Mr. Speaker, it is a pleasure today to join in the debate on the budget.
In response to some of the comments about the group of Liberals here today, they are different from some Liberals from the past. It is the nature of the times. They have come with a different perspective and it has shown up directly in the budget.
The overriding goal of the government since it came to power has been jobs and growth. We believe good economics and good social policies are one and the same thing. The most fundamental way good social policy begins is with a job. We must respond to the challenges of our times. We must adapt to the new economy and the new infrastructure based on ideas and innovation. The very nature of government must change. We must develop a new notion of responsibility. The time has long past when governments can or should do everything.
Several major things have happened. The world economy has become truly integrated. We must think globally. Trade barriers have been brought down. Communications are instant and transportation is swift. Markets never sleep. There are no longer any islands. Like it or not, there is no place to hide.
Since 1984 our debt has risen by three times. Compound interest is gobbling us up and the government now has a two track approach to sustained and sustainable economic growth. Growing economies produce jobs; economies that are not producing do not produce jobs.
The key to growth is productivity, which is how well ideas, workers, resources and investments are brought together in the country's economy. It is about ingenuity, better management and paying attention to the common sense of our workers.
How do we get high productivity growth increases, the only way we can increase real incomes? We must first improve our skills. We must have better innovation. We must provide a welcoming climate for investment, and let no one forget it. We must remove any disincentives we have created for people and business. Those were disincentives created by government. We must get our fiscal house in order.
The budget's plan introduces far reaching action to restore fiscal health which is essential for a strong, growing economy. The budget will fundamentally reform what government does and how it will do it. It will bring permanent change in the way government does business. The object is to get government right so it can fill its social and economic mandates and be more effective and sustainable. This will include deep cuts in the
federal program spending, not simply lower spending growth but substantial reduction in actual dollars.
That is fundamentally the philosophy of the majority of the governing side of the House. In a party of the Liberal Party's size there will be some who want to go further right and some who want to go further left. However, they do realize the government cannot be in every aspect of society.
I will comment on two or three things, overview of budget details and the program review undertaken, the underpinning for all of the cuts and directions of the government.
The budget is about getting government right so it can do a better job of helping to get the economy right by sustaining growth and confidence in creating new jobs while preserving our ability to help those in need. To meet this goal the budget delivers our commitment to cut the deficit to 3 per cent of the economy in two years. Some say that is not enough. Believe me, unless there is a target one can see on a daily basis, one will not hit the target.
Despite the impact of higher than expected interest rates, if economic performance is stronger than our prudent forecast, the deficit could fall at a steeper rate than was forecast. Our fiscal actions will total $29 billion in reductions over the next three years, more than any budget since the post war demobilization. In two years, program spending will be $10.4 billion less than today. It is a cumulative cut and will go on forever.
Just as important, the budget also changes the very nature of how government operates. This will ensure spending will be restrained beyond our two-year target period. The deficit will continue to fall, reflecting our commitment to eliminating it completely.
To achieve these results the budget takes fundamental action across government programs and operations. It implements the results of the program review, which I will speak to in a few moments, a comprehensive examination of departmental spending. We will focus on what is essential and do it better. The budget of some of the departments will be cut by one-half.
The budget also acts on a new vision of the federal government's role in the economy, one that includes substantial reduction in business subsidies. These will drop by $3.8 billion this year to $1.5 billion in the year 1997-98. The budget reforms major transfers to provinces, modernizing the federal-provincial fiscal regime, making it more effective, flexible and affordable.
These wide-ranging reforms mean a smaller public service. Some 45,000 positions will be eliminated, but we will manage this difficult process as fairly as possible, including the use of early departure and early retirement incentives.
This is also fair to the taxpayer. That is why the budget does not increase personal income tax. However, there are measures to improve tax system fairness. We eliminated the deferral taxes on investment income earned by private holding companies and we eliminated the ability of people to earn business or professional income by the ability to pick their own fiscal year end, an option that helps defer taxes, albeit only for the one year.
We are also eliminating all tax advantages of family trusts. We are temporarily reducing our upper limit on the RRSP contributions to $13,500 so benefits do not flow to people who earn more than two and a half times the average wage.
It is clearly a budget that places absolute priority on the expenditure reduction. It delivers nearly $7 in spending cuts to $1 in new tax revenue.
Let me speak of the program review. The budget agenda is not a plan for smaller government; it is a plan for smarter government and for the reform of the very structure of government and how it spends. The budget reflects the results of the program review we launched a year ago, and the actions taken to date secure structural reform irrevocably and deliver significant savings beyond the two fiscal years for which we have set firm deficit targets.
Achieving this goal demands wide-ranging bottom line action, and that is what the budget delivers. The size of government will be reduced substantially over the next three years. Departmental spending will be reduced by 19 per cent from the 1994-95 levels. For some departments, spending will be halved.
I mentioned that in my previous statement, but I cannot overestimate the realness of these kinds of cuts. In total, these actions will deliver a three-year saving of almost $17 billion. Let me be clear. These are real cuts in absolute dollars. They are not measures that try to pretend that a drop in the rate of spending growth is somewhat of a spending reduction.
Government programs are being redesigned by this review to make them more efficient and cost effective. Regional development agencies, for example, will play newer roles and will focus on small and medium sized business, and assistance will emphasize repayable loans, not grants.
A basic philosophy of the program review was that the federal government should not be doing what someone else can do better. As a result, we are devolving some programs to other levels of government and we are privatizing other activities. For example, fisheries and oceans will devolve fresh water responsibilities to the provinces. Forest and mineral development agreements with the provinces will be discontinued. Airports and recreational harbours will be transferred to local authorities,
and the Minister of Transport will move this year to privatize CN.
There was a lot of work done on all aspects of government. The government we will see two years from now will be far different from the government we saw at the beginning of our tenure.