Mr. Speaker, I would like to inform you that I will be sharing my time with the hon. member for Carleton-Charlotte.
Mr. Speaker, the 1996 budget follows through on the government's commitment to reduce the deficit in a sustained fashion. However, we should not forget that balancing the budget must never be the sole objective.
Improving public finances should always be a means to reach the greater goal of lowering interest rates, creating jobs and ensuring Canada's prosperity and future. It must also allow us to continue to work on other priorities and issues which are dear to Canadians.
It goes without saying that one of the top priorities is to maintain Canada's social program network. These programs have made Canada one of the most envied countries in the world. To reach that goal, as the Prime Minister promised, we must propose a long term funding framework for health services and social programs that will grow, while also being stable, predictable and sustainable. To that end, the 1996 budget provides for the setting up, over a period of five years, of a funding framework for the Canada health and social transfer.
This transfer, which was introduced in the 1995 budget, is the most important federal initiative to provide financial assistance to the provinces regarding health care, post-secondary education and social assistance.
Under the Canada health and social transfer, provinces enjoy increased flexibility in designing and managing their own programs, while medicare and other social measures are being preserved.
Since these transfers to the provinces represent a sizeable proportion of total federal spending, we cannot improve public finances without reducing them, as we did in the case of all other expenditure items. This is why funding will be reduced in 1996-97 and in 1997-98.
Following consultations with the provinces, the 1996 budget now expands the scope of the Canada health and social transfer, which will not undergo additional cuts. We have established a five year funding mechanism under which transfers will increase and the cash portion will be stabilized, to eventually increase over the years.
It is important to note that federal equalization payments to the poorest provinces, which also help fund social programs, will keep on increasing. The new mechanism is based on four fundamental principles: maintaining health care and social programs; re-establishing the increase in transfer payments and stabilizing the cash portion; guaranteeing stable and foreseeable funding to the provinces; providing the provinces with more comparable funding.
Our action plan takes these principles into account. Allow me to review its main proposed elements. The funding level for the CHST announced last year for 1996-97 and 1997-98 will remain stable, which means that appropriations will amount to $25.1 billion in 1997-98 and will be made up of tax points and cash in roughly equal proportion.
The 1996 budget provides for five year legislated funding of the CHST over fiscals 1998-99 to 2002-03.
During the first two years of the implementation of the new mechanism, appropriations will remain at $25.1 billion. Since the provinces' tax points will increase, the cash portion paid by the federal government will decrease somewhat. However, total funding, cash and tax points combined, will remain stable. It is obvious that as a result of the CHST, global entitlements will never diminish. Funding will not be cut.
In fact, during the three last years of this framework, total transfer entitlements will grow each and every year at an increasing rate, according to a formula tied to economic growth. This means that, by the end of the five-year period, overall CHST entitlements should exceed those of 1997-98 by $2.3 billion. For the first time since the reduction plan was initiated in the mid-1980s, a federal government will be taking steps to make these transfers grow faster.
Moreover, under this framework, the cash portion of the CHST is guaranteed never to fall below $11 billion. In fact, by the end of the five-year period, it should begin to grow. For greater safety, the cash floor within the transfer will be guaranteed by legislation to make absolutely sure that cash transfers will never be under $11 billion during this time frame.
The budget also provides for a new allocation scheme reducing disparities caused for a large part by the ceiling imposed by the Conservatives to tranfers to three provinces under the Canada assistance plan.
Finally, the new allocation scheme will be implemented gradually over five years. In theory, each province's entitlement will be adjusted periodically based on its share of the CHST and its relative demographic weight within the country. By the year 2002-03, any disparity in per capita financing will have been reduced by half.
Of course, this is a compromise solution and no single allocation scheme will satisfy all the provinces. We believe however that this is a reasonable compromise and that the five-year phasing in of the
new allocation scheme will give provinces a chance to adjust and to plan with greater certainty.
To conclude, budget proposals regarding the CHST clearly show that the federal government is doing its share to ensure the future of the Canadian health system and social security net and to build a renewed social and economic union. The provinces will continue to decide how they want to allocate federal transfers between these priorities.
Finally, the government is taking steps to ensure that social programs remain within the financial capability of the nation and meet the needs of Canadians in the future.