Mr. Speaker, I am pleased to support third reading and approval of Bill C-28, legislation with important elements that speak to national vision, national values and national leadership.
The true measure of real leadership is where a government places its priorities. Certainly the priorities of the government are clear and concrete as demonstrated in the bill before us and in fact in the federal budget.
As the Minister of Finance said in his budget speech, our goals remain what they were when Canadians elected us in 1993: first, to build a country of opportunity, a country of jobs and growth where every Canadian has equal access to the avenues of success and, second, to safeguard and strengthen a compassionate society.
Since 1994 we have followed a consistent and solid plan centred on a balanced approach. In fact it is paying off today. With the 1998 budget, for the first time in almost 30 years the books will be balanced. Again in 1998-99 and 1999-2000, our two year fiscal planning period, we are on a clear course to reduce the debt as well.
It also means that we are now in a position where we can make key social investments that respond directly to the concerns of Canadians. Just as important, we can make these investments without jeopardizing our continued advance to a balanced budget.
Health and education are issues that affect every Canadian in every region. They reflect key national values. It is proper that as our federal financial situation improves, our government has given first place to investing in these vital activities. It is this type of investment that all Canadians can appreciate. This is the sort of support for federal-provincial partnership all Canadians should endorse.
The most significant part of today's legislation clearly is the measure to increase the cash floor of funding to the provinces under the Canada health and social transfer. Bill C-28 increases this guaranteed amount of federal cash funding for health care, post-secondary education and social assistance and services. It increases it from $11 billion to $12.5 billion a year through to the year 2002-03. It starts applying this higher cash floor one year earlier than originally slated.
This means that the provinces will receive an extra $7 billion in cold hard cash over six years. This is cash the provinces did not budget for. It is new money that the provinces can now include in their budgets and in their disbursements at the provincial level. That is by far the largest new spending commitment we have made since first coming to office.
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.
Clearly the CHST measure represents by far the most financially substantive measure in this legislation. There are also other parts of this wide ranging bill that should be highlighted again.
A key theme of both our 1997 and 1998 budgets has been the critical importance to Canada's future and the future of Canadians themselves of enhancing skills and knowledge. Bill C-28 represents an important step in our journey to success in a new millennium. It follows through on our 1997 budget pledge to help and encourage Canadians to save for post-secondary education of their children. Under this legislation we are increasing the amount that Canadians can invest in a registered education savings plan from $2,000 to $4,000 a year for each student beneficiary.
As well Bill C-28 will allow someone who has contributed to an RESP but who then sees the intended student not go on to post-secondary education to transfer that income from the plan into an RRSP. This will reduce the risk and the disincentive previously facing parents. The problem was that the benefits of their RESP investment could be completely forfeited if their child chose not to pursue higher education. With Bill C-28 that investment in an RESP will continue to provide real value for families even if the child does not go on to post-secondary learning.
I would also like to remind the House that this legislation also takes important steps to encourage and support charitable giving by Canadians. In a global economy marked by rapid change and sometimes disturbing dislocation, Canada's charitable sector is a critical partner in meeting the needs of Canadians, especially the disadvantaged and those at risk.
Our government recognized the importance of giving charities the tools they need to accomplish their important work. This commitment reflects not only a social obligation but also economic common sense. Even though tax assistance for charitable giving entails a cost for governments, it is plainly a much lower cost than providing full support directly through public funds.
In each of the last three budgets the federal government has made it easier for Canadians to contribute to charities. These measures have been especially useful in encouraging donations from modest income donors for example by making a higher level of tax credit available for lower levels of giving.
Our 1997 budget proposed and this legislation will enact further measures to help all charities attract donations from modest income donors, notably by levelling the playing field between the crown and other kinds of charities. Bill C-28 increases the amount of donations for which charitable credit can generally be claimed to 75% of net income from the previous 50% mark. This 75% limit will apply equally to all charities, eliminating the previous advantage enjoyed by donations to the crown and crown foundations.
In addition to increasing gifts from modest income Canadians, it is important, as the charitable sector itself has made clear, to encourage larger gifts of capital from individuals and corporations.
Since Canada already has generous provisions for donations in cash, the most promising way to encourage new giving is to provide more generous treatment for gifts of appreciated capital property. This point is driven home by the fact that the U.S. tax system features significantly more generous incentives for gifts of capital assets than our own existing system. The result appears to be a much higher level of giving.
Accordingly, this legislation also reduces the income inclusion rate on capital gains arising from certain donations, such as stock shares and bonds, from 75% to 37.5%. This was an area where the existing law in Canada was much less generous than in the U.S. Now with Bill C-28, Canadian charities will enjoy an equal footing with those in the United States.
Both of these measures, those concerning the RESPs and charitable giving, touch on the tax system. There are certainly further elements of this legislation that also address tax matters with the general goal of improving clarity and fairness.
As I said at second reading, one of the foundations of a well-functioning economy is an effective, fair and transparent tax system, a system which allows companies and individuals to focus on the work of building and growing their companies or their personal endeavours through real value added, not through manipulation of the tax rules. This is why C-28 includes a range of technical tax measures which include the following.
The legislation includes rules relating to transfer pricing, rules that will ensure when goods are transferred between elements of a single multinational corporation the pricing involved is based on the principle of arm's length dealing. In other words, companies will not be able to avoid or manipulate taxes by setting a transfer price that is artificial or arbitrary.
There are also rules that restrict the transferability of business losses between affiliated persons, rules that apply when a corporation becomes or ceases to be exempt from income tax.
This legislation takes further action that stops bankrupt individuals from claiming a double deduction of personal tax credits, like the GST credit, in the year of bankruptcy.
Finally, this legislation includes a measure that ensures there will be no tax penalty for Canadians receiving disability benefits should the insurance company paying those benefits become insolvent, and an employer takes on the responsibility for those benefits.
I should again remind the House that these technical provisions of C-28 regarding taxation were certainly made public a long time ago through draft legislation and ways and means motions. As a result, they have been closely scrutinized by private sector experts. In fact some of the provisions respond directly to requests and suggestions from the private sector. That is why I am confident these sections of Bill C-28 carry the support and acceptance of the sectors involved and deserve the same support from this House.
To conclude, let me just briefly return to the subject of the Canada health and social transfer, the part of this legislation that touches most broadly on the public interest. It has been argued during the debate that Canada's provinces supposedly contributed an unfair share to the federal deficit reduction. The enrichment to the CHST has been described as only restoring some of the funds we had taken away to begin with.
Let us be clear. Reductions were made in transfers to provinces under the CHST when it took effect for 1996-97 but the action was not unfair and it was very necessary. The fact is that as we launched our deficit reduction strategy, a contribution from virtually all areas of federal spending was the only way to get Canada's financial house in order.
No objective observer can question what had to be done. The hard truth is provincial transfers represent about 20% of all our federal program spending. That is $1 out of every $5. There was simply no way we could meet our deficit without those reductions.
If we had not taken the tough action that we did, February's budget could easily have forced us to deliver further cuts in public spending rather than the historic announcement of balanced books. Because we did what had to be done when it had to be done, we have been able to help achieve the federal fiscal success that is beginning to pay real dividends, dividends of solid benefit to each province and all Canadian citizens.
The deficit cutting exercise was transparent. It was done in consultation with Canadians and provincial governments. We gave the provinces a full year's notice of our plans so they too had time to adjust their own priorities and programs.
The bottom line is clear. Through the hard work and shared commitment of a vast majority of Canadians, we have eliminated the deficit for the first time in more than a quarter century. We have put ourselves in a position where we can renew responsible realistic investments in key social areas.
We are making those investments with a clear and considered philosophy. That philosophy is that it is only proper that our hard earned fiscal dividend goes to where it does the most good, helping the most Canadians. Surely the Canada health and social transfer honours that criteria. Just as surely Bill C-28 deserves the support of each and every hon. member of this House.