Madam Speaker, I welcome the opportunity to lead off debate on third reading of Bill C-76, an act to implement certain provisions of the February 1995 budget.
The bill seeks to give concrete reality to the non-taxation measures announced in the budget, a budget of reform and renewal that has been described as historic.
This means that, over the next three fiscal years, this budget will translate into cumulative savings of $29 billion, $25.3 billion of which will be the result of spending cuts. This is by far the most ambitious series of measures proposed in a budget since demobilization, after the Second World War.
The objectives set are extremely important, but so are the means used to achieve them. Indeed, in order to achieve lasting fiscal consolidation and then fiscal balance, it is essential to change the role and the very structure of the state. We will continue to reap the benefits of this budget in 1997-98 and beyond.
These measures will have a very significant impact on future levels of federal spending. By 1997-98, program spending will total $108 billion, compared to $120 billion in 1993-94.
Although it was a tough budget, Canadians approve it. They approve it because they know we have to stop writing IOUs and get on with the business of building the 21st century economy.
By 1996-97, our financial needs, that is the new money which we have to borrow on financial markets, will go down to $13.7 billion, or 1.7 per cent of the GDP. Canada will fare better than any other G7 country.
The public debt will stop growing faster than the economy. The debt to GDP ratio will start decreasing. This is the key to a manageable financial situation, and it is the reason why we are not merely trying to reduce the deficit. Indeed, we are also determined to start the Canadian debt ratio on a downward trend.
Let me emphasize that these projections do not rest on rosy assumptions. On the contrary, prudent assumptions that were more pessimistic than the private sector average were used. The assumptions were backed up with substantial contingency reserves. We will continue to rely on prudent assumption. We will continue to set short term targets that make impossible to postpone action. We will continue to take whatever action is needed to meet our objectives. This is the course we will stay until the deficit is eliminated entirely.
Let me turn now from the budget background to the specific elements of the bill before us today. As the provisions of the bill have already been discussed at some length in the House, I will focus on a few highlights and draw the attention of members to the one amendment that is more than a technical amendment.
I am referring to the transfers to the provinces. We will never have the kind of structural changes needed if we do not reform our system of transfers to the provinces.
We must implement a system which will better meet today's needs, and we must also be able to fund that system over a long period.
As regards the first requirement, we feel that the conditions set by the federal government for transfer payments in sectors which clearly come under provincial jurisdiction should be reduced to a minimum.
Currently, the Canada assistance plan transfers come with many needless conditions that restrict the provinces' capacity for innovation and increase administrative costs. In short, the costsharing method no longer helps the provinces which are clearly responsible for designing and delivering social assistance programs and for implementing them as efficiently as possible, in accordance with the needs in the community.
This bill will deal with the situation by providing funding for the Canada assistance plan in the same way as the established programs financing did in the areas of health and post-secondary education. As a result, the current breakdown into three
transfers no longer has any basic justification. That is why we are combining them into one single block transfer program called the Canada health and social transfer, starting in 1996-97.
The Canada health and social transfer represents a new, more flexible and mature approach to federal-provincial fiscal relations but the physical situation demands that the new system also be less costly than the current one. That is why when the CHST is fully implemented in 1997-98 the total of all major transfers to the provinces will be down by about $4.5 billion from what would have been transferred under the present system. However to put this into perspective, the reduction will equal about 3 per cent of aggregate provincial revenues.
We believe our approach to provincial transfers passes three very important tests. First, the federal government has hit itself even harder. Second, the provinces have been given ample notice of the government's intentions. Third, the reduction in transfer payments is equitable across provinces.
In addition to the introduction of the Canada health and social transfer, the bill also includes other measures that will help to reduce the cost of payments to provinces. One of these measures is the reintroduction of a 5 per cent eligibility threshold to the fiscal stabilization program. This will restore the program to its original function of compensating provinces for revenue losses in the event of severe economic downturns, that is, where revenues decline by more than 5 per cent.
I want to turn now to a number of allegations about the CHST which members of the official opposition and the Reform Party have made in the debate on Bill C-76. Some opposition members have been confused about the additional flexibility which the CHST will offer provinces in the area of social assistance.
The hon. member for the riding of Quebec alleged that the government was misinforming Quebecers when it said that federal conditions on social assistance transfers were being reduced. Let us be clear on what is happening here.
This bill is a major reform of the system of federal transfers to the provinces and territories that will lead to the Canada health and social transfer, the CHST.
Starting in 1996-97, the EPF and the CAP will be replaced with one single mechanism, the CHST. Contrary to the existing system which is based in part on costsharing agreements, the CHST will be a block funding mechanism, like the EPF. Accordingly, transfers will not be determined by the provinces' spending decisions as they are under the cost shared programs.
The new arrangement will eliminate inherent limitations of the former cost shared programs and reduce longstanding irritants.
Provinces will no longer be governed by rules determining which expenditures are eligible for cost sharing and which are not. They will be free to find innovative approaches thanks to social security reform. Administrative costs of cost sharing will be eliminated. Federal spending will no longer depend on the provinces' decisions concerning delivery of their welfare and social services programs and the identity of recipients.
The Canada health and social transfer is a new vision of federal-provincial fiscal relations which gives more flexibility and freedom to the provinces while increasing their accountability, and provides more stable fiscal arrangements to the federal government.
This approach will bring about more mature fiscal relations.
The hon. member for Calgary North has been giving us contrary advice on how we should deal with transfers to the provinces. First she says there has been no consultation with provincial governments about the future of federal transfers and that the federal government has been too hasty in setting out important parameters for the health care system which will affect Canadians for years to come. However, in the next breath she attacked the government for precisely the opposite error. She asked how provinces in the health care sector are supposed to plan if the federal government will not tell them how federal transfers will be structured in the future and how much the provinces can expect to receive. The hon. member cannot have it both ways.
The government has taken a very sensible approach in dealing with the provinces. In the 1994 budget the government gave the provinces a two-year breathing space prior to making any cuts in transfers. In the 1995 budget, transfer restraint does not take effect until 1996-97, even though action is being taken in the federal backyard in 1995-96. The provinces have been given two years to manage the reductions and adjust their programs. At the same time the CHST provides more flexibility for provinces to make the necessary adjustments.
In addition, the government will soon begin consulting with the provinces and the territories to develop a permanent method of allocating the Canadian health and social transfer among the provinces from 1997-98 onward.
The federal government remains committed to a co-operative and productive approach to federal-provincial relations.
Third, under clause 13 on the new CHST, the Minister of Human Resources Development shall invite all provincial governments to work together to develop, through mutual consent, a set of shared principles and objectives that could underlie the new Canada health and social transfer.
The official opposition is trying to depict this quest for shared principles and goals as an artificial issue.
Its members would like the House and Canadians to believe that this whole process is nothing but a plot to underhandedly impose new conditions, methods or penalties. This is what I have to say about such comments.
"Mutual consent" means that no government in Canada can be subjected to new principles and objectives against its will.
In other words, only the governments that freely agree to new objectives and principles will be bound by them.
Governments that do not agree would not be bound by those objectives and principles.
So, if some provinces, including Quebec, do not agree, they will not be bound by the objectives and principles approved by other governments. Things cannot be made any clearer.
Indeed, this is usually what "mutual consent" means, an agreement made by consenting parties. The wording of the legislation is quite clear on this issue. I do not see the need to be more explicit than that.
Fourth, the Reform Party has proposed eliminating cabinet's role in enforcing the Canada Health Act as well as considerably reducing the role of the Minister of Health. Instead it would turn over this job to the federal court.
Hon. members should recall that Bill C-76 makes no substantive amendments to the Canada Health Act, only consequential amendments required by the ending of the established programs funding and introduction of the CHST. The five Canada Health Act criteria whose enforcement will be affected by these motions relate to universality, comprehensiveness, accessibility, portability and public administration.
The current procedure for applying penalties to a province is as follows. The Minister of Health initiates the process by consulting the province. If the province has not given a satisfactory undertaking to the minister to remedy the default within a reasonable time, she refers the issue to the governor in council. The governor in council decides whether penalties are appropriate, how much they should be and whether they should be reimposed.
Under the Reform proposal, the minister would instead apply to the federal court. The federal court would decide whether penalties were appropriate, how much they should be and whether they should be reimbursed.
This government strongly supports the Canada Health Act, as does an overwhelming majority of Canadians all across this country. The member for Winnipeg North is here. He has spent his whole life advocating and supporting the Canada health system. I am sure he would agree with the view of the government and my own view that if we should turn the decisions on enforcement over to the courts, we would pull away one of the most fundamental principles behind the act, which is that we as politicians and as a government must take responsibility for the Canada Health Act.
It is the cornerstone of this government. We will not accept any amendments that weaken the ability of the federal government to enforce the delivery of a system that Canadians find is one of the most attractive features of living in this country.
The provisions of the Canada Health Act which the Reform Party object to have served Canadians well since that act was passed over a decade ago. Reformers are seeking to water down the enforcement of national medicare standards, but we will not waver from our commitment. The Reform amendments would have the courts decide how the Canada Health Act is to be applied. Canadians have elected us as parliamentarians to do this job. We do not intend to shirk that responsibility.
Fifth, some opposition members seem to suggest that all our problems would disappear if only the federal government would abandon health care and other social programs and give the provincial governments more transfers of tax points.
The Canadian government has no intention of giving up its responsibilities in terms of funding major social programs. The Canada social transfer will help to subsidize the programs which are essential to all Canadians, including Quebecers, and its contribution will reach almost $27 billion by 1996-1997.
Canadians all know how important these programs are, and to suggest that the federal government should withdraw from them is preposterous, as preposterous as the suggestion that Ottawa should replace these transfers by giving up tax points. The Canadian government needs all of these tax points to fulfil its obligations towards all Canadians, including Quebecers. Everyone knows that, because they mean more for the have provinces than for the have not provinces, tax points put the underprivileged provinces at a disadvantage.
Another issue raised in the bill and in further debate has been subsidies to business. In the course of program review, departments across the government took action to reduce business subsidies. Overall we are proposing to cut business subsidies by 60 per cent. This includes agriculture and transportation subsidies that were designed decades ago.
The bill proposes to repeal the Western Grain Transportation Act and to terminate the western grain transportation subsidy paid to railways effective July 31, 1995. The reform of the WGTA will result in savings of $2.6 billion over the next five years.
This is much more than a deficit issue. The elimination of the subsidy will encourage the development of value added processing and the production of higher value crops. It will result in a more efficient grain handling and transportation system. It will help maintain our market access for grain sales in foreign countries and comply with our obligations under the agreement establishing the World Trade Organization.
A number of further initiatives will facilitate the transfer to the new system. These include a payment of $1.6 billion to owners of prairie farmland plus a $300 million transportation adjustment fund. The bill also provides for the regulation of maximum freight rates that can be charged by railway companies to move grain from the prairies.
There is an amendment to the bill on the matter of freight rates that I would like to point out to the House. Clause 21 of the bill has been amended to strengthen the provisions governing the review of the maximum regulated freight rates. Instead of an automatic sunsetting provision for maximum rates, the Minister of Transport will be given the authority to determine whether the rates should be fully deregulated during a review in 1999. These amendments are designed to provide greater rate protection to shippers. Should the benefit of full rate deregulation become apparent during the period leading up to the review, the Minister of Transport will have the authority to remove the maximum regulated rate protection.
The bill also proposes the elimination of the Atlantic freight subsidies under the Atlantic Region Freight Assistance Act, the ARFAA, and the Maritime Freight Rates Act, the MFRA. These subsidies which have proven inefficient in reducing shipper costs are of marginal and declining importance to regional economic activity. This measure to take effect this July will save nearly $100 million a year. To help ensure that the elimination of the subsidy contributes to a better transportation system, the budget announced a five-year $326 million transportation adjustment program.
I would like to respond to some of the specific criticisms made about the Western Grain Transition Payments Act. First, the hon. member for Saint-Hyacinthe-Bagot, the critic for the official opposition, during his speech on May 31 stated that the transition payment of $2.2 billion is tax free. The payment being made by the government to owners of prairie farm land is $1.6 billion and is taxable. The payment is neither $2.2 billion nor is it tax free.
The hon. member has also suggested that transition payments will be made to beef and hog producers in western Canada. The payments are being made to owners of land which in 1994 produced grain or land which was in summer fallow in 1994 and which in 1993 grew grain. Payments will not be made to western beef and hog producers.
I know the hon. member has a long history of being interested in grain transportation. In committee he gave a very eloquent defence of his position. He told me he had worked on the issue many, many years ago. I very much appreciated his comments and I simply wanted to put on the record some of the perspectives of the government on the issue.
On behalf of the NDP, the hon. member for The Battlefords-Meadow Lake stated that with the repeal of the WGTA, elevator points would lose $1 million annually in income. The repeal of the WGTA will result in increased transportation costs to producers. This will encourage producers to move from being oriented on exporting grain to increasing local consumption of grain to increase diversification in the economy on the prairies.
This diversification will in turn create more jobs on the prairies. For example, the construction of a new canola crushing plant in Moose Jaw was recently announced. This plant will help diversify the local economy by producing value added processed products.
The same member has suggested that we as members of Parliament need a chance to study the effects of the removal of the WGTA. Ever since the WGTA was enacted in 1984 it has been the subject of studies and ongoing reviews. There were numerous studies conducted before the WGTA was passed. As well, there have been an extensive number of studies on the WGTA reform conducted by industry, academics, various consultants, as well as by the federal and provincial governments over the past decade.
This is not the time to study nor to continue delay. Now is the time to act. I am sure the member from the New Democratic Party understands how dramatic these changes will be on the prairies. We are all looking forward to a responsible, co-operative attitude among the producers, shippers, rail companies and provincial and federal governments to make sure this works. It is no longer the time to study.
There are also a number of amendments in the bill on the public service. The measures I have outlined so far, along with other initiatives arising from the program review, mark the transition to a more focused, effective and frugal federal government. Reducing the public service was not an objective of the
program review. Such a reshaping of the government's role and the spending cuts it entails will unfortunately have an effect on the employees delivering services to Canadians on behalf of the federal government.
By the time the 1995 budget actions are fully implemented, federal employment is expected to decline by some 45,000 or about 10 per cent. Natural attrition and the programs currently in place are inadequate to deal with changes of this scope. The government appreciates the valuable service its employees provide. We are committed to managing the reductions in a fair and orderly fashion.
In keeping with this commitment the bill proposes changes to the Public Sector Compensation Act that will allow for an early departure incentive. This incentive could be taken by as many as 13,000 to 15,000 employees in the most affected departments. We estimate the cost of the program for the public service, the military, certain separate employers and the crown to be about $1 billion which will be included in the 1994-95 fiscal year.
Other proposed changes to the act will allow for cost neutral changes to non-salaried terms of employment and for certain new kinds of leave. In addition, we are proposing amendments to the Public Service Employment Act that will give public sector managers more flexibility in staffing arrangements.
Employees affected by the downsizing who decide not to take advantage of the departure incentives will have a reasonable period to find employment elsewhere in the public service, but that period cannot be indefinite. The government simply cannot afford to pay people for not working.
Accordingly the bill also includes amendments to the workforce adjustment directive so that surplus employees in most affected departments who decline departure incentives will cease to be paid after six months and will be laid off after one year unless alternative employment is found.
The President of the Treasury Board recently signed an agreement in principle with the public service unions to assist employees affected by downsizing. He will be working through joint labour-management adjustment committees to assist affected employees in making the transition from the public service.
Our goal in introducing these and other transition measures is to be fair to the taxpayer as well as to the federal employees affected. We believe the program balances the objectives.
Today's legislation will play a key role in setting the country on the course of fiscal responsibility and government renewal. These measures are absolutely essential if we are to meet our deficit targets and refocus the government on its priorities and on the country's needs.
We have drawn directly on the advice of Canadians from whom we heard several months before the budget and who subsequently gave us advice after the budget. Canadians in turn have shown their strong support for the budget. They know it will promote better public finances and a stronger economy.
To secure the savings that will lead to the improvements we must pass the legislation as quickly as possible. Anything less will compromise our ability to reach the objectives we have promised Canadians and our commitment to a secure and prosperous future for ourselves and our children. I therefore urge all members to give the bill final approval in the House.