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.