Madam Speaker, it is for me a great pleasure to give today my support to Bill C-73, the Borrowing Authority Act, which has reached the third reading and final concurrence stage in this House.
This bill is in fact an internal economy measure which is introduced once a year to allow for the continuation of the permanent operations of the government. This does not mean that the government does not consider this measure seriously, quite the contrary.
This bill follows the presentation by the Minister of Finance last month of the most important and significant budget for the future of this country since the Post-War years.
This budget brought in-depth changes to the nature of federal spending. Its provisions were adopted because the need for a sound administration has become incompatible with a growing national debt that has a destructive impact nation-wide.
This bill provides for a borrowing authority of up to $29 billion. A large portion of this amount accounts for the appalling and unacceptable gap that has developed between projected federal expenditures and revenues.
Canadians are well aware of the situation. They understand that the cost of outrageous deficits means higher taxes and interest rates and less economic growth in the future.
These same reasons explain why the 1995 budget and its harsh measures have had so much support from the people.
In the 1994 budget, we undertook to keep the deficit under $32.7 billion in 1995-96 and to reduce it even further to 3 per cent of the GDP, that is $24.3 billion in 1996-97.
This budget contains harsh measures that will make sure we reach those goals despite higher interest rates than expected.
However, this budget goes much further than the goals set for the next two years. Our reforms will continue to be productive in the following years and will allow us to go on and hit the final target of this government, that is a balanced budget.
We will be able to claim that our mission has been achieved the day this kind of bill is no longer necessary.
To hit our deficit targets we are implementing cumulative savings over the next three years of $29 billion. This is the largest set of actions in any budget since the demobilization after World War II.
These actions mean changing the size and shape of government. By 1996-97 program spending will fall from $120 billion last year to just under $108 billion this year. The structural changes we are making will ensure significant deficit reduction continues in 1997-98 and beyond. The bottom line benefits of this will be dramatic
The deficit will fall to $32.7 billion in 1995-96 and to $24.3 billion the year after, as we promised. With the deficit in 1996 at 3 per cent of GDP, this will be the lowest level since 1974-75.
By that time our financial requirements, the new money we have to borrow from the markets, will drop to $13.7 billion. That will be just 1.7 per cent of GDP, lower than any currently forecast for any other G-7 nation. We are again backing up our prudent economic assumptions with substantial contingency reserves; $2.5 billion in 1995-96 and $3 billion the year after. This means we can still come in on target next year, even if interest rates are 1 per cent higher and growth half a per cent lower than our forecast.
Our contingency reserve can do more than protect our target. If it is not needed it will not be spent. It will go to reducing the deficit even further. This underscores another benefit our prudent planning could deliver.
If interest rates and growth do better than are forecast and just conform to the private sector averages, the 1996-97 deficit could drop below $19 billion. That is $5.5 billion less than this budget projects. That would bring our deficit down to 2.3 per cent of GDP.
Even if we do no better than our projected targets, 1996-97 will be an important milestone since the debt will no longer be growing faster than the economy. The debt to GDP ratio will have begun to decline at last. That is the key to fiscal sustainability, to put our debt ratio on a permanent downward track.
I need not go on summarizing our budget plans and the promise they carry. The House has heard days and days of budget debate. The court of public and market opinion has ruled strongly in favour of our courageous strategy.
Let me turn briefly to the thrust of Bill C-73. I again ask the House to support and speedily pass this bill.
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. Without passage it could lead to a situation in which no government bonds could be issued except to fund maturing issues. The bottom line here could be increased costs to taxpayers because it would expose the government to the additional interest rate charges and risks implied by increased short term funding.
Bill C-73 contains three basic elements: authority to cover financial requirements for 1995-96; a provision for exchange fund account profits; the renewal of a non-lapsing amount. In total we are requesting authority to borrow $28.9 billion for the 1995-96 fiscal year.
The largest element is the provision for $24.9 billion of borrowing to meet the net financial requirements as set out in the budget. There is a provision to cover $1 billion of exchange fund account earnings, earnings which would make necessary 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.
There is the well established, over the last seven years, $3 billion non-lapsing amount. This sum can either be used during the course of the year to manage contingencies such as the unexpected foreign exchange requirements or it can be carried forward into the next fiscal year.
There are some technical provisions in Bill C-73 that more clearly link fiscal year borrowing authority with fiscal year borrowing requirements.
For example, one provision provides that the 1995-96 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 this non-lapsing amount 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. Once it is passed, this bill will also cancel all borrowing authority remaining from fiscal 1994-95.
This bill is a regular feature of each year's legislative agenda. It contains no remarkable or unexpected provisions. Its supporting background was fully documented in the budget, the main estimates and related documents.
However, what is remarkable in both senses of the term is the clear, courageous and concrete action the Minister of Finance set out to set the federal deficit on the fast track. By doing so, our government is laying the foundations for continued national economic renewal and restored national unity.
I therefore encourage the House to approve Bill C-73 post haste so the new borrowing authority will be in place at the beginning of the new fiscal year, 11 days from now.