Debates of Feb. 1st, 1999

Questions Passed As Orders For Returns

[Michelle Dockrill, NDP, Bras D'Or, NS]

What groups, organizations or projects received funding and in what amount from the Enterprise Cape Breton Corporation in the period from 1993/94 to 1998/99?

Return tabled.

[Peter Adams, Liberal, Peterborough, ON]

Madam Speaker, I ask that the remaining questions stand.

[The Acting Speaker (Ms. Thibeault)]

Shall the remaining questions stand?

[Some hon. members]

Agreed.

The House resumed consideration of the motion.

Finance

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Madam Speaker, it is with pleasure that I rise today to speak on the prebudget report.

We are going to see in the not too distant future in the upcoming budget the clear direction of the government on the very important financial matters facing our country. Members of the opposition and all Canadians are waiting with some degree of suspense.

The world is changing at an unprecedented rate. Globalization and the forces of technology create change on a daily basis. Governments have to lead and it is going to take significantly more response from the current government than what we have been used to over the past five years.

This is a government without a real agenda, without a firm vision. It is government by cruise control. The government instead of looking well into the next century in terms of where it wants to take the country is focused solely on the next election.

The Organization for Economic Cooperation and Development recently said that current trends in Canada could lead to a substantial decline in Canada's per capita income relative to the OECD average. I repeat that there could be a substantial decline in our per capita income unless significant changes are made to the direction in which we are going as a country.

The only economic policy that this government has had has been in fighting the deficit. Our party and our members are as pleased as any party or any member with the fact that we have eliminated the deficit.

If we go back to 1979, it was the Conservative Party under the leadership of Joe Clark that introduced a budget which was the first fiscally responsible budget of a generation. At that time, had that budget been implemented, instead of being defeated for purely partisan purposes, Canadians would have been better served and the deficit quite possibly would have been eliminated far earlier than it was.

Canadians are responsible for the elimination of the deficit. Canadians have borne the brunt of deficit reduction. We have seen taxes in Canada increase from $114 billion in 1993 to $151 billion last year. That is a 23% increase. At the same time we have seen transfers to the provinces cut by 35%. Health care and education is reeling across Canada.

Our health care system is in tremendous shock, not just in my province of Nova Scotia but across Canada. Every province is reeling under the effects of the unilateral cuts to the transfers made by this government.

The government tells us to look at the fundamentals. The Minister of Finance and the Prime Minister tell us that the fundamentals are sound. We have, as part of those fundamentals, the highest personal bankruptcy rate in the history of our country. Currently we have a negative savings rate. We have the highest taxes of any of the G-7 countries.

The Liberals have cut the deficit by increasing taxes significantly, by cutting and by offloading responsibilities to the provinces. Canadians have the highest personal debt rate in the history of our country. While the government can pontificate about being in the black, Canadians are at an unprecedented rate of being in the red. The Economist magazine has published articles on the Canadian situation. At one point it reported that it was a miracle we were able to eliminate the deficit. It gave credit not to the current government but to the previous government. The Economist magazine specifically stated that the credit for deficit reduction in Canada goes to the passage of time and the successful reforms earlier this decade made by the previous government.

I will remind members opposite of those structural changes in the Canadian economy. Quite possibly they are wallowing in their own hypocrisy today because they fought these changes vociferously during election campaigns. The changes were: free trade, the GST, and the deregulation of financial services, transportation and energy. These were the tough visionary policies that were required then to provide benefits to Canadians today. I would posit that those are the types of tough visionary decisions that are required today to lead us into the 21st century.

Unfortunately, this government, a government of caretakership and cruise control, refuses to provide the type of visionary leadership that Canadians need.

The Minister of Finance and the Prime Minister keep saying that the fundamentals are strong. These are some of those fundamentals. We have an unemployment rate that is twice that of the U.S. The dollar hit record lows throughout the summer. Our productivity is lagging our G-7 partners. Our percentage of global foreign direct investment has dropped from 8.9% to 4% in recent years. The IMF and the OECD are both saying that taxes are too high. Our comparative tax burden in Canada relative to the U.S. continues to pummel initiative, productivity and success for Canadians.

Canadian families making $30,000 a year are paying out a marginal tax rate of approximately 40% in combined federal and provincial taxes. In nine of our ten provinces our top marginal tax rate is more than 50%.

We hit that top marginal rate at approximately $60,000. In the U.S. the top rate, federal and state combined, is in the mid to upper 40% range. Americans do not hit that marginal tax rate until they have an income of $271,000 U.S. or $410,000 Canadian. This type of disparity, this type of spread between our tax rates and the tax rates of our largest trading partner, is simply not sustainable. It is one of the reasons that an unprecedented number of our brightest and best young people are going to the U.S., what is frequently referred to as the brain drain.

Since 1973 productivity in this country has been lagging behind our competitors. We have seen a secular decline in the Canadian dollar, which is closely linked with productivity. The Prime Minister's erudite response this summer was that somehow the dollar was not such a big problem and that it would help tourism. The finance minister, the Prime Minister and other members opposite seem to believe that Canada can devalue its way to prosperity.

In fact it is quite the opposite. The contrary is true. If these low dollar and low productivity policies continue we will have a self-fulfilling prophecy in that many Canadian manufacturers and employers will put off investing in the types of capital investments and productivity enhancement infrastructure they need to become better, more productive and more competitive in a global environment. This will happen for two reasons. First, many of these productivity enhancement items, such as equipment or software, are imported and are more expensive because of the low dollar. Second, the companies feel that they do not have to become more productive and more competitive because they are hiding behind a non-tariff trade barrier, also known as a low dollar policy. When that changes it is going to be a significantly difficult time for Canadian employers and employees as we see the effects of current government policies and inactivity in addressing the issues of productivity.

The issues the government should be dealing with are lowering taxes, reducing the regulatory burden, working with the provinces to eliminate interprovincial trade barriers and working to address labour market flexibility. Those are the types of issues that need to be addressed. But the government has focused on one thing and one thing only. It has forgotten the fundamentals of building a strong economy and making the types of investments required to lead Canadians effectively in a very competitive environment.

We are hoping that in the upcoming budget we do not see more Liberal focus group economics. We are looking for leadership, not politics. In the last budget, when there was a vague whiff of a surplus, the Liberals brought forward a millennium scholarship program which will only benefit about 5% of students seeking higher education. Even then, it will only kick in in 2000. It is a scholarship program which is not even available to students pursuing education in private career colleges.

There is a global trend toward private post-secondary education. It is part of the labour market flexibility that will be very important if we are going to compete. But this new scholarship program does not recognize a global trend in education. In the last budget debate we suggested an amendment that students attending career colleges and private colleges, which are the wave of the future, could receive benefits from the millennium scholarship fund. Instead the Liberals did what was politically expedient and not what was sound from a public policy perspective.

We are concerned with a government that would spend $2.5 billion before it knew the degree of the surplus. There is nothing like the smell of hard currency around the snouts of Liberal backbenchers to incite a feeding frenzy.

The Liberals know a great deal about spending. It was the Liberal Party in the late 1960s which was able to take a zero deficit to $38 billion by 1984. The Liberals deserve some credit for having developed a certain proficiency in spending. However, we hope they do not revert to their old ways.

There is a concern on this side of the House and certainly in our party that the Liberals are practising the politics of signalling right and then turning left. We know in their own heart of hearts that they have had to pinch their noses and pursue policies of the previous government, which they knew were right, over the last several years. We are somewhat happy that they have done that. The only thing worse than the Liberals stealing Conservative policies would be for them to implement their own, which would be far more deleterious to Canadians in the end.

If we are going to be proactive in this country, if we are going to be successful in the 21st century, I would hope that the finance minister would spend a significant amount of time reviewing the prebudget report, and particularly the Progressive Conservative dissenting report within which he will find some very sound and forward thinking policy initiatives, such as the reduction of EI premiums.

Payroll taxes are one of the single biggest impediments to job growth in our country. The Minister of Finance has said in the past that payroll taxes kill jobs. Now we are asking that he actually live up to his rhetoric, reduce payroll taxes and put the money back into the hands of employers and employees. Employers can create jobs if we give them the tools. One of the things we are putting in the way are payroll taxes which are unnecessarily high.

Any Liberal opposite who would argue that high payroll taxes do not kill jobs would have to prove to me that the law of supply and demand is no longer relevant. When the cost of input is increased, whether it is for labour or anything else, the demand for that input is reduced.

Unless the Liberals are proposing that we repeal the law of supply and demand, I would suggest that we need to reduce EI premiums. We are proposing that EI premiums be reduced to $2 per $100 of insurable earnings.

We are calling for a full indexation of income tax brackets. Now is the time, particularly in a post-deficit period, to eliminate the bracket creep and reverse the trend. There have been 1.4 million low income Canadians who have been pushed onto the tax rolls and another 2.5 million Canadians who have been moved into higher tax brackets due to partial indexing. We are calling for full indexation of the tax brackets and we are hoping that the minister will provide this in the upcoming budget.

We are calling for an increase in the basic personal exemption to $10,000. In the U.S. a low income American does not begin to pay taxes until reaching an income equivalent to $11,000 Canadian. In Canada, supposedly a kinder and gentler nation, we start taxing Canadians at $7,000.

In the last federal budget the Liberals said that they provided tax relief for low income Canadians. In fact somebody making $10,000 per year received a tax benefit of approximately $78 per year in the last federal budget. That is about one coffee per week at Tim Horton's. If they go to Starbucks it is one per month. That was the pittance, the insult, that the Liberals threw at low income Canadians in the last budget.

We are calling for an increase in the capital gains exemption. Throughout Canada we are seeing growth in high tech industries and in small businesses, particularly in the area of technology. The current amount of $500,000 simply does not reflect the values of these businesses. We must keep in mind that for many small business owners, really their complete life, their entire capital accumulation is within their small business. If we are to encourage small business people and create an environment within which Canadians want to grow and succeed in entrepreneurial ventures, increasing the capital gains tax exemption makes sense and makes sense now.

We are calling for an increase in the health and social transfers to the provinces. The Liberals have cut significantly since 1993, some 35%, in their transfers to the provinces. What is interesting is on the health care issue now the Liberals, after having unilaterally cut the health care system across Canada, forcing Canadians to face significant losses in the quality of our health care system, they are saying they want to reinvest but they want to ensure they can protect Canadians against the provinces.

They are saying they want to make sure they can have some control because they do not want the provinces making the wrong decisions. It was not the provinces' fault what happened since 1993, it was the federal government's fault. The provinces did not reduce their transfers from the federal government. It was the federal government that reduced those transfers that set the provinces and our health care system reeling across Canada. Now we have the patriarchal big brother approach by the federal government and the unbridled hypocrisy of federal government members when they say they want increased accountability from the provinces when in fact when given the opportunity to be responsible with health care they blew it since 1993.

We are calling for indexing the child tax benefit. There was a private member's bill by one of our members which was passed by the House. We are calling for the government to follow up and index the child tax benefit to ensure that inflation, even at a very low rate, does not reduce and eliminate this benefit for low income Canadians.

We are calling for real and measurable debt reduction targets. It is very important for our international markets to see that the commitments Canada is making or is willing to make to debt reduction are not simply going to disappear amidst new Liberal spending. We need to see firm debt reduction targets with the goal of reducing our debt to GDP ratio to the G-7 average of 55% over the next five years.

We are calling for an increase in the RRSP foreign content limit to 50%. It is inconsistent with asking Canadians to invest to protect their future, invest and save for their own future, and then denying them the opportunity to achieve geographic diversification in their portfolios. The Canadians equities market represents only about 1% to 1.5% of global equities markets, yet we are forcing Canadians to invest in one small equities market. That is simply not consistent with maximization of the returns.

We are also calling for parliamentary control—

[The Acting Speaker (Ms. Thibeault)]

I am afraid the hon. member's time has expired.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, the member referred in a number of instances to the effective tax rates in Canada. He was talking about someone making $30,000 a year as an example. I think he is mistaken and I would like to set the record straight.

If a taxpayer has $30,000 of taxable income they are just at the first, lowest effective rate federally, which is 17%. Provinces have a variety of rates but they are roughly equivalent to about 50% of the federal taxes. So that someone in Ontario, for instance on $30,000, would pay 50% of the federal rate overall. That means an effective rate of 25%.

What the member failed to include in his calculation was that all Canadians get a non-refundable basic personal amount of about $6,500 which reduces the taxes otherwise payable. Therefore the real tax out of pocket of a single person making $30,000 is only 19.6%, not the numbers the member was giving.

The second matter the member spent some time on was with regard to the comparative brackets between Canada and the U.S. Clearly there are some differences there. If all the member wants to do is have a comparable bracket for someone in the $250,000 range to be equivalent to the U.S., I suggest we establish a rate of 29.01% which is the highest federal rate plus .01% more and set it at $.5 million and then we will be better than them. It is really a frivolous argument.

The question I want to ask the member is on the CHST issue. As the member knows, there is a lot of misinformation concerning that. In Ontario the actual cuts in CHST were less than $1 billion and yet at the same time Ontario had tax cuts of $4.3 billion. It is clear that although there was an equitable reduction across the country with regard to the transfers related to health, the provincial governments themselves have to make decisions. One of the decisions the province of Ontario made was to reduce taxes and to cut health services at the same time. These choices are provincial choices. They are not federal choices.

I ask the member whether he had the same situation in his province.

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Mr. Speaker, I thank the hon. member for his question.

The member calls it a frivolous argument that the top marginal tax rate in the U.S. does not kick in until the threshold of $271,000. In Canada it kicks in at approximately $60,000. He calls it frivolous that we actually tax at a higher rate at the top marginal tax rate and we start at $60,000 and in the U.S. it does not start until the equivalent of $410,000. How can the member justify his assertion that this is frivolous?

In last year's prebudget debate the hon. member opposite when I was speaking about the brain drain said that Canadians should not want to leave this country because of our great health care system and because of all the social niceties. He listed various reasons why Canadians would not want to leave the country.

My response is that perhaps his time would be better spent standing at the border explaining to Canadians who are voting with their feet and choosing to go to the lower tax, higher opportunity environment why they should not leave, because they are leaving. They are leaving because the government continues to tax at all levels of income far too high.

The hon. member still obviously does not understand the impediment to economic growth that high taxes are. When he mentions Ontario he forgets to mention that Ontario actually increased its investment in health care. While the federal government cut its investments in health care, the province of Ontario and many other provinces increased their investments in health care.

The member is right to identify there was a tax cut in Ontario. This tax cut led to one of the strongest levels of economic growth in our country. It led to one of the strongest levels of job growth in our country. Perhaps the member should learn from the evidence and the example of Ontario that tax cuts can create economic growth and that governments can make the right choices and cut taxes and invest more in health care.

[Jason Kenney, Reform, Calgary Southeast, AB]

Madam Speaker, the comments from the member for Mississauga South indicate once more that Liberal accountants may know how to count beans but they do not understand how to grow the economy.

The hon. member opposite said that it really is not consequential whether we have the highest marginal rate kick in at $60,000 or a quarter of a million or a half a million dollars. This really does suggest he does not understand the disincentives to work, save and invest among the most productive segment of the economy. I am offended when I hear a member from Ontario, who stood in this place and voted to cut billions of dollars in health transfers from his own people and his own province, turn around and blame the Ontario government for cutting taxes. Yes, the Ontario government cut taxes but its income tax revenues went up by $5 billion because more people are working, saving and investing, something a Liberal could not possible understand as a rational response to tax relief.

Does the member for Kings—Hants agree with me that the member opposite does not understand the supply side dynamic that tax relief provides as demonstrated in the crucible of Ontario in the past three years?

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Madam Speaker, I do not always agree with the hon. Reform member and this is not a message from the united alternative. That being the case, I agree with him completely in his assertion that the Liberals simply do not understand supply side economics.

Liberals believe Canadians will not be bothered by being taxed more and more and that the economy will not be stalled by this. They believe employment insurance premiums and payroll taxes do not kill jobs. They do not even believe in the law of supply and demand. The Liberals believe in Liberal focus group economics. They have no understanding of the types of economic principles that are leading even their counterparts in social democrat governments elsewhere to produce more tax relief, jobs and growth than they are capable of producing.

The previous government gave the Liberals a great start on the road to economic success with free trade, the GST, deregulation of financial services, transportation and energy. We really gave them every opportunity to succeed and yet they still do not recognize what Canadians need now. More than anything else Canadians need lower taxes, less regulation, more jobs, more economic growth. We want Canadians to succeed here. We do not want them to have to succeed in the U.S. or in other countries where opportunities are growing faster because taxes are lower.

[Karen Redman, Liberal, Kitchener Centre, ON]

Madam Speaker, I will be sharing my time with the hon. member for Scarborough—Rouge River. I had the distinct privilege this year to be part of the Standing Committee on Finance and to have toured across Canada. We heard that Canadians want and expect from this government integrity, accountability, consistency and above all that their voices be heard as part of this budget process.

The finance committee met with Canadians from all walks of life. While it is important that we meet from time to time with the leaders of national organizations, we also met with grassroots Canadians across the country. One of the things they said loudly and clearly is that they do not want quick fixes. Canadians want us to operate on prudent estimates. They want us to use realistic targets which are reflected in the finance committee's recommendation that the government continue to employ a contingency reserve by setting aside $3 billion per year. As at present, the contingency reserve should be used to fund neither increased program spending nor tax cuts but that it should go toward the debt.

I did a survey in my constituency of Kitchener Centre. Eighty per cent of respondents indicated that the government needs to work on paying down our national debt. We must be attentive to this issue. Our committee also recommended that the government establish a long term target for a sustainable debt to GDP ratio.

Again we heard Canadians say “Give us realistic targets so that we can move forward in a measured pace”. This government has demonstrated its ability to do that by paying down the deficit and we are now ready to take on the debt.

Our committee also recommended the establishment of an interim debt to GDP ratio, a target of 50% to 60%, that should be achieved in this mandate.

Another issue I heard about from my constituents in Kitchener Centre was the lowering of personal income taxes.

Last spring the finance committee had the opportunity to deal with the Mintz report which looked at Canada's corporate tax structure as compared to the other G-8 countries. While the report did make some recommendations, it also pointed out that our corporate tax system is in the mid-range of other G-8 countries, roughly where we would hope to target.

Our payroll taxes in comparison to other G-8 countries, despite what we read in the media, are on the low side. As a matter of fact this government has in four consecutive moves lowered EI premiums to the point where as of January 1 of this year they were lowered to $2.55.

One of the areas where we need to be attentive is in our personal income taxes. That is something the finance committee suggested we look at as we can afford to do it. Again, it has to be a change that is sustainable and one that Canadians can count on.

Across this country in every province we heard concerns regarding health care, the universality of our health care system as well as the standards of our health care system. It is that message that the finance committee carried forward in recommendation 17, recommending that the government strengthen its involvement in health care by further increasing the cash floor by $1 billion starting in 1999 to the year 2000.

It is important that we add money and help to give a federal presence and federal leadership in health care. But the problems facing health care are far greater than merely money.

Previously I served at other levels of government as well as on a district health council. I know that health care, not only in Ontario, in Kitchener Centre, but across this nation is changing. It is evolving from an institutionally based health care system to a preventive health care system. We need to look at how we fund health care. It is not just a matter of dollars.

We also heard in many communities, my own included, that we need to be attentive to the issues of both home care and pharmacare. But again I hear the people of Canada asking for a vision, for a strategic plan, not just merely dumping money on problems.

Recommendation 19 recommends that the federal government fund health care research and that this research money be doubled. This should be achieved within five years.

The issue of standards of reporting in health care is very popular and certainly something which Canadians are interested in seeing. A demonstration that has benchmarks so that we can measure the kind of health care we as Canadians enjoy needs to have the kind of research and statistics behind it in order to make those yardsticks meaningful. Funding to medical research will help to get us halfway there.

The finance committee also heard that research, not only on behalf of government but to encourage the Canadian private sector to enter this important industry, needs to be encouraged. It is on that note that we suggested the networks of centres of excellence program have their funding raised as well as technology partnerships.

The community that I represent was largely manufacturing in its historic base. I see that base evolving. My community is looking for highly skilled technical workers. These are the workers who will be needed to partner with business in the next millennium.

The committee also recommended that the government enhance its financial support for the National Research Council. There are two universities and community colleges in my riding. There is talk about the brain drain. Giving funding to research and especially the granting councils because of the peer review aspect is the way not only to enhance research and the end product, but also the way to create a milieu where we will keep the best and brightest in Canada.

Poverty is an issue that I heard about across Canada. It is an issue I care about deeply and certainly one that I have heard about in my community. We are trying to address this issue through some of the recommendations in the budget.

The committee recommended that we build on the 1998 measures which increased the basic personal amount and spousal amount by $500 to again increase it this year by a further $200, bringing the amount to $700 of additional income that can be earned tax free.

The committee also recommended that we increase the basic personal and spousal amount by $500 for lower income people.

We also suggested that we continue to take away the 3% surcharge which was partially taken off in last year's budget, and it is an issue of credibility that we now do it for earners above the $30,000 level.

The committee recommended that the government reintroduce indexation when the fiscal situation improves. In the meantime, measures should be taken to offset the impact of deindexation.

Measurable, predictable actions of this government are what has put this nation on a stable footing. It is essential that we continue down the path that looks at the impacts of global and domestic trends and that we respond to the evolution of health care and our social system.

I am very proud to be a member of the finance committee that brought forward what I think is a very thoughtful, forward-looking prebudget document.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Madam Speaker, I am pleased to participate with colleagues on both sides of the House today in this prelude to the upcoming 1999 federal budget.

As I lead into my remarks, which will be made within the shared time, I cannot help but think back to the way things were just a few years ago when I was first elected to this House in 1988. The backdrop of how we got here from there is still important to Canadians. It is still important to all of us who understand how we got here from there as we try to lay out some kind of framework, some kind of direction on where we will go from here, what kind of leadership we will exhibit and where we will try to lead our Canadian economy within the ability that a federal budget can offer.

One concedes of course that a government budget will not always be able to provide leadership and direction in all elements of the economy. We do not run the entire economy from our desks here in the House of Commons, nor does the ministry of finance run the entire economy from its ministerial offices.

Approximately seven years ago we had the recession of 1992. I remember that it was supposed to be a difficult year. It turned out to be for Canadians a very difficult three years. It was not a one-year cyclical recession.

There were reasons for that. The cyclical recession of 1992 was exacerbated by several other economic circumstances, each of which was chosen by the government of the day as part of a policy option.

I know they were not selected to exacerbate the recession. They were selected because they were seen as necessary. Some of it was necessary medicine. Some of it was just the right time to implement policy. However, it turns out to have been poor timing.

I notice that our colleague from the Progressive Conservative Party made reference to choices made by the Progressive Conservative government in the very early nineties which perhaps in some way laid some of the groundwork for our economy. Some of those decisions that were taken did lay the groundwork. As I say this, one has to remember that the timing was actually atrocious.

In opposition I and my colleagues did not spare the government at all in our criticism, as much because of the timing as for its effect on Canadians.

High interest rate policies were pursued by the Bank of Canada. The timing was awful. High interest rates mean high unemployment. At the time of the recession the bank decided it would squeeze and crush inflation out of the Canadian economy. The timing was all wrong. It succeeded ultimately, but at a very high cost to Canadians.

The government decided to implement a new GST, replacing the earlier MST. However, there are economic costs in implementing a new tax like that.

There were adjustments to the free trade agreement. Those adjustments would have to have been paid in any event, but those adjustments, in terms of employment losses, occurred right at the time of the recession.

Then there was the hopelessly out of control government spending of the day that ran deficits from $25 billion to $42 billion.

All of these factors exacerbated that very difficult recession year.

I remember talking to constituents. Most of us in this House have dealt with constituents who have been in difficult personal situations. Some were unemployed. I remember saying “This is just a cyclical recession. It will be over in a few months or a year. Don't worry, the jobs will come back”. However, that situation persisted for several years at a very high cost to Canadians.

When it all ended, sometime in 1993, 1994 or 1995, as fate would have it Canadians elected Liberals in October 1993. Our first order of business was to deal with the deficit. We adopted a plan, a process which was called a program review.

There were tax adjustments. There were effective tax increases at the time. They were modest, but nonetheless they were increases. The revenues increased, expenditures went down and we ended up balancing our Canadian budget approximately one year ahead of schedule.

We are now entering a second or third year in which we will have a surplus. The result of that backdrop has produced a situation that is described as “good fundamentals”.

Who can take the credit for it? Certainly those who were in government. As a government member I will ask Canadians to give us credit for dealing with the deficit. I think they have given us credit for that, notwithstanding the desire of members opposite to discount that fact.

Other things occurred. Interest rates came down, in part because of government action, but in part as well because of market reaction to other economic factors.

Our interest rates now are the lowest in 25 or 30 years. Our inflation is down to the lowest it has been in 25 or 30 years. That is very positive.

The free trade agreement then became the North American Free Trade Agreement. We have adjusted to that and we are now seeing the benefits of jobs and exports.

Our balance of trade has been in positive territory for a long time. Our current account, which moved into positive territory a couple of years ago, is now slightly under and is heading back toward positive territory. That is all very healthy.

The deficit is gone. We are now faced with the difficult problem of how high taxes should be and what kind of a surplus there should be. Certainly we want balanced books. Maybe there should not be a surplus. Maybe there should just be a balance. Then we would not need to argue about a surplus.

Because of the finance minister's prudent planning we are facing small surpluses this year and next year. That allows all of us to happily debate over what targets the surplus should be directed to.

This government has undertaken to use the surplus in three areas. It will use it to pay down the debt, which was sitting at around $583 billion and has now been paid down in modest amounts to $570-some billion. That may be small progress with a billion here and a billion there but pretty soon it adds up.

Our economy is growing at the same time, which means that our national debt to GDP ratio is dropping. This is the measuring stick most economists use in looking at our ability to sustain and carry a debt. That ratio is now poised to drop below 50%. It was riding up toward 60% at one point. We are now headed below 50%, which is positive territory for us. We have to deal with debt management. Like it or not it is there and we have some bills to pay.

Second, we will have to restore the effectiveness of our social programs. There is more than one way to do that. Spending money properly is one way as well as sustaining them and making sure there is enough money to deliver on our objectives.

Third is tax reduction. In the last budget the government began to deliver tax reductions in modest amounts. These reductions are showing up at the low end of the income scale. This time I as one member of parliament would like to see tax reductions spread right through the economic spectrum. In its report the finance committee mentioned the surtax which is still a part of income taxation at the federal level. My constituents and I would like to see that addressed seriously.

[Grant Hill, Reform, Macleod, AB]

Madam Speaker, this is my opportunity to speak to the prebudget debate. I will be splitting my time with the member for Prince George—Bulkley Valley.

It is easy to criticize a government in power on a big issue like health. I intend not to do too much of that today. I will go over the record of the Liberal government on health and then I will go to the comments of some people in the country as to what they think rather than what I think on this issue.

I was around for the red book. I saw the promises in the red book. The red book promised to preserve and protect medicare and to have a national forum on this issue to be chaired by the Prime Minister. The public took those promises at face value and I expected those promises would be kept.

What have preserve and protect ended up meaning? Over the last three years it has meant $16.5 billion in cumulative cuts. It has meant 188,000 people today on a waiting list for surgical procedures. Over the last two years 1,400 of my colleagues who were trained in Canada and who practised in Canada have left this country never to return. My latest information is that half the medical school students in Canada are now being trained to replace those who are leaving. Those are straightforward facts.

I will go over what a couple of Canadians have said to me recently on this issue. This letter is from somebody who lives in the town in which I practised medicine for over 20 years, a hospital in which I gave this kind of care. She wrote to me saying that on December 15, 1998 she slipped on the ice in front of her home, a fall that caused multiple fractures to her right ankle. She immediately went to the emergency ward at the High River hospital where she received quick, caring and responsive attention. As the break was significant the decision was made to transport her to the Rockyview hospital in Calgary where she, as well as the High River hospital personnel, were under the impression that the surgery would be performed that evening as arrangements had been made by telephone.

She went to Rockyview. The surgery was not performed on the Tuesday. She was reassured the surgery would likely be performed on the Wednesday. This was not the case. She was kept on morphine without seeing a doctor until Friday.

On Friday she asked “Where is my doctor?” He came and told her that he would try to do the surgery that day but that some people in her condition had waited up to two weeks before they could find the time and operating space to perform this operation. She went on to say that luckily she had the surgery that day.

That is absolutely unacceptable in a country like Canada. That would have been so unheard of when I started my practice that the patient would have come to me and said “Grant, that is malpractice”.

Let us think of what she did for those four days. She lay there with the swelling in her ankle worse. She lay in pain on morphine. She did not see a clinician. She saw only the nurses, nurses doing wonderful work. It was unacceptable. She asked me why this was happening in a country like Canada. I leave that to my colleagues across the way.

I also have a letter from somebody in Qualicum Beach, B.C. I picked two letters from the west because they were closest to my home. I get letters like these from every part of the country, from every province and every jurisdiction.

This individual addressed the letter to the Minister of Health. He watched an interview with the minister on January 17 on the CTV program Sunday Edition . He stated that the minister's comments had generated a few questions. I will not go through them all. I will go to the last and the main question. It is the individual's understanding that the federal government contributions toward health care in Canada had been reduced $6 billion per year. He asked if this correct was correct. If so, he asked, why has the government seen fit to increase taxes in over 35 areas during this same period?

He indicated that it appeared the finance minister's so-called balanced budget had been to a large extent achieved through reductions to health care and through increased taxes, not through what he wanted them to do, which was to decrease government waste and a severely bloated bureaucracy. He went on to bemoan the fact that health care would be the place that the Liberals chose to cut.

This is not a politician. This is not somebody with a vested interest other than the fact that some day he may be sick. These letters are coming like a blizzard to my office.

What do the nurses say? They are writing to me and asking me to put questions on the floor of the House of Commons in question period. The first question from RNs in Alberta was: Is the government aware that Canadians' health and well-being are being affected by an impending shortage of registered nurses? They await an answer.

The supplementary question was: Is the government prepared to invest in the future health of Canadians by investing in nurses. They are saying that the percentage of money going to nurses has dropped, that there is a recruitment problem, and that nurses will not go to college to become nurses any more because of these horror stories. They ask whether the health minister knows that qualified RNs are no longer able to deliver safe health care for Canadians.

What do Canada's physicians say? I am just one lone voice. They have an association that involves all health care workers in Canada. I have never seen such unanimity on an issue. They are saying the federal Liberal health care cuts are dreadfully wrong. I will not read what they say. It is very obvious what they say.

It is easy to criticize, is it not? An opposition politicians can stand over here and berate the government for what it has done. I would like to take a bit of a constructive approach then and say what the government should do.

First, we need stable funding for medicare. The health minister said today Reform would not put any more money into medicare. I do not know where he has been. I would like to give his head a shake. Let me give him the information: $6 billion over the next three years is our proposal, to be reinfused directly into medicare. New spending, not a chance; repriorized old spending. That is the difference. These guys only look for new spending. We do not need new spending. They are spending on areas they should never be spending on.

We also need a thorough review of medicare. I had someone on the phone just a few moments ago who said the wagon needed to be stopped and looked at, that funding alone would not fix medicare problems. That is true. We need to put the patient first. Today the bureaucrat, the politician and the medical profession are first in medicare. The patient is not first, and that must change. We need to put more accent on prevention. Also, the government has been very harsh on natural health products.

Reformers have talked a lot about hepatitis C. We need to have, and this is a commitment, a billion dollars of new money put into hepatitis C compensation. I want to spend a moment on hepatitis C, a topic which is very timely. Parliament has not been sitting for a couple of months and there have been some real significant developments in the hepatitis C area.

First is the Arkansas prison connection. Many of us in the country watched a TV show which showed a direct connection between Canadian regulators and dirty prison blood from Arkansas and Louisiana. The RCMP should be looking at that information. There was criminal activity in the hepatitis C issue in Canada.

A big compensation package has just been announced for one small group of infected Canadians. The Hepatitis C Society says it is unacceptable and inadequate. It has major problems with it. It is advising the public not to accept it.

It is very healthy to look at what is happening in other countries on hepatitis C. This is brand new information. Switzerland has just charged the Swiss blood agency with endangering the lives of hemophiliacs. It looks like people will go to jail in Switzerland. Italy has just ruled that the ministry of health must pay compensation to everyone infected by hepatitis C, not just a few. In France people are in jail. The prime minister and health minister in France have both been charged. In Canada we have zip. We do not have anything going on except a few dollars being offered to a few.

The prebudget debate on health care is not over. The government says it will reinvest the pittance it will put in of $1 billion, $2 billion or $3 billion, until just before the next election when it will say it is okay to have angina and give back the money it took. That is not acceptable.

[Dick Harris, Reform, Prince George—Bulkley Valley, BC]

Madam Speaker, I listened this morning as the chairman of the finance committee delivered his prebudget speech. Once I had listened for awhile I had no doubt that it was written by the finance minister's office, much in the same way as the activities of the finance committee and the witnesses that were called were organized by the finance minister's office.

As I listened to his report I wondered what finance committee he was travelling with. I was also on that finance committee and on most of the things that he was saying this morning I was hearing quite the opposite. As we travelled across the country we heard a loud and fervent cry for tax relief from average working Canadians, small businesses, professionals and large businesses. Everyone out there wants tax relief. The government has been the instrument that has led them to seek tax relief because over the last five and a half years the government has increased taxes somewhere in the range of 36, 37 or 38 times in the billions of dollars.

While the Minister of Finance stands and crows about balancing the budget which is not true, and I will talk about that next, for any increase in revenue he has just pulled his magic tax lever and the money has just flowed out of the pockets of working Canadians. The average Canadian family has seen their household disposable income decrease by over $3,000 since 1993. What kind of treatment is that for hardworking Canadians who are trying to have a better standard of living for themselves?

I want to set the tone by laying out exactly where we stand as Canadians in the tax system with which the government has burdened us compared with some of our neighbours, in particular our G-7 partners.

The personal income tax burden on Canadians is a full 56% higher than the other members of the G-7 countries. The corporate income tax burden in Canada is 9% higher than the average of our G-7 partners. These are countries that we compete with. Canada also has the highest property tax burden in all the OECD countries. Of the 33 countries, Canada ranks highest in property taxes.

In 1996 the average Canadian family paid a total tax bill of $21,242, 46% of their gross income. This is more than they pay for food, shelter and clothing combined which is around $17,000. Picture it. The average Canadian family with a couple of kids, a house, a mortgage, a steady job sees $21,000 a year go out in taxes and about $17,000 go out in shelter, food and the basics of life. That is disgusting for a country with the potential that Canada has.

Over the last five and a half years there have been wage increases for Canadian workers. They have worked hard for them. Their companies have worked hard to improve their bottom line and they have rewarded their employees.

What happened to those wage increases because of the Liberal government's tax policies? The government has taxed back over 150% of any wage increases that the average Canadian worker got. Imagine. If workers got a $100 increase, the government taxed back $150. If they got $1,000 increase over the last five and a half years, the Liberal government taxed back $1,500. If they got a $10,000 increase over the last five and a half years, the government taxed back $15,000. How do we get ahead in this country when we have a government that wants to rip out of our pockets not only what we get in a wage increase but more. It is a sad situation.

It is clear that Canadians need tax relief. There is no doubt about it. As the committee travelled across the country we heard the call for real tax relief, not just tinkering around with the surtax like the Liberals have done in the past. Canadians want real tax relief, something they can hold in their hands.

I said earlier that we should not believe the finance minister when he talks about balancing the budget. The fact is that this finance minister may say he has a balanced budget but the money he has used to make up that budget is the EI surplus which he has taken out of the pockets of working Canadians. He has used the pension funds of the federal civil service. He has taken that and has put that against the deficit. All he has done is borrowed within the family and he says he has a balanced budget. He does not have a balanced budget. He is still about $16 billion or $17 billion short.

If the economy takes a downturn in the next couple of years, those EI funds are going to be needed. Where are they? They are in new spending programs the government has introduced, $3 billion last year and another $3 billion this year. What ever happened to the promise by the government and the finance minister to hold the line on spending? No new spending. It just ain't true.

Let us talk about the EI fund. There is about $20 billion in EI surplus. Before the Christmas break we talked about how the EI commission has said that a $15 billion surplus would be fine. It would provide not only sustainability for the fund but also a rainy day fund in case the economy took a dramatic downturn.

It was also said that any finance minister who really cared would probably want to return the $5 billion or $6 billion excess in the form of premium reductions to the people who were paying it. Has that happened? I do not think so.

The finance minister continues to rape and pillage the EI surplus fund, to build his surplus to fund his increased spending programs, to enhance his opportunity to become the leader of the Liberal Party. One has to wonder whether the finance minister has the best interests of Canadians at heart or his own best interests at heart.

Earlier my colleague from Macleod talked about the crisis in health care. We have a crisis. Over 180,000 people are on waiting lists.

This is a true story from my riding. A neighbour of mine had been experiencing some severe chest pains and shortage of breath for a number of months. He went to his doctor who tried to get him to a specialist in Vancouver. Of course there are no specialists in Prince George, we cannot afford it. He went to a specialist in Vancouver and had an angiogram. It was determined that he has one artery completely blocked so an angioplasty cannot be done.

The next option is a bypass. In the old days a single bypass was a routine procedure. These days there is no money for a single bypass. Two, three or four bypasses are needed before someone can get into the operating room. That man was sent home in pain, in the same situation he was in when he went to Vancouver. He was told “We cannot do anything for you. Get another artery clogged and maybe we can look at you”.

That is the state of health care in this country. It is because the Liberal government has ripped the heart out of health care. Since 1993 it has taken out over $7 billion. When is it going to put something substantial back and help Canadians who have serious health problems?

[Alex Shepherd, Liberal, Durham, ON]

Madam Speaker, I will be sharing my time with the member for Mississauga South.

Throughout this debate there has been the odd mention from time to time of the issue of bracket creep. This issue is close to my heart and is something I would like to use my time to discuss. I do not think many people really understand this issue. This is a cancer which exists within our taxation system. It is as deadly as a cancer because it has crept through our taxation system in a slow and insidious way. It was ironic to hear the Conservative member talk about going back to our old ways because we have to go far back to understand how this insidious cancer became part of our taxation system.

Back in 1984 the then Conservative government stated that it would not allow indexation of tax credits and tax exemptions to occur unless inflation exceeded 3%. Back in 1984 the rate of inflation was 10%, so obviously people were getting a degree of relief, that is that portion which exceeded 3% at that time. There was very little debate about the issue of bracket creep.

However, today we note that it is the stated policy of the Bank of Canada to keep our inflation rate within a narrow band between one and two percentage points. Needless to say because inflation is less than 3%, there is no indexation.

What does this all mean to the average taxpayer? Let us say that someone earned about $2,000 a month in 1992 and that person paid $800 in rent. By 1998, assuming they had kept up with inflation and indeed a lot of people have not been able to do even that, their income would have risen to $2,360 and their rent would have been $944. The reality is of course that that person is no better off. The dollars they bring into their household buy less goods.

Revenue Canada taxes this incremental increase as if it were real income. In this case the tax may be as much as 50% or $180 per month for something that quite frankly has never happened. In real terms their income did not rise and the dollars will not buy even the same amount of goods because we have implemented a tax on them.

To give another example which is a practical one, a family with two dependants from 1992 to 1997 saw their income rise by $900, but their income taxes actually went up $1,400. This is the double compound effect which is known as bracket creep. These are not wealthy people. They are not the idle rich. They are in fact middle to low income earners. We should be ashamed of what we are doing to them.

The impact on the truly high income earner is almost negligible. As one's income gets very high, personal exemptions are less and less of concern because they represent such a small quantum of deduction.

I have done a number of graphs on this. They show that there is about $840 million worth of revenue we bring in to our coffers from this insidious tax called the bracket creep.

The other aspect of bracket creep is that it creates a burden for people. Indeed we can look at marginal rates of tax. I will give a quick explanation of what a marginal tax rate is. It is that tax on an extra dollar of income, not on the dollars that one has already paid or may have been eligible for, but the extra dollar that one pays tax on.

With respect to bracket creep, over the years we have slowly amplified this marginal tax bracket on low income earners who go from basically paying no tax—people who earn under $8,000 a year are not taxed—to paying some tax. Suddenly, not only do we get the normal taxation coming into effect but we also have the problem of bracket creep. As a consequence income earners earning approximately $20,000 suddenly find themselves earning an extra dollar which costs them 50 cents on the dollar.

Imagine the impact this has on many low income families. The reality is that it is very difficult for them to get out of their so-called poverty trap. I do not have to remind the House that Statistics Canada regards the low income cutoff of $20,000 to be poverty.

I had a phone call from a constituent the other day. He told me how he had become disabled and earned only $12,000 a year. Miraculously he was able to get a part time job and double his income to $24,000. When he looked at his take home pay, he quickly came to the realization that he had hardly progressed at all. I told him that he suffered from bracket creep but I had not been able to come up with a cure.

The people are not versed on the virtues of fundamental economics but they know something is terribly wrong. From low income seniors to the working poor we are fleecing them to the tune of $840 million a year, $840 million of tax money on income that never happened. It is a tax illusion.

I remind this House that a voluntary tax compliance system is operable only when people believe the system is fair.

Some have suggested a piecemeal approach to this such as giving increased child tax credits and other benefits directed at this group. This is just what it entails, a piecemeal approach, a band-aid to cover a cut when the wound is still infected. Put them back on the treadmill for a few more years and this insidious aspect of bracket creep will catch up to them again. This may be the expedient solution but it is certainly not the right solution.

Last month we read of the survey on Canada as reported by the OECD. It had some alarming conclusions about the Canadian economy. It stated that our standard of living would likely decline so much so that by 2015 Canada's standard of living would be lower than the average of all OECD countries.

There are many reasons for this but I would like to read one of them, which is that indexation has pushed 1.4 million low income individuals on to the tax rolls over the 10 year period ending in 1998. Over 1.9 million individuals have been pushed from the lowest marginal tax bracket to the middle bracket while 600,000 were pushed from the middle to the higher income brackets.

We live in a remarkable time. People's income is not increasing. Indeed it is declining. Taxes are going up. Savings are being reduced and people are turning more and more to consumer credit just to stay afloat.

Personal credit is reaching alarming levels made only possible by lower interest rates. One hundred and sixteen per cent of disposable income now goes toward personal debt. This is unhealthy. A country that cannot save and maintain its level of disposable income is a country that is not progressing but on the decline.

Some have suggested other methods to reduce taxes, for instance the 3% surtax. This will affect people with incomes in excess of $50,000. One of my dreams for our budgetary process is to adequately address the issue of bracket creep.

I hope in the short period of time I have had I have been able to enlighten if not all at least some of our members of parliament and some of the people watching us of what is meant by bracket creep and how it affects the average income earner.

I hope that one of the things we will be able to address in this budget is some move to eliminating the whole concept of bracket creep.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I am pleased to rise on this pre-budget debate. As a member of the finance committee I have had the opportunity to travel across Canada with the committee to consult with Canadians and to hear from a broad cross-section of groups.

The finance committee invited many of the groups to come before it to discuss the application of our budget surplus. The groups were asked in all cases to come to the finance committee with their national priorities so we could report to the House and the finance minister how we should approach Canada's fiscal situation.

It was clear that notwithstanding the request, many of the groups that came before the finance committee preferred to deal with their own priorities in isolation rather than the overall national interest. It does pose some difficulty to the finance committee in terms of forming a consensus as to what Canadians believe when so many groups come before the finance committee and speak on behalf of their special interest.

One which concerned me at the time and still does was the intervention by the Canadian Chamber of Commerce. This group obviously represents major business and industry across the country. It came before us with some scenarios of how that surplus should be applied.

I want to share with the House what the Canadian Chamber of Commerce felt we should do with the surplus, the so-called fiscal dividend.

The first item was that 50% of any total surplus should be applied against the national debt. The second was to reduce EI premiums by 15 cents. The third was to eliminate the 3% general surtax completely. The fourth was to increase basic personal exemptions by $500 for all taxpayers. The fifth was to increase RRSP contribution limits by an additional $1,000 bringing it up to $14,500.

The sixth item was to introduce indexing of RRSP contributions so that the amount of contributions could rise over time. The seventh was to fully index personal income tax brackets and credits to the CPI over the medium term. The eighth item was to increase the foreign content of RRSPs to 30% from the current 20% and the last item was that there should be no new government spending.

In the written submissions and oral testimony given by the Canadian Chamber of Commerce there was not one mention of health care. This concerned me. It is reflective of the kinds of things the finance committee dealt with. It had to segregate those narrow interests of the wish list of particular groups and try to put them in the context of a national interest.

This was of concern to me and I raised it at the time at the finance committee. I referred to it as the presentation from Oz. This was a presentation that demonstrated that they had the brain to figure out all these details.

It also had the courage to list nine items, each of which would benefit the highest income earners of Canada but not every taxpayer in Canada. It was skewed or biased on behalf of the highest income earners in Canada.

It had brains. It had courage. But what this proposal did not have was a heart. We need a budget that has heart. We need a budget from the finance minister that has the brains to figure out the priorities, to make sure the important priorities of health care, debt reduction, income tax reduction and social conscience are reflected in the budget.

Much has been said before the finance committee about a subject near and dear to my heart, child poverty. Child poverty is a convenient political synonym for the broader issue of family poverty.

We have through Statistics Canada an instrument called LICO, low income cut off. It establishes levels of income given population areas, whether urban or rural, and the number of persons within a family. That has been used from time to time to be the measure of poverty in Canada.

Statistics Canada will clearly state that we do not have a poverty level established in Canada. It is something that we have refused to do and I find it really important.

In 1989 the House of Commons dealt with a motion to deal with the elimination of so-called child poverty by 2000, a motion tabled by Ed Broadbent.

Mr. Broadbent was in the House on his last day as a member of parliament. He was leaving the place. Most of the dialogue was giving tribute to Mr. Broadbent. Those who had the guts to talk about child poverty were talking about food, shelter and clothing.

Today we talk about child poverty and listen to advocacy groups talking about child poverty. One person, when asked for a symptom of child poverty, cited as an example a case where a child would not be able to go to a birthday party because they could not afford a good enough gift.

It was at that point that I recognized child poverty had become defined in a way that is much different from the perception and concerns of Canadians. I raised the point with the finance minister that a measure of poverty in Canada is important, not relative poverty which is what LICO is, but real poverty. If Canadians understood there are people who do not have the food, the shelter or the clothing they need then we would not be so desensitized to the seriousness of this problem in Canada.

The numbers have become so large and so fuzzy in terms of what constitutes poverty in Canada, I believe Canadians have become desensitized. I also believe that groups like the Canadian Chamber of Commerce have become desensitized to the seriousness of that issue simply because of definitions and soft numbers.

Under the health regime we have concerns about social poverty. In Canada 25% of children enter adult life with significant social or behavioural problems.

I have had many initiatives suggesting that we have to address these from the standpoint of prevention because each and every Canadian must pay for the cost of dealing with children with problems after they have them. If we can get a better balance between prevention and remedial action all Canadians stand to benefit.

Under the current Income Tax Act we have the child care expense deduction which is up to $7,000 for a preschool child. As all members know, the deduction is worth more to high income earners versus low. It is my recommendation that the finance minister convert the child care expense deduction to a refundable tax credit and make it available to all families with children regardless of whether they are working at home or in the paid labour force.

I believe there are some issues beyond basic fiscal issues. It is the health of our children and the social deficit in Canada that we also have to address. We must have a budget with brains, courage and, most important, a heart.

[Jim Abbott, Reform, Kootenay—Columbia, BC]

Mr. Speaker, I was very interested in the member's comments about people in the lower income area. He would be aware that this government in its wisdom chooses to tax at a very high rate, for example, a family of four earning $30,000 a year. Those people are still paying at least $4,000 a year in federal taxes. He should know that under the Reform proposal we would fundamentally eliminate those taxes at that level.

Why does the member not understand the simple mathematics in this case? If the government is to continue to extract these kinds of taxes from people at the low end and then turn around and give them back meagre pittances, meagre portions, meagre initiatives, why does he not understand that dollars left in the hands of those people, where those people at the low end of the scale get to make the decisions for their family, are far more productive than taking those dollars away and in turn turning around and giving them back?

The reality is that since the Liberals came to power in 1993 they have taxed back 155% of all wage increases. It has not paid to have a wage increase under the Liberals. Why does he not recommend to his finance minister to leave the money in the hands of the people who need the money rather than extracting it from them?

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, if the member would broaden his thinking a bit I think he would understand the issue better.

A family of four earning with $30,000 of taxable income pays 19.26% of income tax. What he has also failed to recognized is that family of four is also eligible to receive non-taxable benefits such as the GST credit, property and sales tax credits, the child tax benefit, the national child benefit and other things.

If he would take all those things into account I think he would see very clearly that for low income people who get non-taxable benefits, if he incorporated those in, the tax burden on a family of four making $30,000 is less than 10%. I would be happy to sit down with the member and work out the issues.

If we were to raise the non-refundable tax credit to which many refer as the first $6,500 tax exemption, it would mean that more Canadians would be able to earn income and not be taxed. The member also has to remember that people with means, people with high family incomes who work casually and have some part time or on the side activities, can benefit by increasing that exemption. We cannot target those in need by raising the lowest level at which they start to be taxed. We have to balance the need to target those benefits.

As the member may well know changes in the Tax Act take place very seldom and very slowly, but the philosophy behind it is that it is not just poor people who make $6,500 a year. It is people who have some investment income because they split income with a spouse who is not working. There are other situations where high income working families have casual income they transfer to other family members and on which they do not pay taxes in terms of a family situation.

Maybe the point is not to raise it on an across the board basis so that more Canadians get an increase, which is a very expensive proposition. Why do we not simply look for ways to target tax benefits to those in most need. I believe that is what the member has in mind.

[Jim Abbott, Reform, Kootenay—Columbia, BC]

Mr. Speaker,the member has unwittingly made my point. He is an accountant. His explanation, as eloquent as it is, is proof positive of how totally mixed up, convoluted, thick and unworkable the Tax Act is presently.

We are talking about putting money back into the hands of low income people. From the point of view of the sheer volume of the words that he just gave us, I do not understand his answer.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, the member should listen once again. If we were to raise the non-refundable tax credit by $1,000, that $1,000 tax credit would be equivalent to $250 in the pocket. He does not understand that an additional $250 in the pocket would be for each and every taxpayer in Canada regardless of their level of income because every Canadian is entitled to the non-refundable tax credit.

If the member understands that it costs a lot to give every taxpayer $250, would it not be better to find a way to give those in need, the lowest income Canadian, the benefit of $500 by not giving it to everybody across the board? That is the point I do not think the member has understood.

[Pauline Picard, Bloc, Drummond, QC]

Mr. Speaker, I am pleased to take part in this debate on the report of the Standing Committee on Finance on pre-budget consultations.

I said I was pleased and I am pleased to take part, but perhaps not happy to enter into the debate to once again try to show the government how wrong it is and how it is building a surplus on the backs of the most disadvantaged, the sick, the poor and the unemployed.

This report marks the start of a new age, that of Liberal arrogance raised to new heights. The Bloc Quebecois vigorously dissociates itself from the Liberal report, which is nothing more than a semblance of democracy, than propaganda by the Minister of Finance. The report is centralizing and makes a mockery of the provinces.

From the number of measures announced in health care and education, we are guessing that the secret wish of the Liberals is to govern a province.

The report by the Liberal majority says that only the Liberal government is right and that Quebeckers and Canadians appearing before the committee were wrong.

The report by the Liberal majority distorts reality in a number of respects, in saying that the Canadians consulted wanted the Minister of Finance to voluntarily hide the surpluses under the guise of prudence, surpluses we estimate at $15 billion for this fiscal year, whereas the Minister of Finance estimates them at a maximum of $4 billion.

Last week, two female journalists were interviewed at a TV station and they commented on the pre-budget consultations. They are editorial writers very well known in English Canada. These women reported exactly what would appear in the budget. According to them also, the budget surplus was higher than what the Minister of Finance had said.

From one week to the next, his story changes from $5 billion, to $3 billion, to $7 billion, but I think he has led us to believe it is a bit over $4 billion. These journalists said “We are going to tell you what is in the next budget”, whereas normally a budget must be kept secret until its release. They then set out to tell what would be in the budget, and it was totally believable, because there has already been a kind of leak and everyone is talking about it now. So it will be no surprise.

It is known that $3 billion will be used for debt reduction. Another $2 billion will go for health, provided the provinces bend to the will of the federal government. There may be $2 billion, but if the provinces refuse, wishing to respect the Constitution, health being a provincial jurisdiction, the federal government will make it just $1 billion for the entire health system across Canada. We call that blackmail.

So we have $3 billion, maybe $2 billion for health, and another $2 billion, for they are going to lift the hidden tax on middle-income taxpayers.

Adding these figures together, I get $7 billion, apart from the billion or so to be invested, or already invested, which will also be in the budget. That makes a little more than what the Minister of Finance tells us, a bit over $4 billion.

All the problems in the health system across Canada are essentially a result of the brutal cuts by the federal Minister of Finance, the $6.3 billion yearly since this government has been in power. Page 64 of the Liberal report states, and I quote:

By reducing the health services they provided, the provinces challenged one of Canada's most cherished national symbols.

This is the height of arrogance, when we know that the federal government has dumped its deficit onto the backs of the provinces, the sick and the most disadvantaged.

The Bloc Quebecois finds it unfortunate that, when it comes to health, there is no mention of the social union agreement signed by all Canada's premiers at the meeting in Saskatoon. Provincial premiers are calling on the federal government to return to the provinces the $6.3 billion in cuts to the Canada social transfer. That is not mentioned in the report. That is not important. The 10 premiers want to see social transfer payments back at what they were when this government came to office in 1994.

This money does not belong to the federal government. It comes out of taxpayers' pockets so that we can have decent social programs, and health care is a provincial responsibility.

So the federal government should give the money back to the provinces. That seems clear to me. But no, cuts are made and the provinces left to deal with the repercussions at their level, while health costs continue to rise because of the ageing of the population and the acquisition of new technologies. The provinces are told that they are running the system badly, that it is their fault they have been cut. They are told that, if they want money, they can have it, but only if they get down on their knees. It is unbelievable.

I hope that those listening will understand the situation, because it is not acceptable. This arrogant government is boasting how well it looks after us. All that matters to them right now is to make it into the history books. Prime Minister Jean Chrétien wants visibility in everything they do. They could care less about the disadvantaged, the unemployed and the ill.

Quebec was cut almost $2 billion annually, $1 billion of it in health. In just one term in office, Jean Chrétien's policies have cut federal government health payments by almost half.

Jean Chrétien is going around—

[The Acting Speaker (Mr. McClelland)]

Excuse me, but the hon, member knows she must not name another member.

[Pauline Picard, Bloc, Drummond, QC]

I apologize for this breach of protocol, Mr. Speaker.

Last week, we heard the member for Saint-Maurice, our Prime Minister, say on television “Come and visit Canada, the greatest country in the world.” This country is the home of 1.5 million unemployed and another 1.5 million children living in poverty, yet he brags about there being no quarrels, no problems, all being well and harmonious between the provinces. Come on, what planet does he live on?

The number of homeless people is growing, as one can see on the streets of Toronto. I saw it on CPAC last week. It is incredible to see that more and more people are forced to live on the street. And we do not have any program for these people. Yet, when travelling abroad, we claim to be living in the greatest country in the world, when in fact, from coast to coast, our health system is being dismantled because we are not getting the money that belongs to us as taxpayers.

That is unacceptable, and I hope that the government and its members will realize what is going on.

[Gilles-A. Perron, Bloc, Saint-Eustache—Sainte-Thérèse, QC]

Mr. Speaker, I thank my colleague from Drummond for sharing her time with me.

I cannot say that I am pleased to address the report of the Standing Committee on Finance on prebudget consultation.

To give a bit of background, I travelled across Canada in 1997 to listen to people and to their recommendations on what ought to be in the 1997 budget. Bhat happened? Not a thing. People were made to travel, much energy and money was expended to listen to them, but none of their recommendations made it into the last budget.

In the fall of 1998, in the latest consultations, once again people put themselves out to appear and to tell this Minister of Finance what should be in the budget. Still more surprising, what these people had to say did not even make it into the report.

The report tabled before the holidays is one that was created, thought up and written, by the boss, the real boss of the Standing Committee on Finance, the Minister of Finance. If read carefully, this report is there to pat the government on the back, tell the minister what a fine, intelligent fellow he is, what a really great job he is doing.

If the finance minister is going to show off, he should do it properly. His forecast was a surplus of some $2 or $3 billion. According to the Bloc Quebecois figures, the figure will instead be $10 billion or more, if not $15 billion.

What is the source of these surpluses the Minister of Finance boasts about? Where do they come from these billions of dollars saved by the Minister of Finance? It is easy, no academic studies are required to figure out where these billions of dollars come from. They come first from the unwarranted cuts in transfers to the provinces, health care services, social services and education. My colleague from Drummond could talk for hours about the negative effects of these cuts in health in all the provinces of Canada, primarily in Quebec.

Where does the money come from? Quite simply from the fact that over the years the government opposite has been raising income tax on the middle class and the poor by not indexing tax tables. Where do these surpluses come from? They come from this government's shameless siphoning-off of funds from the employment insurance fund, to which workers and employers contribute to create employment insurance intended to help workers in trouble. But they siphon the money off.

Our Minister of Finance is lucky, for the low interest rates of recent years have provided him with lower debt service costs, allowing him to save on income tax. The world economic situation has also provided the government with more revenues than it expected.

No, this Minister of Finance and this government have not kept their promises. They told us “We will put a stop to this shameless wastage”. But they have not yet done so. They also said “We will cut useless and outdated programs”, but they are creating other useless and outdated programs, such as the millennium scholarships. They are going to spend billions of dollars rather than give the money to the provinces so they can manage it efficiently. They are continuing duplication in areas of provincial jurisdiction.

The report refers to a productivity covenant. Rubbish! This government should start by being effective and productive and by doing a good job of managing taxpayers' money.

This year I did not travel across Canada listening to what people had to say on the budget. I sat down in my riding of Rivière-des-Mille-Îles—I am sure you will not mind, Mr. Speaker, if I say hello to my constituents—and asked members of the general public, bank managers and presidents of chambers of commerce what the government should do with the surpluses. They came up with three or four ideas.

First of all, there was unanimous agreement that the government should return the cuts in provincial transfer payments so that the provinces could do something about the problems caused by the cuts in the health, education and social services sectors.

The second suggestion was to give the middle class and the most disadvantaged a tax break. This could be done by indexing the tax tables.

The third suggestion was to improve the employment situation and reduce the premiums paid by employees and employers.

I suggest that the Minister of Finance pay a little visit to the Gaspé and New Brunswick, that he pay a little visit to seasonal fishers with EI problems. He should get out and see some real people.

Finally, everyone agreed that the government should clean up its act, as it has been promising to do since 1993. Everyone remembers the famous red book of 1993. This government should not establish programs like the millennium scholarships. Instead it should introduce the programs needed to create jobs and get Canadians and Quebeckers working.

That is what an intelligent government should be doing, not boasting of its achievements at the expense of the provinces and the poor workers of Quebec and of Canada.