Mr. Speaker, if no one else will pick up the cudgel then certainly I will. I will speak about three things this evening, tax cuts, debt reduction and transfers on the CHST.
First is the issue of debt reduction which in my submission has been ably done by the finance minister. We have gone from a situation where we had about $42 billion in deficit to a situation where we are now running a surplus estimated at anywhere between $4 billion and $8 billion. The question is really one of how Canadians want to deal with the surplus which is their own creation, a tribute to Canadian taxpayers.
I am more of a debt hawk than the finance minister. I would allocate more moneys to debt reduction. I consider the debt to be a burden on us and our country. To my mind the $3.5 billion commitment is a minimal gesture given the size of our national debt. I am something of a minority in this view. This commitment to steady debt reduction is a first step and is something the finance minister needs to be commended for.
I am very impressed by the finance minister's ability to see the gross debt to GDP ratio reduced from something in the order of 73% down to something in the order of 66% to 67%. That is an amazing accomplishment, an accomplishment for which he is to be commended.
When the finance minister presents his budget I urge him to restate the debt so it is somewhat more comparable to our competition. When those people in red suspenders from Switzerland, talked about by our Prime Minister, actually compare our debt to GDP ratio with the ratios of other countries, they will realize this is quite an accomplishment. When we are more comparable we will achieve some savings in absolute terms on interest rates. I hope that will prevent the dead loonie bounce. We have achieved a great deal in absolute terms in the reduction of the debt and I commend the finance minister on his commitments.
I urge the finance minister to make it very public in this Chamber in two weeks that we have reduced or paid off market debt by $13 billion this year alone.
This is quite an accomplishment and a significant sum of money. This means that Canada, as a government, is no longer on debt reduction. It is no longer in the market for debt.
The direct effect is that we will make the moneys that heretofore had gone for government financing available to the private market.
I was fortunate to have a conversation with Governor Thiessen on this very point. He was saying that because Canada no longer borrows money it therefore has money available to the nation in general and also to private investors for corporate borrowings.
As we all know, borrowing on a bond market or borrowing in debt instruments is a cheaper way of borrowing money than going to the equity markets and borrowing on the equity market.
We have passed on to Canadians generally a tremendous benefit to those who need to borrow in order to carry on the capitalization of their companies.
That in and of itself is probably a bit of an unsung consequence of doing things right in a fiscal fashion. This government in my view has done it right. We have reduced debt in absolute terms. We have committed ourselves to reducing debt in a steady downward trend.
We have achieved a downward trend from 73% to 66% or 67%, which hopefully by the end of this mandate will be either in the low 60s or the high 50s. That in and of itself is a tremendous accomplishment.
Finally on the issue of debt, I urge on the finance minister two things, that he restate the debt to GDP ratio in a comparative fashion so that it is readily comparable to our competition, and that he celebrate Canadians' accomplishments in the absolute reduction of our national debt by something in the order of $13 billion this year.
I now to turn to tax cuts. If there is a budget in which to accomplish tax cuts, I would like to suggest this is the budget.
Surely the beleaguered middle class taxpayer deserves something of a break. The surtax can be removed at this stage. This was a tax imposed on Canadian taxpayers in order to fight the deficit. The fight for the deficit is now over. Deficit reduction has been completed and we are now into the realm of debt reduction. The rationale for that tax no longer exists. I urge the finance minister that this should be a priority tax cut.
In addition, 10% of the taxpayers pay 50% of the taxes. As difficult as it may seem, we need to recognize these are the people who carry the financial burdens of the country. When someone is carrying the financial burdens of the country such as this 10% group is they need to be recognized on this level of taxation.
I was somewhat disappointed that the finance minister found himself a little politically boxed in with respect to the EI cut. As members know, 10 cents costs the government $700 million. This is a shocking figure.
The government found itself in a situation where it had to pass on an EI cut. We ended up cutting 15 cents or just over $1 billion. That in and of itself uses up room for doing other tax cuts.
There is a good argument to be made that other kinds of tax cuts could have been done in priority to the EI cut.
If we looked at a variety of charts with respect to the taxes that Canadians pay, consumption taxes, corporate taxes, employment taxes and personal taxes, we would note that as a general proposition we are fairly competitive with other G-7 countries in virtually all categories, with the sole exception of personal taxes where we compare somewhat unfavourably with our nearest competitors, the Americans. There is something in the order of a 4% gap between where we would like our competitive taxes to be and where they are presently.
I for one would have liked that $1 billion in EI cuts to have been applied to personal income taxes as opposed to employment taxes. A dollar is a dollar is a dollar. However, on the other hand it would have been nice to have spread those dollars over a greater number of Canadians.
The additional cuts that I would like to see are in the area of thresholds. I know there has been a great deal of discussion about bracket creep. I suggest to hon. members opposite and indeed on this side of the House that bracket creep is a little understood concept. However, an area that is easily understood is that of thresholds.
Our tax system, generally speaking, is fairly competitive up to about $60,000 or $70,000. After that our competitiveness with respect to our thresholds erodes rather rapidly, in particular as it relates to our nearest competitors, the Americans. While we cannot expect that changing thresholds will in fact solve all problems, the only thing the Government of Canada can control is the area of its taxation systems. We cannot control how much a young engineer from Waterloo University might be paid by Microsoft versus a Toronto or a Regina based company; however, we can have some impact on the taxation system.
Therefore I would have liked to have seen something done in the area of thresholds. My suggestion would be that we move the highest threshold up to around $70,000 or $80,000 as the maximum threshold and that we move the middle threshold up from $29,000 to about $35,000. That, in and of itself, would provide considerable tax relief so that we would not be taxing Canadians too quickly. If in fact the finance minister has the budgetary room to be able to do that, I would think that is an area which should be seriously explored.
There is also a certain level of hypocrisy in our approach to this. As we see it, we are moving ourselves from a resource based economy to a knowledge based economy. When we move from a resource based economy to a knowledge based economy we can reasonably anticipate that some Canadians will do very well indeed.
How are we going to expect people to put the effort into improving their knowledge base if in fact the tax system takes it out at the other end? We need to address this as a country as we do our budgeting over the course of the next number of years.
The final area I would like to address has to do with the CHST, the Canada health and social transfer. This is of course the big block of cash and tax points which is transferred to the provinces. It is in the order of $25 billion to $26 billion.
We will have noticed in the newspapers a great deal of whining on the part of a variety of premiers concerning “reductions in the CHST”. The biggest whiner of them all is the premier of my province who is blaming his entire incompetence and mismanagement of Ontario's economy on a reduction totalling something in the order of $938 million from the federal government over the course of six years. What he neglects to point out in the course of generating his argument is that Ontario's revenues have actually risen over the past six years to somewhere in the order of $10.5 billion. Even with what we call Mike Harris math in Ontario, he is ahead by something in the order of $9 billion. However, when one philosophically commits oneself to tax cuts in priority to all other priorities, one will in fact generate a situation where one has to deal with other areas. One has to make cuts to health care and education and one has to ratchet up the debt.
Surprise, surprise, but that is what has happened in Ontario. The debt has risen under Mr. Harris' stewardship to something in the order of $20 billion to $30 billion. Depending on when he calls the election, it may be as high as $30 billion. Right now it is around $20 billion. This year alone tax cuts will cost the Ontario treasury something in the order of $4.5 billion. Those tax cuts alone would wipe out the deficit and provide a small surplus, if properly managed.
As other members opposite have said, there is some disgrace in our health care system. It is not the system that we would wish it to be. Those tax cuts could have been applied to educational priorities, but they have not been applied to educational priorities.
Therefore, when one ideologically commits oneself to tax cuts in priority to all other priorities one necessarily mismanages the government's finances, and when one necessarily mismanages the government's finances one has to blame somebody. Why not blame the federal government which has cut back the CHST to Ontario by a total of $938 million over the course of six years?
We must not neglect to point out that the effect of proper management at the federal level has brought interest rates down. The interest rate reduction benefit to Ontario alone is something like $1.3 billion, which more than offsets the minimal reductions to the CHST.
In government management there is always a choice in priorities. What priorities are we going to take? If one looks at the priorities of this government, first of all it gave priority to the reduction and elimination of the deficit. That has been achieved. It is a tremendous accomplishment to go from a deficit of $42 billion to a surplus of something in the order of $4 billion to $8 billion in the course of six budgets.
This government then gave priority to reducing the debt in absolute and real terms. Thirteen billion dollars off in one fiscal year out of the market is an enormous accomplishment.
It then prioritized tax cuts and last year made a number of tax cuts at the low end. I applaud the government for doing that. Now I would like to see the upper end receive its tax cuts.
Finally, this government has done all of this with a minimalist approach to the reductions in the CHST and it has accomplished it over the course of the six years with a great deal of notice.
Canada is more than ten little fiefdoms with one taxing authority. Canada is a nation. The priorities of our nation have been set by this government and I support those priorities.
I urge this government to continue the absolute reduction of the debt, to provide tax cuts to Canadians who have borne most of the burden and to continue to prioritize the needs of our country in the fashion that I have outlined.