Mr. Speaker, I am very pleased to have this opportunity to speak on the basis of our report. I intend to speak on a number of things. First, I will look at Canada's economic record over the last three years. Second, I will look at some of the difficulties we faced as a finance committee in making the difficult decisions needed to make our recommendations for the next budget. I will then go through some of the decisions we did take and then conclude.
Looking back over the last three years, the financial record of the government and the Minister of Finance is truly remarkable. When we took office, Canada's debt was at $500 billion. Combined with the provincial debts of $188 billion, every single Canadian, man, woman and child, owed $24,000.
When we took office the deficit was $42 billion. In his three budgets, the Minister of Finance has taken us from that $42 billion, or 6 per cent of our gross domestic product, down to a figure well below 3 per cent of our gross domestic product. In his economic statement to the House of Commons, the finance minister said that by the year 1998-99, the deficit will be down to 1 per cent of gross domestic product or $9 billion.
When this figure is achieved it will no longer be necessary for the government to borrow from the markets to fund its annual deficit. This will mean that the deficit will be balanced in the eyes of every other country in the world because they go on the basis of financial requirements as opposed to the national accounts that we have pursued.
Part of this has been achieved through low interest rates. Because of the minister's fiscal responsibility, Canada has been able to lower its interest rates 20 times since March 1995. Interest rates have come down by five full percentage points. It started off two and a half percentage points higher than the Americans on the short end. It is now two and a quarter points lower for short term bonds and debt instruments. We are also equal to or less than the Americans going out to 10-year bonds.
Foreign borrowing requirements, which were the highest of the G-7 when we took office, are now being brought under control. This means that a degree of economic sovereignty has been reintroduced into the fiscal process. International financial markets will dictate to us less and less in terms of what Canada can and cannot do. This is so important in giving us the options for the future to set our economic agenda.
Over this period of time economic growth has increased. The Bank of Canada now recognizes that next year the economic growth rate will be 4 per cent or greater. This will be the fastest rate of economic growth of any of the G-7 countries.
In spite of all of this good news, one of the very difficult and agonizing facts of life is that unemployment is still very high at 10 per cent. If members from every side of the House could have one wish, I am sure it would be to see that every Canadian who wants a good job has a good job.
What is our record in spite of this very sobering fact about unemployment? Over the past three years, Canada has created 644,000 net new jobs. This is not to be scoffed at. This is at the same time that the federal and provincial governments have been going through incredible downsizing and unfortunately having to lay off public servants.
When we look at the record of 644,000 new jobs, what has happened in other countries in the world? Those 644,000 new jobs created in Canada is 87,000 jobs more than the four European members of the G-7, more than Germany, England, France and Italy combined over the same period of time.
The growth in jobs in the United States has been about comparable to that of Canada. We still have a huge gap. Therefore the finance committee of the House of Commons asked Professor Andrew Sharpe to come before us because of the work he had done in putting together a number of research papers and economic thinkers in this area.
He explained to us that the Canada-U.S. unemployment gap can be explained as follows. Seventeen per cent of it is definitional because United States does not count passive job seekers. Eight per cent of it is because the U.S. has about four times as many people incarcerated in jails and prisons. Naturally, these are going to be the people with the lower educational levels and the ones who would not likely fit as readily into the job market. That accounts for 25 per cent.
Fifty per cent of it is because of the cyclical weakness in the Canadian economy and the output gap we have vis-à-vis the United States. The remaining 25 per cent, he explained, was largely due to structural differences, namely higher benefits for the unemployed and second, different immigration policies.
We do not take any consolation from this because we realize that what we have to do is get more and more Canadians back to work. This has to be our major priority and preoccupation.
How can we best do this? We are seeing how the low interest rates are now creating incredible benefits for Canadians. We are seeing how the decrease in interest rates have resulted in a saving to a homeowner on a $100,000 mortgage of $3,600 a year.
We have seen how this decrease in interest has resulted in a decrease in the cost to a person buying a car on time of $525 a year. That is a $15,000 car. This decline in interest rates has resulted in savings to a business person who is borrowing $1 million a year of $34,000.
It is critical to the economic progress, to the increase in the growth rate and to job creation to maintain a course of monetary and fiscal policy that will ensure low interest rates. Nothing can do more to help create jobs in the future.
Over this period of time we have been in office, the Minister of Finance has had a record of achievement unparalleled in my generation not only in terms of the things I have talked about but in meeting his deficit targets and reintroducing a sense of credibility into the office of the Minister of Finance.
In the past, deficit targets had not been met. They never were. They were done on a five year rolling target basis where governments typically put off the difficult decisions until the fourth and fifth years. On the other hand, our minister has stuck to the two year rolling targets and in every year has not only met his deficit target but has surpassed it. His last deficit target of some $32 billion for 1995-96 he surpassed by more than $4 billion.
We in the Finance committee had to deal with the issue of what we do now that we are in a surplus position vis-a-vis our deficit targets. We had three alternatives. One was to use these surpluses to further reduce the deficit and eventually perhaps start to pay down our enormous and growing debt load.
The second one which many people called for was to introduce at this time a major tax cut. We had many suggestions as to what the tax cut should be.
A third option, urged on us by many, was to increase expenditure programs. One big item where we were called upon to increase expenditures, including by the official opposition, was in transfer payments to provinces.
We wrestled with all the options that were open to us and we felt that on balance we have come up with an approach which is balanced. We must above all else continue to finish the job of meeting and surpassing our deficit targets. But because we do have a little room to manoeuvre and subject to an update of economic circumstances before the next budget, we have suggested targeting six different areas. Those selected target areas were selected based on our Canada wide consultations, listening to Canadians and hearing their priorities, and also as members of Parliament listening to what we have heard in our constituencies and from our own colleagues.
The six areas we have chosen to target for action in the forthcoming budget, all within the context of finishing the jobs we have started, are the following.
First, children and poverty. We have suggested that the working income supplement might be increased in order to target the children of the working poor. Families that are among the working poor, as we heard before our committee, often have benefits of $3,000 a year less than those who are on social welfare. This creates the welfare wall, a disincentive for those on social welfare benefits to go into the workplace.
Second, we have targeted Canadians with disabilities. Over the past number of years, decades, the benefits going to those with a disability have eroded mainly because of the lack of indexation.
A wonderful job was done by the hon. member for Fredericton-York-Sunbury and his task force in identifying the increased cost that people who have a disability suffer simply because of that disability, increased costs which can prevent them from becoming active members of Canada's economy. We have called for modest measures to help recognize the added costs of those with disabilities.
Third is the area of literacy. We were shocked to learn in our deliberations that 42 per cent of Canadians do not possess the literacy skills necessary to deal with basic reading material such as newspapers. Even more shocking, only 22 per cent of Canadians have the highest literacy skills which are required in the new knowledge based economy of the future.
We owe a great deal of credit to Senator Joyce Fairbairn who established the Secretariat for Literacy which mobilizes thousands upon thousands every year to deal with this issue of literacy. We have called for substantial increases in its small budget which is only $22.3 million.
Fourth, we have asked that consideration be given to helping students who are bearing highly increased costs to get their own education. We have suggested three income tax measures which could help recognize the increased costs of tuition and attending a post-secondary institution.
Fifth, one of the great reasons that we have this huge unemployment gap with the United States is, as Dr. Andrew Sharpe pointed out, the problem of our output. It is basically a question of productivity. Since the 1980s Canadian productivity has not gone up and this is the major reason for our high unemployment.
One of the reasons we have not had this increase in productivity is that Canada does not fare well by international standards when it comes to our level of research and development. We feel it is important to target research and development and science and technology at this time. We have called for three different measures.
The first is to renew the program which funds the Networks of Centres of Excellence. According to George Connell, who appeared before us, this program for the Networks of Centres of Excellence is the most effective instrument yet discovered for capturing the benefits of academic research for the advantage of the Canadian economy; universities and businesses collaborating on a nationwide basis to apply our basic research and get it commercialized.
Second, we have called for increases to Canada's three granting councils. These are the Medical Research Council, the humanities council and the NSERC, the engineering council and science and council. They grant moneys to post-secondary graduate students in our universities to help them do their research on a post-doctrine basis. It is one of the most effective programs we have for ensuring that we have highly educated people here in Canada who do stay here to do their graduate work and hopefully afterward.
Third, we have called for a new type of infrastructure program.
Infrastructure one was good. Six billion dollars was mobilized in the three levels of government to replace wasting infrastructure at the municipal level. This was a concrete and mortar type of program. We of course cannot afford that type at this time.
We have said we should have a new type of infrastructure investment in our future going into our research and development facilities of our universities, hospitals and other research institutions. The Government of Canada would put up one-third and another one-third could come from the other levels of government or the private sector. This is the type of infrastructure that would
create short term jobs during the building, yes, but even more important, it would give rise to an expanded base for R and D in Canada and the creation of those long term jobs which conduce to our productivity and our economic future.
The sixth area where we have asked the government to target in the next budget is the voluntary and charitable sectors. We have had enormous cutbacks over the past three years. We realize that many Canadians have seen their programs diminished. Many Canadians have suffered as a result of that. We take no joy in that.
However, at the same time, we have seen a renewed commitment by the voluntary sector to help make this a better and stronger country. Over six million Canadians every year volunteer their time and efforts to help their fellow Canadians. This amounts to about a billion hours of contribution in terms of work. That is the equivalent of 617,000 full time workers or 5 per cent of all jobs in Canada.