House of Commons Hansard #116 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was billion.


FinanceGovernment Orders

3:10 p.m.


Andy Mitchell Liberal Parry Sound—Muskoka, ON

Mr. Speaker, as I mentioned earlier, I will be sharing my time with the hon. member for Ottawa West.

I am pleased to have the opportunity to participate in this prebudget debate. As the finance committee outlined in its recent

report, the government has made good progress in meeting its economic and fiscal objectives. The 1997 budget is the time to stay the course and finish the job.

When the Liberal Party formed the government in 1993 it had as its agenda jobs and growth. Since that time it has made progress, although more needs to be done. Yet the record is clear. At the end of November nearly 650,000 more Canadians had jobs than when we assumed office three years ago. The last year alone saw the private sector create almost 223,000 new jobs. That is not yet good enough, but when we compare this job growth to the three years prior to our coming to power when thousands of jobs were actually lost we see that progress is being made.

Canada has also achieved economic growth. Since October 1993 the GDP has significantly expanded. In the third quarter of this year real GDP rose 3.3 per cent. Canada is expected to have the strongest growth among all G-7 nations next year.

These successes have been solid accomplishments. More important, the pace at which the economy and employment is expanding is and will likely continue to increase. They will do so because the government has a specific and well designed strategy to support growth and job creation. It is this strategy I should like to take a few minutes to speak to.

The government's plan addresses both immediate and long term job creation needs through five key components. First, it will set the appropriate macro economic conditions to keep interest rates low and to encourage investment. Second, it will get government right by ensuring that government programs and policies contribute to a more productive economy. The third part of the strategy is to ensure that we create opportunities for Canadian businesses to grow by selling in the world economy. Fourth, it will invest in growth through strategic investments in new technology, in worker skills and in capital projects such as infrastructure. Fifth, it will help Canadians to adapt by encouraging them to adjust to the new economy, helping small business grow and prosper and reducing the regulatory burden on business.

That strategy is working because the Minister of Finance and the government have understood the importance of appropriate fiscal and economic policy and have carried out these policies as well as any nation in the industrialized world.

On our first priority of setting healthy economic fundamentals, the accomplishments are significant. Interest rates are at their lowest level in 40 years. Inflation is at its lowest sustained level in 30 years and both factors are leading to increased investment and business confidence. In the last quarter alone business investment in manufacturing equipment and machinery was up by almost 33 per cent. This increased confidence leads to increased jobs.

On the second priority, we are getting government right. When we took office the deficit was $42 billion, almost 6 per cent of GDP. In the present budgetary plan, after the two year cycle, it will drop to $9 billion, or 1 per cent of GDP. That is an 80 per cent decrease. We will have gone from having the second worst record on the deficit among the G-7 countries to having the very best. We have achieved this success not by emphasizing increased taxation rates but by getting government right and by reducing spending.

Together our last three budgets have put in place savings which will build to $29 billion annually by the fiscal year 1998-99. By that time departmental spending will be 21.5 per cent lower than in 1994 and program spending will have declined by 14 per cent from where it was in 1992-93. Most important, the Minister of Finance is expected to table a budget with a two year plan which for the first time in 30 years will not require the federal government to enter into new borrowings. This will free investment for the private sector and will lower the economic drain of interest payments to foreign debt holders.

As I mentioned earlier, these actions have led to low inflation and low interest rates. The records show that in the long run countries with sustained low inflation tend to have lower unemployment rates.

On the third point of creating opportunities through trade, the government has again made good progress. The volume of Canadian exports has increased by 28 per cent since we assumed office. It now makes up 52 per cent of the real value of total Canadian production. In September 1996 exports were $201 billion and the trade surplus was $28 billion. Most important, it is estimated that this improvement in Canada's trade balance has created about 275,000 jobs in the last two and a half years.

The fourth component of the government's job agenda has been to invest in growth and to give Canadian businesses and workers the opportunity to succeed in today's economy. This investment has taken many forms, including technology initiatives. They are initiatives such as the establishment of Technology Partnerships Canada, a $250 million fund to lever private investment in the strategic high tech sectors of the economy. There is a new investment of $50 million in the Business Development Bank of Canada. There is the community access program which allows rural communities to access the information highway. There are many other initiatives such as the industrial research assistance program and the sectoral partnership initiative. These initiatives are making Canadians more competitive and will lead to future job creation.

The fifth component of the government's plan in our jobs and growth agenda is to help Canadians adapt. Nowhere has this initiative been more strongly pursued than in our assistance to small businesses. We have helped increase access to capital by expanding the small business loans program from $4 billion to $12 billion. We have expanded the asset base of the Business Development Bank from $3 billion to $15 billion and the Minister of Industry has established a community investment plan which

allows communities to match individuals in their areas that have investments with the businesses that need that investment in order to grow in their communities and to create jobs.

We have helped business to access information through the development of Strategis, the largest business web site in Canada. It provides our businessmen and women, the entrepreneurs who go out every day and put it all on the line, with the information they need to be successful.

With a lower tax rate on small business earnings under $200,000 and the $500,000 lifetime capital gains exemption, it will allow a small business person to continue to invest their earnings back into the business and ensure that they have some sort of wealth when it comes time for them to retire.

The government has managed the Canadian economy well. The deficit is down substantially, spending is down, social programs have been reformed to ensure their sustainability, exports are up, new investments in technology and infrastructure are taking place to secure our future.

In conclusion, the economy is growing. It is real progress. It is not enough yet and that is why the government intends to stay the course and finish the job.

FinanceGovernment Orders

3:20 p.m.


Marlene Catterall Liberal Ottawa West, ON

Mr. Speaker, I want to follow on the comments of my colleague for Parry Sound-Muskoka, on the economic accomplishments of our government over the last three years, and talk about how this ways and means motion before the House today represents the spirit of many of those accomplishments.

It is a bill primarily about taxation measures. It demonstrates admirably how one can tighten up the tax system, make it fairer, but also through the tax system achieve other social goals and goals for society.

I mentioned fairness. Our government has taken a number of measures to make the tax system fairer for Canadians. Many of them are contained in this bill. The motion will amend the Bankruptcy and Insolvency Act, the Canada Pension Plan, the Children's Special Allowances Act, the Customs Act, the Old Age Security Act. It makes amendments to numerous bills which are based on the principle of fairness and achieving a social objective as well.

Since the draft amendments which are represented in the bill were first released in 1995 many helpful comments and suggestions from taxpayers have been heard and these are by and large incorporated in the bill before us today.

First of all, millions of Canadians are putting time and money into non-profit voluntary and charitable organizations. Their efforts are indicative of the collective response to urgent human needs, particularly in a period of fiscal restraint. To encourage these efforts, the percentage of net income to which a tax break for charitable donations applies will increase from 20 to 50. It will be 100 per cent in the case of testamentary gifts.

The legislation will also provide extra support for the education of our young people by increasing the limit on the transfer of education and tuition credits. To assist parents or spouses helping to support the cost of studies, if the student is unable to take full advantage of the tax credits related to the cost of their education, the ceiling will be lifted so that additional credits can be transferred to a spouse, parent or guardian responsible for the costs of the education. That increase is 25 per cent, from $4,000 to $5,000.

We also have taken a number of measures over time to assure Canadians that the system is fair, that if they are paying their fair share of taxes, to the greatest extent so is everybody else. We have done that in a number of ways.

First, it has been a question of tightening up our taxation system, closing a number of loopholes. For instance, through a concerted effort we have increased overall general compliance with the collection of taxes to the tune of $7.7 billion extra taxes collected.

Special compliance measures in selected areas have led to the collection of an additional $500 million in taxes. Accounts receivable have been reduced through a number of different measures. We have given Revenue Canada a greater ability to obtain the information it needs to ensure that taxes are applied fairly and that they are being collected.

Our mandate has given people some assurance that people are paying their fair share. I do not think there is one of us who has not heard repeatedly, every time we have had to cut a program or reduce spending in one area or another, that we should be closing those tax loopholes and taxing the corporations. A number of measures have been taken to address those fairness issues that bother so many of our constituents.

We have tightened the rules on the forgiveness of business debt. We have improved the rules preventing the artificial or premature recognition of tax losses. We imposed a 12 per cent capital surtax for banks and other deposit institutions. We have tightened up to

eliminate abuses in the energy sector while at the same time making it a more level playing field for renewable energy sources that can then compete with the more traditional energy sources and on a fairer basis.

We have introduced tighter rules governing the taxation of family trusts. We have addressed the whole issue of assets abroad both in individual taxation reporting and in the taxation reporting of businesses so that businesses with assets abroad will now have to disclose them. Property owners with assets of more than $100,000 will be required to disclose them. The government will then be better able to monitor the collection of taxes from wealthier taxpayers.

We are planning to stop the practice of moving assets offshore to avoid paying taxes. This is an age old abuse of the system which Canadians want to see brought to an end.

This bill also takes the necessary steps to protect the future of our Canada pension plan. Until now, when businesses were in receivership payment of the employer's CPP contributions often went delinquent once the business had finally declared bankruptcy. Remaining assets were divided among the creditors and the CPP contributions were left unpaid.

The legislation before us today will ensure that CPP and similar employer contributions owed to the government will now have priority. In this time of fiscal restraint Canadians can no longer afford to see the valuable dollars that support their social programs slip from the hands of government.

Through the taxation system we have done a number of things to improve child support and support to low income families. This is a massive piece of legislation before the House today. I have been able to touch briefly on a few of its provisions but with an emphasis on pointing out to Canadians that throughout our three budgets and the measures to implement those budgets there has been a tremendous effort to assure Canadians that all Canadians are paying their fair share, that we are closing those tax loopholes that make Canadians suspicious of one another from time to time and that we are doing our best to ensure not only that we are spending wisely but that we are collecting revenue in a wise and fair manner as well.

FinanceGovernment Orders

December 9th, 1996 / 3:25 p.m.


Richard Bélisle Bloc La Prairie, QC

Mr. Speaker, in its pre-budget report issued last week, the Liberal majority on the Standing Committee on Finance identified six areas that have been targeted for action and that were described at length by the committee's chairman this morning. These are child poverty, the disabled, literacy, students, who are facing ever-mounting costs, scientific research, and voluntary and charitable organizations.

According to the committee chairman, the action the committee is looking at would cost the Canadian government approximately $2 billion annually. While we are not lacking in compassion for the citizen groups identified here, we can see the Liberals sliding back into their old ways: as soon as the deficit drops a bit, they talk about launching off once again into the mad spiral of public spending.

The main point here is that, by slashing provincial transfer payments, the Liberals have forced the provinces in turn to make drastic cuts to spending on health, education and social assistance.

The Liberals are offloading the disagreeable task of balancing the budget onto the provinces. And they talk about helping certain very specific groups that are already feeling the effects of provincial budget cutbacks that, in turn, came about because of federal cuts in transfer payments to these very provinces. Talk about cynicism.

Eighty-four per cent of the reduction in the deficit to date comes from cuts to provincial transfer payments, while only 16 per cent comes from leaner government administration. We would have expected the reverse. Yes, the federal government is offloading its deficit onto the backs of the provinces, who must, in turn, cut direct services to the public.

Let us take a closer look at how the Liberals are trying to lower the Canadian deficit.

If we assume that the Liberals will be going to the polls after bringing down their next budget, and that the Minister of Finance's most recent forecasts will not change in the meantime, the Liberals will have lowered the deficit by $25 billion during their term of office.

This $25 billion saving breaks down as follows: budgetary revenue will have gone up by $23.1 billion, while program spending will have gone down by $14.4 billion, for a net result of $37.5 billion. However, during this same period, the money spent to service the debt will have increased by $9.5 billion, and the plan is to set aside a $3 billion reserve in 1997-98 for contingencies, for a total of $12.5 billion, leaving us with a net amount of $25 billion.

During the four-year period between 1993-94 and 1997-98, revenues will have risen by $23.1 billion, for the following reasons: personal income taxes have increased by $15.1 billion; corporate taxes by $7.1 billion; GST revenues by $3 billion and unemployment insurance contributions by $1.3 billion. On the other hand, there will have been a drop of some $3.4 billion in other tax and non-tax revenues.

Consequently, the increased revenue comes totally from an increased tax burden on businesses and individuals, even if the Minister of Finance boasts of not having increased personal

income taxes since he has been minister. Part of this rise in revenue can be explained by the upturn in the economy, but you will agree that this is a minimal effort, considering how weak our economy is.

For example, between the third quarter of 1993 and the second quarter of 1996, revenues from personal income tax increased by $8.8 billion, or 17.1 per cent, while personal incomes rose by only 7.4 per cent over that same period. One can, therefore, conclude that the fiscal effort being demanded of Canadian taxpayers is still higher under the Liberals.

During the period from 1993-94 to 1997-98, program expenditures will have dropped by $14.4 billion for the following reasons: transfers to individuals will have decreased by $600 million; transfers to other levels of government by $6.8 billion; and grants and other transfers by $4.7 billion.

Consequently, government expenditures account for only $2.3 billion of the $14.4 billion in total cuts, or as I said before, 16 per cent of the whole. Thus, more than 80 per cent of cuts in federal expenditures come from transfers and grants to third parties, transfers to the provinces in particular. The government has not, therefore, tidied up its own backyard; instead, the federal government has forced the provinces to tidy up theirs.

According to the government's budget plans, under the Liberal regime, unemployment insurance benefits will still lag behind contributions by approximately $5 billion. The Liberals are taxing jobs to the tune of $5 billion annually, to reduce their deficit artificially.

When the Minister of Finance claims he must build up a reserve to prepare for the next recession, we should ask him where this reserve is. Where does he keep those $10 billion, $15 billion, even $20 billion he brashly took out of the pockets of workers and employers? The Minister of Finance is using this surplus to finance his deficit. He practically admitted as much in the House on October 10, and I quote: "-that the government return the unemployment insurance fund-to the consolidated revenue fund".

This means that the government pockets the fund's $5 billion surplus to finance its program spending and other expenditures. The Minister of Finance did not say he was putting the money from the unemployment insurance fund in a separate reserve account but in the government's consolidated revenue fund. Consequently, the federal government's real deficit is $5 billion more annually than the minister claims in his eloquent speeches.

Today the unemployment insurance fund has a major surplus, mainly due to repeated cuts in the unemployment insurance program over the past six years. The present surplus, plus the forecast drop in future costs as a result of unemployment insurance reform, would give the government a chance to reduce premium rates substantially and thus promote job creation in this country.

The federal government has not contributed to the unemployment insurance fund since 1989, but it goes ahead and draws on the surplus as though it were some kind of income tax. It is not up to wage earners or their employers to absorb the deficit but to all Canadian taxpayers.

The annual surplus for the next few years is expected to be around $5 billion, mostly as a result of new provisions that will come into effect as of January 1, 1997 and make it even more difficult to qualify for benefits, in addition to reducing the actual amount of the benefits themselves.

The last recession cost us about $20 billion in unemployment insurance. However, the chief actuary, Mr. Bédard, told the Financial Post on October 1, 1996, that because of permanent cuts in the program, the next recession would not be as costly.

At the November 4 hearing of the Standing Committee on Finance, the Conseil du patronat du Québec requested a reduction of 45 cents in unemployment insurance premiums. The proposed reduction of 5 cents was mere window dressing, as far as the Conseil du patronat was concerned, and would have practically no impact on the economy, according to them.

As for monetary policy and its impact on unemployment, our position in the Bloc Quebecois is as follows: the Bank of Canada's objective for inflation should be a target of between 2 and 4 per cent instead of the current target of between 1 and 3 per cent approved by the government. We must realize this would be a minor adjustment to the present monetary policy and not a complete about face from the policy we have now.

Interest rates create jobs so long as they are not always being raised at the drop of a hat to fight the inflation that usually accompanies a descending rate of unemployment. Furthermore, the lower the range of inflation selected, the greater the likelihood interest rates will rise quickly, thereby increasing the risk that the monetary policy will negate the efforts to create jobs.

Under the current monetary policy, our economy is unable to make optimum use of its resources. Zero inflation in Canada means less than optimum growth for collective wealth.

According to economist Pierre Fortin, a stable inflation rate of 3 per cent over a relatively long period of time would allow the unemployment rate to drop below 7 per cent, leading to the creation of some 460,000 jobs more than there were in October 1996. If the rate of inflation is pushed lower than 3 per cent, many workers are needlessly kept unemployed.

The Bank of Canada should not release its control over inflation, but, rather, focus on a target that permits a more tolerable interest rate, thus better fulfilling its mandate under the act.

The current monetary policy is not appropriate in the Canadian context. If the economy is overheating in Toronto, it is not necessarily overheating across the country. The Bank of Canada should remember that.

The Bloc Quebecois urges the Liberal government to act quickly to stimulate job creation. If the economy gets moving again and if the increase in employment is accompanied by a rate of inflation of more than 2 per cent, the Governor of the Bank of Canada runs the risk of plunging the Canadian economy into a recession once again by keeping the rate of inflation too low.

It is therefore vital to ensure that the monetary policy is in line with the financial job creation policies the federal government is being asked to establish and the Quebec government is currently establishing. Otherwise all efforts in this area will be for naught. This is a matter of consistency among the various macroeconomic tools at the government's disposal.

The central bank openly chose to focus on inflation at the expense of everything else. The monetary policy must reflect the mandate of the central bank and thus no longer focus exclusively on price control.

The central bank has a habit of tightening controls on the monetary situation when Toronto or Vancouver start to experience overheated economies, wreaking havoc with the economies of Montreal or the maritimes, which do not evolve at the same speed.

For example, the unemployment rate in the United States is 5.2 per cent, and inflation has held at around 3 per cent for over 2 years. A number of states, however, have virtually zero unemployment-Iowa, with 3.3 per cent; Wisconsin with 3.1 per cent; Nebraska with 2.4 per cent-and yet the federal American reserve is not resorting to particularly drastic measures.

Although the Bank of Canada likes to think it operates independently of the government, the Minister of Finance has had the power, since 1967, to set general policy on issues such as interest rates. If he so wished, the Minister of Finance could decide that the Bank of Canada should target a higher rate of inflation than what it is currently targeting.

The index used to set monetary policy could overestimate inflation, because it does not take into account new products on the market, improved quality of products, and movement of consumers towards low price centres, which Statistics Canada does not consider when calculating inflation. This means that when inflation is 1 per cent or less, we are perhaps in a period of deflation.

In conclusion, we must not forgot that the federal government is cutting back on provincial transfer payments and that cuts to Quebec will total $636 million in 1996-97 and $1.2 billion in 1997-98.

The impact of the CHST combined with the recurrent effect of earlier cuts represents a cumulative $33 billion shortfall that Quebec will have absorbed between 1982 and 2000.

For the year 1996-97 alone, federal transfer payments were $3.3 billion less than in 1981-82. Since the deficit forecast by the Quebec Minister of Finance is $3.275 billion, Quebec would have a balanced budget today, were it not for the federal government offloading its deficit since the early 1980s. And yet the Liberals will have the nerve to go to Quebec voters with such a poor record. It is a sorry state of affairs.

FinanceGovernment Orders

3:45 p.m.

Winnipeg—St. James Manitoba


John Harvard LiberalParliamentary Secretary to Minister of Public Works and Government Services

Mr. Speaker, I appreciate the comments and the contribution of the hon. member to the current debate.

The member raised reasonable questions about what our inflation rate should be. There has been debate in this country and elsewhere, in fact perhaps right around the world about what is the proper level of inflation. He says that the Bank of Canada aims at an inflation rate of somewhere between 1 per cent and 3 per cent. He thinks, and I suppose he is speaking for his party, that the target for the inflation rate should be somewhere between 2 per cent and 4 per cent. I accept that as a strong and legitimate point of view because there is a legitimate debate going on among economists as to what the inflation rate should be.

The main reason I wanted to take to my feet is I cannot overlook the fact that the hon. member represents a separatist party, the Bloc from Quebec. When he talks about low interest rates producing jobs in Canada, I wonder what the inflation rate or interest rates would be in an independent Quebec. Chances are that if Quebec were to declare its sovereignty or its independence, interest rates would go through the roof.

I also noticed in his speech the absence of any comment on the provincial economy. We know that the unemployment rate in the province of Quebec is very high, far above the national rate. The hon. member might want to reflect on that fact.

I think it is a given among economists and all observers that the Quebec economy is in such bad shape because of the separatist government in Quebec City. When there is a separatist government in Quebec City it shakes the confidence of business people. The hon. member and his party should reflect upon these facts and perhaps give serious consideration to a big change in their policies.

FinanceGovernment Orders

3:45 p.m.


Richard Bélisle Bloc La Prairie, QC

Mr. Speaker, I want to thank the hon. member for his question and comments. I may say that the main reason why I did not speak at length about the economy of Quebec is that we happen to be in the House of Commons where, as parliamentarians, our priority should be to discuss the public finances of the federal government.

As for their impact on the finances of the Government of Quebec, I referred to this a few moments ago, but as far as Quebec's public finances as such are concerned, I think this is a subject for the Quebec National Assembly.

I would also like to say to the hon. member that when he makes allusions to political uncertainty, what keeps political and economic uncertainty alive, both among the general public and among investors is more likely to be the messages sent by federalist spokespersons like the hon. member than the situation as such.

The public and investors are not afraid of a second or a third referendum on the political future of Quebec.

People are far more afraid of the uncertainty or the messages being spread around by people like the hon. member, who wonders what might happen in a sovereign Quebec and tries to frighten people or scare away international investors. The problem is more the kind of talk we are hearing than the fact that a third referendum is scheduled to be held in Quebec in three or four years time. I think that is the problem.

The hon. member also mentioned the governor of the Bank of Canada and monetary policy. I want to tell him that as far as I know, until Quebec becomes a sovereign state, Canada's monetary policy is still determined by the governor of the Bank of Canada.

The federal Minister of Finance also has an opinion to give, which he does every year and which does, of course, influence the governor of the Bank of Canada. What has been very hard on Quebecers so far, especially on the people of Montreal, is the tendency to keep inflation very low, as soon the economy shows the slightest sign of overheating in Toronto or Vancouver, and what we have seen in the past 15 or 20 years is that Quebec, and especially the Montreal region, is always the first to lose jobs when interest rates are raised. As soon as the economy gets up steam again and the Bank of Canada lets interest rates go down, Ontario and the Toronto region are always the first to benefit.

In the end, the Montreal region is always the first to lose jobs and always the last to recover them when interest rates are brought down again.

Actually, I think the hon. member put us on the right track. Once again we have seen why Quebec must become sovereign. It is because Quebec is not the master of its own monetary policy. As long as Quebec is a part of Canada, it will always be the governor of the Bank of Canada, supported by the Minister of Finance of Canada, who determines the cost of borrowing. Quebec and especially the Montreal region will always be at a disadvantage.

FinanceGovernment Orders

3:50 p.m.


Gilbert Fillion Bloc Chicoutimi, QC

Mr. Speaker, I have listened to my colleague with interest. Naturally, he was not able to paint the full picture of the government's financial situation, or we would have spent the whole night here discussing it, particularly since, financially speaking, the economy of this country has a great deal wrong with it. Many changes must be made.

Moreover, the Bloc Quebecois had, via its members on the finance committee, suggested a host of ways to turn the economy around. But that is not what my question is about.

My point concerns unemployment insurance. My colleague has already touched on the question a little. I would, however, like to know his opinion, because, with the present unemployment levels, which are unacceptable regardless of what the Prime Minister and the Minister of Finance have to say, the government has not set itself any objective for job creation, despite its campaign promises. In addition, the government is presently using the unemployment insurance fund surplus, which came out of the workers' pockets, to do away with its deficit.

I would like to hear my colleague's comments on this lack of awareness of unemployment in Canada and of the unemployment insurance surplus.

FinanceGovernment Orders

3:50 p.m.


Richard Bélisle Bloc La Prairie, QC

Mr. Speaker, as my colleague from Chicoutimi put it, it is most regrettable. The Minister of Finance says that, when the Liberals came to office, a little over three years ago, the federal deficit was $42 billion and that he lowered it to slightly less than $40 billion-$39.7 billion, I think-at the end of the first year of his mandate. The objective for the fiscal year ending March 31, 1996 was $32.7 billion.

With a supreme effort, the Minister of Finance brought it down to $28.4 billion. What we must remember is that with the $5 billion annual surplus in the unemployment insurance fund, the Government of Canada's real deficit is not $28 billion, but $33 billion. Last year, it was not $39 billion, but rather $43 billion or $44 billion.

Without the surplus from the unemployment insurance fund, which the minister appropriates to artificially reduce his deficit, the federal deficit has hardly moved since the Liberals took office. I also agree with my colleague from Chicoutimi that our unemployment rate is artificially too high and the money that should go to job creation is artificially and improperly being used to reduce the deficit, which is in fact much higher.

Excise Tax ActGovernment Orders

3:55 p.m.

Saint-Léonard Québec


Alfonso Gagliano LiberalMinister of Labour and Deputy Leader of the Government in the House of Commons

Mr. Speaker, it was not possible to reach an agreement pursuant to Standing Orders 78(1) and 78(2) with respect to the proceedings at second reading of Bill C-70, an act to amend the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the Income Tax Act, the Debt Servicing and Reduction Account Act and related Acts.

Therefore, I give notice that, at the next sitting of the House, pursuant to Standing Order 78(3), a minister of the crown will be moving a time allocation motion for the purpose of allotting a specified number of days or hours for the consideration and disposal of proceedings at that stage.

The House resumed consideration of the motion.

FinanceGovernment Orders

3:55 p.m.


Alex Shepherd Liberal Durham, ON

Mr. Speaker, it gives me great pleasure to discuss the fifth report of the Standing Committee on Finance. I am sharing my time with the hon. member for York-Simcoe.

I know a lot about the finance committee. I served on the finance committee. I congratulate the committee for its work and its very fine report. I know the long hours which that committee sits and the many witnesses it hears in dealing with this country's economic problems.

The report talks of a broad range of generalities. It talks about our existing trade surplus. This of course is one of the things which has driven our economy to success. Within the trade surplus is the fact that we are continuing with our historical trading patterns. A lot of it is oriented toward automobile trade and the natural resource sector.

One very important aspect the report talks about is the need for more money in research and development. That is something which interests me. It is the underpinning of our economy.

When we talk about jobs and growth, it is appropriate to think not about what is going to happen tomorrow, but rather where we would like the economy to be in the year 2010. If we thought of ourselves in the year 2010 and looked back to today, we would ask ourselves what sort of structures we would put into place to make Canada a competitive economic engine in the world marketplace.

I congratulate the finance committee for noting the very important aspect of research and development. Canada is rated in the OECD countries as about 18th in the world in the area of research and development spending. That is not good enough. Through our budgetary constraints we have cut spending in research and development over the last two or three years by $91 million. For Canada to catch up to the world we have to put more energy into our research and development budgets. We have to do that effectively and efficiently. We cannot afford to waste our valuable resources as we build a new innovative economy.

The Asian countries are going leaps and bounds ahead of us in a lot of ways in this area. As a matter of fact, I just had the advantage of coming back from Taiwan where I was invited by the local chamber of commerce there to look at its economy. It is an amazing success story; from 1948 with a population of 5 million, the size of Vancouver Island, to today with 21 million and the eighth largest economy in the world. It did it with education, research and technology.

We have a great country here. It is a huge country full of natural resources but I do not think we are using our best natural resources, the resources between our ears. That is why I was very pleased to see that the finance committee noted the importance of increasing our commitment to research and development.

In 1993 we had an infrastructure spending program. That was very important for the economy and the mood of the people which existed back in 1993. The object of that program was to provide hope. I think that has done that. Most people in this country realize this is a different world and a different economy than we had in 1993.

That infrastructure spending program focused a lot on municipal infrastructure, roads, sewers, and so on. Everybody realized with the differences in our economic well-being that we are not going to be able to put as much money in the infrastructure spending program as possibly we once did. Having said that there is the other important aspect and that is to refocus that program.

I mentioned the infrastructure of the grey matter between our ears. I noted one of the very important points in that report was increasing funding for infrastructure through science and technology. I believe that is really where the growth in employment in this country is going to be.

Statistics Canada has told us over and over again that those companies which use science and technology in their operations expand quicker and have a higher payroll, that wages are higher in those industries.

We very much live in a time of a changing economy where the old economy is getting smaller and the newer economy, which is the knowledge based economy, is growing. We have to make sure

that we spend our resources on the right side of that equation. I believe the right side of that equation is in science and technology.

Speaking of technology, how do we physically do this? We have already established the NSERC program and also the national centres of excellence. These centres link all our university research programs together so that we do not have duplication going on in two or three institutions at the same time. They communicate with one another and they focus on how to develop new technologies.

It is through this type of system that I believe we should be underpinning our new infrastructure spending program. In my riding I have one of those schools of excellence at Durham College. I know it is looking forward to finding ways to enter and excel in the area of science and technology but it needs the resources to do that. This is where governments come in.

Some people will ask why governments are involved in research and technology and should not private industry do that. In every OECD country their governments are heavily proactive in the area of financing science and technology. Why is that? Industry invariably has short term goals, profit maximization. Indeed a lot of the people I have talked to talk about how much their profits or losses are going to be in the next three months. They do not even talk about next year anymore. Their focus is very much short term.

This is where governments can bring in that long term planning and thought horizon which will deliver us and our country into the year 2010 with a robust and engineered society. We are underpinning the importance of science and technology.

In our high schools and post-secondary institutions we have to spend more time focusing on where we are going as a country economically. I have been surprised by the number of secondary schools I have gone to. When I talk to the students they are unaware of how our economy is changing. I think it is important for government to show leadership in this area, to tell our youth this is how the economy is changing and that they very much have to be part of that.

It is very important that we do not just have a hollow comment about the importance of this new economy but that we participate in the funding of that science and technology to increase the knowledge base that exists in this country.

Canada has a tremendous background of success in science and technology, in telecommunications sectors, bio-medical research and agriculture research and engineering. These are all areas where Canada has excelled in the past. We have a nucleus for that which exists in our country and we have that within our university environments.

One thing that is important that I believe any new spending program on research and development should underpin is a filtration system. By that I mean every project that a centre of excellence or NSERC looks at should have a filtering system where they actually filter out whether a concept is a marketable concept. It talks about the commercialization of basic research.

These are the things this budget summation is all about. It is looking toward the future, not the past, putting useful and meaningful employment in the hands of our young people, looking to the year 2010 where Canada can be the leader in the world in science and technology.

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4:05 p.m.


Gilbert Fillion Bloc Chicoutimi, QC

Mr. Speaker, at the beginning of his remarks, my hon. colleague congratulated the members of the Standing Committee on Finance on their work on a report he described as excellent. He failed to mention however that this was a majority report that ignored to a large extent the official opposition members' input.

I would like to draw his attention to the title of this report, which is "Finish the Job". Does finishing the job, as he said, mean less money for research and development, an area he seems to like and in which Canada has taken a tumble in terms of its ranking among OECD nations? Canada now ranks 18th, while it used to do much better than that.

Does finishing the job mean bleeding the Canadian public service? Does it also mean bleeding Canada Post? Does the report's title mean bleeding and taking advantage of the unemployed across Canada?

I would like my hon. colleague to tell us what he would be prepared to do to help the unemployed find a way out and live with a degree of dignity instead of being forced onto welfare in a few weeks. Will the government just keep shovelling its deficit into the provinces' backyards, as it has since taking office?

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4:05 p.m.


Alex Shepherd Liberal Durham, ON

Mr. Speaker, I thank the hon. member for his comment. The reality is unemployment is with us and it is at exceptionally high levels.

Let me clarify one thing. As more people find work in this country we have a labour participation rate. Over 600,000 people in the last three years have found work and more people are stepping up to the pedestal saying they want to get into the labour market as well. This is partially why the rate is at 10 per cent.

The member possibly did not understand all of what I said. I said that through research and technology and our educational institutions we have to give the people of Canada new skills. A lot of that 10 per cent figure has to do with what I would call structural unemployment.

The bottom line is the economy has not changed. It is unfortunate but true. It is no different than if we had lived at the time of the industrial revolution when we changed from the horse to the iron horse, the railway. It is the same kind of technology which exists today. We can improve that but there is no quick fix. There is no quick fix for the unemployment rate. The real long term fix will be to underpin the brain power of this nation. I am suggesting that is what the report addresses and beyond.

Perhaps the member did not see the first part of the title. The first part is: "1997: The Budget and Beyond". It is the beyond that is important. It is the beyond that builds on the technological excellence we have always had in this country and tries to include all those people who for various reasons are unable to find work, long term work or skilled work. We are developing a society of skilled and unskilled workers. We have to lower our pool of unskilled workers and increase our pool of skilled workers. This is what the report has recognized as the pathway to the future.

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4:10 p.m.

The Acting Speaker (Mr. Milliken)

Order. It is my duty, pursuant to Standing Order 38, to inform the House that the question to be raised tonight at the time of adjournment is as follows: the hon. member for Frontenac, chemical product industry.

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4:10 p.m.

York—Simcoe Ontario


Karen Kraft Sloan LiberalParliamentary Secretary to Minister of the Environment

Mr. Speaker, last year I rose in the House to speak in a similar debate. At that time I raised concerns regarding the social deficit in this country, in particular the issue of child poverty, and urged the finance minister to do something for Canadian children in need.

I am a member of the Liberal Party child poverty committee. Last year this group of Liberal members spoke to the finance minister a number of times and also had an opportunity to meet with the Prime Minister and other members of cabinet. We asked for an increase in the working income supplement.

As a group of House of Commons backbenchers and one Liberal Senator, the child poverty group worked very hard and in the end our efforts were rewarded. The cabinet, the Prime Minister and the Minister of Finance listened and the Canadian children benefited.

In the 1996 budget the working income supplement was doubled for low income families. This change will increase assistance by $250 million a year to 700,000 Canadian families.

These are not easy times in which to govern. We must recognize the challenges facing the Minister of Finance and applaud his efforts to stabilize the Canadian economy. He has taken strong measures to correct the previous government's mismanagement of the public finances. As a result the confidence of the people in the national government has increased. We have exceeded our deficit reduction targets, interest rates are lower than they have been for 40 years and almost 700,000 new jobs have been created.

We are getting the economic fundamentals right to create an environment of opportunity for job creation. Tough decisions have been made to get our economic deficit under control and Canadians can take comfort in the fact that we are making prudent judgments in a balanced and compassionate way.

In light of calls by the Tories and the Reform Party advocating income tax cuts, it is imperative that we continue to stay the fiscal course. In fact, I conducted a recent poll in my riding and results to date show overwhelmingly that over three-quarters of the respondents do not favour the policies of the Tories and the Reform Party on income tax cuts. Until the debt and deficit are under control, income tax cuts are fiscally irresponsible and detrimental to the public good. One has to look no further than the extreme disparities between rich and poor that have resulted in Ontario from the tax cut imposed by the Progressive Conservatives under Premier Harris.

The finance minister has spoken about the plight of poor children many times in this Chamber. I know he will continue to establish initiatives that seek to better the lives of all children in Canada. We must continue to reduce the social deficit in this country.

Today I would like to address the third deficit we face, the ecological deficit. Increased awareness of the causes of environmental degradation and the impact on human health ensure a high national concern for environmental issues.

As human beings, we often forget that we are part of nature, that we are in nature and that nature is in us. We are, in some ways, disconnected to the natural world. In the words of Edward Wilson, biological wealth is the basis of our material and cultural wealth. Too many forget this inextricable link and place short term economic gain ahead of long term ecological disaster.

Thomas Berry, an ecotheologian says in his book The Dream of Earth , that the earth community is a wilderness community that will not be bargained with, nor will it simply be studied, or examined or made an object of any kind, nor will it be domesticated or trivialized, except when other living species are violated so extensively the human itself is imperilled.

He goes on to say that if the earth does grow inhospitable toward human presence, it is primarily because we have lost our sense of courtesy toward the earth and its inhabitants, our sense of gratitude,

our willingness to recognize the sacred character of habitat, our capacity for the numinous quality of the earthly reality.

We must remember to be grateful for the biological material that we use. We must remember to be courteous to the earth community as we use its products. We must be ever mindful of the effect of the disposal of waste materials back into the earth.

Paul Hawken, author of The Ecology of Commerce , states that we currently use 40 per cent of the world's biological production. In 40 years the earth's population will double. If there is no increase the rate of consumption, we will use 80 per cent of what is produced. Major ecosystem failure happens at 60 to 70 per cent.

We pump toxins into the water, the air, the soil. Some substances act as endocrine disrupters and affect the endocrine system, especially on developing human and non-human fetuses. Scientists have yet to determine a tolerable minimum threshold. It appears that the timing of exposure has more significance than the dose. As a result, endocrine disruptions play havoc with the reproductive and neurological systems of the developing fetus.

Some forms of endocrine disruptions, like PCB molecules, are persistent and can travel with the wind currents to pristine, isolated Arctic areas where they biomagnify as they make their way up the food chain. Once absorbed in the flesh of higher order animals and mammals, they bioaccumulate. PCB ratings in the milk of Inuit mothers is significantly higher than mothers who live in the south.

I am pleased to say that we have met, and in some cases exceeded, our ozone depletion goals. However, we must work harder to achieve our climate change commitments.

Environmental problems are complex and multifaceted. They require the support of many inside and outside of government. It is not only the Minister of the Environment that should champion the environment. The Minister of Finance can also support the cause of a healthier environment. This starts by greening the budget.

I would like to congratulate the Minister of Finance on the steps he took in the last budget to begin this process. Changes were made to the Income Tax Act that allow for tax incentives for donations of ecologically sensitive land. This is an excellent model for encouraging conservation. As well, the Minister of Finance and the Minister of Natural Resources are looking at removing fiscal barriers to energy efficiency investments.

These are examples of a good start. I commend the Minister of Finance on these initiatives. We must work hard to continue to find ways to reduce our ecological deficit. Above all, we must remember to show courtesy and gratitude for the biological wealth that the earth community provides us, for this biological wealth is the basis of all our other wealth.

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4:20 p.m.


Jim Silye Reform Calgary Centre, AB

Mr. Speaker, I have a comment on the speech given by the hon. member. She said that she conducted a survey in her riding or had access to a survey that talked about the impact of immediate tax cuts at this time. She indicated that was part of the Reform and Conservative platforms.

In case she is interested, our platform does not state that. If I were to answer that survey I would probably be part of the majority that says "immediate tax cuts at this time are not the proper thing to do". First, we have to create a surplus in the budget. At minimum we must balance the budget before across the board tax cuts. That is what we are recommending.

The only selective tax cut in our fresh start platform is that which pertains to the UIC fund. It has a huge surplus and the minister has room at this point in time-this is after all the prebudget consultation period-to listen to those who suggest that it is a payroll tax that could be reduced because of the surplus.

I want to make sure the member understands our platform. Members opposite continually say that we are in favour of immediate tax cuts. This is the second time today we have been misquoted. A member even said that in a statement today. That view is not accurate. I have already explained our policy on that issue. I hope the member will remember that in her future references to the Reform platform on tax cuts.

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4:20 p.m.


Karen Kraft Sloan Liberal York—Simcoe, ON

Mr. Speaker, I am absolutely delighted that the member from the third party has seen the light and understands the fiscal reality within which the country operates. I totally agree that it is terribly irresponsible for anyone to take on measures of tax reduction in the light of budgetary constraints and who this would really benefit.

If this is the Reform Party platform, the so-called fresh start-restart perhaps-then the member opposite should inform some of his colleagues. When I hear members of his caucus ask questions of the Minister of Finance during question period, it seems quite obvious that they are demanding these irresponsible tax cuts right now. It would be really helpful if the member opposite could help inform his colleagues of what their platform is.

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4:20 p.m.


Jim Silye Reform Calgary Centre, AB

Mr. Speaker, with reference to the questions we ask the finance minister in question period with respect to helping low income families and addressing the issue of child poverty, there is a difference of opinion here. Yes, the child supplement can be increased, as the member pointed out in her speech. That has been recommended and it will help families to the tune of another $250 million. That is nice and that is good. But that is not enough and it does not go far enough.

The Reform platform would offer more. But it is not tomorrow, not now. It would have to come when the budget is balanced and we all have to work toward that. The government could do a lot more

by making a lot of cuts, which I will talk about in my speech. The government could offer the relief, which can be offered at that time, to over 1.9 million lower income families across the board. That will truly help lower income people. That will truly help to eliminate child poverty because it will be leaving the money in the hands of those people who need it the most, those who make the least. We are still taxing people who make $12,000 a year to the tune of $1,200.

If we can target it to those families who are in need and increase it, that will help. But it does not help across the board. That is the direction we are trying to go in with that issue. That may give the impression that we are saying immediate tax cuts now. What we are saying is let us look at the fiscal policy of the government, rethink it and apply it to help the greatest majority of lower income people.

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4:20 p.m.


Karen Kraft Sloan Liberal York—Simcoe, ON

Mr. Speaker, once again I find myself in a position of agreement with the member opposite when he says that we have a difference of opinion. We certainly do have a difference of opinion, especially when it comes to dealing with the issue of child poverty.

On one hand, the member talks about funding to one segment of the population, but on the other hand his party would cut all transfers to the provinces for social assistance programs. If that does not hurt poor children, I am not sure what does.

His party also advocates the cutting of all equalization payments and things like that to areas that are in tremendous need. I am really glad that we have a difference of opinion on this. As a regional, western based party, the Reform Party does not understand the need for balance and compassion and putting into prospective all parts of the country, different classes of society and making sure that everyone has a fair opportunity. That is why this Liberal government is firmly committed to creating opportunity for all people in this country, not certain regions and not certain groups.

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4:25 p.m.


Jim Silye Reform Calgary Centre, AB

Mr. Speaker, I will be using my full allotted time.

The debate is about the report of the government on the prebudget consultation process. I am glad to have this opportunity to make a contribution to it and to maybe make some suggestions for the finance minister's next budget. I did not sit very much this past year on the Standing Committee of Finance, but I did in the previous two years so I do understand the process and I will make some comments about that.

This is really about spending, revenues and handling the affairs of this great corporation we call Canada. The Government of Canada is empowered to do that. Annual statements come out, as do projections from the finance minister. Let us just see where we are going. Based on the information given to us by the government, let us see if we are in fact asking the right questions, setting the right agenda in these prebudget consultations and asking for input to solve the right problem.

I maintain, and I have argued this before, we are trying to solve the wrong problem. The problem we are trying to solve is just a subset of the major problem. The subset that the government is trying to resolve and in fact was elected on is setting its spending deficit at 3 per cent of GDP. That really means telling the people of Canada that this government will only spend 3 per cent more of the gross domestic product than what it brings in.

The people of Canada said: "Boy, compared to the previous government that is a hell of an idea and we are going to let you guys go do it". The Liberals also told us they were going to create jobs, jobs, jobs with this $6 billion infrastructure program. Those were the two big promises they made.

There is no question that the government has made progress on its deficit target. It came in here at the year ending 1994 with a deficit of 5.9 per cent of the GDP. To the year ending 1996, the deficit is at about $28 billion which comes to a little over 3 per cent of GDP. Next year it is projected to be even better and the year after, although it is in fantasy land, the government estimates that it will be right down to almost 0 per cent.

I agree that the government has done well on deficit reduction. However, the bar is so low and the target so soft it is easy to do. Anybody could do it. Anybody who was finance minister could have done what this minister did. How did he do it? When he cut program spending over the two-year period from year ending 1994 to year ending 1996, projected out even to year ending 1997, the cuts he made go from $120 billion down to $109 billion. That is $11 billion in spending cuts. It sounds great. However, $7.5 billion of that was downloaded on the provinces for health care, education and welfare. That is why I have suggested anybody could do it.

We have had members of the government giving speeches about how wonderful it is to be helping the infrastructure of the mind through the science and technology development fund and how it has already spent $9.5 billion on families with children, but because it is giving another $250 million how great and wonderful it is.

The government should take a look at itself and not be so proud of having made cuts on the backs of provinces. The excuse today given in question period, "If you are mad at us for downloading, look at what those rotten, dirty guys in the provincial governments are doing. They are downloading on the municipalities even more than we are. If we are bad they are worse". Both of them are trying to justify something that is dumb.

Eliminate useless and wasteful spending and stop catering to the special interest groups. Every group that comes to the consultation process says: "Do not touch us. Our group is very important. Look at all those other people. Cut them. Find it there". If that was done, how would we ever cut? How would we ever balance a budget?

Start saying no to wasteful spending. The government does not have the guts to do it. It takes the easy way out. It cuts money to the provinces and says to the provinces: "You do it". That is what the finance minister has done. I do not compliment him for that, I criticize him for it.

The deficit is fine. It is coming down. What has the government done in terms of spending over the last three years? In the year ending 1994 the government spent $158 billion. The next year the government increased overall spending to $160.7 billion. Last year, the year ending 1996, it spent $158.9 billion. That is relatively flat in spending, yet the government is bragging about tough times and cutbacks. Why is that?

The government is adding to the big problem. It is increasing the debt. The interest cost to service the debt is increasing. Despite lower interest rates, it is still a huge megadollar expenditure for the government. What does it do about it? It keeps adding to the problem, although not as fast as the previous government. It brags about it, but it is not solving the problem. Canada is bleeding to death. Canada had a huge wound under the Conservatives but it still has a huge cut and it is still bleeding severely under the Liberal government.

The finance minister bragged a couple of months ago that he had broken the back of the deficit at $22 billion or $24 billion. That is a joke. Only a Liberal could stand and say that he has broken the back of the deficit by spending $24 billion more than the government brings in. That is not breaking its back, it is adding to the problem. It is adding to the suffering. It is adding to the hurt. That is what these financial statements show.

What should the government be doing in the consultation process? It should be asking the experts of the country, the many witnesses: What really is our problem? What will really help our economy? If we lower our deficit and spend a little bit less, if we still spend more than we bring in but not as much as the previous government, will that help? Or should we just tackle the debt?

The percentage of debt to gross domestic product is the true measurement. That is the challenge. That is the bar which the government should set. That is how it should be measured. Anybody who is in government, provincially or federally, should measure it that way. We all know in business that debt and equity are correlated items. The banks look at the debt to equity ratio. It is on that basis the banks lend money.

If the finance minister had the intestinal fortitude and truly understood economics, he would look at the debt as a percentage of GDP. What has happened in that category? What does that show us?

When we came in here the net debt was $514 billion. That was the net interest bearing debt. That has now increased to $586 billion, a $72 billion increase. The debt has gone up by $72 billion. Imagine the interest costs on that alone. The deficit has only been reduced by $13.4 billion. Half of that has come from cuts to the provinces, which have gone from $42 billion to $28 billion.

Thanks in large part to low interest rates, higher tax revenues and a $5 billion surplus in the UI fund, we have ended up with these financial statements. There has been an increase of $25 billion in revenue. I would say that $15 billion to $17 billion of that is economic growth. Not all of it is growth. About $10 billion is attributable to tax increases.

When the finance minister says, as he did today in answer to a question from a Bloc member: "We have not increased personal income taxes since we have been here", that is not true. I know I cannot use the word that starts with "l" and I will not. I will not say that he is the "l" word, but I will say that he is definitely misrepresenting the situation.

There are two ways to increase income taxes. One is by raising the rate and the other is by reducing, eliminating or tinkering with the available exemptions and deductions. For instance, there is the labour sponsored venture capital funds which he has reduced. All those people who participated, their taxes just went up, thank you very much. He did a lot with the seniors benefit and seniors pensions. He has tinkered around and he has raised personal income taxes. Personal income tax revenue has gone up by over $6 billion and not all of it is just due to a growth in the economy. This points out as far as I can surmise by my analysis of these statements that the revenue of the government has increased, the spending of this government has stayed level at $158 billion to $161 billion and its spending cuts basically match its increases.

I submit to the hon. members opposite, please question me on this when I am done. Are we really solving the problem or are we just attacking a subset of the problem? It is a disease but if it grows then one will end up getting really sick and then will die. The real problem is the debt. The deficit is a subset of that. Yes, we have to eliminate the deficit but the Reform Party would do it sooner. We would get there quicker and we would offer some tax relief to the Canadian public a lot sooner than what these financial statements show.

As further proof and as my last comment on this topic, it is important for Canadians to understand that the debt as a percentage of GDP has gone up since we have been here. It has gone from 71 per cent to 74.2 per cent. It is going in the wrong direction. Our problem is increasing.

The Liberals, as wonderful as they think they are, as high as they are in the polls and who love to rub it in our faces, are not solving the problem. In the long run they are going to pay for it because they have had a window of opportunity to do something. We have been here advising them on how to do it. Even in the book Double Vision we are given credit and the finance minister gives us credit behind closed doors for encouraging and pushing because we are in tune with Canadians and we know what they want.

Just as with Canadian Airlines, the Reform Party knew that the tax fuels were too high. Our critic recommended a reduction. We knew that the flight attendants and the ticket agents wanted to vote in support of a pay cut, even though those who were making only $20,000 to $30,000 should not take a pay cut, but they were willing to because they loved their jobs. We said to let it go to a direct vote and they said no but we forced them to. Now who gets the credit? They do.

Whoever this Angus Reid is, and whatever poll is saying that the Liberals are in touch with the people, crap. They are in touch with us. They listen to us and they take our suggestions and then they take the credit, but that is okay. As long as it is good for all Canadians, I am very, very happy.

I do not like the budget consultation process if there is not a consensus and they only listen to those they want to listen to. I accuse the chairman and his committee of selective hearing. In his speech this morning the chairman mentioned that he had heard evidence that in the United States the income taxes are 30 per cent lower than here and the unemployment rate is 5 per cent. Our taxes are 30 per cent higher and our unemployment rate is 10 per cent. Does that not tell us something? Lower taxes mean more jobs. Lower taxes mean lower unemployment. It should be obvious.

Then what did the chairman of the finance committee do? He went to great lengths and I think he spent more time than he wanted to in saying that in Canada our payroll taxes are lower than in the United States and it is proof that lower taxes do not necessarily work. I do not see the connection. It does not make any sense to me at all.

It is sad for me to see the government members and especially the frontbenchers take credit for the low interest rates and low inflation rate in Canada. How sad to try to take credit for something that the Liberals criticized when they were on this side of the House. I am not saying that they criticized lower interest rates, but they criticized the monetary policy of John Crow. I can find in Hansard what the Minister of Finance said. He said it was totally wrong. He said it was totally inappropriate. Now the Liberals are reaping the benefits of it and are trying to take credit for it by saying that the government is responsible for the low interest rates. Bull. Bull. It is sad to see someone try to take credit for somebody else's hard work and effort, especially when one is hypocritical and contradicts oneself.

It is also sad when we look at the big problem, which is the debt and the high interest costs to service that debt. There are all the areas where there is still a huge waste in government spending, the billions for business program is what I call it. The government will not do anything about that. There are regional development programs where it could save some money. There is the size and waste in the public service and what they could do to solve that. It is a shame that even on criminal justice, young offenders, and all those areas the government still continues to use nickel and dime solutions to thousand dollar problems. That is the sad part.

Eventually the economy is going to turn around. My learned friend from Capilano-Howe Sound knows and he pointed out that the economy is a cycle. We all know that. What goes around comes around. It goes up and down. We are going to hit a period of high inflation again. We are going to hit a period of high interest rates again. Sure as all of us are in this room, before we pass away we will see double digit interest rates again. Even though the rates are down at 4 and 5 per cent, they are going to come back. Now we have the opportunity to do something about it.

The Canadian public is ready for cuts, ready to go through the pain, but it has to be done quickly. We have to do the surgery and then let the patient recover. By continually operating and tinkering with all different parts of the body the poor patient feels like he will never get better. He feels like Frankenstein. Quite frankly, that is how I would analyse this financial policy of the government, Frankenstein.

Even the Organization for Economic Cooperation and Development countries in their annual report did a study of Canada. They blamed the high unemployment rate. Nobody over there can figure out why we still have double digit unemployment with this wonderful package they have offered the Canadian public over three years. The reason is high tax rates.

We have the highest tax rates going. On tax rates as a percentage of GDP, if we look at where Canada is on a chart, all taxes, corporate and individual, are about 35 per cent as a percentage of GDP. Compare that to those countries at 24 per cent or 30 per cent and we will see the unemployment rate. We will see the correlation. That is what this government will not listen to or look at.

There are also our generous unemployment and welfare benefits. How can we have a welfare program which pays somebody just as

much to stay at home, able bodied people who can work, as somebody would get by working for minimum wage? It does not make sense. Instead of doing something about that, the government ignores it.

On unionization, I believe in unions. I believe that employees of any corporation or any company should have the right to unionize and get together and collectively negotiate against an employer, public or private. At the same time both public and private employer should have the opportunity to replace those workers. But no, the government is going to put Bill C-66 through here. It is going to screw up, meddle and make it a mess so that nobody knows what a replacement worker is and whether or not they qualify. It is going to be a joke and this red tape is costing this country billions of dollars.

Across the board tax cuts are what is needed once we have a balanced budget. That will kick start the economy, not the selective cuts like five cents off per hundred dollars in UI as the finance minister is doing now.

The objective of this country's fiscal policy should be a virtuous cycle of lower debt servicing cost. Imagine what this country would be like if every year instead of our interest costs going from $40 billion when we first came here when we were paying $38 billion to where we are now paying in excess of $48 billion to $50 billion and it is going to go up even more, that they would be going down. The interest costs would be going down, not just the deficit but the interest costs. That would be solving the problem. Then I would say the finance minister deserves all these credits those backbenchers are giving him.

We need to generate a surplus. Then we can offer tax relief and then we can pay down some of the debt as well. That is how we develop, and this phrase was coined by my colleague from Capilano-Howe Sound, a virtuous cycle of lower debt service costs. That should be the objective of the finance committee. That is what I would empower it to do. Find us a way to get interest costs to go down. Give us the suggestions on how to do that and then we would be solving the problem and not tinkering around with nickel and dime solutions for thousand dollar problems.

Get the fundamentals right. The finance minister brags about how he gets the fundamentals right. He does not have them right. He will not give us a target for a balanced budget, just that we will get there someday. He does not attack the debt. He is just on the deficit. He will not reduce UI like everybody else said in the Standing Committee on Finance. I was there for a couple of meetings this year and it was the same old story: reduce the UIC. It is a killer of jobs. Reduce it not by 5 cents, reduce it by 60 cents, 20 or 30 per cent. The Reform Party is suggesting that and we are in tune with the Canadian public, but the government will not listen. Make it a true insurance policy.

CPP is going to have to go up. People are worried about that. So CPP will be raised, but UIC will not be lowered. There is a $5 billion surplus in the fund and it is just being used to pay the deficit. That is not right. If CPP is going to be increased at all, it has to be offset with a decrease in the UIC so that psychologically employees and employers know that overall it is not going up, it is just being adjusted to account for the needs and the demands of the Canadian public.

That is was we have to do. That is how we will create jobs in this country if we get the fundamentals right. Those are some of the fundamentals and some solutions I see the country needs.

Is my time up, Mr. Speaker? Will you give me five more minutes?

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4:45 p.m.

The Acting Speaker (Mr. Milliken)

It is not for the Speaker to give the hon. member five more minutes; it is a matter for the House. If the House wishes to give the hon. member five more minutes, the Speaker as the servant of the House will give it.

Is there consent?

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4:45 p.m.

Some hon. members


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4:45 p.m.


Jim Silye Reform Calgary Centre, AB

Mr. Speaker, I have a couple of things to add to the issue. I would like to finish with the CPP. It is a very big issue. Currently there is $40 billion in the fund which generates $4 billion through interest on loans to provincial governments at low prevailing interest rates.

We have to fix this. The way to fix it, unlike what the government is doing by trying to treat everything separately, is to look at the economy as a whole. This is a payroll tax just as UIC is a payroll tax and so is workers compensation. When there are high payroll taxes, it is a job killer. The government should try to look at the collective package.

One thing that could be done with CPP and has even been recommended is to start working with the fund toward a greater growth investment fund rather than just a yield of low interest rates. Try to get it into a growth fund where possibly we might luck out in a couple of years and have anywhere from 15 to 30 per cent growth in it. That is what the Reform Party is recommending with its super RRSPs. It would be something which would be run by an independent fund manager to let the money grow so that we would all be guaranteed our pension benefits down the road.

We all know who creates jobs. The government's job is to create the economic environment, the right environment for the private and public sectors to create jobs. There is room for job creation in both the public and the private sector, but the public sector thinks,

feels and acts as if it is the only engine to fuel the economy. Once we balance the budget and offer across the board tax relief, not selective cuts, the government and the country will benefit from the growth in the economy. A lower overhead and lower spending will result in lower taxes which will increase disposable incomes and thus through greater demand the private sector, along with some public sector services, will create the increase in jobs that is required.

On unemployment and employment, under the section in the report that the chairman of the Finance Committee put forward, the words were carefully chosen. However carefully they were chosen, they could not hide a dismal record of achievement. The growth in unemployment barely kept pace with the increase in population, natural and through immigration. That is a sad situation. The government pins much hope on job creation by lower interest rates. That is going to create a whole bunch of jobs. We hope these expectations will be met for the sake of the large number of Canadians who are seeking work and who are ready to enter the labour force. We will need a long and prolonged period of low interest rates and a willingness for people to borrow and spend more.

There is a lack of consumer confidence for big ticket items and that is what is keeping the domestic market restrained. There would be increased confidence if income growth lowered the relative size of the debt they carry.

This fact makes income raising tax cuts even more important in the restoration of genuine prosperity.

In this prebudget fiscal plan and this report we see nothing encouraging in this account for the Canadian public. What we see is the government not even at a balanced budget, saying how it is going to spend anything it gets once it approaches.

Heaven forbid, if the finance minister ever gets up and tries to say this one more time and to hoist this on the Canadian public, that once the deficit in this country reaches single digits, $8 billion or $9 billion, then we have virtually a balanced budget and a zero deficit.

He has said this and that is not true. Just because the OECD countries have a different formula and by their standards-crap. If there is a $9 billion deficit and if that deficit is not borrowed abroad but is borrowed domestically from the public service pension fund, it is still a liability. It has to be paid back. Those funds have to be replaced even though they are borrowed from oneself. Therefore, let not the minister say ever, until he is at zero, that he has a balanced budget.

We need to work toward the debt, to use the debt as a percentage of gross domestic product as our solution. Lower taxes like in the States are the solution. That is how we will create jobs in this country. I appreciate the extra time.

FinanceGovernment Orders

4:50 p.m.


Alex Shepherd Liberal Durham, ON

Mr. Speaker, as always, I listened intently to the member for Calgary Centre. He started his speech, which really set the tone of everything he said, with saying that Canada is a corporation.

Everybody knows that Canada is not a corporation. The Government of Canada is not run like a corporation. The bottom line is that the Government of Canada is about dealing with people's problems.

He went on to talk about the so-called downloading. He used the word downloading when talking about reducing transfer payments to the provinces. As has been said in this House time and time again, we reduced those transfers far less than we reduce our own spending.

The member is inconsistent. He talks about improving the efficiencies of government. Why would we not also want the provinces to become more efficient? Should we keep the provincial government transfer payments intact while reducing our own spending? This does not make sense. Everybody knows in this country that we have to add the federal government debt plus the provincial government debt to get a total quantum of public sector debt in this country.

It is only reasonable that we reduce provincial government transfer payments. The thing is technology has taken over our society to such a great degree. What we are asking governments to do is the thing that the business sector did maybe 10 years ago. It embraced the concept of newer technology to reduce the cost of government. That is what we are asking the provinces to do and that is what we are asking the federal government to do.

I am surprised that the member from the Reform Party, who spent such a great deal of time talking about the importance of balancing budgets, has not taken that into realization. We want the province of Ontario, the province of Quebec and indeed the province of Alberta to each take part in the process of reducing government spending and making government more affordable to people.

He went on and on about the ratio of debt to GDP. I dispute some of his figures. As I understand, for the 1996-97 fiscal year he is right, it is around 75 per cent of the total debt to GDP ratio. But that is projected for the next fiscal year to go down to 74 per cent.

In spite of his great long dissertation about the importance of using debt to GDP ratio, the bottom line is that we have turned the corner on that very important figure. I agree with him, we should be focusing on how to reduce government debt.

It seems most of his discussion surrounds why we cannot do it tomorrow. We are in a big hurry. The bottom line is the ship of state takes a long time to move. I have come to that realization.

This government has done the very important things to move that ship of state, whatever it is, 10 or 15 degrees from the course it was on.

Within the first two or three years it does not look like it is much different. As the program continues to impact on government spending and debt reduction, that becomes greater and greater. That is the course that we are on.

That is what everybody in this country says to us, stay the course, keep on that 15 degrees. They do not tell us to go 30 degrees or 40 degrees one way or 70 degrees back the other way. They tell us to stay the course. It is the Reform Party that wants to get off course. This all has to do with timing and how we put our plan into place.

The bottom line is the reduction in interest rates is related to fiscal responsibility. The international and domestic financial communities have looked at what governments are doing and said yes. What is an interest rate but a risk factor: "I am going to loan you x dollars and you are going to pay me back 10 years from now. I think you will inflate the economy. You will print money by increasing the deficit. Therefore I want a higher risk factor''.

In reality that interest rate component has been continually reduced in Canada over the past three years. This tells us that not only the domestic financial community but also the international financial community believe that Canada has its debt and deficit situation under control. Take credit for it? Why would we not? We have lived under an administration that did just the reverse. It drove interest rates through the ceiling. It is very much a check mark, an A+ average by the international financial community.

I heard this member talk about across the board tax cuts. The same member stood in this House about a year ago and talked about the flat tax. Remember the flat tax? We were going to take money from the middle class and give it to the wealthy. Now he has a different formula. I guess by reform he means reforming his own party.

In the final analysis most federal government spending is to people. The member has not been honest. The member has not said what people spending he is going to cut to get off that course another 10 degrees or 15 degrees. He did not talk about how much he is going to cut the old age pension, et cetera.

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4:55 p.m.


Jim Silye Reform Calgary Centre, AB

Mr. Speaker, I have not abandoned the dream of a simplified tax system that would feature a single or a dual rate. It would generate more money than what this current government with its complicated, convoluted, complex tax system has in place and which is too stubborn to try to change. I have not abandoned that but each speech has its time and we have to stick to the topic at hand.

He does not agree with my statistics about year ending in 1996 or 1997, that the debt as a percentage of GDP will be 74 per cent or 75 per cent but that it is going down in 1998 to 74 per cent. Shame. That is unacceptable. When this government came in it was 71 per cent and it is going to brag about reducing it to 74 per cent? That is the hypocrisy and the master of myth at work at its best. We need a debt to GDP ratio of under 50 per cent, and the member knows it.

There is this business about how they have made way more cuts outside of the transfers to provinces. The figures say to me that for the year ending 1998, governments do not figure. The total cuts will be $18 billion and $7.5 of that will be on the backs of the provinces for health care, education and welfare. Shame on the Liberal government that would do that when a Reform government in those three categories would have cut only $3.5 billion.

The member asked why the government should not take credit for the decline in interest rates. Because his government is not responsible for the low interest rates in this country. It is not sound fiscal management for the government to spend $20 billion more than it brings in. The first year that we had $15 billion more than we brought in, everybody was all upset. So to brag about a $20 billion deficit is not good enough.

The interest rates are low because of the monetary policy of the Bank of Canada under John Crow which has been continued under the current governor of the Bank of Canada to keep inflation low. It is low inflation that allows for the lowering of interest rates. Inflation is low when the demand for supplies and services goes down. Then the banks have to do something. To encourage people to incur debt and borrow more money banks have to lower their interest rates because of what is happening in the economy. It is kind of a diabolical situation. Banks lower interest rates when things are not moving.

Lower interest rates lead to increased work in housing and housing related products and services. Big ticket items should start to move now based on lower interest rates. I agree with the hon. member on that point, but to take credit for it, no. I still say the government is taking credit for something it does not deserve to take credit for. Low interest rates are not a function of the government's sound fiscal policy. It is not sound to be adding to the problem to the tune of $20 billion plus per year.

At another point in time I will elaborate on the simplified tax system featuring a dual rate, which is in the best interest of Canada and will lead to the number of jobs the government has failed to deliver.

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5 p.m.


John Bryden Liberal Hamilton—Wentworth, ON

Mr. Speaker, I will be sharing my time with the member for Vancouver East.