Mr. Speaker, I am pleased to take part in this debate concerning Bill C-28 and to support the government's decision to increase cash funding to the provinces under the Canada health and social transfer.
The measure of real leadership is where government places its priorities. The priorities of this government in this case are clear and concrete.
Health and education are issues that affect every Canadian in every region. They are truly national concerns. It is proper that as our federal financial situation improves, the government has given first place to investing in health and education through boosting provincial funding for these vital purposes. This is the type of investment all Canadians can appreciate. This is the sort of support for federal-provincial partnerships that all Canadians should endorse.
Under this legislation federal cash funding to the provinces under the CHST will be guaranteed at $12.5 billion annually for the next five years. That is a $1.5 billion increase over the previously legislated cash floor.
It is important to remember that the cash portion of the CHST is only part of the total value of our federal support for provinces in the areas of health, education and social assistance. When tax points are included, the total funding to provinces provided under the CHST will exceed $25 billion. That will grow to over $28 billion in the years ahead.
There are some critics unfortunately who try to dismiss or minimize the issue of tax points. They try to ignore the fact that these federal tax points once transferred to the provinces are not only a gift that keeps on giving, but a gift that keeps on growing year after year. Tax points. I know that sounds abstract, arcane and perhaps bureaucratic, but Canadians owe it to themselves and to our national policy debates to understand the issues involved, especially if they are to appreciate the legislation before us.
Over the years as federal-provincial social programs have been developed the federal contribution has taken two forms. One is a commitment of direct cash contributions. But as of 1977, we also agreed to provide the provinces with tax points.
What is a tax point transfer? It simply means that the provinces can collect a portion of the taxes that would otherwise go to the federal government. In other words it means that provincial tax revenues increase, federal revenues decrease and the national taxpayer still pays the same rate. There was good reason for the provinces to accept these tax points. As the economy grows so does the value of those points. While there have been economic ups and downs, each of those tax points is worth much more today than when the programs they fund were introduced.
Consider for a second the tax points transferred to the provinces in 1977 to support health and social programs. In 1977 those tax points amounted to some $3 billion worth of revenues. Today they are worth about $12 billion. In other words if the federal government had not transferred those tax points to the provinces, today we would have some $12 billion more a year in our coffers.
Some of that money could have gone to accelerate the deficit reduction but I firmly believe and I am sure hon. members in government believe it belongs where it is doing the work it does. That means providing a national health care system that is the envy of our American neighbours. It means support for post-secondary education that makes attending a Canadian university much more affordable and accessible than is generally the case in the United States of America.
To me the bottom line is clear. Federal support for health care and education, two of the most important concerns within our society, is real and reliable. As our economy grows and our financial situation improves it is support that is again growing.
I am not trying to hide the fact that to get Canada's deficit down transfers did have to be cut. The cash portion of federal funding for provinces represents about $1 in every $5 of federal program spending. We simply could not get the deficit down without including transfers in the fiscal restraint effort of our first mandate.
A number of points should be considered in judging our federal performance on trimming transfers. First, our original cuts to cash transfers represented about 3% of total provincial revenues. In other words 3 cents of every provincial spending dollar. I hardly think there are too many Canadians who would describe that as an excessive or exorbitant contribution to resolving a national debt problem that was hurting us all.
Second, we have always shared the concern Canadians were feeling about the future of social programs, especially health care. Because of our better than expected fiscal progress we are now able to reduce the size of our planned transfer cuts with Bill C-28 restoring up to $1.5 billion of federal revenues a year to provincial coffers. This means our transfer cuts will end up equalling only about 2.5% of provincial revenues.
Third and most important, let us recognize these transfers cuts brought real bottom line benefits to the provinces not just losses. That may sound contradictory but it is again the truth. We should not forget that our federal deficit reduction program has played a crucial role in allowing Canadian interest rates to fall to their lowest sustained level in some 40 years. While international pressures have seen rates move up somewhat, they are still well below the levels we can all remember from the 1980s.
It is not just individual Canadians and corporations that have benefited from these lower rates. The provinces have also been winners.
First, the lower interest rates made possible by our fiscal restraint have meant lower provincial debt servicing costs. In fact we have estimated that the drop in rates provided the provinces with a $1.8 billion dividend between January 1995 and December 1996. That saving has continued to grow.
Second, the provincial gains go beyond lower interest charges. Canada's low interest rates are the reasons why growth and job creation have accelerated significantly in recent months. Our growth rate is one of the best in the world and our unemployment rate in December was the lowest in seven years.
That makes the provinces winners as well, providing them with higher tax revenues through more working Canadians and healthier companies, not to mention reduced welfare costs. In other words, the success of our deficit battle has improved the ability of provinces to invest in health care and education.
Personally I have no patience for those who try to argue that the government has supposedly acted unfairly and offloaded our deficit on to the provinces. I see it differently. Yes, we imposed cuts but as carefully and as fairly as we could. Provinces, in fact all Canadians, are sharing in the very real rewards those federal cuts have bought and paid for.
I have raised these points because they serve as a useful context for the legislation we are now considering. Before concluding I must make a couple of further points about the government's commitment to health care and education. The enrichment of the CHST under Bill C-28 may be the most dramatic evidence of our commitment but is not the only proof of our continuing expanding support for these vital social and economic activities.
For example, also in Bill C-28 we are taking an important step to help Canadian parents save for their children's education. The legislation will expand the limit on the amount that may be invested in a registered education savings plan for a youngster from the current $2,000 to $4,000 a year. This brings the limit for such savings—where the income is tax sheltered until used to pay school costs—more in line with the growth in tuition and other school expenses.
Our action on health care also extends well beyond the funding under the CHST. For example, in last year's budget our government announced that we would provide $150 million over three years to help provinces put in place such pilot projects as new approaches to home care and drug coverage that will enable them to test new ways to improve our health care system.
In the 1997 budget we also committed $50 million over the next three years to allow both levels of government, federal and provincial, to put in place a co-ordinated national system of health data. This will ensure that health care providers, planners and individuals across our country have the right health information at the right time, including the most up to date knowledge possible concerning the treatments available.
I know my remarks have gone beyond the specific legislation before us, but no act of government stands in isolation from the overall directions it has established and commitments it has made. That is why I welcomed the opportunity to speak today in support of Bill C-28. It demonstrates the government's commitment to the critical issues of health care and education. It proves that the direction it has set is one of continuing partnerships and support for the provinces.