Madam Speaker, I appreciate having the opportunity to speak to the opposition motion. In particular, I would like to clear up some apparent misconceptions regarding how spending on social programs has fared under the Canada health and social transfer.
The federal government's actions in the area of transfers to the provinces clearly demonstrate that social programs are a top priority. This is fact, not partisan rhetoric.
Under the previous longstanding system of transfer payments to the provinces, support for social programs came in two forms. The first was a cash component. In other words, direct funding. There was a tax point component, where the federal government let provinces step in to collect a share of taxes that would normally have been levied by Ottawa.
This is not an abstract issue. Under the formula agreed to, as the economy grew it meant that the value of these provincial tax points would grow. That meant that the amount of direct cash funding could shrink because the total value of that funding would remain constant.
However, this previous approach spelled a problem for the provinces because the cash portion was scheduled to gradually decline. In fact, the cash portion was on track to dry up completely and there was nothing to prevent it from doing so until this government acted in the 1995 budget.
In that budget we replaced the Canada assistance plan and established programs financing with the CHST. In spite of enormous fiscal constraints that we faced at that time, we saw to it that this new transfer system would include a five year guaranteed cash floor of $11 billion in addition to tax points. In other words, the cash floor is the minimum amount of cash that the provinces receive for health, education and other social programs.
We did more than guarantee sizeable and certain cash transfers to substantial social programs such as health care. At the earliest possible opportunity, as soon as we got our fiscal house in order, we increased this cash flow to $12.5 billion per year. This measure, announced in 1997, means that the provinces will receive an extra $7 billion over six years.
The interesting thing about this increase is that we brought it into effect one year earlier than we originally planned. We were able to increase our commitment to assisting the provinces in vital social programs because this government's progress in deficit fighting has given us some leeway to allocate more money toward new health initiatives.
For example, the 1997 budget provided $150 million to the health transition fund and $50 million to the Canada health information system over a three year period. Our budget of 1996 set aside $65 million for the health services research fund and our most recent budget increased funding for the Medical Research Council by $65 million.
None of this would have been possible without drastic spending reductions during the early years of the government's mandate, cuts which we made sure were deeper for the federal government than for our provincial transfers.
The most severe cuts were in the area of direct program spending, which included the operating costs of government departments, business subsidies, department transfers and appropriations to crown corporations.
The federal government also made cuts in transfers to the provinces. When the government has an annual deficit in excess of $40 billion and an accumulated debt of over $500 billion, and when 20% of spending is on transfers to other orders of government, that is to say $1 out of every $5 spent, the choices are limited. There is not the option of cutting transfers to the provinces.
There are those who would argue very different numbers because they refuse to recognize the value of federal tax points in their calculations. They ignore the fact that this is a contribution to provincial revenues that keeps growing year after year.
Has one provincial spokesman suggested a willingness to give the tax points back? This issue is not often debated but it is extremely important one.
Canadians owe it to themselves in our national policy debates to understand the issues involved. Over the years as federal-provincial social programs were developed the federal government contribution has taken two forms. One is the commitment of direct contribution, but as of 1977 we also have to provide the provinces with tax points.
What is a tax point transfer? It simply means that the provinces can collect a portion of taxes that would otherwise go to the federal government. In other words, provincial tax revenues increase, federal revenues decrease and the national taxpayer still pays the same rate.
There are good reasons for provinces to accept these tax points because as the economy grows so does the value of these points. While there have been economic ups and downs, each of these tax points is worth much more today than the programs we funded when they were introduced.
Let us consider for a moment the tax points transfer to the provinces in 1977 to support health and social programs. In 1977 these tax points amounted to about $3 billion in revenues. Today they are worth about $12 billion. In other words, if the federal government did not transfer these tax points it would have some $12 billion more in its coffers to spend on health and social programs.
When we hear calls for the federal government to hand over billions more for health and social programs, we must remember that this ignores the fact that provinces enjoy significant additional revenues from tax points they have already collected in previous years. That is why we continue to calculate the value of tax points in the final calculation of our transfers to the provinces.
This being said, I would not deny that we asked the provinces to share the fiscal sacrifices that governments had to make. Nor would it be fair for me to belittle or to understate the burden of restraint that was imposed by necessity on these governments and indeed on all Canadians.
The opposition must also be fair that the motion we are debating today fails the test of fairness in two areas. First, it fails to acknowledge the sheer lack of choice that we faced earlier in our mandate, and I have already elaborated on that. Second is the point I would like to address further. The motion suggests that the funding policies of the federal government have single-handedly imposed harmful consequences for health care and other social programs.
Quite simply the opposition motion does not tell the whole story. I would like to put it in some perspective. Earlier in my remarks I demonstrated that health and social programs were a top priority of the government. What are the priorities of provincial governments?
Looking at the province of Ontario as an example, in the current fiscal year the CHST is $850 million less than in 1993-94. Yet Ontario has brought in a tax cut amounting to $4.5 billion. If Ontario can afford a $4.5 billion tax cut then it can afford to cover the $850 million it is missing in transfers.
I realize that what the provinces do with their money is beyond the scope of this debate, but nevertheless to have a fair, meaningful and informed debate about how social programs have been affected by savings under the CHST we must remain mindful of what we are doing as a government, what we can and what we cannot do.
Can we as a federal government balance the federal budget? The answer is yes. In fact we have already done that. By restoring order to our finances can we as a federal government do our part to ensure that the provinces have more money for health and social programs? Clearly the answer is yes, and we have already done that. We raised the CHST cash floor to $12.5 billion and we did it a full year ahead of schedule.
As a federal government are we in a position to increase direct funding to key health initiatives? The answer is yes. As I have already indicated our last three budgets have allocated more money toward the health transition fund and other programs.
Can we as a federal government force the provinces to balance their budgets? The answer is no. It is up to them. Some have and some have not.
Can we as a federal government demand that provinces use any budgetary surplus for spending on health care? The answer is no. Again that is up to them.
Can we as a federal government insist that the provinces treat health care rather than tax cuts as a top spending priority? The answer is no.
The answer to these questions are quite revealing. For one thing they reveal that even though spending on social programs may be the top priority in Ottawa, it does not necessarily follow that spending on social programs is the top priority of the provinces.
The mark of leadership is the ability to accept responsibility for decisions, even unpopular ones. The record of the federal government speaks for itself. We have no problem accepting responsibility for the tough spending decisions we have made. The wisdom of these decisions has been borne out by the dramatic turnaround in the fiscal health of our nation.
We cannot accept blame for weakening the social safety net through our restraint measures. In fact the opposite is true. As a government that is once again in control of financial destiny we have been able to put in place a sound financial foundation. Our fiscal turnaround has meant significantly lower interest rates for all governments. That helps business growth and tax revenues. Together this means lower costs for governments themselves and that we are better placed than ever before to enhance the quality of life and security of individuals.
The policies I have outlined clearly demonstrate the government's commitment to sustaining and improving social programs.