then compete with agriculture in Eastern Canada, which receives absolutely no financial assistance from the federal government.

They are exaggerating by cutting a number of subsidies. Western producers wanting to get into beef or pork or wanting to compete with dairy producers will therefore be able to do so with federal money. If this is what fair treatment for everyone means, I would hate to see what unfair treatment means in this country.

[An hon. member]

Lies.

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Yes, lies, Madam Speaker.

Other budget measures will also have a strong impact, for example the 30 per cent cut in the social safety net for farmers. The Minister of Finance opposite should listen more closely, as he is the one who will cut $250 million over three years. That, too, is a three-part program. If the federal government contributes 70 cents, will the $1.00 paid by the farmer and the province be increased to $1.15? I am asking the question.

I am also concerned about the closing of two of the seven research facilities in Canada. In Quebec, two facilities will be closed, one in La Pocatière and one in L'Assomption. That is terrible.

Of the $164 billion in this year's budget, $50 billion will be used only to pay interest costs. Let me give you an example of mismanagement.

On April 1, 1997, after investing more than $7 million in La Pocatière in less than 10 years, Agriculture Canada will close the experimental farm in La Pocatière, the oldest one in Quebec, which opened in 1910. They are closing it now after investing $7 million. Where is this government's vision?

In closing, I urge Quebec farmers, whether they are dairy, beef or pork producers, farrow or finish operators, to open their eyes and look at the Liberal government opposite that is treating them so unfairly and inequitably.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Madam Speaker, I rarely heard such grandstanding. The hon. member opposite would have us believe that we are not cutting deep enough and cutting too much at the same time, that we are cutting in the wrong places, and so on. Yet, the vast majority of the population told us again yesterday in a poll that the government's budget was just right, like just about everything else this government does.

The hon. member told us that the budget was next year's budget, suggesting that we did not cut deep enough this year. He then said that we cut too much this year, right after he accused us of postponing the cuts until next year instead of cutting this year.

He says that the government does not create jobs. Yet, 432,000 jobs have been created since the beginning of last year. According to the news we heard this morning, where was the highest rate of economic growth among all G-7 countries? As you may have guessed, Madam Speaker, right here in Canada. That says a lot about the comments made by the hon. member opposite.

As this is a question and comment period, I would ask the hon. member-I must say that I disagree with his comments and that I do not want to use unparliamentary language-if he knew what he was talking about when he alleged that Quebec dairy producers were being treated unfairly compared with Western grain farmers?

Does he know that Western grain farmers will lose 100 per cent of their subsidies, which represent a large part of their income, while dairy producers-1,000 of whom live in my riding-will lose 15 per cent of their subsidies, which account for 9 per cent of their income? Fifteen per cent of 9 per cent, all of which can be recovered under the production cost formula within the Canadian dairy plan. Does he know this already? And if he does, why did he say the things he just said, when he knows better?

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Madam Speaker, I thank my colleague opposite, the Liberal Party whip and hon. member for Glengarry-Prescott-Russell, for his question.

It is true that he has many farmers in his riding. However, I read yesterday in a newspaper that one of his constituents, Réjean Pommainville of the FAO in the riding of Russell, said: "The withdrawal of the dairy subsidy represents 6 per cent of farm income for Ontario dairy producers". He went on to say: "We can assess at $4,500-" It is one of your constituents and not someone from Frontenac.

[The Acting Speaker (Mrs. Maheu)]

I am sorry, but you must address the Chair.

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Madam Speaker, Réjean Pommainville is not from Saint-Laurent-Cartierville but from Russell, in the hon. member's riding. He said: "We can assess at $4,500 the loss per dairy farm in Ontario".

How much will the dairy producers in his riding receive as compensation? Nothing! How much will Western producers receive? An amount of $2.9 billion. That is unfair. Since forty-seven per cent of industrial milk is produced in Quebec, Quebecers will be hit hardest by this budget. Dairy producers know it and I hope that they will understand some day.

In August 1995, when the Canadian Dairy Commission is asked by producers to approve an increase in the price of milk, it will probably agree and pass on to all Canadians the increase that you did not have the courage to impose. It will be a consumption tax on butter, cheese, yogurt and ice cream.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Madam Speaker, I thank the hon. member for Frontenac for his praise of a close personal friend of mine, Réjean Pommainville.

[An hon. member]

A former friend of yours.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

I do not think the hon. member opposite is in any position to decide who my friends are. Mr. Pommainville can decide for himself. He is a distinguished member of the community in Limoges. His father, Armand Pommainville, who is now in his 80s, was one of the presidents of the Russell County Liberal Association. I take this opportunity to thank him for his great work for the Liberal Party.

The hon. member opposite always failed to admit what all Canadians know is true and he should know as well: we have a production cost formula for price adjustment. Also, he failed to respond to the following: why did he claim that dairy producers were in a situation similar to that of grain producers and that dairy producers were being dealt with unfairly when this is not the case?

We know full well that there is a production cost formula in place, and that there is no comparison with Western grain producers, who are loosing 100 per cent of their subsidies, which is a much higher percentage. Finally, does the hon. member not know that corn producers in his region for example, as well as many other grain producers in Eastern Canada, were not all that crazy about the Crow's Nest agreement?

[Jean-Guy Chrétien, Bloc, Frontenac, QC]

Madam Speaker, there is no question in what the hon. member for Glengarry-Prescott-Russell just said. The name of his riding is so long, it reads like a newspaper. My point is that the Western Grain Transportation Act has been in force for 98 years. It has always cost billions of dollars to operate. Yes, Transport Canada did reduce the amounts involved gradually, from year to year.

If you look at the books, you will see a sum of $560 million mentioned in there. Did you know that grain was stored in hopper cars, shipped to Thunder Bay and then back to Vancouver? This system was administered by our governments, and the Liberals have been in power almost all the time since 1960. The Liberals just watched hopper cars travel back and forth at taxpayers' expense. Let us pay.

Now, they want to save $560 million in the future, while paying out nearly $3 billion. This is a disgrace.

How much is there for Quebec farm and dairy producers in there? Nothing, as usual; in fact, they have to make further sacrifices. Madam Speaker, our colleague, Mr. Landry, would have a question, if you would recognize him.