Mr. Speaker, I want to take this opportunity before speaking to the budget to respond to some of the things that have been said by some members opposite.
The Reform Party has been critical of a number of things. First is the child tax benefit which will raise federal spending for children once fully implemented to $6 billion a year. Incredibly, the leader of the Reform Party or, as someone referred to him yesterday, the leader who aspires to be the leader of the fifth party in this House, said yesterday that commitment is totally negated by the cuts in transfers since 1993. That is an incredible statement from the Reform Party, the party that wants to cut faster, including transfers, so that it can give a tax break to its friends. It is really astounding. Its budget plan would decimate education and health.
Reformers cannot have it both ways. They cannot criticize us for not doing enough out of one side of their mouth and out of the other side of their mouth say "but if it were our way, we would cut faster". When it comes to protecting medicare, education and children, Canadians do not look to the members opposite but to this side of the House.
Then incredibly Reformers in their debate over the last days have been critical of deficit reduction, arguing that some of the relief comes from growth in the economy. I will just stop there. What are they saying? Are they against growth in the economy? They are right, the economy is growing because of the steps we have taken in our three prior budgets. Corporate profits are up, tax revenues are up as a result of that and somehow that is a bad thing. It is really quite something to behold and extremely difficult to understand.
Then there is the Bloc, members of the official opposition.
Last night, I read the speech made yesterday by the hon. member for St. Hyacinthe-Bagot regarding the budget. Unfortunately, it was pretty confused and his logic was way off.
On taxes they attack us on a lack of action. They allege we are lazy. I would say that if anyone is lazy in this debate it is the members of the official opposition because they did not read the document entitled "L'équité fiscale", one of the budget documents.
If they had read it, they would have found examples of measures adopted since 1993 to enhance tax fairness.
I could cite from that just three examples of steps we have taken to address the very concern they raise.
For example: eliminating the $100,000 lifetime capital gains exemption, extending the base for the alternative minimum tax, eliminating tax advantages available through trusts, restricting the use of tax shelters.
The opposition is opposed to all those measures. They voted against our budget.
They were opposed to these measures and yet they stand here and say that we have not done anything in the tax fairness area. We have done it but we have done it without their help.
Again on the point of a total lack of logic in the speeches by the members from the official opposition, incredibly they allege that the deficit has come down because tax revenues have gone up. Then a page later, in the speech I read last night, the member for Saint-Hyacinthe-Bagot said that it was because of cuts. Which is it?
One cannot talk from both sides of one's mouth at the same time.
Let me turn to the budget itself. When we came to office in the fall of 1993 our country faced a number of daunting political policy challenges about the economic and fiscal fronts. We were not
alone. Indeed our problems were shared by most industrialized countries.
Where Canada is unique perhaps is in the straight ahead approach we have taken to implement lasting structural reforms. We went beyond hopeful talk to hard action and tough choices and that is delivering accelerating results and growing benefits to Canadians. The evidence is clear and concrete. The opposition merely has to put aside their partisan glasses and read this year's budget with open eyes. That is what financial markets have done; that is what Canadians have done.
I need not remind this House why we took these vigourous and disciplined measures to put our financial house in order. Large deficits and a huge public sector debt made interest rates soar, undermined confidence, drained domestic savings and caused a considerable increase in the country's foreign debt.
That illustrates our philosophy in financial matters. Dealing with the problem of public finances is not go a goal in itself-we see the reform of public finances as a prerequisite for national growth, job creation, security and economic and social independence. We are starting to see the results.
In the economic arena, forecasters concur. As I said earlier, Canada will be a growth and job creation leader in the G-7 this year. One of the key engines for this growth is interest rates. Currently short term rates are near a 35-year low. In fact, they are lower than comparable U.S. rates for maturities of up to 10 years. That is no accident. Our fiscal plan combined with our commitment to low inflation has created the conditions and the credibility needed to bring down interest rates.
In today's debate I want to continue to focus on our fiscal record. That is not to ignore important investments that the budget announced in job creation and in vital social action for low income children, for health care, for the disabled and to assist charities. This is in the historic tradition of nation building and support for those in need that has been the heart blood of our party and distinguishes us from others in this House.
These investments would not have been possible without jeopardizing jobs and growth, without our sustained progress in deficit reduction. It is jobs and economic growth that are themselves key components in helping eliminate poverty and hardship.
The budget announced this week shows that our consistent cohesive fiscal plan is working. It confirms that our federal deficit this year will be no higher than $19 billion. I want to highlight some points about that.
First, that result is over $5 billion below the target we set out. This is the third year in a row that we have bettered our targets.
Second, when we took office the deficit that year, 1993-94, was $42 billion or 5.9 per cent of GDP. This year as I said the deficit will be under $20 billion, closer to $19 billion or lower, or less than 3 per cent of GDP. We have cut the deficit in half in three years.
Third, our 1996-97 results will also be more than $9.5 billion below our deficit a year ago. That is the largest year over year decline ever in the history of this country.
Fourth, how we are achieving this dramatic progress is just as important as the results themselves. The vast bulk of our fiscal action has been on the expenditure side, cutting spending rather than raising taxes. In fact this is also our third budget in a row with no increase in personal income tax rates.
There are a number of factors contributing to the success of Canada's deficit diet.
First, our budget planning was based on cautious economic assumptions. These included the assumption that the interest rates would be higher than what all of the forecasters in the private sector had predicted. However, interest rates were lower than forecast, because of the credibility we re-established on the financial level. Lower rates meant lower costs of servicing a much smaller public debt.
Then there was the contingency fund, included in our plan in order to prevent our finances from going off course, in the event we ended up with a crisis like that of the Mexican peso and the volatility it caused in the international markets and in interest rates.
However, we also made it very clear, from the outset, that, if this reserve were not needed it would not be spent, it would go directly to reducing the deficit. And this is what happened again this year.
But budgets are about tomorrow, not just today. Here again our fiscal story is a good one and I am afraid it drives the members opposite nuts.
The 1997 budget reaffirms that we are clearly on track to meet our deficit targets of 2 per cent of GDP in 1997-98 and 1 per cent in 1998-99. That 1 per cent mark will represent a historic turning point for our country. It is a point where our financial requirements, that is, the need to borrow net new money on financial markets to pay for our programs and debt charges, will be eliminated.
While there will still be a deficit, it will be managed through the federal government's own internal resources. That means that 1998 will mark the first time in 28 years we will not have to go to the
markets for new money. It will put the Canadian federal government in an enviable position internationally.
Financial requirements of course is the way most other major countries measure their deficits. By eliminating them in 1998, Canada will have the best financial record of any G-7 country based on current national budget plans.
It must be clear that the turnaround of Canada's public finances is not the work of the federal government alone-it is a national accomplishment. The provinces and territories significantly improved their financial situation too and continue to do so. This is why the total deficit in the government sector should improve considerably in Canada, compared to the other countries in the G7.
I want to return to a key point. Our federal deficit improvement has been overwhelmingly achieved through cuts in program spending instead of boosting the tax burden.